Reviewed by Andy Smith
Fact checked by Hans Daniel Jasperson

Lump-Sum vs. Pension Payments: An Overview

Monthly pension payments are a fixed dollar amount. They begin at retirement and last until a retiree’s death. Some plans offer a survivor’s benefit for a living spouse. A lump sum distribution is a one-time cash disbursement at retirement. The retiree is solely responsible for managing the funds throughout their retirement years.

Those who are approaching retirement and who are eligible for a pension often weigh the choice between accepting the traditional, lifetime monthly payments or taking a lump-sum distribution.

Key Takeaways

• Pension payments are made for the remainder of a retiree’s life.
• Lump-sum distributions allow individuals to spend or invest the money.
• Those who take a lump sum might outlive their money.
• Pension payments can stop if a pension administrator goes bankrupt.

Lump-Sum Distributions

A lump-sum distribution is a one-time payment from a pension administrator. Individuals have access to a large sum of money that they can spend or invest.

A pension payment annuity is commonly a fixed payment but a lump sum offers flexibility. It may also provide regular income if it’s invested properly. Those who take a lump-sum distribution can name a beneficiary to receive any money that’s left after their deaths.

Income from pensions is taxable but individuals can roll over a lump sum into an IRA and control when to withdraw the funds and pay income tax. Retirees will eventually have to take required minimum distributions (RMDs) from their IRA but that won’t happen until age 73.

Note

Rolling a lump sum pension payment into an IRA lets individuals plan when they’ll take their distributions and when they’ll pay the associated taxes.

Pension Payments

A pension payment is a set monthly payment to a retiree for life and for the life of a surviving spouse in some cases. Some pensions include cost-of-living adjustments (COLA) so payments are indexed for inflation.

A regular pension check can help retirees budget and control overspending. Retirees with company health insurance may have to opt for pension payments because coverage might stop if an employee takes a lump sum.

Retirees with pension income were more likely to remain financially stable in 2020 than those who cashed out the lump sum, according to research from the Consumer Financial Protection Bureau. Of those with regular payments, 73% could maintain the same spending level after five years compared to only 56% of those who had chosen the lump sum.

Important

Pension payments could stop if a pension administrator goes bankrupt but the Pension Benefit Guaranty Corporation (PBGC), a federal agency, provides insurance that covers most people.

One threat to pensions is that an employer fails to pay long-term. However, pension benefits are safeguarded by the Pension Benefit Guaranty Corporation (PBGC), a government entity that collects insurance premiums from employers sponsoring insured pension plans. The PBGC only covers defined-benefit plans, not defined contribution plans like 401(k)s.

The maximum annual benefit was $85,295.40 in 2024 for a straight-life annuity for a 65-year-old retiree.

Key Differences

Lump Sum

• All pension money is distributed at once at retirement

• The retiree must manage the funds throughout retirement

• Lump sum money can be rolled over into an IRA

• Retirees can designate beneficiaries of the funds

Pension Payments

• Payments are made monthly to the retiree until death

• The PBGC provides insurance in case the pension administrator is unable to pay

• Monthly payments may cease once the retiree dies unless there are survivor’s benefits

• Companies may require retirees to take monthly payments to keep health insurance benefits

How Will I Use This in Real Life?

Planning for retirement can be a challenge because real life has a way of being unpredictable but the decision between taking a lump sum distribution or pension payments can come down to how well you know yourself.

That lump sum payment might not be the right choice for you if your risk tolerance is minimal and the thought of investing the money in the stock market gives you indigestion. You might consider a safer investment, however, or roll the money over into an IRA. Accepting a lump sum payment might be a disaster if spending freely and lavishly is your vice. You could deplete your retirement cushion if you treat it as an unexpected windfall.

Taking pension payments may be your best option if you value safe, steady income above all else, especially with the added benefit of PBGC insurance. And you may be able to keep your health insurance benefits if you continue taking your monthly payments.

It may help to make a checklist of all pertinent factors and organize them according to what’s most important to you.

How Do Companies Calculate Pension Payments and Lump Sum Distributions?

