Reviewed by Thomas J. Catalano
Fact checked by Vikki Velasquez

Dental insurance can be expensive, and many Americans consider it an unnecessary cost. But the cost of dental care can be even more exorbitant, and the lack of care can have serious consequences. Here we discuss the types of dental insurance policies, and whether or not it’s worth the cost.

Key Takeaways

• Dental insurance plans typically cover three types of care: basic, preventive, and major.
• Most plans pay 100% of preventive care, but only a portion of the cost of major care.
• Preferred provider organizations (PPOs) give you the widest choice of providers, but you will pay more if you go out of network.
• Dental HMO plans are more affordable, but they give fewer choices.
• Some Medicaid or Medicare Advantage programs may also help provide dental care.

What Is Dental Insurance?

Dental insurance is the oral version of health insurance. Instead of paying full price for each visit, you pay a steady monthly rate, and your insurance plan pays for some or all of your care. You’ll pay a premium for your policy, as well as deductibles, copays, and coinsurance.

Dental plans cover three types of care: basic, preventive, and major. Up to 100% of preventive care is often covered, but coverage may drop to 50% for major dental work. Basic care falls in the middle at about 80%.

Major care includes treatment such as crowns, dentures, and implants. Basic care covers extractions, root canals, and fillings. Preventive care aims to make sure you don’t need any of these treatments through regular check-ins and cleanings with your dentist.

Types of Dental Insurance Plans

“In general, there are two types of plans, PPO plans and DHMO plans,” according to Dr. Sandip Sachar, a practitioner of cosmetic and general dentistry in New York City for more than 20 years.

“There are also variations within these two types,” Dr. Sachar adds. “PPO plans generally allow you to pick which dentist to go to, whereas DHMO plans only allow you to go to a participating provider.”

Preferred Provider Organization plans (PPOs)

Preferred provider organization plans (PPOs) contract with dentists who provide discounted fees that are passed on to the insured. You’re not obligated to use these providers, but you’ll pay more if you go out of network.

The plan provider pays the dentist after the work is completed. You won’t have to contribute to the cost if it exceeds the contracted amount. This is the most common type of dental insurance plan.

“I recommend purchasing a PPO plan,” Sachar says, “but always inquire if it’s a usual and customary fee schedule, not an in-network fee schedule. This ensures that you can go to any dentist that you like and the insurance will pay a majority of the fees so you don’t have to.” Sachar defines a fee schedule as an allowed amount that dictates how much the insurer will pay for each procedure.

Dental Health Maintenance Organization Plans (DHMOs)

Dental health maintenance organization plans (DHMOs) operate similarly. The plan provider contracts with a network of dentists. You’re generally restricted to obtaining care from these dentists, unless your policy includes a point-of-service provision that allows you to opt out of network coverage. Your insurance coverage will be reduced if you take this option.

“Sometimes having a DHMO plan is better than having no plan at all for patients who can’t afford PPO insurance or who don’t want to pay more for insurance,” according to Sachar.

Important

Some employers contribute to dental coverage costs for employees, but about 20% of employees have to pay the entire premium.

Coverage and Benefits

Some coverages can depend on how long the insured has held the policy. Preventative and restorative care are commonly covered in the first year, as are root canals, extractions, and minor surgeries. Coverage for orthodontics, periodontics, and dentures typically isn’t available until after the first year.

PPOs often cap the amount of coverage they’ll pay in a given year and this can be as little as $1,500.

Most insurers cover 100% of preventative care services but major procedures are only covered up to 50% of the cost and will require that you make copayments.

68 million

The number of Americans without health insurance in 2023, according to the CareQuest Institute for Oral Health.

How Much Will This Cost You?

How much you’ll pay for dental insurance depends on a series of interlocking factors and current trends.

“There’s been a large change over the past 20 years,” Sachar says. “Insurances pass many more costs on to the patient. This includes higher deductibles and coinsurances. They’ve also lowered their fee schedules, the amount they allow for each procedure.”  

Premiums

You’ll have to pay an insurance premium for your coverage. A single individual might pay from $17 to $96 a month. This could increase to $50 to $150 a month for family coverage but it can depend on where you live and your age. You might be able to agree to a higher deductible or coinsurance and your premium will drop a bit in return.  

Deductibles

Dental plans almost always require that you pay a deductible. You must personally make a payment to your care provider for a portion of their services and your dental insurance will pay the balance.

Deductibles are capped at a certain figure and these are usually annual amounts. They reset at the end of the year. You don’t get to roll over any unused deductible amounts into the next calendar year. Money Magazine puts the average deductible at just about $50 per person per year.

Coinsurance

Coinsurance provisions require that you continue to pay for a portion of your care even after you’ve paid your deductible. Deductibles and copays will typically cost you more if you go out of network for care.

Warning

An insurer could require you to pay both a deductible and coinsurance for dental services. Look into their terms for these provisions when you’re looking for a plan.

Annual Maximums

“This is the most the insurer will pay per calendar year,” Sachar explains. “Insurance no longer pays and you’ll have to pay any balance when you’ve met the annual maximum.”  

You would have to come $1,000 out of pocket if your insurer’s maximum is $1,500 and your care costs $2,500.

Common Exclusions and Limitations

Now some more bad news: Most dental insurance policies exclude or limit certain treatments. Orthodontics may not be covered at all on some policies. The National Association of Dental Plans indicates that you must usually purchase an additional rider if you want this type of coverage.

You can most likely forget about cosmetic procedures such as teeth whitening, at least if you don’t want to pay the entire cost on your own. Most policies don’t cover this work.

Pre-existing conditions are typically excluded as well: any ailment or problem that already existed at the time you purchased your policy.

Government Programs for Dental Coverage

Some government programs stand by ready to assist with these expenses.

Individuals over age 65 can get coverage as a supplemental benefit if they sign up for a Medicare Advantage plan, often at no additional cost or for a minimal additional premium. Out-of-pocket costs for deductibles and copays can reportedly be significant, however, particularly for those who need serious care.

Original Medicare doesn’t cover routine dental work but it does cover treatments it calls “medically necessary.” This includes care associated with dialysis treatment for end-stage renal disease beginning in 2025.

The Affordable Care Act also enhanced dental benefits for children beginning in 2014. The ACA caps out-of-pocket expenses at $350 per year for one child or $700 annually for family coverage. Medicaid also provides for top-notch dental care for children.

The Children’s Health Insurance Program (CHIP) added a provision in 2009 that permits families to purchase only dental insurance for their children if they have family health insurance coverage but no dental coverage.

