investment

Reviewed by David Kindness

Bad debts arise when borrowers default on their loans. This is one of the primary risks associated with securitized assets, such as mortgage-backed securities (MBS), as bad debts can stop these instruments’ cash flows.

The risk of bad debt, however, can be apportioned among investors. Depending on how the securitized instruments are structured, the risk can be placed entirely on a single group of investors or spread throughout the entire investing pool.

Key Takeaways

• Securitization is the process of structuring a non-liquid asset or group of similar assets into a security that is sold to investors.
• Securitization bundles many non-liquid assets, usually loans such as mortgages, into a security, which is sold to an investor who receives an income stream from the principal and interest payments on that loan.
• There are two types of securitized assets: those that come as pools and those that have tranches.
• In a pool securitization, investors are equal and share all of the risks. If the pooled security has bad debt, all investors may suffer financial loss.
• In a tranche securitization, the security is split into different levels (tranches) made up of assets with different risk profiles. Higher tranches carry less risk than lower tranches, meaning lower tranches have a higher risk of suffering losses on bad debts first.

Securitization

Securitization is the process of financially structuring a non-liquid asset or group of similar non-liquid assets into a security that can then be sold to investors. The MBS was first created by trader Lew Ranieri in the early 1980s. It became an extremely popular investment in the 1990s and early 2000s. The idea was that the new security could be sold on the secondary mortgage market, offering investors significant liquidity on an asset that would otherwise be quite illiquid. 

Securitization, specifically, the bundling of assets such as mortgages into securities, has been frowned upon by many as it contributed to the subprime mortgage crisis of 2007. However, the practice continues today.

Pools and Tranches

There are two styles of securitization: pools and tranches. Here’s how they affect the level of risk faced by investors.

Pools

A simple securitization involves pooling assets (such as loans or mortgages), creating financial instruments, and marketing them to investors. Incoming cash flows from the loans are passed onto the holders of the new instruments. Each instrument is of equal priority when receiving payments. Since all instruments are equal, they all share in the risk associated with the assets. In this case, all investors bear an equal amount of bad-debt risk.

Tranches

In a more complex securitization process, tranches are created. Tranches represent different payment structures and various levels of priority for incoming cash flows. In a two-tranche system, tranche A will have priority over tranche B. Both tranches will attempt to follow a schedule of payments that reflects the cash flows of the underlying loans or mortgages.

If bad debts arise, tranche B will absorb the loss, lowering its cash flow, while tranche A remains unaffected. Since tranche B is affected by bad debts, it carries the most risk. Investors will purchase tranche B instruments at a discount price to reflect the level of associated risk. If there are more than two tranches, the lowest priority tranche will absorb the losses from bad debts.

For a portfolio, investors can choose from securitization investments such as prime and subprime mortgages, home equity loans, credit card receivables, or auto loans. Investors can also choose an index.

Important

Tranches can be categorized incorrectly by rating agencies, where tranches are rated investment grade even though they include junk assets, which are non-investment grade.

Issuer Risk

In addition to investor risk, securitized assets also pose risks to the issuer. Along with credit and liquidity risk, which investors share, issuers also face capital, reputational, and operational risks.

If the securitized market is full of bad debt—as occurred during the subprime mortgage crisis—this can lead to significant capital risk if the bottom falls out of the market. Financial firms must have sufficient capital to cover their losses arising from credit or market shocks.

A negative reputation can severely impact a financial institution’s ability to acquire credit and customers. Due to the public’s prevailing negative perception of securitized assets, banks that engage heavily in the securitized market must have plans in place to counter the negative perception.

Securitized assets are complex financial products and, as such, require significant capital and operational knowledge to create and market. Financial firms that want to sell securities assets must have appropriate underwriting, collection, and monitoring processes and expertise to profit from these assets while also mitigating risks.

What Are the Major Risks Associated With Securitization?

There are four major risks associated with securitization; credit risk, interest rate risk, prepayment risk, and liquidity risk. Credit risk is the risk that investors will not recoup their investment, while interest rate risk refers to the risk that interest rate changes will affect the price of the securitized asset. Prepayment risk is the risk that the principal will be returned prematurely, leading to lost future income, while liquidity risk is the risk that investors will not be able to sell bad assets on the open market.

What Are Examples of Securitized Assets?

Securities assets are assets that pool together numerous financial products to create a new security. Examples include mortgage-backed securities, collateralized debt obligations (CDOs), and asset-backed securities (ABS).

How Does Securitization Work?

Securitization happens in several phases. First, loans are issued to consumers. Next, banks and other financial institutions pool those various loans into a trust. These assets are then securitized and sold to investors as a pool or in various tranches with various interest rates and risk profiles. Investors receive interest payments, and banks selling the assets receive cash flow, which they use to fund other projects and — eventually — pay back their investors.

The Bottom Line

Securitization is a way for investors to gain access to assets that they would otherwise not have the chance to do so, such as mortgages. It is also a way for companies to reduce their balance sheet and take on more business by selling off assets like mortgages.

Securitization is a way to receive a consistent income stream, though it can be risky as much information about the underlying assets is unknown, such as the case in the subprime meltdown. When bad debts occur in securitization, the loss is shared as there are multiple investors, however, depending on the type of securitization, the loss is shared equally as in pooled securitizations or at different levels as in tranche securitizations.

Fact checked by Vikki Velasquez

Florida has long been a magnet for retirees, and for good reason: The state offers a winning combination of natural beauty, lifestyle perks, and financial advantages for seniors. With year-round warm weather and world-class golf courses, beaches, and fishing spots, Florida offers retirees the chance to enjoy outdoor activities in every season. 

Popular retirement cities include Miami, which attracts retirees seeking a vibrant, multicultural atmosphere, and Sarasota, which appeals to those preferring a more laid-back coastal lifestyle. The Villages, one of America’s largest retirement communities, offers many amenities and social clubs for those seeking an active adult lifestyle. But regardless of which part you choose to live in, you’ll enjoy one of the most compelling reasons to retire in Florida: the state’s tax-friendly environment. 

Key Takeaways

• Florida offers significant tax benefits, including no state income tax and no inheritance tax.
• The cost of living can be higher in popular retirement cities but generally remains reasonable in many parts of the state.
• Florida’s climate is warm year-round but can also bring risks, such as hurricanes.
• The state has top-rated health care facilities, though accessibility can vary by location.

Cost of Living and Housing

Florida’s cost of living varies significantly by region, although recent years have seen sharp increases in housing costs across all regions.

As is the case in most states, living in a major metropolitan area is more expensive. For example, in Miami, housing prices exceed the national average. In Q4 2024, the median sales price in the U.S. was $419,200; in Miami-Dade County, the median sales price was $625,000. 

However, some coastal cities such as Jacksonville and Tampa offer home prices closer to or below the national median. In Tampa-St. Petersburg-Clearwater, the median listing price was $396,973 in January 2025; in Jacksonville, the median listing price was $385,000.

You can find even cheaper home prices if you’re willing to go inland—or move to a smaller community. The median listing price in Marion County was $303,575 in January 2025; in Alachua County, it was $334,700.

However, Carolyn McClanahan, a certified financial planner based in Jacksonville, warns that retiring to rural or smaller communities comes with tradeoffs.  

“The biggest complaint about the major retirement cities is that many retirees are snowbirds who leave in the offseason,” said McClanahan. “Between that and tourists, traffic and services in retirement cities can be feast or famine. Plus, long-term care services can cost more because there are more people to serve. However, rural areas have a very hard time delivering health and long-term care services, so I discourage retirees from moving to rural or small communities.”

While the state’s lack of income tax provides some relief, the median household income in Florida in 2023—$73,311—falls slightly below the national average of $80,610. Florida is also tied for seventh in terms of states with the greatest income inequality, according to data collected by Statista. This income disparity may be especially noticeable in popular retirement destinations, where an influx of wealthy retirees from higher-cost-of-living states has created pockets of affluence alongside populations of fixed-income retirees, who may struggle to keep pace with rising costs.

Note

Regardless of where you live in Florida, property insurance and utilities, particularly air conditioning costs, tend to be higher than national averages.

Florida housing prices–like housing prices across the country–have increased sharply since 2020. Many retirement communities and retirement-friendly metros are experiencing a housing crisis. Middle-income retirees, in particular, may find it challenging to find available housing in their price range.

Taxes

The state maintains a 0% state income tax rate, which means retirement income—including Social Security benefits, pension income, and distributions from retirement accounts, such as 401(k)s and IRAs—remain untaxed, effectively stretching retirement savings further. This law has cemented the state’s reputation as a tax haven for retirees.

This exemption means that retirees can withdraw from their retirement accounts without worrying about state-level tax implications. (Although, it’s important to remember that federal taxes still apply). For those with substantial retirement savings or pension benefits, these tax savings can amount to thousands of dollars annually compared to states that tax retirement income.

Tip

The absence of state income tax also extends to all forms of earned income, making Florida especially appealing to retirees working part-time or maintaining consulting businesses during retirement.

However, the state compensates for its lack of income tax through other revenue sources, which can impact retirees’ budgets. Property taxes vary significantly by county and can be substantial in highly desirable areas. Additionally, it’s worth noting the state’s general sales tax of 6% (which can reach 8.5% with maximum surtax) is above the national average.

While these costs don’t typically outweigh the benefits of zero state income tax, they should be carefully factored into retirement planning—especially for those on fixed incomes.