The typical recipient receives approximately the same amount of money whether choosing the pension or a lump sum. The pension administrator calculates the commuted value using the average lifespan of retirees and adjusts the payment schedule accordingly. Retirees with a longer-than-average lifespan will probably receive more money by taking lifetime payments.

What Are the Disadvantages of Taking a Lump Sum?

Taking a lump-sum payment can be very risky. Perhaps the greatest risk of cashing out a pension early is the prospect of running out of money. A monthly payment offers a steady income for the remainder of one’s life instead and it can also be passed on to a spouse in some cases. Retirees who choose a lump sum could put part of the money into a fixed annuity with the help of a financial advisor.

Is a Pension Plan the Same As a Defined Benefit Plan?

Yes, a private pension plan is a defined benefit plan where the employer makes most contributions on behalf of the employee toward their retirement.

The Bottom Line

A lump-sum pension payment makes sense for some. Having less upfront capital is better for others. Pension payments should align with a retiree’s personal goals in either case. A financial advisor can guide those who are considering whether to choose a monthly payment or invest a lump sum for the long term.

Fact checked by Michael Logan
Reviewed by Ebony Howard

Refinancing your mortgage involves taking out a new loan to pay off your existing mortgage, and, in doing so, hopefully getting a lower interest rate. However, there are several scenarios where refinancing wouldn’t be the best decision, such as if you’d end up with a longer repayment term or save too little to offset the costs.

Key Takeaways

• Refinancing will sometimes cost you more in interest in the long run, particularly if you extend your repayment term.
• The upfront costs of refinancing could mean that, even if your monthly payments decrease, you won’t break even before eventually moving.
• A cash-out refinance can provide you with additional funds for investing, but this is typically a risky move.

1. Consolidating Debt

When you get a cash-out refinance, you can leverage some or all of your home equity to take out a larger loan amount. In addition to repaying your old mortgage, this means you’ll also have excess funds that can be used to pay off your other outstanding debt. If you’re able to secure a lower interest rate, then consolidating debt in this manner can simplify your monthly payments and save you money in the long run.

However, if the reason you had so much outstanding debt was due to poor spending habits (presumably with a credit card), then refinancing will only provide a temporary solution. If you rack up new credit card debt on top of your now larger mortgage balance, you may be unable to afford your monthly payments for the latter, which might mean losing your home.

Refinancing may still be a good option if you need to pay down debt that’s grown out of control, but first you’ll need to address your spending habits to reduce your reliance on credit.

2. Getting a Longer Repayment Term

In addition to securing a different interest rate, you can also get a new repayment term when you refinance. While increasing your repayment term typically coincides with lower monthly payments, since they’re spread out over an extended period, you’ll also likely pay more over the life of the loan due to the interest having more time to accrue.

For some, having outstanding debt for a longer period is worth the breathing room it provides their monthly budgets. However, if you’re refinancing simply to get that lower monthly payment without thinking about the long-term costs, you could be inadvertently setting yourself back.

In order to determine how different repayment terms and interest rates affect your monthly and total payments, consider using a mortgage calculator.

3. Saving a Little Each Month

Refinancing just to save a little money each month sounds good in theory, but it’s easy to overlook the total costs in favor of small savings. When you add up expenses like appraisal fees and closing costs, refinancing typically costs around 3%–6% of the loan amount.

So if you’re refinancing a $500,000 mortgage, you might pay around $15,000 to $30,000 upfront. That means if you’re able to save $100 per month on your mortgage payment by securing a slightly lower interest rate, it would take around 12.5 to 25 years to offset those costs. Even if you ultimately come out ahead, you may not want to wait that long to break even.

4. Saving for a New Home

Refinancing your mortgage can potentially help you save for a new home. For example, if you can reduce your monthly payments via a lower interest rate and/or longer repayment term, you’ll have a little extra each month that you can put toward a down payment.

However, if you’re expecting to move within a few years of refinancing, you could end up costing yourself more than you’d save. As previously mentioned, it can take a couple of years to recoup the upfront costs of refinancing. So if you move before reaching your breakeven point, you’ll lose money on the refinance.

5. Changing the Loan Type

Another common reason to refinance is to get a different kind of mortgage, such as swapping an adjustable-rate mortgage (ARM) for a fixed-rate one, or vice versa.