The Bottom Line

Dental insurance can be a hot topic of debate. Is it necessary? Is it worth it, what with all the extra associated expenses? Numerous types of out-of-pocket costs can apply and some types of work might not be covered at all.

Whether you should buy dental insurance is a personal decision with no one-size-fits-all answer.

“The best advice I give when asked about dental insurance is to always read the fine print,” Sachar says. “Do your best to try to understand how the insurance works. Ask about what’s covered and what’s excluded.”

Fact checked by Vikki Velasquez

Thanks to the Health Opportunity Patient Empowerment Act of 2006, it is possible to move money from an individual retirement account (IRA) to a Health Savings Account (HSA) without paying any taxes or penalties. This rollover, which can be done once, is known as a qualified HSA funding distribution. It allows you to cover more healthcare expenses tax free for you or a family member.

While there are no taxes or penalties involved in this type of distribution, there are restrictions on who can do it and when. You must be eligible to contribute to your HSA in order to make a rollover from your IRA, remain eligible for a year after the rollover, and keep the distribution within HSA contribution limits.

Key Takeaways

• It is possible to make a one-time, tax- and penalty-free distribution from an IRA in your name to an HSA in your name.
• You must be enrolled in a high-deductible health plan to contribute money to an HSA, including making a rollover from your IRA.
• You must also remain eligible to contribute to your HSA for at least 12 months after making a distribution from your IRA.
• Moving funds from another type of retirement account, such as a 401(k), to an HSA is possible, but you must have rolled over funds into an IRA first.
• An IRA and HSA are tax-advantaged accounts, meaning contributing to them will reduce your taxes.

What Is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a tax-advantaged savings account that allows you to set aside pretax money for healthcare expenses, including dental and vision care. Money can be withdrawn and spent from the account tax free and penalty free as long as you spend it on qualified healthcare expenses.

To contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP), which is a health insurance plan with an annual deductible of at least $1,650 (individual coverage) or $3,300 (family coverage). Generally, contributions to an HSA are taken from your paycheck; the maximums you can contribute in 2025 are $4,300 (individual) or $8,550 (family).

Note

Out-of-pocket maximums for HDHPs in 2025 are $8,300 for individuals or $16,600 for families. Premiums don’t count toward out-of-pocket costs, but deductibles, co-insurance, and co-payments do.

If you withdraw money from an HSA before age 64 for expenses that are not qualified healthcare costs, you will have to pay both taxes and penalties on the money. However, you never lose the money in an HSA; it will simply roll over to the next year indefinitely, even if you change jobs or health insurance plans. If you no longer have an HDHP, you can invest the money in the account and keep it until retirement.

Once you reach age 65, you can withdraw money penalty free from an HSA for any reason. However, nonmedical withdrawals will be taxed at your current income rate; withdrawals for medical expenses remain tax free.

Understanding IRA-to-HSA Rollovers

An IRA-to-HSA rollover is one of the ways that you can fund your HSA, and it can be done once in your lifetime. This can have tax benefits for you if you use the money to pay for qualified healthcare expenses.

To move funds from your IRA to an HSA, you must be currently eligible to contribute to your HSA. That means you need to be covered by a high-deductible health plan. Your rollover counts toward your annual HSA contribution limits.

If you have already made HSA contributions for the year, your contributions plus the amount you move from your IRA cannot be more than the annual limit. In 2025, these limits are $4,300 for individual coverage or $8,550 for family coverage (the coverage you have on your health plan). You can make an additional catch-up contribution of $1,000 if you are age 55 or older.

If you make a qualified HSA funding distribution when you have individual coverage, then later switch to family HDHP coverage, you can make a second qualified HSA funding distribution for the remaining amount.

Note

Both HSAs and IRAs are individual accounts; you cannot own them jointly with anyone—not even a spouse. You and your spouse can each roll money from your own IRA to your own HSA, but not to each other’s HSA. However, you can cover health expenses for each of you or your dependents from either HSA.

Because a qualified HSA funding distribution can only be done once in your lifetime, it may make sense to wait until you are 55 or older to take advantage of the additional $1,000 allowed as a catch-up contribution. A financial advisor who specializes in retirement and tax planning can help you determine what timing will make the most sense for you.

Rollovers From Other Types of Retirement Accounts

It is possible to fund your HSA with money from another type of retirement account, such as a 401(k) or 457 plan. However, these funds must first be rolled into an IRA. At that point, they become available for a one-time, tax-free distribution into your HSA.

To avoid accidentally incurring penalties from this type of two-step rollover, it is best to work with a financial advisor.

Tax Implications

Rolling over money from a traditional IRA to an HSA can save you money in two ways:

1. If you or a family member will need expensive healthcare that you wouldn’t otherwise have the money to cover, a qualified HSA funding distribution can allow you to tap into money saved in your IRA without having to pay taxes or penalties for an early withdrawal.
2. If you keep your HSA into retirement and use it for healthcare expenses, you won’t have to pay taxes on the funds in the account. If you spend them directly from a traditional IRA, on the other hand, withdrawals will be taxed as ordinary income.

Important

While you can roll over funds from a Roth IRA into an HSA, this doesn’t provide the same tax benefits. Withdrawals of contributions from a Roth IRA are already tax free and penalty free, and you can withdraw earnings tax free after age 59½.

Testing Period and Penalties

If you don’t plan to stay enrolled in your high-deductible health plan for at least 12 months after you make a qualified HSA funding distribution, the rollover can get expensive quickly. That’s because a qualified HSA funding distribution includes a 12-month testing period after the transfer, during which you must remain eligible for your HSA. This means you have to stay enrolled in your HDHP for at least a year after your rollover.

If you switch health plans to a non-HDHP, the money that you rolled into your HSA will suddenly count as income. You will need to include it on your tax return and pay income taxes on the distribution. The amount will also be subject to a 10% penalty.

Note

These penalties and taxes can be waived if you become ineligible for an HSA due to death or disability.

Considerations for Those Approaching Medicare

The testing period for a qualified HSA funding distribution requires you to stay eligible for an HSA for one year. This can create problems for anyone about to get coverage through Medicare because your HSA contribution limits drop to zero beginning in the first month you enroll in Medicare.

If you enroll in Medicare less than one year after rolling over contributions from your IRA to your HSA, your contributions will fail the testing period and be considered income in the year you make the distribution. This rule also applies to any retroactive Medicare coverage. If you delay enrollment and then your coverage is backdated to a time within the testing period, your contributions will still count as income for that year.

To avoid any taxes and penalties, make any transfer from your IRA to your HSA more than a year before you plan to enroll in Medicare. A financial advisor can help you find the best timing for your situation.