Climate and Weather

The southern region of Florida experiences a true tropical climate, while the north experiences subtle seasonal changes. Overall, the state enjoys warm temperatures year-round, with summer highs typically ranging from the mid-70s to the mid-90s Fahrenheit, while winter temperatures average between the mid-50s and mid-70s. 

Florida is especially vulnerable to climate-related risks, including hurricanes, flooding, and occasional tornado threats. As a result, homeowners face higher insurance costs in Florida, especially in coastal areas where hurricane insurance is essential. Insurance premiums have increased sharply in the state over the past few years. 

Warning

Many major insurance carriers have reduced their coverage in Florida or left the state entirely, leading to higher premiums from the remaining insurers.

Flood insurance, which is required in some coastal areas of the state, can add thousands of dollars to annual housing costs. Even inland, some properties may require flood insurance, depending on elevation and their proximity to bodies of water. 

Retirees may face additional expenses related to the climate, including the need for impact-resistant windows or hurricane shutters in many areas, increased maintenance costs due to salt air and humidity in coastal regions, and the potential need for backup power systems during outages. 

Health Care and Senior Services

Florida’s health care landscape reflects its large senior population, offering world-class hospitals, specialists, and outpatient facilities. Several nationally ranked hospitals are located in Miami, including the University of Miami Health System and Baptist Health South Florida. Moffitt Cancer Center and Tampa General Hospital serve the Tampa area. In Orlando, the AdventHealth system and Orlando Health both offer comprehensive medical services and specialized geriatric care units. 

Important

Keep in mind that wait times for new patient appointments can be longer in popular retirement areas due to high demand.

The state’s retirement communities have also evolved to include on-site health care delivery systems. These communities often feature integrated health care services, from primary care clinics to specialized rehabilitation facilities (at a cost). Additionally, Florida has developed an extensive network of assisted living facilities, skilled nursing homes, and memory care centers to accommodate varying levels of care. 

While the state’s overall health care costs tend to be lower than the national average in many areas, specialized care and certain medications can be more expensive. Medicare Advantage plans are widely available throughout the state, often with competitive premiums.

The state has also seen growth in concierge medical practices and specialized geriatric care centers, but these premium services often come with higher costs. For retirees with chronic conditions, Florida’s climate and health care infrastructure can be advantageous; there are numerous care centers for specific health conditions, including heart disease, cancer, and diabetes. 

The Bottom Line

Florida consistently ranks as one of America’s top retirement states because of its unique combination of financial, lifestyle, and health care advantages. For many, the state’s most compelling draw is its favorable tax structure, most notably its lack of state income tax. However, higher property taxes and insurance costs can offset these benefits—so consider your full financial picture before you commit to retirement in the Sunshine State. 

If you’re nearing retirement, you’ve probably wondered when to start taking Social Security benefits. For years, age 65 was considered the “normal” retirement age, but a law passed in 1983 gradually raised this age to reflect the increasing life expectancy of Americans.

As of 2025, the full retirement age (FRA) is still rising depending on your birth year. Knowing when to claim benefits can significantly impact your monthly checks.

Key Takeaways

• Full Retirement Age rises to 66 years and 10 months for those born in 1959.
• You can start benefits at age 62, but your payout will be reduced.
• Experts recommend waiting until age 70 for maximum benefits.

What’s Changing With Social Security in 2025?

Your full retirement age (FRA) marks the point at which you can claim your full Social Security benefits, based on your lifetime earnings.

• If you were born in 1958, your FRA is 66 years and eight months.
• If you were born in 1959, your FRA is 66 years and 10 months.
• If you were born in 1960 or later your FRA is 67 years.

Note

This increase is part of a trend to ensure the system’s long-term solvency as people live longer. With an aging population, the government has gradually raised the age for full retirement benefits.

How Much Will You Get at Different Ages?

If you begin receiving Social Security benefits before your FRA, your monthly benefit will be reduced by up to 30%, depending on how many years before your FRA you start claiming.

Conversely, if you delay benefits until after your FRA, your benefit will increase by 8% per year until you turn 70. This means waiting could result in a 32% higher monthly benefit by age 70 compared to claiming at FRA.

Here’s an example from the Social Security Administration of what benefits look like at age 62:

The earlier you claim, the lower your monthly payment will be. For some, waiting might be worth it.

What’s the Best Way to Maximize Your Retirement Income?

Stephanie McCullough, founder and financial planner at Sofia Financial, says we have to make our best guesses since we’re missing a variable in the calculation: The age when we will die. 

“One of the most helpful things all of us can do, which serves us well in a multitude of situations, is to try to keep our fixed expenses as low as we can. Those hard-to-change, repeated regular costs like housing, car payments, utilities, and monthly bills,” McCullough says. “I’m not saying you shouldn’t enjoy your life–quite the opposite! If you keep those fixed costs low, you have more room for discretionary fun stuff, as well as to adjust to any exogenous shocks life throws at you.”

When’s the Best Time to Claim?

One of the most critical decisions you’ll face as you approach retirement is when to claim your Social Security benefits.

“Waiting until 70 certainly has its benefits: a higher initial monthly payment, which means greater cost-of-living (inflation) adjustments (since they are a percent), and one that people may overlook is higher survivor benefits for the surviving spouse, if applicable,” McCullough says. “Even if the higher-earner in a couple may not live terribly long, their benefit amount will determine how much the widow(er) receives for the remainder of their life, which can have a big impact over the years.”

There are also times it makes sense to claim your benefits at a younger age, as it can increase the monthly cash flow of the household. 

There’s no one-size-fits-all answer, but there are key factors that can help guide your decision:

• Health and life expectancy: If you or your family have a history of shorter lifespans, claiming earlier may be more beneficial. If you expect to live longer, delaying benefits might be the way to go.
• Marital status: Married couples can often benefit from a strategy that maximizes survivor benefits, while single or divorced individuals might make different decisions based on their circumstances.
• Financial needs: If you need income to meet immediate financial obligations, claiming early might be necessary. But if you can afford to wait, it’s usually best to delay to increase your lifetime benefit.
• Other retirement income: Consider your investment portfolio and other retirement income sources.

How Will These Changes Affect You?

These changes are live, so it’s important to plan for them. Here’s what to consider:

• If you’re over 62: Check your FRA. If you’re close to it, decide whether to wait or claim benefits early.
• If you’re under 60: Start adjusting your retirement expectations. The FRA continues to rise, so you may need to plan for a later retirement or boost your savings.
• The longer you wait, the higher your payout: If you’re financially able to delay, a larger monthly payment could benefit you greatly.

Other Social Security Changes in 2025

Along with the increase in the full retirement age, other Social Security adjustments are set to take effect in 2025:

• Cost-of-living adjustment (COLA): Recipients will see a smaller increase of 2.5% in their benefits, down from 3.2% in 2024.
• Maximum taxable earnings: The maximum amount of earnings subject to Social Security taxes will increase from $168,600 to $176,100.
• Appointment-based services: To improve efficiency, Social Security offices will move to an appointment-only model for in-person services nationwide.
• The earnings test: If you’re below FRA and continue working, your benefits may be reduced based on your earnings. In 2025, the income limit before reductions will rise to $23,400 (up from $22,320 in 2024). After FRA, you can earn up to $62,160 without any adjustments, a $2,640 increase from 2024.

The Bottom Line

With Social Security rules changing, it’s important to plan ahead. Whether you’re already eligible or a few years away from retirement, understanding the new FRA and how it impacts your benefits will help you make the best financial decisions. Consulting with a financial expert and adjusting your retirement strategy now could mean a bigger payout later.

The key takeaway: Don’t rush into claiming Social Security benefits without considering how the age adjustments will impact your monthly payments. Consider your life expectancy and retirement savings to figure out the best time to start taking benefits.

Reviewed by Pamela Rodriguez

It’s no surprise that the energy we consume is pricey, whether we’re buying gasoline, heating oil, or electricity. Yet many people are shocked when they add up all their monthly bills to see precisely how much their energy consumption costs them annually.

According to various research, in 2023, the average household spent $2,449 on gasoline and $2,412 on electricity.

Anything you can do to conserve energy and keep more money in your pocket is a step in the right direction.

Let’s take a look at 10 painless ways to reduce consumption and cut your expenses.

Key Takeaways

• Adjust your thermostat based on the season as well as whether you’re home or away to reduce your energy consumption and cut costs.
• Ceiling fans, energy star appliances, and energy-efficient light bulbs can also help you save.
• Even when they aren’t in use, home electronics use energy and increase your electricity bill. So turn them off or unplug them.
• Set up your shower, faucets, and toilets to use less water, and regularly change or empty your furnace filters to keep the unit at its most efficient.
• Sealing and insulating your house, closing doors, windows, and shades, and using trees and other greenery for shade are other low-cost ways to cut energy usage and bills. 

1. Adjust Your Thermostat

Turning up your thermostat during the summer and turning it down during the winter are great ways to cut energy use. The Department of Energy (DOE) recommends adjusting your thermostat 7°-10° for 8 hours a day from its normal setting.

Whether it’s summer or winter, this can keep your house comfortable while reducing your energy costs and decreasing the demand on the energy grid.

A programmable thermostat lets you make the house hotter or cooler during periods when you aren’t home. This reduces the temperature difference between the exterior and interior of your house, which in turn reduces energy loss.

If you don’t have a programmable thermostat, you can manually adjust your existing unit.