Switching to a fixed-rate mortgage means you won’t have to worry about your interest rate rising, but you could still end up overpaying if interest rates eventually fall. Even if you decide to refinance again in the future to secure that lower rate, the additional closing costs could eat into those savings.

Meanwhile, if you’re switching to an ARM, then the risks are a bit more complex. Maybe you’ll get lucky and your rates will stay low throughout the life of your loan, but that’s unlikely. Since it’s difficult to predict whether rates will rise or fall, there’s no way to know exactly how much you’ll owe each month. So not only could you end up paying more than you would with a fixed rate, that uncertainty will make budgeting trickier.

6. Freeing Up Money for Investing

If you need money, you may be tempted to tap your home equity. However, when you get a cash-out refinance, those funds technically aren’t yours to keep. You can use them as you see fit, but you’ll still need to pay that amount back.

So if you invest that money, there’s an inherent risk you’ll lose it (or won’t earn sufficient returns). Should your investment falter, you’ll then have less capital to pay back your now larger mortgage.

7. Getting a No-Cost Mortgage

With a no-cost mortgage, you won’t be charged any upfront closing costs when refinancing. That may sound like a good deal, but you’ll most likely still end up paying those costs, they’ll just be rolled into the new loan amount or the interest rate will be raised to compensate.

You could still come out ahead in this scenario, but you’ll need to run the numbers and see what makes sense for your situation, rather than letting the offer lure you in.

Are There Limits on How Often You Can Refinance Your Mortgage?

Technically, there’s no limit on how many times you can refinance your home, at least from a legal perspective. That said, lenders may impose their own limits, typically to prevent borrowers overwhelmed by debt from constantly refinancing.

Moreover, each time you apply to refinance your mortgage, lenders will look at factors like your credit score, home equity, and debt-to-income (DTI) ratio. If you’re found lacking in these areas, you might not get approved for the refinance anyway. Additionally, you may not want to refinance too many times, as each time you do lenders will usually pull your credit report, which causes a temporary dip in your credit score

The Bottom Line

Refinancing your mortgage isn’t a decision to make lightly. While there’s plenty of situations when doing would work out in your favor, it’s easy to fall into the trap of lowering your monthly debt payments at the expense of your long-term savings. So before refinancing, be sure to calculate the total costs and confirm that this would be the best choice for your financial situation.

First determine what type of annuity you have

Fact checked by Suzanne Kvilhaug
Reviewed by David Kindness

Recurring or ongoing payments are technically annuities. Whether making a series of fixed payments over a period, such as rent or car loan, or receiving periodic income from a bond or certificate of deposit (CD), you can calculate the present value (PV) or future value (FV) of an annuity.

Key Takeaways

• Recurring payments like rent on an apartment or interest on a bond can be considered annuities.
• Ordinary annuities and annuities due differ in the timing of those recurring payments.
• The future value of an annuity is the total value of payments at a future point in time.
• The present value is the money required now to produce those future payments.

Types of Annuities

Annuities as ongoing payments can be defined as ordinary annuities or annuities due.

• Ordinary Annuities: An ordinary annuity makes (or requires) payments at the end of a particular period. For example, bonds generally pay interest at the end of every six months.
• Annuities Due: An annuity due, by contrast, involves payments made at the beginning of each period. Rent or loan payments required at the beginning of each month are examples.

With ordinary annuities, payments are made at the end of a specific period. Annuities due are made at the beginning of the period.

Future Value of an Ordinary Annuity

FV measures how much a series of regular payments will be worth at some point in the future, given a specified interest rate. If you plan to invest a certain amount each month or year, FV will tell you how much you will accumulate. If you are making regular payments on a loan, the FV helps determine the total cost of the loan.

Consider a series of five $1,000 payments made at regular intervals.

Because of the time value of money—the concept that any given sum is worth more now than it will be in the future because it can be invested in the meantime—the first $1,000 payment is worth more than the second, and so on.

Suppose you invest $1,000 annually for five years at 5% interest. Below is how much you would have at the end of the five years.