Steps to Make an IRA-to-HSA Rollover

A qualified HSA funding distribution must be performed by the person who owns both the IRA and the HSA. It is conducted as a trustee-to-trustee transfer. If you withdraw the money from your IRA and then make a contribution to your HSA, this is an indirect rollover and doesn’t count as a qualified HSA funding distribution.

To make sure you follow all the steps properly, contact your HSA provider first to get any special instructions. Then share these instructions with your IRA provider. If the accounts are held through the same provider or brokerage, they will likely already have these steps accounted for. You may also want to talk to a financial advisor first to make sure you have properly considered all the tax and penalty considerations that you need to be aware of before you make the rollover.

Once you’ve made the distribution, it will be reported to the Internal Revenue Service (IRS) on Line 10 of Form 8889, Health Savings Accounts (HSAs). This will be attached to your Form 1040 income tax return.

The Bottom Line

A qualified HSA funding distribution allows you to make a one-time rollover from your IRA to your HSA, providing tax benefits into retirement as long as you use the funds for qualified healthcare expenses.

To avoid taxes and penalties, make sure that your rollover is within annual HSA contribution limits. You will also need to remain eligible to make HSA contributions for one year after the rollover to avoid having the distribution count toward your regular income. To ensure that your qualified HSA funding distribution goes smoothly, consult a financial professional who specializes in tax and retirement planning first.

Reviewed by Margaret James
Fact checked by Vikki Velasquez

Off-balance sheet assets are assets used in off-balance sheet financing, the practice of leaving certain financial arrangements off the balance sheet. Some examples are guarantees, retained or contingent interests, some derivative instruments, and variable instruments.

Key Takeaways

• Off-balance sheet (OBS) assets (activities/arrangements) don’t appear on a company’s balance sheet. 
• Off-balance sheet assets must be disclosed in the reporting company’s Management Discussion and Analysis section of its financial reports.
• Some off-balance sheet asset reporting requirements changed in 2016 and 2021 regarding leases, which, depending on who the party is and the type of lease it is determined to be, must be recorded on balance sheets.

Off-Balance Sheet Asset Disclosures

Guidelines passed by the Securities and Exchange Commission and Federal Accounting Standards Board now have stricter definitions than those of the past for allowable off-balance sheet arrangements.

Companies must disclose any off-balance sheet financial arrangements in their Management’s Discussion and Analysis of Financial Position and Results of Operations (MD&A) within their financial reports.

Leases

Businesses leasing an asset (the lessee) must record leases as a finance or operating lease and record it as a right-of-use asset and lease liability on their balance sheet. Businesses providing the asset (the lessor) to a lessee must classify the lease as a sales-type lease, direct lease, or operating lease, and record it appropriately.

Types of Off-Balance Sheet Arrangements

Several arrangements can be excluded from a balance sheet, some of which are:

• Letters of credit: Letters of credit are financial instruments used in international trade, where a foreign buyer’s bank pays an exporter once products are shipped. These monetary commitments are often used by companies entering new markets when developing trustful relationships with trade partners in those markets.
• Guarantee arrangements: A guarantee arrangement is an agreement between two parties where a third party agrees to pay a liability if the liable party cannot make good on its part of the agreement. For example, if a young business applied for a loan, it might have someone willing to pay the loan act as the guarantor if it were not able to pay some time in the future.
• Commitments to originate loans: A loan commitment is an agreement from a bank to a business to lend that business a specific amount of money.
• Certain derivative instruments: A credit derivative is a contract between two parties, such as futures, options, or swaps. However, they are only required to be on the balance sheet if their fair value can be reflected as a liability or asset.
• Certain contingent liabilities: If certain conditions are met, a business might need to account for contingent liabilities, such as being sued. If proceedings lasted for more than a reportable annual or quarterly period, it would have to disclose the lawsuit and potential liabilities in its MD&A.

Explain Off-Balance Sheet Assets Like I’m 5

Companies are required by standards boards and regulatory authorities to report all of their assets and liabilities, which can include many types of financial transactions, physical property, investments, and more.

In the past, businesses were allowed to not record certain financial arrangements on their balance sheets. These omissions gave them an opportunity to disguise some transactions to make themselves seem more profitable, efficient, or otherwise more attractive to investors than they might have been if the arrangements were included on the balance sheet.

Specific assets are still allowed not to be included on balance sheets, but they must be disclosed in the Management’s Discussion and Analysis section of the required financial reports.

What Are Off-Balance Sheet Assets?

Off-balance sheet assets are assets that are not included in balance sheet line items. These assets must be disclosed in the Management’s Discussion and Analysis.

What Are the 4 Categories of Assets on a Balance Sheet?

There are many categories of assets that can be included on the balance sheet, such as current, non-current, operating, intangibles, physical, and fixed assets.

What Are Examples of Off-Balance Sheet Transactions?

Some examples of off-balance sheet transactions are letters of credit and guarantees, derivative instruments, and contingent liabilities.

The Bottom Line

Companies are allowed to omit certain assets from their balance sheets. These assets are called off-balance sheet items; however, off-balance sheet assets must be disclosed in the Management’s Discussion and Analysis section of the financial report.

Reviewed by Margaret James
Fact checked by Yarilet Perez

Forward P/E vs. Trailing P/E: An Overview

The forward P/E uses projected future earnings to calculate the price-to-earnings ratio. The trailing P/E, which is the standard form of a price-to-earnings ratio, is calculated using recent past earnings.

It can be helpful for investors to consider both calculations of the P/E ratio. If an investor has noted the forward P/E ratio from the previous year, the investor can check to see how accurate the previous year’s estimated P/E was based on the current P/E.

Forward P/E calculations are also helpful in comparing the likely future performance of similar companies in the same industry.

Key Takeaways

• Trailing P/E is calculated by dividing the current market value, or share price, by the earnings per share over the previous 12 months.
• The forward P/E ratio estimates a company’s likely earnings per share for the next 12 months.
• The primary difference between the two ratios is that the trailing P/E is based on actual performance statistics, while the forward P/E is based on performance estimates.

Trailing P/E

When analysts refer to the P/E ratio, they are usually referring to the trailing P/E. It is calculated by dividing the current market value, or share price, by the earnings per share over the previous 12 months.

This measure is considered the more reliable of the two metrics since it is calculated based on actual performance rather than expected future performance. However, it could prove a limited or faulty estimate since a company’s performance factors, costs, and profits change over time.

But the trailing P/E has its share of shortcomings, namely, a company’s past performance does not signal future behavior. The fact that the earnings per share number remains constant while the stock prices fluctuate is also a problem.

Important

If a news event drives the stock price significantly higher or lower, the trailing P/E will be accurate to the current state of the stock.