2. Use Ceiling Fans

If you have ceiling fans in your house, turn them on and use them properly.

According to Energy Star, a voluntary labeling program sponsored by the DOE and the U.S. Environmental Protection Agency (EPA), ceiling fans should be set to spin counter-clockwise in the summer. This pulls hot air up to the ceiling and away from the living space.

In the winter, reverse the setting so the fans blow the hot air down.

3. Buy Energy Star Appliances

Energy Star also identifies energy-efficient appliances, including washers, dryers, refrigerators, freezers, dishwashers, dehumidifiers, room air conditioners, computers, and more.

When shopping for new appliances, look for ones with the Energy Star label. It ensures that the items you are considering will help you save money.

Of course, don’t increase the use of these items just because their lower energy consumption results in a lower energy cost. Consuming more defeats the purpose.

4. Turn Off Home Electronics

Stereos, DVD players, televisions, kitchen appliances, and any other plugged-in appliances draw a small amount of power even when turned off.

Use the surge suppressor to turn them completely off when not in use, or unplug these items until you really need them.

5. Use Energy-Efficient Light Bulbs

A quick and easy way to reduce your energy use is to replace existing incandescent bulbs with energy-efficient bulbs. According to the DOE, the switch to LED lighting can save about $225 in energy costs per year for the average household.

Regardless of the bulbs you use, turn them off when you leave the room. For laundry rooms, garages, basements, and other little-used areas, consider the installation of timers that automatically turn off the lights after a preset amount of time, just in case you forget to shut them off.

6. Conserve Water

Low-flow fixtures that conserve water are available for your shower, faucets, and toilets. In addition to installing these items, be sure to replace faucets that drip, fix toilets that leak, and turn off the spigot when brushing your teeth or scrubbing dishes.

Every drop of water you save contributes to the conservation of this valuable and indispensable resource.

7. Seal and Insulate

A well-insulated house can reduce the amount of money you spend on heating and cooling. Start by checking your attic for insulation. In an unfinished attic, you shouldn’t be able to see the floor joists. If you can see them, you need more insulation.

Also, be sure to fill in and seal any holes in your exterior walls, such as the places where pipes come into the house, and around windows and doors.

Wrap your boiler and exposed pipes with insulation to help them maintain the proper temperature.

8. Change or Empty Filters

Change the filter on your furnace on a frequent basis. Many furnace manufacturers recommend doing it quarterly or even monthly to keep the unit operating at peak efficiency.

Similarly, empty the lint filter in your dryer after every use. Even a small amount of lint reduces energy efficiency. A lot of buildup could even cause a fire.

9. Close the Doors and More

Close the doors on your refrigerator and house as quickly as possible. Keep fireplace dampers shut when not in use. Close the curtains to cover your windows when the temperature is low. During the summer, close them to reduce the heat that comes through your windows

All of these efforts may seem small, but they certainly can help to conserve energy and reduce your utility bills.

10. Use Trees and Other Plants

Strategically placed trees and bushes can help reduce your heating and cooling costs. During the summer, trees provide shade. During the winter, they and other plants can provide a windbreak.

Positioning large deciduous trees in the right places can reduce cooling costs by up to 25%, according to the DOE.

These deciduous trees should be planted on the south and west sides of your home. They can be positioned strategically to shade hard surfaces that retain and emit heat, including driveways and patios.

Because they lose their leaves in winter, trees allow the sun to warm your house. Evergreen trees planted on the north side of your home will help to shield the house from cold winds in every season.

Can Solar Energy Heat a Home?

Yes, it can, although you might need to supplement it with other energy when sunlight is scarce. Solar energy can be used to heat your water or your inside environment. It can also be used to generate electricity to power heating or cooling appliances.

Could an Electric Space Heater Cut Heating Costs?

It could if you use one in just the room in which you spend the most time, shut the room’s doors, and turn down the thermostat for the whole house. The same idea applies if you happen to use a wood-burning stove. Then, essentially, you’ll be heating just one room in the house and saving on other heating energy costs.

What’s the Best Way to Save on Gas?

The best way to save on gas is to drive your car as little as possible. Combine your errands into a single trip whenever you can. Take public transportation and carpool. Depending on the area where you live or work, consider walking or riding a bicycle. Also, make sure your car is properly maintained to ensure fuel efficiency.

The Bottom Line

Cutting your energy consumption conserves valuable resources and can save you money. It’s not that hard to do if you are mindful of your energy use and your options for reducing your consumption. Once energy conservation becomes a habit, you should see a difference in the bills you pay.

A health savings account (HSA) is a tax-advantaged savings account for medical expenses like doctor visits, prescription drugs, and dental care. You can open an HSA if you enroll in a high-deductible health plan (HDHP). 

High deductibles mean higher out-of-pocket costs, but your HSA contributions and withdrawals for eligible expenses are tax-free. This could save you money in the long term, especially if you have significant medical needs.

Key Takeaways

• HSAs allow you to pay for qualified medical expenses using pre-tax income, which could save you money on out-of-pocket health care costs.
• Unlike comparable savings plans, such as flexible spending accounts and health reimbursement arrangements, you can continue using your HSA to pay for medical expenses after you leave your job.
• You can only get an HSA if you have a high-deductible health insurance plan.

Advantages of an HSA

HSAs have substantial benefits compared to other types of health coverage.

HSAs Pay for Many Types of Medical Expenses

Your HSA can pay for copays, coinsurance, and other health care costs not covered by your health plan. Besides standard doctor visits, your HSA can also cover vision and dental care, prescription drugs, over-the-counter health products, family planning expenses such as contraception and fertility treatments, and even menstrual care products. You can find the full range of qualified medical expenses on the Internal Revenue Service (IRS) website. 

In addition to these medical expenses, the HSA may also cover limited types of insurance premiums. For example, if you lose your job and buy COBRA coverage, those premiums are HSA-eligible expenses. So are the premiums you pay for health insurance coverage while you receive unemployment compensation. Medicare premiums, although not those for Medicare supplement insurance (i.e., Medigap), are also eligible if you’re 65 or older.

HSAs Have Tax Advantages

When you contribute to your HSA, the money comes from your paycheck before taxes are taken out. This lowers your taxable income. In other words, if you earned $70,000 and put $5,000 into your HSA, you’ll only owe income taxes on $65,000 for that year. This can save you money during tax time.

You can also make after-tax contributions to your HSA and claim these as deductions when you file your federal income tax return.

Distributions from your HSA are also not taxed as long as they’re what the IRS considers “qualified” distributions. A qualified distribution (or withdrawal) means the money was used for eligible medical expenses. A non-qualified withdrawal could result in a 20% tax penalty.

If you’re over 65, you can withdraw money from your HSA for any reason without paying a tax penalty, although you’ll still owe income tax on the withdrawal if the money is used for non-medical expenses.  

You Can Take Your HSA With You When You Leave Your Job

Your HSA is yours to keep, even when you leave your job. You can usually continue contributing to it if you maintain HSA-eligible health insurance. This portability sets the HSA apart from the similarly structured flexible spending account (FSA) and other employer-sponsored savings accounts, such as the 401(k).

Your HSA will last even in retirement. You can reimburse yourself for eligible medical expenses incurred at any time if you maintain proof of the expense, such as a receipt. The money in the HSA never expires.

Your HSA Works Alongside Other Investment Accounts

When you turn 65, you can take money out of your HSA tax-free to use as retirement income. In this way, the HSA complements your other retirement accounts. It combines the tax-free savings of a 401(k) or traditional individual retirement account (IRA) while you’re working, and the tax-free withdrawals of a Roth IRA when you retire.

The investment opportunity is especially attractive if you’ve reached your annual contribution limits on other retirement accounts. Even though you can’t contribute as much to an HSA as you can to 401(k) or IRA, it can still boost your overall savings.

You can use your contributions to purchase the same types of financial assets as more traditional retirement accounts, including stocks, bonds, and exchange-traded funds (ETFs).

Disadvantages of an HSA

An HSA may help offset health care costs, but it may not be the best solution for everyone.

You Can’t Get an HSA Without a High-Deductible Health Plan

Your health insurance deductible is the amount you pay for covered medical expenses each year before your insurer starts to pay. The higher the deductible, the more you’ll spend out of pocket. In 2025, HDHPs are defined as having a deductible of at least $1,650 for individuals or $3,300 for families. However, many HDHPs have higher deductibles, often more than $3,000 for individual coverage.

The trade-off is that HDHPs generally have lower premiums. Thus, if you have expensive health care needs and expect to meet your annual deductible, you could save money you would’ve otherwise spent on higher premiums.

But if you only go to your general practitioner or the occasional specialist throughout the year, your out-of-pocket expenses will quickly add up. While your HSA contributions should cover these costs, you may prefer for your health insurance plan to cover major medical expenses directly, even if it means paying higher monthly premiums.

Most of the Value of an HSA Comes From Contributing a Lot of Cash

In 2025, you can put up to $4,300 in your HSA if you’re single or $8,550 if you have a family. These contributions never expire—you can use the money anytime, even years later. However, maximizing your contributions means you might have less money for other investments, including retirement accounts and cash savings.

Since you can only use these contributions for qualified medical expenses, you’ll only build up savings if your medical costs are lower than what you put in your HSA. If you have a severe illness or medical emergency, you could drain what you added to your HSA and still pay high excess out-of-pocket costs if you haven’t met your deductible.