Or use the Future Value formula:

$begin{aligned} &text{FV}_{text{Ordinary~Annuity}} = text{C} times left [frac { (1 + i) ^ n – 1 }{ i } right] \ &textbf{where:} \ &text{C} = text{cash flow per period} \ &i = text{interest rate} \ &n = text{number of payments} \ end{aligned}$​FVOrdinary Annuity​=C×[i(1+i)n−1​]where:C=cash flow per periodi=interest raten=number of payments​

Using the example above, here’s how it would work:

$begin{aligned} text{FV}_{text{Ordinary~Annuity}} &= $1,000 times left [frac { (1 + 0.05) ^ 5 -1 }{ 0.05 } right ] \ &= $1,000 times 5.53 \ &= $5,525.63 \ end{aligned}$FVOrdinary Annuity​​=$1,000×[0.05(1+0.05)5−1​]=$1,000×5.53=$5,525.63​

The one-cent difference in these results, $5,525.64 vs. $5,525.63, is due to rounding in the first calculation.

Present Value of an Ordinary Annuity

In contrast to the FV calculation, the PV calculation tells you how much money is required now to produce a series of payments in the future, again assuming a set interest rate.

Using the same example of five $1,000 payments made over five years, here is how a PV calculation would look. It shows that $4,329.48, invested at 5% interest, would be sufficient to produce those five $1,000 payments.

This is the applicable formula:

$begin{aligned} &text{PV}_{text{Ordinary~Annuity}} = text{C} times left [ frac { 1 – (1 + i) ^ { -n }}{ i } right ] \ end{aligned}$​PVOrdinary Annuity​=C×[i1−(1+i)−n​]​

If we plug the same numbers as above into the equation, here is the result:

$begin{aligned} text{PV}_{text{Ordinary~Annuity}} &= $1,000 times left [ frac {1 – (1 + 0.05) ^ { -5 } }{ 0.05 } right ] \ &=$1,000 times 4.33 \ &=$4,329.48 \ end{aligned}$PVOrdinary Annuity​​=$1,000×[0.051−(1+0.05)−5​]=$1,000×4.33=$4,329.48​

Future Value of an Annuity Due

​The annuity due’s payments are made at the beginning, rather than the end, of each period.

To account for payments occurring at the beginning of each period, the ordinary annuity FV formula above requires a slight modification. It then results in the higher values shown below.

The reason the values are higher is that payments made at the beginning of the period have more time to earn interest. For example, if the $1,000 was invested on January 1 rather than January 31, it would have an additional month to grow.

The formula for the FV of an annuity due is:

$begin{aligned} text{FV}_{text{Annuity Due}} &= text{C} times left [ frac{ (1 + i) ^ n – 1}{ i } right ] times (1 + i) \ end{aligned}$FVAnnuity Due​​=C×[i(1+i)n−1​]×(1+i)​

Here, we use the same numbers as in our previous examples:

$begin{aligned} text{FV}_{text{Annuity Due}} &= $1,000 times left [ frac{ (1 + 0.05)^5 – 1}{ 0.05 } right ] times (1 + 0.05) \ &= $1,000 times 5.53 times 1.05 \ &= $5,801.91 \ end{aligned}$FVAnnuity Due​​=$1,000×[0.05(1+0.05)5−1​]×(1+0.05)=$1,000×5.53×1.05=$5,801.91​

The one-cent difference in these results, $5,801.92 vs. $5,801.91, is due to rounding in the first calculation.

Present Value of an Annuity Due

Similarly, the formula for calculating the PV of an annuity due considers that payments are made at the beginning rather than the end of each period.

For example, you could use this formula to calculate the PV of your future rent payments as specified in your lease. Let’s say you pay $1,000 a month in rent. Below, we can see what the next five months cost at present value, assuming you kept your money in an account earning 5% interest.

This is the formula for calculating the PV of an annuity due:

$begin{aligned} text{PV}_{text{Annuity Due}} = text{C} times left [ frac{1 – (1 + i) ^ { -n } }{ i } right ] times (1 + i) \ end{aligned}$PVAnnuity Due​=C×[i1−(1+i)−n​]×(1+i)​

So, in this example:

$begin{aligned} text{PV}_{text{Annuity Due}} &= $1,000 times left [ tfrac{ (1 – (1 + 0.05) ^{ -5 } }{ 0.05 } right] times (1 + 0.05) \ &= $1,000 times 4.33 times1.05 \ &= $4,545.95 \ end{aligned}$PVAnnuity Due​​=$1,000×[0.05(1−(1+0.05)−5​]×(1+0.05)=$1,000×4.33×1.05=$4,545.95​

What Is an Example of an Ordinary Annuity Payment?