Stock analysts consider the trailing P/E as a type of price tag on earnings. This relative price tag can be used to look for bargains or to determine when a stock is too expensive. Some companies deserve a higher price tag because they’ve been around longer, have deeper economic moats, or a variety of other factors.

Some companies with a high trailing P/E ratio could be overpriced and deserve lower price tags for a variety of factors; others are underpriced, representing a great bargain. Trailing P/E helps analysts benchmark periods year-over-year for a more accurate and up-to-date measure of relative value.

Forward P/E

The forward P/E ratio estimates a company’s likely earnings per share for the next 12 months. The forward P/E ratio is favored by analysts who believe that investment decisions are better made based on estimates of a company’s future rather than past performance. Estimates used for the forward P/E ratio can come from either a company’s earnings release or from analysts.

Because forward P/E relies on estimated future earnings, it is subject to miscalculation and/or the bias of analysts. Also, companies might underestimate or misstate earnings to beat the consensus estimate P/E in the next quarterly earnings report.

Other companies may overstate the estimate and later update it, going into their next earnings announcement. Furthermore, external analysts may also provide estimates, which may diverge from the company’s estimates, creating confusion.

Forward P/E vs. Trailing P/E Example

Company XYZ has a stock price of $53 per share. Over the past year, the company has reported earnings per share (EPS) of $3.44. Its trailing P/E would be 15.4.

Trailing P/E = $53/$3.44 = 15.4

Company XYZ has been making investments in its infrastructure, which are expected to boost profits. As a result of these improvements, the company projects an EPS of $4.77 for the next 12 months. This forecast means the company has a forward P/E of 11.1.

Forward P/E = $53/$4.77 = 11.1

Investors and analysts comparing both the trailing P/E and the forward P/E will note that since the trailing P/E is higher than the forward P/E, it may indicate that earnings are expected to increase in the future. This would make the stock attractively priced based on future growth estimates.

It’s important to note that forward P/E is an estimate and could be optimistic, so investors should approach it with an air of caution. Comparing these two ratios alongside ratios with similar companies can help investors get a sense of overvalued or undervalued stocks to aid them in decision-making.

What Does P/E Tell You?

Price to earnings (P/E) is a financial metric that compares a company’s stock price to its earnings per share (EPS). It signifies how much investors are willing to pay (stock price) for a company’s earnings on a per-dollar basis at a specific point in time. Investors and analysts use P/E to determine whether a stock is overvalued or undervalued. A high P/E ratio signals that a stock is overvalued or that investors expect future growth. Conversely, a low P/E ratio signals that a stock is undervalued or that investors expect contraction in the future.

What Is a Good P/E Ratio?

A good P/E ratio will depend on many factors, such as the specific sector being analyzed, the current state of the economy, and the specific characteristics of the company being reviewed. As such, there isn’t a specific number or range that one can point to. It’s important to make an analysis in context and compare a company with its peers.

Generally, a high P/E ratio would indicate a company is overvalued (sell opportunity), and a low ratio would indicate a company is undervalued (buy opportunity), yet this could not be true, as a high P/E ratio might mean expected future growth for a company rather than overvaluation, for example.

What Does “Trailing” Mean in Finance?

In finance, “trailing” means a data point based on past performance. For example, “trailing 12 months” is commonly used and refers to a financial metric from the past 12 months as opposed to the previous month, quarter, or year. There is trailing 12 months (TTM) for net income, revenue, and various ratios. The goal is to smooth out the results of the past period being analyzed so investors can get a clear picture of a company’s results.

The Bottom Line

Both trailing P/E and forward P/E provide useful but different insights for investors. Trailing P/E/ is based on actual results, providing a picture of a company’s past performance and giving insight into a stock’s current value. It doesn’t consider future growth, however.

Forward P/E is just that, a valuation that takes into consideration projected future earnings. These earnings are estimates, so investors should be cautious when making decisions based on forward P/E.

A revitalized downtown and growing amenities make Danville more than just budget-friendly

Fact checked by Vikki Velasquez

Tucked away in southern Virginia near the North Carolina border, Danville is a mid-sized town of just over 42,000 people. It offers retirees a quieter, more relaxed lifestyle than larger cities without sacrificing essential amenities, largely thanks to more than $300 million invested in local revitalization over the past decade.

Once a hub of tobacco production, Danville has steadily reinvented itself. Its River District, now the town’s centerpiece, has seen a dramatic transformation, with historic warehouses repurposed into housing, breweries, restaurants, and even a science center. Let’s look at why this Virginia town is gaining attention as an affordable retirement gem.

Key Takeaways

• Danville offers a much lower cost of living than the national average, making it easier for retirees to live comfortably on a fixed income.
• The median home value is just over $110,000, about a quarter of the national median, and taxes, food costs, and housing expenses are significantly lower than across the U.S, 
• The town also provides ample access to medical services, with 160 health care establishments countywide and affordable local transportation.
• Recreation in Danville tends to be relaxed and community-focused, with entertainment options like riverfront hiking trails, art venues, and weekly farmers markets.

Cost of Living in Danville, Virginia

Even among the other top retirement destinations in the United States, Danville stands out as an exceptionally affordable choice. The median household income in the town is $42,778, barely more than half the national median of $80,610. That might seem like a drawback at first glance, but it’s actually a reflection of the area’s remarkably low cost of living.

Take housing, for example. The median home value in Danville is just $110,200, compared to $419,200 nationally. That offers potential savings of more than $300,000—and a discount of nearly 75%—for retirees interested in homebuying. Recurring costs are similarly reduced, with the typical monthly housing expense in Danville at $776 versus $1,338 for the average American.

Food costs also tend to be much lower than in the rest of the country. A two-person household in Danville spends around $586 a month, while the national monthly average is about $832. That equates to a discount of roughly 30%.

In addition to the low local costs, retired Danville residents can benefit from the fact that Virginia doesn’t tax Social Security income.

Note

The top four categories in the average retiree’s budget—housing, transportation, healthcare, and food—account for roughly 77% of total annual spending. Optimizing for these expenses is one of the best ways to keep your cost of living down.

Health Care and Accessibility

Reliable access to health care is an essential quality in a top retirement destination, and Danville more than delivers. The town is home to 160 medical facilities, including three hospitals. That number may seem modest compared to larger metropolitan areas, but it works out to a surprisingly dense 3.7 health care establishments per square mile.

Not only can Danville residents reach a medical provider without traveling too far, but local transportation is also more affordable than in many parts of the country. The typical monthly transportation cost in Danville is just $1,058, slightly below the national average of $1,098.