There Are HSA Taxes and Tax Penalties

If you use HSA money for something other than qualified medical expenses, you may have to pay income tax and an additional 20% tax on the amount. The distribution will be reported on your tax return (Form 1040).

There are no exemptions for the income tax requirement for non-qualified distributions.  However, you (or your estate) will be exempt from the 20% penalty if the distribution is made after you turn 65, become disabled, or die.

These rules are stricter than for other investment accounts, such as the 401(k) and 403(b), which allow for a taxable but penalty-free early withdrawal to pay for sudden financial hardship.

HSA Alternatives

Two alternatives to the HSA are flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs). These plans generally cover the same expenses, though there are some exceptions, such as certain health insurance premiums covered by the HSA.

The FSA works like an HSA in that contributions are made with pre-tax income, and distributions are not taxed if used for qualified medical expenses. However, these differ from HSAs in two crucial ways:

1. You can start an FSA regardless of the health plan you choose.
2. Unused contributions don’t roll over to the next year unless your FSA expressly permits it (not all do). The IRS limits the amount that can be carried over. The carryover limit was $660 for contributions rolled over from 2024 into 2025.

Your employer funds an HRA, which can only be used for qualified medical expenses. Your employer’s contributions don’t count toward your income, so you’ll never have to pay taxes on them. But if you use the HRA to pay for a non-qualified expense, you must pay income tax.

You can roll over the balance of an HRA to the following year, but there’s a limit to how much you can be reimbursed during a given coverage period. 

How to Make the Most of Your HSA

Try to contribute the maximum amount to your HSA each year. This helps ensure you’re covered for regular checkups, specialist visits you expect, and any emergencies requiring more painful expenditures. Any money you don’t use stays in your account and can become a nest egg for retirement.

Note

A 65-year-old retiring this year can expect to spend an average of $165,000 in health care and medical expenses throughout retirement. 

Invest according to your risk tolerance: Because your HSA allows you to invest your funds, you can invest in slow-growing, less risky financial assets (such as ETFs) or faster-growing, potentially more volatile ones (such as stocks). Make sure you understand your own investing goals, including saving for retirement or preparing for significant health costs.

The Bottom Line

Open enrollment happens every year, which allows you to weigh the pros and cons of your health insurance options. While your HSA can help reduce the burden of high out-of-pocket costs from an HDHP, those costs might be lower with a different plan. A higher-premium plan might be worth lower out-of-pocket expenses.

On the other hand, an HSA could help you meet your long-term saving and investing goals while simultaneously covering you in the event of a large medical bill. Ultimately, its value depends on how much you can contribute.

9 tips to help you navigate the car-buying process

Fact checked by Brendan Harkness

Buying a car from a dealership can be equal parts exciting and overwhelming. However, if you follow some simple car-buying tips, choosing your next set of wheels should be a lot less stressful. Whether you want a pre-owned vehicle or a brand-new model, the nine steps below should make it easier to navigate the process. 

Ready to apply for a car loan right now? Find your lowest rate with the best auto loan lenders available today.

1. Calculate Your Budget

Before you begin car shopping, it’s important to take an honest look at your finances. Buying a new vehicle has the potential to increase or perhaps even introduce several expenses into your monthly budget, including: 

• Car loan payments
• Auto insurance premiums
• Property tax payments (which may be annual)
• Maintenance costs

Additionally, you’re likely to have upfront costs associated with your vehicle purchase as well. For example, you might have to pay one month or more of new auto insurance premiums in advance, plus sales tax and property tax on your new purchase. 

It’s also common for dealerships to charge document fees and other dealer fees in addition to the purchase price of your vehicle. Some fees and taxes (like sales tax) may be eligible to be rolled into your car loan if you’re financing the vehicle. But you might be responsible for paying other costs, like property tax, out of pocket depending on your lender and the maximum loan-to-value (LTV) ratio it offers.  

It cost an average of $12,182 to own and operate a new vehicle in 2023, according to AAA. Depending on the type of vehicle you choose to purchase and many other factors, your true cost of owning a car could vary.

2. Check Your Credit

Unless you’re paying cash for your new or used vehicle, it’s critical to review your credit before you start the car shopping process. An auto lender will check one or more of your credit reports and associated credit scores when you apply for financing. Therefore, you should be aware of the condition of your credit so you’ll have proper expectations when you apply for an auto loan.

Lenders rely on credit scores to predict risk. A higher credit score indicates that a borrower is more likely to pay future credit obligations on time. So it makes sense that lenders tend to reserve their lowest rates and best loan offers for applicants with higher credit scores. 

With lower credit scores, you’re more likely to face higher interest rates, less attractive borrowing terms, and possibly higher down payment requirements as well. With bad credit, you might find it difficult to qualify for some auto loans without a co-borrower or co-signer. 

The Fair Credit Reporting Act (FCRA) gives consumers the right to access their three credit reports free of charge at least once every 12 months. (Visit AnnualCreditReport.com to claim your free reports.) These free reports don’t include credit scores. But there are other sources for free credit scores available, such as credit card issuers and online credit monitoring services. 

3. Choose the Vehicle and Features You Want

Once you know your budget and the condition of your credit, you may be ready to begin researching vehicles in your price range. To narrow down potential vehicles you can make a list of your preferences, such as:

• Your preferred vehicle type (e.g., car, van, SUV, truck, etc.)
• The number of passengers you need to transport
• The amount of cargo capacity you need
• Whether you need the ability to tow
• Your access to garage or parking space 
• Whether you want four-wheel drive or all-wheel drive
• The type of fuel economy you want
• Top features on your wishlist (e.g., leather seats, backup camera, sunroof, etc.)

It’s important to have a good idea of the type of vehicle you want to buy and the features that matter most to you before you visit a dealership. Defining your wants and needs in advance makes it harder for a salesperson to push you into purchasing a car you don’t want or can’t afford. Plus, researching the average prices of your favorite vehicle options in advance can help you be better prepared before you step foot onto a car lot. 

4. Get Pre-Approved for a Loan

Comparing financing options from multiple auto lenders is one of the most important steps in the car-buying process—a step you should begin long before you visit your first dealership. According to the Consumer Financial Protection Bureau, shopping for the best rate on an auto loan has the potential to save you hundreds and possibly thousands of dollars.

Thankfully, many auto lenders will allow you to see if you’re pre-approved for a car loan. The pre-approval process can let you check your estimated interest rate, the amount you’re approved to borrow, and your estimated monthly payment. If a lender pre-approves you for a car loan, you’re not guaranteed to be approved, but you have a good chance of qualifying for financing. 

In many cases, a car loan pre-approval will result in a hard credit inquiry that has the potential to impact your credit score in a negative way. However, if you apply for multiple auto loans within a 14-day window (sometimes up to 45 days), FICO Scores will treat those rate shopping credit checks as a single credit inquiry—this means they will have minimal impact on your credit.

Compare the Best Auto Loan Rates

The best auto loan for you will depend not only on interest rates, but also available loan amounts and terms, credit score requirements, and other factors.

5. Choose a Dealership

By this point, you may be ready to start visiting car dealerships in your area. To prepare for this step, it’s wise to research established and reputable car dealerships with positive reviews and high customer satisfaction ratings. 

Look out for red flags like dealerships that charge high additional fees on top of the vehicles they sell. A reasonable document fee may be standard, depending on your location. It’s also normal to pay sales tax, title and registration fees, and inspection and emission fees in certain states. However, some dealerships may add on other fees (e.g., advertising fees, destination fees, tire protection, market adjustments, appearance packages, etc.) that could add thousands of dollars to the cost of your vehicle purchase. 

In general, it’s best to visit several dealerships. Just as you want to compare auto loan offers, you’ll also want to compare vehicle offers before you make your final decision to make sure you get the best price on a new (or used) car.

6. Test Drive and Inspect the Vehicle

Another important step in the car-buying process is to test-drive the car models you’re considering purchasing. Test drives can help you evaluate the comfort and performance of different vehicle options. (You may want to take notes if you’re still trying to narrow down your options and choose a favorite vehicle make and model.)

As you draw closer to the point of choosing a specific vehicle to purchase, you can use the test-drive process to accomplish the following important steps. 

• Verify the vehicle you’re considering has the features you’re looking for and is the trim level you want to purchase. 
• Check for damage or defects on the vehicle’s interior and exterior. 
• See how the vehicle handles at different speeds. 
• Make sure you’re comfortable driving and parking the vehicle. 

If you’re buying a used car, it’s also important to obtain a copy of the vehicle’s history. Doing so should enable you to check for accidents, maintenance records, and details of previous ownership.

7. Negotiate With Salespeople

Whether you’re trying to get the best price on a new car or a used car, it’s important to sharpen up your negotiating skills before you visit an auto dealership. Shopping for a car in today’s market can be more difficult for buyers than it was in the past due to a combination of challenges such as higher prices, higher interest rates, and lower inventory levels. 

Nonetheless, negotiating with auto salespeople (at least to some degree) may still be possible depending on your location. And the tips below may help you navigate the process. 

• Be firm regarding your budget. 
• Feel confident about the vehicle price research you did ahead of time. 
• Don’t be afraid to walk away and visit other dealerships. 
• Get offers from multiple auto dealerships before you make a final decision. 
• Avoid being in a hurry to purchase.
• Pay attention to the total cost of the vehicle (including additional fees the dealer adds on), not just the monthly payment.