An ordinary annuity is a series of recurring payments made at the end of a period, such as payments for quarterly stock dividends.

What Is the Difference Between Amortization and Annuity Due?

Amortization schedules are given to borrowers by a lender, like a mortgage company. They outline the payments needed to pay off a loan and how the portion allocated to principal versus interest changes over time. An annuity due is the total payment required at the beginning of the payment schedule, such as the 1st of the month.

What Is a Deferred Annuity?

A deferred annuity is a contract with an insurance company that promises to pay the owner a regular income or lump sum at a future date. Deferred annuities differ from immediate annuities, which begin making payments right away.

The Bottom Line

Present value and future value formulas help individuals determine what an ordinary annuity or an annuity due is worth now or later. Such calculations and their results help with financial planning and investment decision-making.

Reviewed by Charlene Rhinehart

Quicken is one of several well-known, widely used, and highly successful financial software programs developed by Intuit, Inc. (INTU). Intuit subsequently sold its personal financial management tool to private equity firm H.I.G. Capital in 2016.

Quicken offers users services from basic checking and savings account management and budgeting, all the way to portfolio analysis and management features such as capital gains tracking. There are Windows-based versions of the program available as well as for Mac that’s compatible with Apple’s operating system.

Although manufactured for a number of global markets, Quicken remains focused largely on a North American customer base. While Quicken has dominated its niche market since its first release in 1984, there are a number of similar, alternative products available and which are increasingly challenging its dominance.

Key Takeaways

• While Quicken still dominates the financial software program universe, several alternatives exist.
• Another rival, Empower, offers investment management services.
• Banktivity, developed specifically for Apple products, serves as a personal or small business financial management program, allowing users to monitor accounts across several devices.

1. Empower

Empower represents an attractive and less expensive alternative to Quicken for individuals who prefer a cloud-based program—and one that offers extensive investment management tools. In fact, as of February 2025, it had $1.8 trillion in assets under management (AUM).

The basic Empower financial services package, which includes account tracking, budgeting, bill paying, and other basic services, is free. However, Empower makes its money primarily from individuals, with a minimum of $100,000 in assets, who choose to upgrade to the personal wealth management services the company offers. Fees begin at 0.89% for the first $1 million of assets managed and range down to 0.49% (for accounts over $10 million) per year. Empower’s fees are significantly lower than average for full wealth management services.

With the paid wealth management service, clients are assigned a personal financial advisor and receive all the usual services a client expects from a wealth management company, including tax and estate planning, tax-loss harvesting, advice on insurance, educational funds for children, and any other necessary services to provide full financial management for clients.

But even the free personal finance services offered are extensive and competitive with what is offered by Quicken. Included are services such as budgeting, a retirement planner, net worth analyzer, and an investment allocation target checker. The budgeting component includes a cash flow tool that allows individuals to input income and spending, and then receive weekly, monthly, or annual analyses of their projected cash flows.

The retirement planner can be used to map out a retirement plan, and then to monitor how closely the user is adhering to the plan. This feature allows users to set spending and savings goals, track income events, and project the future value of their investment portfolios. Its asset allocation component determines a user’s risk tolerance profile and then makes appropriate investment allocation recommendations. The comprehensive features and the flexibility of input variables offered in this module compare favorably to any comparable service, free or paid.

Empower has received good reviews on a number of levels, one being that it offers better account synchronization than most programs of this type. It also receives high marks for customer service, a rare plus for a free financial services software program. Empower offers much more in-depth investment analysis and planning than Quicken. It also offers enhanced security through its use of multi-factor authentication.

Empower services are accessible by computer, tablet, or cellphone.