Tip

Public transit is also readily available, including a Mass Transit System that offers $1 bus rides from 6 a.m. to 6 p.m., Monday through Saturday. Rides are 50% off until noon for seniors, persons with disabilities, and Medicare cardholders.

For longer trips—whether for out-of-town health care or just to visit family—Raleigh-Durham International Airport is only 61 miles away from the city center. That makes interstate and international travel relatively convenient, without the higher cost of living that often comes with being too near a major airport.

Lifestyle and Recreational Activities

Affordability and access to health care are essential, but retirement should also be about enjoying your time. Danville offers a surprisingly well-rounded lifestyle for a relatively small city for those who would like a slower-paced, low-stress place to live.

For one, Danville supports a small but active arts community with 19 different art establishments, including everything from galleries to public performance spaces. For example, The Danville Museum of Fine Arts and History—housed in a Civil War-era mansion—anchors the city’s cultural scene with rotating exhibits, community events, and art education programs.

If you prefer to spend your leisure time outdoors, you can take advantage of Danville’s extensive trail system and riverside parks. The Dan River runs directly through the town, creating easy access to hiking, fishing, and kayaking opportunities. Thanks to the area’s relatively low Federal Emergency Management Agency (FEMA) climate risk rating, you can enjoy these spaces with less chance of natural disruptions.

Note

Danville’s top-rated Riverwalk Trail spans nearly 13 miles along the Dan River and connects several parks, historical sites, and downtown areas, making it a local favorite.

The Danville community may be quieter and more relaxed than in larger retirement destinations, but there are still plenty of ways to make connections. For example, a weekly farmers’ market runs from May to October, offering local foods and handmade goods. Meanwhile, summer brings free outdoor concerts through the Rhythms at the River series, bringing the townsfolk down to the River District waterfront.

The Bottom Line

Danville shines for its exceptional affordability, with the cost of living well below the national average in key categories like housing, food, and transportation. Its recent revitalization has only added to its appeal, turning its formerly empty downtown into a hub of local eateries, cultural venues, and green spaces.

If you’re looking to stretch your savings without sacrificing quality of life, Danville stands out as a smart and increasingly vibrant place to settle down.

Reviewed by David Kindness
Fact checked by Vikki Velasquez

Information technology (IT) plays a key role in the operations and success of most businesses.

For example, it makes it possible for accounting professionals and company managers to understand, organize, and master more effectively the intricacies of a wide range of financial data.

In particular, an accounting information system (AIS) provides these professionals with a tool that facilitates the collection, management, retrieval, and reporting of financial information that’s necessary for a business to meet its goals efficiently.

An AIS links inputs, procedures, and outputs for accounting purposes. AIS-generated reports can provide guidance for critical business decisions.

Key Takeaways

• Accounting information systems (AISs) facilitate the collection, management, and retrieval of information that’s necessary for a business to meet its goals efficiently.
• An AIS should include six critical components.
• These components are people, procedures and instructions, data, software, an IT infrastructure, and internal controls.
• They can create a formidable network of accounting assistance and help a business achieve success.

The 6 Components of an AIS

Armine Alajian, CPA, startup accountant, fractional CFO, tax consultant, and founder of the Alajian Group Inc. in Los Angeles and New York indicates that the key components of an AIS are:

1. People
2. Procedures and Instructions
3. Data
4. Software
5. Information Technology Infrastructure
6. Internal Controls.

These components serve three functions. They collect and store the necessary financial data, implement controls to accurately process it, and disseminate it to key personnel.

#1 People

Employees use the AIS within the business, while outside professionals who are enlisted for their services may also use it. These people can include key managers and accounting staff but several others as well.

“The ‘people’ component is first because it’s the most important,” Alajian says. “It encompasses everyone who’s using the system: accountants, auditors, managers, and analysts. There may be both internal users, such as employees, and external users, such as regulatory agencies.”

Collectively, they develop and manage the system.

#2 Procedures and Instructions

The second component concerns how information is collected, processed, stored, and then retrieved. It typically involves a series of steps.

“Processing is typically done by software,” according to Alajian. “Collection may include both manual and automated components. It must be accurate or else projections won’t be. Processing is what gives you usable information. Storing data gives companies the ability to analyze past performance, and it’s crucial for tax preparation.”

#3 Data

Data is all the information that goes into the AIS. This component likely includes:

• Payroll information
• Sales reports
• Inventory records
• Income statements, balance sheets, and cash flow statements
• Invoices
• Tax documents
• Purchases

Other data might be included depending on the business. Centralizing all this information in a single, accessible location can make it easier to get an accurate picture of a company’s financial health.

#4 Software

The software component refers to the computer programs that automate the collection, processing, and management of all this data.

AIS software reduces errors and supports the faster generation of financial information required by management.

“Commonly used options are QuickBooks, Freshbooks, or Xero, to name a few,” Alajian says. “Many companies have their own custom systems.”

#5 Information Technology Infrastructure

The fifth component is the information technology infrastructure that the software can’t function without.

“It’s basically the computers or hardware you’re using as well as the network to store and share information internally, which could be cloud-based or internal,” Alajian says.

IT infrastructure also includes mice, disk drives, printers, keyboards, and yes, even pens and paper. They’re all necessary to gather, organize, and distribute data.

#6 Internal Controls

Internal controls are the police of the AIS. They’re the security features that protect the data against the criminals of the technology world. They may be as simple as required passwords or as complex as biometric verification methods.

They stand against the viruses, hackers, and cyber-crooks that attempt to infiltrate computer-based networks.

Important

Internal controls protect more than businesses as a whole. They also shield employees whose Social Security numbers and other critical, personal data are included in the AIS.

Integration and Efficiency

Together, these six components can create a formidable network of assistance for a business that’s striving to effectively and efficiently meet its goals.

As Scottish poet Robert Burns once said, however, “The best-laid plans of mice and men often go awry.” AISs have the potential to go awry if they’re mishandled.

The American Institute of CPAs and the Canadian Institute of Chartered Accountants have pinpointed five specific factors that contribute to the reliability, sustainability, and success of any AIS:

• Security
• Confidentiality
• Privacy
• Processing integrity
• Availability

Only those with express permission to access an AIS should do so. Internal controls must be firmly in place to protect the data.

“One crucial idea in internal controls is segregation of duties. For example, the person who approves payments shouldn’t be the same person in charge of recording transactions,” Alajian says. “This kind of cross-checking helps to prevent unnoticed fraudulent transactions.”

Confidentiality works in tandem with privacy, and it specifically addresses how the collected data is used.

Processing integrity refers to the labeling and organization of the data. It dictates that data should be all-inclusive, properly labeled, and identified. It should be readily and promptly available to those with the authority to access it.