Be aware that auto dealers will often try to get you to add on additional products after you purchase your vehicle. For example, a salesperson or finance manager may try to upsell you an extended warranty or GAP insurance. 

Extended warranties and similar products can cost thousands of dollars and are big money-makers for the companies that issue them and the dealerships that sell them. Yet in general, you’re better off saving the same amount of money in an emergency fund, where you’ll have access to the cash if you need it for repairs. And if you don’t have to spend the money on repairs, you can use it for something else.

If you save your emergency fund in a high-yield savings account, your cash will have the opportunity to grow at a faster rate. 

8. Finalize the Deal

Once you’re confident you’ve negotiated a good deal on your new or used car purchase, it’s time to look over the details. Make sure to read any purchase contracts carefully before you sign them. The same rule applies to auto loan agreements from your lender, whether you got a loan through the manufacturer or an outside lender.

If you’re trading in a vehicle as part of your new purchase, look over those details as well. Make sure the dealership is paying you what it agreed for your former car, and that the funds are enough to cover the cost of any existing car loan you owe on that vehicle (if applicable). 

The dealership may also need certain information from you to finalize the sale of your new vehicle. For a smoother process, bring the following documents with you during the car-shopping process. 

• Identification
• Proof of insurance
• Lender pre-approval letter(s)

9. Take Delivery

In some cases, you may be able to drive your new vehicle home from the dealership the same day you purchase it. At other times, you may have to arrange pickup or delivery of your vehicle at a later date. Yet in either scenario, the dealership should provide you with a clean vehicle and a full tank of gas. 

If your car is arriving at a later date, be sure to inspect it again for any new damage that might have occurred during the delivery process. You should also expect a demonstration of the key features of your new car, including safety features and pairing your phone with the vehicle’s Bluetooth technology. 

Many dealerships will also handle the process of registering your car and obtaining your license plates on your behalf. However, depending on your state of residence, you may have to pay property taxes before the dealership can complete this process for you. 

Frequently Asked Questions (FAQs)

What Do You Need to Buy a Car From a Dealership?

If you plan to buy a car from a dealership, it’s important to calculate your budget and check your credit before you start the process. From there, you can choose the type of vehicle you want and shop around for the best interest rates on car loans. It’s also smart to get pre-approved for an auto loan before you begin visiting car dealerships. 

Completing these steps puts you in a better financial position to buy a car from a dealership. Once you’re armed with a loan pre-approval and you know the type of car you want to buy, the car-buying process should be much easier to navigate with success.

Should You Go to the Dealership by Yourself?

Going to a car dealership with a trusted family member or friend is often better than going alone. Communicate how much you want to spend on a car and your other car-buying goals with your loved one before you visit the dealership. The supportive presence of another person may boost your confidence during negotiations and provide you with reassurance if a salesperson tries to pressure you into a decision that isn’t in your best financial interest.

What Are the Advantages of Buying From a Dealership?

There are several potential advantages to buying a car at a dealership, versus online or from a private party. At a dealership, you may have the opportunity to test drive and explore multiple vehicles. You may also be able to compare additional financing options and take advantage of manufacturer incentives that have the potential to save you money on your vehicle purchase.

You can use our auto loan calculator to compare multiple loan offers and determine the best deal on financing.

Can You Buy a Car From a Dealership Without Credit?

Figuring out how to buy a car from a dealership with no credit can be a challenge. When you have no credit, lenders may require you to provide a larger down payment to secure an auto loan. You may be charged a higher interest rate, which could impact both your monthly payment and the amount of money you can borrow to buy a new vehicle. 

If you have time to work on establishing your credit before you apply for a new car loan, you may be able to improve your chances of qualifying for more affordable financing. Otherwise, adding a co-borrower or co-signer with good credit to your car loan might also be a helpful solution while you work to build better credit for the future. But you should understand that your co-applicant is taking on considerable risk by adding their name to your auto loan.

Can You Buy a Car Online From a Dealership?

Buying a car online is becoming an increasingly popular way to purchase a vehicle from an auto dealership. In some cases, you may even be able to arrange an initial delivery of the vehicle you’re interested in for a test drive (or an extended test drive) as well. Keep in mind that there may be additional fees when you purchase a car online, such as delivery fees, depending on the policy of the dealership. At a time when buying a new car costs more than ever, paying additional fees may not be the right fit for every budget.

Fact checked by Vikki Velasquez

New York might not be a traditional retirement destination like Florida or Arizona. But as a place to retire it has a lot going for it: lively and walkable cities, many top-flight health care facilities, natural wonders galore, and even relatively mild weather—for much of the year, at least. At the same time, living in New York can be expensive, especially if you want to take advantage of everything it has to offer.

Whether you already call New York State home and would like to stick around for your retirement years or live someplace else and are pondering a move, these are some of the financial issues you’ll want to consider.

Key Takeaways

• The state of New York offers a wide variety of places to retire, from fast-paced urban centers to quieter rural areas.
• The cost of housing can be high, especially in New York City and its nearby suburbs.
• New York has relatively high taxes but offers some breaks to retirees and people over 65.
• Health care services vary widely in quality but include many top-rated facilities across the state.

Cost of Living and Housing

Despite what much of the world might think, New York isn’t all concrete and skyscrapers. It’s a remarkably diverse state, ranging from densely populated cities to woodsy suburbs to vast tracts of farmland. In fact, New York is among the nation’s top five producers of milk, apples, grapes, and other agricultural products—not to mention No. 1 for cottage cheese and yogurt!

While one recent study ranked New York fifth overall in average living costs (after Hawaii, the District of Columbia, Massachusetts, and California), reducing any state to a single average can mask significant differences from one region or community to another.

For example, the Economic Policy Institute estimates the average cost of living for two adults in the New York area, which includes New York City, at $7,742 a month or $92,899 a year. By comparison, suburban Westchester County north of New York City runs $7,417 a month or $89,002 a year on average, while rural Chenango County in the south-central part of the state comes in at $4,881 or $58,566.

Cost of Living in NYC vs. Smaller Cities

If urban living appeals to you, you’ll also find substantial cost differences between the New York City metropolitan area and other large cities across the state. Here are a few examples, listed in order of average cost:

Besides cities of varying sizes, New York has many small towns to choose from, where living costs may be lower still. 

Average Cost of Homes Across Different Regions

The major driver of these differences is the cost of housing, which is notoriously scarce (and pricey) in some parts of New York City in particular. The state itself estimates that housing costs, including property taxes and utilities, account for about 40% of household expenditures for New York City residents. That’s a good deal more than the common financial guideline that housing costs generally shouldn’t exceed 30% of a family’s gross income. (Devoted New Yorkers, of course, would argue that the city’s cultural amenities more than make up for it.)

If you’re looking to buy a home, New York prices are likely to seem high compared with other parts of the country. And indeed they are in many cases, judging by the average U.S. home price of $419,200 in the fourth quarter of 2024.

While most New York City residents rent rather than own their homes (see next section), homebuyers in Manhattan paid a median price of $1.1 million in December 2024, according to Realtor.com. Bear in mind that given the nature of the city’s housing stock, many of these homes are condominiums or co-ops and not free-standing single-family houses, making comparisons to other parts of the state a little tricky.

Suburbs in close proximity to New York City also reflect those high costs. Scarsdale, long considered a particularly desirable community in Westchester County, matched the city’s median price of $1.1 million (although buyers probably got more square footage per dollar there than in the city). White Plains, another large Westchester suburb, reported a median price of $483,800.

Away from New York City’s gravitational pull, prices begin to come down to earth. For example, the three other large cities referred to earlier had median sales prices well below the national average:

Rochester, for example, had a median sales price of $214,000, Syracuse came in at $200,000, and Buffalo at $240,000.

In rural areas, prices can be lower still. In Chenango County, for example, the median sales price was $167,900.

So, where you choose to live is likely to be the single most important factor in whether retiring to New York is a practical option.

Renting vs. Owning a Home

As mentioned above, the majority of New York City residents are renters—69% by one recent estimate. Apartment rents there recently averaged $3,500 a month, although that can vary greatly based on the size of the apartment, the section of the city, and other factors.

Even retirees who are accustomed to owning their homes may find that renting—in New York City or anywhere else—has some advantages. For one thing, it’s a good way to try out a particular city or neighborhood without making a major financial commitment. For another, you might not want to take on another mortgage at this stage or even be eligible for one.

Taxes in New York

No one would call New York a tax haven. Software maker TurboTax, for example, ranks its tax burden as the highest of any state in the U.S., accounting for both state and local income, property, and sales taxes. By its estimate, New Yorkers pay 12.47% of their income, on average, in taxes. Compare that with, say, 9.38% for Illinois residents and 6.33% for Floridians.

While taxes can be a factor in the where-to-retire calculus, they shouldn’t be your only consideration.

“I always tell clients not to let the tax tail wag the dog,” said Michael Terry, a certified financial planner with Merit Financial Partners in Maspeth, N.Y. “It’s more important to ask yourself what you really want and focus on your goals.”

You might find that New York is a perfect fit, regardless of taxes—or that you’d be happier in New Hampshire or New Mexico or even New Zealand.

What’s more, New York’s taxes aren’t uniformly onerous. In some cases, retirees or anyone over a certain age gets a break. This is what you can expect:

Income Taxes

Like most states today, New York has a graduated, or progressive, income tax system, where higher brackets of income are taxed at higher rates. The state’s top rate, 10.9%, is among the highest in the country. Fortunately, that rate applies only to income over $25 million. If you’re married, file jointly, and earn $100,000, say, none of your income will be taxed at a rate higher than 6%.

In addition, certain types of retirement income are either excluded from taxation or subject to different treatment. Here’s a breakdown:

Social Security benefits. While the federal government considers Social Security retirement benefits to be part of your taxable income, New York State, unlike some others, does not. If Social Security represents a substantial portion of your income, this could be a big plus.

Pensions and other retirement income. If you have income from a traditional, defined-benefit pension plan, rules vary. Federal pensions are exempt from taxation in New York, as are New York State and local government pensions and certain others. If your pension comes from a different source, such as a private employer, it is taxable, although you may be eligible to exclude the first $20,000 in payments. Included in that $20,000 is any income you receive from 401(k)s or similar defined-contribution plans, as well as IRAs. Roth accounts in those plans are exempt from taxes in New York, as they are elsewhere.

Investment income. On the downside, if you have investments outside of your retirement accounts, New York will tax your capital gains as ordinary income, unlike the federal government and a handful of states, which tax long-term gains at a lower rate.

Note

Some locales, such as New York City, impose their own income taxes. In New York City, for example, taxpayers can pay anywhere from 3.078% to 3.876% on top of what they’re paying the state.

Property Taxes

Property taxes in New York aren’t the highest on the nation, although they’re usually in the top 10. The Tax Foundation, for example, recently ranked New York sixth overall, after New Jersey, Illinois, Connecticut, New Hampshire, and Vermont. Property taxes are set on the local level in New York and can vary from one place to another, even towns that are right next door. So if you’re shopping for a home, comparing local property taxes is a good way to save some money.

Local taxing authorities in New York also have the option to grant what the state calls “senior citizen exemptions” to residents over the age of 65 who meet certain income requirements. The exemption will reduce the assessed value of their home (which is used in the property tax calculation) by as much as 50%.

In addition, homeowners can be eligible for the state’s School Tax Relief Program, known as STAR, again subject to certain income limits. The basic STAR program applies to homeowners of any age, while Enhanced Star is for those 65 and up. According to the state, participants in basic STAR receive a benefit of roughly $290, while for Enhanced STAR it’s about $650.

Sales Taxes

New York ranks 10th overall in terms of state and local sales taxes, according to the Tax Foundation. Both the state, the counties, and individual cities can impose sales taxes. On average, New Yorkers pay about 8.53% in combined sales taxes, the foundation says.

On the plus side, many everyday purchases are exempt from sales taxes, including most groceries (except for prepared foods), prescription drugs, and over-the-counter medicines. Shoes and clothing under $110 are also exempt from state, but not necessarily local, sales taxes.

Tip

Fantasizing about retiring to a college town? New York State is second only to California in number of colleges and universities.

Climate and Weather

If you’re looking to spend every day of your retirement years in shorts and flip-flops, New York may not be for you. But if you enjoy the change of seasons, and don’t mind a little (or a lot) of snow in the
wintertime, it just might be.

Upstate vs. Downstate Weather

In general, the southernmost parts of the state, including New York City, have the mildest winters, while upstate New Yorkers are wise to invest in a good snowblower. Weather near the Great Lakes can be particularly brutal due to the so-called lake effect. The city of Buffalo, along Lake Erie, reliably makes national news most winters for its snowfall totals, sometimes requiring devoted Buffalo Bills football fans to shovel out their stadium on game days.

How Winter Weather and Disaster Risks Affect Insurance Costs

Harsh winters can interfere with your daily life, of course, making it more difficult to run errands, walk the dog, and enjoy the outdoors. So unless you’re an avid skier or snowshoer, you might want to focus your search downstate. Cold temperatures, snow, and ice can also have a financial impact in terms of bigger heating bills and even higher insurance premiums. Storm-related damage—collapsed roofs, burst water pipes, etc.—is a major source of insurance claims and a driver of higher premiums.

New York has largely dodged many of the worst weather-related disasters in recent years, although it’s by no means immune to them. Hurricane Sandy in 2012, for example, caused enormous damage, and dozens of deaths, along the Atlantic coast and all but shut down New York City for days.

The website Insurify reports that the average annual home insurance rate across New York in 2024 was $2,404. That’s lower than many other states, including such popular retirement destinations as Colorado, Florida, and South Carolina. 

Health Care and Senior Services

New York has an abundance of health care facilities, although their quality varies widely, experts say.

The federal Centers for Medicare & Medicaid Services, which rates hospitals based on mortality, safety, readmission rates, the patient experience, and timeliness and effectiveness of care, recently gave its lowest possible grade of one star to more than 25% of New York’s hospitals, according to a USA Today Network analysis. Only about 8% received a five-star rating, compared with about 13% of hospitals nationwide.

Similarly, the Leapfrog Group, a nonprofit focused on patient safety, ranked New York’s hospitals 34th in the nation on that measure in 2024.

So if you’re new to New York you might want to do some research, just in case. One useful resource would be the New York State Department of Health’s NYS Health Profiles website, which provides information on individual hospitals’ quality and safety as well as the services they offer.

New York City’s Health Care Infrastructure

The New York State Department of Health lists 63 hospitals in New York City. Some are major teaching hospitals affiliated with universities such as Columbia, Cornell, and New York University.

Of the 20 hospitals that made U.S. News & World Report’s 2024-2025 Best Hospitals honor roll as the best of the “Best” nationwide, three are in New York City: Mount Sinai Hospital, New York-Presbyterian Hospital-Columbia and Cornell, and NYU Langone Hospitals. Only one New York hospital outside of the city made the list: North Shore University Hospital at Northwell Health in Manhasset, on nearby Long Island.

Health Care Facilities in Upstate Regions

New York City may dominate the list of premier hospitals in the state, but many other cities have hospitals that score highly enough to make U.S. News’ “Best Regional Hospitals” list, including Albany, Buffalo, Poughkeepsie-Newburgh, Rochester, and Syracuse.

Senior Services

New York has a wide variety of services aimed at helping older residents age in place if they wish to or find an appropriate living facility when they are no longer able to. The state health department’s NYS Health Profiles website mentioned above also has searchable information on nursing homes and long-term care facilities, home care agencies, adult care (including assisted living), and other types of providers.

Another good resource is the New York State Office for the Aging. Its website offers information on all of these topics as well as ways to connect with local programs and services.

What if You Live in New York Only Part of the Year?

If you maintain a residence in New York and spend 184 or more days in the state during the year, you are considered a resident for tax purposes. If you spend less time than that, you are considered a part-year resident. Part-year residents must pay taxes on any income they received while living in New York as well as on any income they received from New York sources while living elsewhere.

Are New York Taxes Deductible on Your Federal Tax Return?

State and local income and property taxes are deductible on your federal tax return, but only if you itemize your deductions, rather than taking the standard deduction. What’s more, since the passage of the Tax Cuts and Jobs Act of 2017, you can deduct no more than the first $10,000 of these so-called SALT taxes in total.

That’s where things stand as of early 2025. However, lawmakers from high-tax states have pushed for raising the SALT cap and President Trump has indicated his support for the proposal. So stay tuned.

Does New York Tax Municipal Bonds?

If you live in New York and buy municipal bonds issued in New York, the income they produce is generally triple-tax-free, meaning that it isn’t taxed on the federal, state, or local level. If you buy municipal bonds from another state, however, they will be subject to state and local taxes in New York. Many mutual fund companies offer municipal bond funds geared for residents of particular states.

The Bottom Line

Like many big decisions in life, selecting a place to retire involves tradeoffs. New York can be an expensive choice in terms of taxes, housing, and overall cost of living. At the same time, it has advantages you’re unlikely to find elsewhere, at least in such abundance. As financial planner Terry notes, a good way to think about it is to focus on your goals, rather than simply on the dollars-and-cents aspects. “Assign a value to each of your goals and act accordingly,” he suggests.

If you decide New York isn’t right for you, that’s fine: you have a whole country, indeed world, to choose from. If, on the other hand, New York comes out at the top of your list, take some time to explore the state and see what city, town, or region most suits you and your budget. As the signs on the interstate say: “Welcome to New York!”

Reviewed by Samantha Silberstein

Investing in foreign securities, while a good thing for your long-term portfolio, continues to pose threats for investors. As people broaden their investment universe by expanding into global stocks and bonds, they must also bear the risk associated with fluctuations in exchange rates.

Fluctuations in these currency values, whether the home currency or the foreign currency, can either enhance or reduce the returns associated with foreign investments. Currency plays a significant role in investing; read on to uncover potential strategies that might downplay its effects.

Key Takeaways

• Investing in foreign stocks and bonds can diversify your portfolio but currency fluctuations can hurt or help your returns.
• Political instability, foreign taxes, and currency risks are factors to consider when investing in foreign securities.
• Investors can hedge against exchange-rate risks with currency futures but they come with risks.
• Investing in FX-related exchange-traded funds (ETFs) may be safer and easier than directly investing in the FX market.

Pros of Foreign Diversification

There is simply no doubting the benefits of owning foreign securities in your portfolio. After all, modern portfolio theory (MPT) has established that the world’s markets do not move in lockstep and that by mixing asset classes with low correlation to one another in the appropriate proportions, risk can be reduced at the portfolio level, despite the presence of volatile underlying securities.