The Bottom Line

Thanks to hardware and software technologies, an AIS can provide businesses with a reliable and expeditious way to collect, manage, retrieve, and use information that’s vital to a company’s operations and overall success.

Each of the six components described above plays an integral role in a properly functioning AIS.

In addition, Alajian suggests a few questions to ask yourself if you’re considering fine-tuning or creating your own:

“Do you have a firewall? Is information password-protected and available only to select personnel? How simple is it for those personnel to access the raw data and the reports they need to analyze your company’s finances? Will an accountant or auditor have everything they need? And who’s checking to see that the raw data is complete, accurate, and reliable?”

Check these issues off your list as you implement your AIS. And don’t hesitate to get the helpful assistance of a qualified accounting professional, if necessary.

Buying a car involves certain financial and legal steps

Fact checked by Vikki Velasquez

Buying a car is a big decision, and you may have to live with your choice for years to come. Whether it’s a brand new luxury model or a beat-up junker, understanding the ins and outs of buying a car will help you get the best deal possible, look out for common pitfalls, and avoid buying a lemon.

Key Takeaways

• Figure out your budget before buying, including insurance and maintenance, and decide whether to pay in cash or with a loan.
• Choose a car that fits your needs (not your dreams), and always test-drive it before committing to buy.
• Private sellers can be cheaper, but dealerships and online platforms offer more convenience and protection.
• Don’t skip negotiating; knowing the car’s fair value and staying calm can save you a lot of money.
• Always double-check the paperwork to understand the costs, your financial responsibilities, and your legal rights.

There are a lot of factors to understand before buying a car—mileage, model, price, terms, and financing—that can be overwhelming if you aren’t familiar with them. Planning ahead and having a clear picture of what you want and what you can afford will help the process go smoother and leave you with a car that you and your finances are happy with.

Determine Your Budget and How You’ll Pay

The first step in buying a car is to set your budget. You need to know how much you can afford before starting the process. Overpaying can drain your savings, hurt your monthly expenses, or impair your financial profile.

Look at your monthly income and expenses and see what cost makes sense. Remember, the cost of a car isn’t just the price of the car itself; it’s also the insurance, gas, and maintenance costs. Experts recommend allocating 10% to 15% of your take-home pay for car expenditures. If you’re buying a used car, you may even want to include an additional buffer for increased maintenance costs.

After you decide how much you can spend on a car, figure out how you’ll pay. If you have enough savings to pay in cash, that’ll help avoid taking on debt and making monthly payments. It will also cost less money in the long run than an interest-bearing auto loan. Just make sure your car savings don’t take away from other priorities, such as college or an emergency fund.

Note

Using a credit card to pay for your car isn’t the best idea as any monthly balances carried over will incur the high fees that credit cards come with.

If you need to take out a car loan, you’ll want to look around for the best rates. Many car dealers offer in-house financing, but you can often find better rates from a bank or credit union. You might save a lot of money if you can get a pre-approval before you start car shopping.

Here’s where your credit score also comes into play. The better your score, the better your rate, and the less you’ll pay for your car. If you know you’ll need to borrow money, work on getting your credit score up before taking out a loan.

And if you are taking out a loan, having some cash to put forward as a down payment will help lower your monthly payments. As a rule of thumb, putting down 10% for used cars and 20% for new cars is a good idea.

Determine What Type of Car You Want

The car you want should ideally be the car you need. For example, if you live in a part of the world where it snows often, a four-wheel drive might be more prudent than a sports car. Looking for a car that serves your needs is the best starting point for your car search.

Will you primarily be commuting, or will you be transporting a group of kids to soccer practice? Will you have a large parking space in a lot or a tight squeeze in a small city? These are the types of questions to ask as you make your decision.

There are plenty of resources available to you that will help you pick the right car. Look at car websites, reviews, and YouTube videos to get a deeper familiarity with brands and models. Try to understand the pros and cons of each, the different features, and how all of that fits into your life.

Once you’ve settled on a few choices, take them for a test drive so you know how it feels in the specific car. Feeling how the car performs on the road can significantly impact your decision.

Important

Choosing between a new and used car is an important decision. While having a new car is great, it’s not always the best financial decision as new cars lose value as soon as they’re driven off the lot.

Decide Where You’ll Buy the Car

Where you buy your car can affect a lot of factors, such as price and quality. Here, we’ll break down what each means:

Private Seller: Buying from a private seller can get you a good price. They often need to sell and don’t have the same overhead costs to cover as dealerships do, so the price could be lower. However, a used car from a private seller comes with no warranty, and you’ll want to get the car inspected to ensure it’s in good repair. Additionally, make sure the paperwork is in good order.

Dealer: While buying from a dealer generally costs more, it’s usually the easiest and safest option. You’ll have a wide range of cars to choose from (some even with warranties), they’ll be able to offer financing, and they can handle all the paperwork. The higher cost may justify the peace of mind and simplicity of buying from a dealer. Note that dealers are required to include a Buyer’s Guide on each used car, which will provide additional information on the specific vehicle.

Online: Buying online can reduce the stress of having to buy in person, and there are plenty of options available to consumers now. Online marketplaces like CarMax (KMX) and Carvana (CVNA) allow users to select from a large assortment of cars at different prices and different types of financing. Even traditional car dealerships offer delivery options. It’s also in your right to receive a Buyer’s Guide when you buy online.

Out of State: Buying out of state can be a good option, especially if you’re looking for a rare car. It generally opens up a lot of selection but does come with points you need to consider, such as transportation (will you pick up the car and drive it back, or will you have it delivered?), abiding by state laws, different state taxes, and adhering to your state’s specific emission laws.

Negotiate the Price

Asking for a better price can be uncomfortable. Negotiating doesn’t come naturally to many people, but it’s definitely worth attempting, as it can save you hundreds or thousands of dollars.

When buying a car, know its fair market value. You can use many resources to determine this, such as online websites such as Kelley Blue Book or Edmunds. Ask the seller how they arrived at the price they’re offering.

You can negotiate from there. Be friendly and calm, but don’t give in to pressure, especially if you’re equipped with all the facts. You can walk away any time; plenty of cars are out there, and sometimes walking away might convince the seller to drop the price. This process also applies when trading your old car for a new one.

Finalize the Deal and Transfer Ownership

When buying a car, there’s plenty of paperwork to complete before you can drive home and take your friends and family for a spin. The paperwork covers all of your financial responsibilities and legal rights. Make sure you understand what you’re signing.

If you’re financing the car, understand the loan (fixed versus adjustable), the term, the rate, the monthly payments, and if there are any ramifications for paying off the car early. Go over all aspects of the contract, especially the breakdown of costs. Make sure there are no add-ons that you didn’t agree to that might increase the cost.