As a refresher, correlation coefficients range between -1 and +1. Anything less than perfect positive correlation (+1) is considered a good diversifier. Combining foreign and domestic assets together tends to have a magical effect on long-term returns and portfolio volatility; however, these benefits also come with some underlying risks.

Risks of International Investments

Several levels of investment risks are inherent in foreign investing: political risk, local tax implications, and exchange-rate risk. Exchange-rate risk is especially important because the returns associated with a particular foreign stock (or mutual fund with foreign stocks) must then be converted into U.S. dollars before an investor can spend the profits. Let’s break each risk down.

• Political risk: The political climate of foreign countries creates portfolio risks because governments and political systems are constantly in flux. This typically has a very direct impact on the economic and business sectors. Political risk is considered a type of unsystematic risk associated with specific countries, which can be diversified away by investing in a broad range of countries, effectively accomplished with broad-based foreign mutual funds or exchange-traded funds (ETFs).
• Taxation: Foreign taxation poses another complication. Just as foreign investors with U.S. securities are subject to U.S. government taxes, foreign investors are also taxed on foreign-based securities. Taxes on foreign investments are typically withheld at the source country before an investor can realize any gains. Profits are then taxed again when the investor repatriates the funds.
• Currency risk: Finally, there’s currency risk. Fluctuations in the value of currencies can directly impact foreign investments, and these fluctuations affect the risks of investing in non-U.S. assets. Sometimes these risks work in your favor, other times they do not. For example, let’s say your foreign investment portfolio generated a 12% rate of return last year, but your home currency lost 10% of its value. In this case, your net return will be enhanced when you convert your profits to U.S. dollars since a declining dollar makes international investments more attractive. But the reverse is also true; if a foreign stock declines but the value of the home currency strengthens sufficiently, it further dampens the returns of the foreign position.

Minimizing Currency Risk

Despite the perceived dangers of foreign investing, an investor may reduce the risk of loss from fluctuations in exchange rates by hedging with currency futures. Simply stated, hedging involves taking on one risk to offset another.

Futures contracts are advance orders to buy or sell an asset, in this case, a currency. An investor expecting to receive cash flows denominated in a foreign currency on some future date can lock in the current exchange rate by entering into an offsetting currency futures position.

In the currency markets, speculators buy and sell foreign exchange futures to take advantage of changes in exchange rates. Investors can take long or short positions in their currency of choice, depending on how they believe that currency will perform.

For example, if a speculator believes that the euro will rise against the U.S. dollar, they will enter into a contract to buy the euro at some predetermined time in the future. This is called having a long position. Conversely, you could argue that the same speculator has taken a short position in the U.S. dollar.

Important

If you’re a small business dealing in foreign orders, you can invoice in your home currency to avoid currency risk.

There are two possible outcomes of this hedging strategy. If the speculator is correct and the euro rises against the dollar, then the value of the contract will rise too, and the speculator will earn a profit. However, if the euro declines against the dollar, the value of the contract decreases.

When you buy or sell a futures contract, as in our example above, the price of the good (in this case the currency) is fixed today, but payment is not made until later. Investors trading currency futures are asked to put up margin in the form of cash and the contracts are marked to market each day, so profits and losses on the contracts are calculated each day.

Currency hedging can also be accomplished in a different way. Rather than locking in a currency price for a later date, you can buy the currency immediately at the spot price instead. In either scenario, you end up buying the same currency, but in one scenario you do not pay for the asset upfront.

Investing in the Currency Market

The value of currencies fluctuates with the global supply and demand for a specific currency. Demand for foreign stocks is also a demand for foreign currency, which has a positive effect on its price.

Fortunately, there is an entire market dedicated to the trade of foreign currencies called the foreign exchange market (forex, for short). This market has no central marketplace like the New York Stock Exchange; instead, all business is conducted electronically in what is considered one of the largest liquid markets in the world.

There are several ways to invest in the currency market, but some are riskier than others. Investors can trade currencies directly by setting up their own accounts, or they can access currency investments through forex brokers.

However, margined currency trading is an extremely risky form of investment, and is only suitable for individuals and institutions capable of handling the potential losses it entails. In fact, investors looking for exposure to currency investments might be best served acquiring them through funds or ETFs—and there are plenty to choose from.

Some of these products make bets against the dollar, some bet in favor, while other funds simply buy a basket of global currencies.

For example, you can buy an ETF made up of currency futures contracts on certain G10 currencies, which can be designed to exploit the trend that currencies associated with high interest rates tend to rise in value relative to currencies associated with low interest rates.

Things to consider when incorporating currency into your portfolio are costs (both trading and fund fees), taxes (historically, currency investing has been very tax-inefficient), and finding the appropriate allocation percentage.

What Is Currency Risk?

Currency risk, also known as exchange-rate risk, is the risk that changes in currency values will impact the value of your money when dealing with international transactions. If you’re a business or investor dealing in foreign currencies, changes in exchange rates can either work in your favor or cause you to lose money. This happens when converting from one currency to another. For example, if you were paid in euros and then needed to convert the money into dollars and the euro weakened, you’ll have less money than anticipated.

How Do You Hedge Against Currency Risk?

To hedge against currency risk, there are a few actions you can take. You can use forward contracts, futures, options, and currency ETFs to lock in exchange rates or offset potential losses. Businesses often hold multiple currencies so they can transact (earn and spend) in the same currency, avoiding exchange rates.

What Is an Example of Currency Risk?

Say that you are a hat maker in the U.S. and you book an order with a French boutique company for €5,000. At the time you make the contract, 1 USD = 1 EUR, so you expect to receive $5,000 when you convert the payment. In three months, when the boutique pays you for the order, the euro has weakened, and now 1 USD = 0.90 EUR. When you exchange your €5,000, you get $4,500 (5,000 x 0.90). You lost $500 just because of currency fluctuations.

The Bottom Line

Investing in foreign stocks has a clear benefit in portfolio construction. However, foreign stocks also have unique risk traits that U.S.-based stocks do not. As investors expand their investments overseas, they may wish to implement some hedging strategies to protect themselves from ongoing fluctuations in currency values. There is no shortage of investment products available to help you easily achieve this goal.

Reviewed by Akhilesh Ganti

Old Economy vs. New Economy Stocks: An Overview

Old economy is used to describe the economic era of the early parts of the 20th century when industrial innovation was expanding in the U.S. and around the world. Comparatively, the new economy refers to the high-growth innovation of the 21st century which has been substantially focused on the use and development of the Internet, Internet technology, and technology in the cloud.

Key Takeaways

• Old economy stocks were central to the success of the Industrial Revolution in the early 20th century and have matured through many market cycles to become mature businesses focused on high-scale production.
• New economy stocks are part of the technology revolution taking shape in the 21st century as growth is centered around Internet technology services.
• Old economy and new economy stocks have very different attributes that usually attract investors for different reasons.

Old Economy Stocks

The Industrial Revolution was a time of innovation in the development and manufacturing efficiency of products.

As such, old economy stocks were the market’s top leaders, growing throughout the years to build out the foundations of the industrial and manufactured goods sectors. Within these sectors, investors will now find large, mature, well-established businesses with consistent growth and relatively steady fundamental characteristics.

Some of the most notable old economy stocks include names like Ford (F), Caterpillar (CAT), 3M (MMM), and Procter & Gamble (PG). These old economy companies’ business activities dominated the economic landscape before the dotcom era of the late 1990s ushered in an entire industry of new, high-growth companies.

Old economy stocks have sustained business activities through many market cycles. While they continue to innovate within their market segments, overall they participate in traditional business activities with relatively minimal investment or involvement in leading new-era technologies. 

Many investors equate old economy stocks with the term blue chip. Old economy stocks are also typically classified in the value category which is known for relatively low volatility, stable earnings, consistent returns, dividends for income, and steady streams of cash flow.

New Economy Stocks

In contrast, so-called new economy stocks are the companies leading a revolutionary transition to the Internet and activities in the cloud. The market has dubbed Meta (formerly Facebook), Apple, Amazon, Netflix, and Google as five of the top new economy companies to watch under the acronym FAANG but there are also many more.

Branching out from basic Internet search, investors will find a plethora of Internet-based technology offshoots that are also driving new economy growth in the 21st century, like companies in the areas of Internet of Things, social media, cryptocurrency, cloud storage, e-commerce, streaming, sharing, big data, fintech, and artificial intelligence.

New economy stocks are in the business of providing innovation for the easy and fast exchange of services. In comparison to old economy stocks, they can have much lower costs of sales and much less need for the physical assets required to manufacture, store, and sell physical goods.

The new economy era reportedly began in the 1990s, fueling the dotcom bubble and dotcom burst as investors saw the vast potential and economic shift.

Note

Many new economy stocks, such as Apple, Amazon, and Google do not carry the same risks and volatility as other new economy stocks because they are now well-established, stable companies.

In the 21st century, these companies have proved to achieve much of the success initially envisioned, continuing to take huge strides with relatively high financial risks to achieve new groundbreaking services centered around the capabilities of the Internet and Internet technologies.

As such, new economy stocks tend to fall in the growth category. They have huge growth potential, treading into new waters and uncovering new opportunities that can possibly revolutionize the way individuals and businesses interact.

As service-oriented, growth companies, the fundamentals of these businesses are drastically different when compared to old economy stocks.

New economy stocks typically need to take on high levels of debt, may have a low return on equity, and often report high price-to-earnings levels as investors believe in long-term speculation. New economy stocks are generally not known for paying out dividends and will typically have relatively lower levels of cash flow since cash is often used for reinvestment.

Investing: Old vs. New

It can be important for an investor to distinguish between old-economy and new economy stocks since the two have very different attributes, risk profiles, and return potentials. In general, when making portfolio decisions, old-economy and new economy stocks will usually filter into either the value or growth category.

For investors looking to broadly diversify their portfolio, a mix of old and new economy stocks can be rewarding. However, depending on risk tolerance and liquidity needs, some investors may choose to overweight towards one or the other.

Value

Old economy value stocks can be a relatively low-risk stock investment that attracts a variety of investors. These value stocks have realistic fundamentals, reasonable price-to-earnings levels, and low volatility.

Many old economy value stocks also pay regular dividends which appeals to income investors and also increases their total return. As such, many investors look to old economy stocks for their stability, steady growth, and dividend income.

Growth

Buying new economy stocks in the 21st century comes with more risk but could pay off for investors with long time horizons that can wait it out until these stocks mature.

The market values new economy growth stocks a little differently than the blue chips with more allowance for speculation. In general, investors are willing to pay much more per dollar of earnings for new economy growth stocks.

Most new economy growth stocks will have higher betas which show their higher risks in comparison to the market. With the higher beta, investors have the opportunity to gain more than the market on uptrends.

Investors can also lose more on downtrends. New economy growth stocks may also fluctuate much more with idiosyncratic risks as well as earnings announcements since lower consistency and stability are factors.

Generally, when analyzing a new economy company, a greater focus is placed on growth expectations and earnings estimates which are speculative forecasts based on opportunities that can be very important along with real results.

What Are Examples of Old Economy Companies?

Old-economy companies are those that fall into the following sectors: automobile, industrial, oil and gas, construction, manufacturing, consumer goods, beverage, pharmaceuticals, and healthcare. Such companies include GE, Ford, Caterpillar, U.S. Steel, Coca-Cola, Procter & Gamble, and Johnson & Johnson.

What Are Examples of New Economy Companies?

New-economy companies are those that exist in the software, e-commerce, cloud computing, search engine, digital advertising, social media, virtual reality, electric vehicle, artificial intelligence, entertainment streaming, and ride-sharing sectors. Companies in these sectors include Apple, Amazon, Google, Meta, Uber, Tesla, Microsoft, Netflix, Nvidia, and Shopify.

What Is Value Investing?

Value investing is an investment strategy where investors purchase stocks they believe are undervalued compared to their true worth. This means that their share prices are trading below what they should be. Value investors seek out companies with strong fundamentals, such as strong earnings, assets, and debt management, but whose stock price is lower than what these fundamentals would otherwise suggest. This is generally due to market conditions or negative sentiment. Value investors buy these stocks at the depressed price and hold onto them until they appreciate, reaching their true value price. Warren Buffett is the most famous value investor.

The Bottom Line

Old and new economy stocks each have their own appeal depending on an investor’s financial goals and risk tolerance. Old economy stocks have their foundations in traditional sectors, such as manufacturing and industrials. They offer stability, dividends, and steady returns, making them great choices for value investors.

New economy stocks are those of Internet and tech companies. These stocks offer high growth potential but come with increased volatility and higher risk. Old economy stocks generally withstand the ups and downs of the business cycles and new economy stocks impact how we live in the future by offering new services and technologies.

However, the overlap in sectors and old versus new is becoming blurred, as large, innovative tech companies, such as Apple and Google, are now considered to be stable, offering steady returns. A balanced portfolio of old and new economy stocks can be a good bet for investors.

Reviewed by Samantha Silberstein

Companies issue stock to raise capital, and anyone with the funds to purchase it can do so. To the company, it doesn’t matter who invests in the stock.

Sometimes, however, a corporation wants to lure a certain class of investor; the kind who wants fixed, scheduled payments. To do that, the company can issue bonds, which come with pros and cons.

Yet, if a company doesn’t want to offer bonds, how can it offer equity while simultaneously guaranteeing investors a certain regular payment? Through the magic of preferred stock, which is sort of an amalgam of bonds and common stock.

Below, we discuss some of the attributes of preferred stock.

Key Takeaways

• Preferred stock is a combination of bonds and common stock, offering dividends but no voting rights.
• Most large companies no longer offer preferred stock; mainly big banks, such as Wells Fargo and Bank of America do.
• If a company goes bankrupt, preferred shareholders get paid before common stockholders but still after bondholders.
• Preferred stock is usually offered at around $25 and acts like bonds, with dividend rates that sometimes fluctuate.

Are Rare

The differences between preferred stock and common stock are few but crucial. Preferred shareholders indeed receive dividend payments, which are a selling feature intrinsic to the security. Conversely, corporations are under no obligation to offer dividends with common stock.

In practice, the blue-chip companies that offer dividends on their common stock don’t issue preferred stock, at all. Seldom do the companies that don’t offer dividends on their common stock, either.

Preferred stock is a dying class of shares. None of the heavyweights, Apple Inc. (AAPL), Exxon Mobil Corp. (XOM), Microsoft Corp. (MSFT), etc., offer preferred stock.

Of the largest companies in the U.S., mainly the large banks offer preferred stock, such as Wells Fargo & Co. (WFC), Bank of America Corp. (BAC), Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM).

In fact, preferred stock is mainly issued by banks. This is due to the continuation of the financial crisis and the corresponding bailouts of 2008-09. Preferred stock becomes an additional asset on the balance sheet, something that banks need more than oil companies and semiconductor manufacturers.

No Voting Rights

Most things in life involve a trade-off, and preferred stock is among them. From an investor’s perspective, the one primary disadvantage to preferred stock is that its holders don’t have voting rights.

Just from the name, you’d figure preferred stockholders would receive, well, preferential treatment. But when a company elects board members, it’s the common stockholders who do the electing while the preferred stockholders sit on the sidelines.

Better During Bankruptcy

On the other hand, say the publicly traded company goes bankrupt. When the company liquidates, the bondholders get paid first. This makes sense; they’re the creditors, the ones who lent their money to the company to help it stay afloat.

Should there be anything left once the bondholders get made whole, the preferred shareholders get paid next. Only then do the common stockholders get paid, if at all. Thus the “preferred” in preferred stock.

There are some other differences between preferred and common shares, too. The latter can be called by the company at its discretion. “We reserve the right to buy these shares back from you on XYZ Date.”

In most cases, you can convert the preferred shares to common shares at a predetermined rate. Do that, and you’re sacrificing surety for volatility and the possibility of capital appreciation.

Note

Unlike common stock, some preferred stock comes with a cumulative feature; if a company skips dividend payments, it has to pay them later to preferred holders before common stock dividends can be issued.

Finding Preferred Stock

Preferred stock listings are different from common stock listings, which are easy to read. Preferred stocks are listed by their series.

For example, Allstate’s stock ticker is ALL. It has Series H, I, and J preferred shares. The listing would be ALL H, ALL I, and ALL J, respectively. Goldman Sachs has 16 series of preferred stock.

All preferred stock comes with different dividend yields. For All State, for example,

• Series H: 5.10%
• Series I: 4.75%
• Series J: 7.375%

Treated Like Bonds

All preferred stock issuances are about the same price. With very few exceptions, preferred shares go on the market at $25. That they don’t stray much from that price tells you how the market treats them almost like bonds.

No one’s going to offer much more than $25 for a share that could be called, and no one’s going to sell so valuable a revenue-producing asset for much less than $25. Note that the issue price is also the price that the company will call the share at, should it choose to.

Another point to note is that the “floating rate” means the dividend payout changes according to criteria determined by the issuer. For example, the rate may be tied to a rate like SOFR.

What Is Preferred Stock?

Preferred stock is a mix between regular stocks and bonds. It comes with fixed dividends, like fixed payments of a bond, so it is more stable than common stock; however, it doesn’t come with voting rights. In the event of company bankruptcy, preferred shareholders get paid before common shareholders, but after debt holders. Preferred stock is rarely offered these days by most companies. Large banks are the primary entities that offer preferred stock.

What Is a 5%, $100 Par Preferred Stock?

A 5% preferred stock with a par value of $100 pays out $5 in dividends annually. Dividends will generally be cash dividends. The dividend rate of this preferred stock would be 5%, which would be different from the yield.

What Are the Disadvantages of Preferred Stock?

While preferred stock offers fixed dividends, those dividends aren’t guaranteed if the company is financially struggling. If the stock is cumulative, missed dividends must be paid before common stock dividends can be issued. Non-cumulative preferred stock does not have this protection.

Additionally, preferred shareholders generally don’t have voting rights, so they have no say in company decisions, such as mergers/acquisitions, electing new board members, issuing new securities, and approving dividends. Lastly, preferred stock usually trades around its par value and doesn’t appreciate along with the company’s share price as common stock does, so investors miss out on price growth.

The Bottom Line

Among intermediate and advanced securities, preferred stocks carry a relatively small learning curve and less chance of risk. You’re less likely to go bankrupt with preferred shares than with common shares.

So should you invest in them? Understand that most preferred shareholders are institutional: organizations that have little to gain and much to lose by putting their funds in anything less stable than a bond or bond equivalent.

For the everyday investor, buying preferred shares is usually something done once you’ve already established a decent-sized portfolio. One that was probably, at least in part, the result of buying undervalued common stocks. If you’re still interested, though, consider a preferred stock exchange-traded fund (ETF).