When buying from a private seller, you’ll need a bill of sale, the title signed over to you, and an odometer disclosure. When buying from a dealer, they’ll usually handle this.

Additional Tips

Get a Vehicle History Report

If you’re buying a used car, you must get a vehicle history report for yourself. You’ll want to know if the car has been in any accidents, if there’s been any type of damage, odometer rollbacks, or title issues. Knowing the car’s history will help prevent buying a car with problems or one that’ll cost you dearly down the road. Sites like Carfax or Autocheck can help you with this information. You can also check on the National Motor Vehicle Title Information System.

Get a Pre-Purchase Inspection

Also, when buying a used car, get an inspection from an independent mechanic. This will reveal any car issues that could cause problems for you later. This is usually not as much of a concern when buying from a dealership, but is essential when buying from a private seller or online.

The Bottom Line

It can be exciting to buy a new car, but it doesn’t have to be stressful if you prepare beforehand. Determining your budget, figuring out the type of car that fits your lifestyle, and knowing where and how to shop will make the process smoother and easier on your wallet.

Take your time, do the right research, ask the right questions, get the car inspected, and don’t be afraid to walk away if something is off. With some initial legwork, you’ll be able to find the car that suits you and your finances.

Reviewed by Thomas Brock
Fact checked by Vikki Velasquez

Specialization and economies of scale are two related economic concepts. Specialization involves focusing on a particular area of expertise to increase efficiency and productivity, which helps businesses achieve economies of scale. This relationship was explored by Adam Smith, who is considered to be the father of modern economics. Let’s take a look at these concepts and how they fit into Smith’s theory.

Key Takeaways

• Economies of scale and specialization are related concepts.
• Specialization involves focusing on one area of expertise, which increases efficiency and productivity.
• An increase in productivity can lead to economies of scale.
• Economies of scale can be achieved by training employees to focus on specific tasks.

Adam Smith’s Theory

Adam Smith laid out many economic theories, one of which was that the division of labor through specialization leads to growth. This idea was part of his book, “An Inquiry into the Nature and Causes of the Wealth of Nations.”

Smith believed that a company can hire more workers as it grows and divide them into certain roles. This means they end up with fewer responsibilities so they can improve and specialize in one core skill. Once a worker becomes more efficient, they become more productive and take up less time and fewer costs.

Defining Economies of Scale and Specialization

Economies of scale describes the cost advantage a company achieves with efficient production. Increasing production and lowering costs result in economies of scale because the costs are spread out over a larger number of goods. Producing additional goods doesn’t require a significant increase in costs. Reducing the cost of units per production is the main benefit of economies of scale.

In an economic context, specialization means focusing on one task rather than multiple tasks. It is a basic concept of learning. This allows workers to perfect that one task. When a person attempts a specific task for the first time, they may not be proficient at it. The more time they spend practicing or learning a skill, the better an individual gets at it. They also become efficient once they’ve mastered that task.

Note

Larger companies are more likely to achieve economies of scale than smaller companies because they can produce more goods and therefore can spread out costs over a larger number of goods.

Achieving Economies of Scale Through Specialization

As labor is divided amongst workers, workers can focus on a few or even one task. The more they focus on one task, the more efficient they become, which means that less time and less money is involved in producing a good. This means that the same time and money allow for the production of more goods.

When specialization occurs and results in economies of scale, a company can reduce the prices of its goods or services because it costs less to produce them. This provides a competitive advantage in the marketplace.

Example of Specialized Labor and Economies of Scale

An assembly line for a manufacturing company provides a useful example of specialization leading to economies of scale. Suppose a bicycle manufacturer has 10 workers each assembling 10 bicycles simultaneously. The time for one individual to assemble a bike could be considerable. In addition, the know-how of having to put multiple pieces together requires the need for more skills.

If the bicycle maker switches to an assembly line in its factory, the 10 workers can each focus on a specialized aspect of the assembly process. For example, one worker would add the brakes, the next worker would add the pedals, and so forth. Each worker would become proficient in their specific task and allow the bike to be assembled faster as it moves down the assembly line. This increases efficiency and allows for additional bicycles to be produced.

Because production increases, the fixed costs of production such as the building and tools used to assemble the bicycles are spread over an increasing number of products, thus achieving economies of scale.

Is Specialization the Only Way to Achieve Economies of Scale?

Economies of scale can be achieved through a variety of means other than specialization. Some other ways to achieve them include using technology to improve efficiency and the power of buying bulk, which leads to better costs. Larger companies can also consider seeking better terms on financing and better transportation networks to achieve economies of scale.

Why Are Economies of Scale Important?

Economies of scale are important because they give companies a competitive edge in the marketplace. Companies accomplish this by lowering their production costs when their output increase—all of which lead to higher profitability. This helps companies boost their bargaining power, keep competitors at bay, and increase their market share.

What Are Some of the Benefits of Specialization?

When companies specialize, they focus on producing one or a few related goods or services rather than producing multiple types. This benefits companies because they can increase their productivity, lower their costs, produce higher quality goods and services, and focus on growing their businesses.

The Bottom Line

Economic theory and the actual implementation of those theories have proven that as a company’s workforce specializes in specific skills, it leads to efficiency, which leads to more goods produced. As more goods are produced, the cost of producing them is spread out, leading to economies of scale, which is an important competitive advantage for any company.

Fact checked by Katharine Beer
Reviewed by Ebony Howard

The job market is competitive. You must communicate your skill set effectively to gain the best competitive advantage for landing the job. During the interview process, highlight as many strengths as possible. Here are seven things you should say in an interview.

Key Takeaways

• Highlight your strengths in a job interview.
• Research the company and know its products and services.
• Flexibility, energy, and optimism are all highly desirable qualities.
• Communicate your interest, experience, and goals effectively.

1. I Am Very Familiar With What Your Company Does

Letting a prospective employer know you are familiar with what a company does shows that you have a legitimate interest in the business and are not wasting their time. Do your homework before arriving for an interview. Check out the company website for information about products and services. Search for the latest transactions and pertinent business news.

2. I Am Flexible

Work environments are always changing. Prospective employers look for candidates who are open to change, adaptable, and who can multitask. Flexibility means you will do what is necessary to finish a task, including working additional hours or taking on additional job duties.

3. I Am Energetic and Have a Positive Attitude

Employers look for candidates with optimism and a “can-do” attitude. Attitudes are contagious and directly affect company morale. Let the optimist in you shine during the interview process. Be sure to always speak positively about past employers. Negative comments and sarcastic statements about past employers and co-workers are unnecessary.

4. I Have a Great Deal of Experience

Highlight any previous job duties that relate directly to your new job. If it is a management position, state every time you were responsible for supervising, training, and developing other employees. Discuss your motivational techniques and share specific examples of how you increased productivity. Feel free to list any training classes or seminars that you have attended.

5. I Am a Team Player

Companies are looking for team players, employees who are cooperative and get along well with other employees. Let your prospective employer know that you can flourish in group situations. Employers expect workers to be productive with limited supervision.

6. I Am Seeking to Become an Expert in My Field

Employers appreciate applicants increasing their knowledge base to make themselves the best employees possible. Stating that you aim to become an expert makes employers view you as an asset. You are a resource that other employees can learn from and you are invested in the long run.

7. I Am Highly Motivated

A motivated employee is a productive employee. Talk about how your level of motivation has led you to accomplish many things. If you are a meticulous worker, discuss your organizational skills and attention to detail. Companies are always looking for dependable employees whom they can count on.

Interview Question Examples

According to the Harvard Business Review, the following questions are common ones you should be prepared to answer at a job interview:

• Could you tell me about yourself and briefly describe your background?
• How did you hear about the job?
• What kind of work environment do you prefer?
• How do you deal with stress or pressured situations?
• Which do you prefer—working on your own or in a team?
• How do you stay organized when you’re juggling several projects?
• What are your salary expectations?
• Are you applying for other jobs?

What Is Illegal to Ask in a Job Interview?

It is illegal for a job interviewer to ask questions about a job applicant’s race, color, sex, age, national origin, or religion. These personal characteristics are all protected by law.

How Long Do Employers Take To Make an Offer After an Interview?

According to LinkedIn, interviewed candidates may wait 1-2 weeks or longer for an offer.

How Are Interviews Commonly Conducted?

Candidates may be invited to interview virtually, in person, one-on-one with one manager, or with a panel of company representatives who all have input and questions. Large companies may have candidates move through a multiple-interview process.

The Bottom Line

Remember that a job interview is an opportunity to sell yourself to a prospective employer. Use the right phrases to give you the best chance of securing your dream job.

Fact checked by Vikki Velasquez

You’ve got an extra room and could use the extra cash. Should you take on a roommate in retirement? With the median rental price of a two-bedroom unit in the U.S. costing $1,887 in February 2025, it might be tempting to consider.

If you do choose to open your home to a roommate, you won’t be alone in making that choice. People over 65 are the fastest-growing age group taking in roommates in their homes, according to SpareRoom, an online platform for people to find roommates.

Here are a few points to consider before taking the step of living with someone.

Key Takeaways

• If you would enjoy sharing your home and you have a spare room, renting a room may be a good way to make some extra money.
• You’ll want to vet a potential roommate carefully with a background check and references.
• Ask people that you know if they know of someone looking for a room to rent. Online ads are another way to find potential roommates.

Advantages of Having a Roommate

Having a roommate (or multiple roommates) can be an easy way to reduce your cost of living—for many people, housing is one of their largest monthly expenses.

“Even a few hundred dollars a month can have a big impact and that might allow you to retire a bit earlier or spend more on things you enjoy,” advises Justin Pritchard, a certified financial planner at Approach Financial.

But you will need to pay taxes on that money.

“The biggest thing to remember is that you have to report the rent as income. You can take deductions to reduce some or all of the income from being taxed, but no matter what, it adds a layer of complication to your tax return,” says Tara Unverzagt, president and senior financial planner at South Bay Financial Partners. “If you file yourself, you may need a professional to do it correctly.”

In addition to the money, having a roommate may be a good way to increase social interaction because many seniors report struggling with loneliness.

A 2023 University of Michigan survey found that more than one-third of adults ages 50 to 80 reported feeling isolated over the past year. Additionally, one-third said they had infrequent contact, which was defined as once a week or less, with people from outside their home in 2023.

Having a roommate could help some seniors stave of feelings of isolation and loneliness due to living alone.

Disadvantages of Having a Roommate

You won’t have as much privacy when you invite a roommate to live with you.

“Is privacy very important to you? If so, you probably want to avoid going the roommate route,” advises Eric Maldonado, a certified financial planner and owner of Aquila Wealth Advisors.

There may be disagreements with a roommate, something you don’t have to worry about if you live alone.

“In any shared living space, there may be conflicts regarding cleanliness and the way the space is utilized. And one of the biggest downsides is that if it doesn’t work out and you want to get the tenant out of the home, it may be very uncomfortable during the process, which could drag on for quite some time,” says Sebastian Frey, a broker associate at Compass Real Estate.

Finding a Roommate

Start by reaching out to people that you know and let them know you are looking for a roommate.

“If you have family or friends local you could try letting them know you are looking for a roommate. If you are a member at a church or social club you could let people know you are looking for a roommate and may even ask to post an announcement,” Maldonado says.

You may wish to place an online ad detailing the room you have for rent.  

“You can post your room on Craigslist or other local accommodations search websites. If you are looking for someone of a certain age or stage of life, there are probably civic clubs or forums you can post in online that cater to those age groups,” Maldonado advises.

Note

If it’s an option, consider relocating to a more affordable area; you might be able to live solo without needing a roommate.

Vetting a Roommate

You’ll want to check out the background of a potential roommate to make sure they are a good match for you.

“You would want to have a very good vetting process. Patience and taking your time [are] key here. Do a background check, follow up with references, and have a couple conversations first,” Maldonado says.

Discuss with a potential roommate your schedule and what you expect from someone living in your home.

“Make sure you clearly outline your living arrangements, your schedule, and your expectations before committing to renting out a room. Take the time to choose a roommate who you think you’ll get along well with,” Hutchinson says.

Preparing for a Roommate

You’ll need to get the room you are renting out ready for a roommate and write up a rental agreement.

“There’s some administrative setup you’ll need to do, including creating a written agreement, preparing your room, and making sure you’ve read up on the state and local laws and tax rules. But the financial reward is well worth your time,” Hutchinson says.

Not sure how much to charge? SpareRoom provides a list of average rents in metro areas around the United States.

“Take a look at other room listings in your area or average rents to see how much you could charge for your room,” Hutchinson advises.

The Bottom Line

If you like company and have a spare room in your home, you may be able to supplement your retirement income by renting a room. Do a background check on all potential renters and ask for references.

Search for renters online, inquire with friends and family, and ask around at social clubs. You’re looking for someone who will be a good fit for your home. Don’t rush the process. Make sure to clean and prep the room and prepare a rental agreement. Once you find the right person, the room is theirs and the monthly rent check is yours.