2. Banktivity (iBank)

Debuting in 2003, iBank was designed by IGG Software specifically for Apple’s operating systems—at first, macOS (for desk- and laptops), and later iOS (for iPhones and iPads). IGG re-christened it Banktivity in 2016.

Aiming to serve as a personal or small business financial management program, Banktivity offers a myriad of financial services, including bank, credit card, loan, and investment account management. Features not included in Quicken but that come standard with Banktivity include multicurrency functionality and variable loan amortization. Its platform for reviewing all of an individual’s financial accounts can be found on one central dashboard: checking, savings, money market, equity and fixed-income investments, retirement accounts, loan accounts, and brokerage accounts.

With its continually updated charts, Banktivity stands out for the detailed income, expense, and investment performance analysis it offers, tracking buys and sells of stock shares, dividends, and stock options.

The program also allows for easy production and printing of custom financial reports.

Research shows Gen X is invested in—but worried about—their later years.

Fact checked by Vikki Velasquez

Generation X is represented by Americans born between 1965 and 1980, and they number approximately 64 million. Full retirement age is looming for many of them, but numerous reports indicate that they’re nowhere near ready financially.

The Schroders 2024 U.S. Retirement Survey found that Gen Xers anticipate having $602,944 in retirement savings when the time comes. Yet they believe they’ll need $1,069,746 to fund a comfortable retirement. That’s a difference of $466,802.

Another finding is even more alarming: 48% of them said that they don’t have any sort of retirement plan or strategy at all.

Key Takeaways

• Only about 14% of Gen Xers felt that they had saved enough for retirement, according to a December 2024 survey.
• The Internal Revenue Code includes retirement plan catch-up provisions for those who’ve gotten a late start on saving.
• The Congressional Budget Office anticipates that the Social Security Trust Fund will run dry by fiscal year 2033.
• Taxes can reduce returns so tax-advantaged investing is crucial.
• Gen Xers stress about their coming retirement years but have healthy financial behaviors.

Why Is Generation X Worried About Retirement?

“The future for Gen X retirees looks very different than it did for our parents,” notes Melissa Murphy Pavone, Certified Financial Planner and founder of Mindful Financial Partners.

“We’re facing the uncertain future of Social Security, rising healthcare costs, increased longevity, and more individual responsibility for retirement savings.”

Only 53% of Gen Xers felt that they would be able to retire on their own terms, according to Fidelity Investments’ 2025 State of Retirement Planning.

The Schroders survey also revealed that only 14% felt that they’d saved enough, and 54% worried that they would deplete their assets before their deaths.

Social Security

Old-Age and Survivors Insurance (OASI), commonly known as Social Security, provides benefits to retired U.S. workers.

However, the Congressional Budget Office anticipates that the OASI Trust Fund will run dry by fiscal year 2033.

Gen Xers’ plans reflect their worries. Schroders found that 43% intend to begin collecting Social Security as soon as possible, compared to 10% who plan to wait until age 70 for their maximum monthly payouts.

How Generation X Can Prepare for Retirement

Solid Financial Behavior

According to an October 2024 report by FINRA’s Investor Education Foundation, while Generation X perceives its financial situation as worrisome, it actually reports fairly healthy financial behavior.

About 55% have a retirement account at work. Overall, they’re contributing yearly to these accounts (and individual retirement accounts), and just 10% report taking loans from them.

They have debt, but it’s primarily related to asset accumulation, such as home and auto loans. And they’re managing it well. However, about a quarter of Gen Xers have student loans, which is a source of strain for them.

Better Resources for Saving

It’s not all doom and gloom for Gen Xers, or at least it may not have to be, according to Chad Parks, CEO & founder of Ubiquity, a leading small business retirement solutions provider.

“The bright side here is that Gen Xers no longer need to be seen as the ‘vulnerable generation’ because they do have access to more retirement planning and savings resources than any generation before them,” Parks says.

“From more diverse investment options (stocks, bonds, ETFs) to higher contribution limits and virtual education and fintech tools, Gen Xers have multiple pathways to take control of their financial journeys through their employer-sponsored 401(k).”

Pavone agrees. “It’s not too late to prepare,” she says, “but the clock is ticking. A CFP® can help Gen Xers take proactive steps like maximizing retirement account contributions, including catch-up provisions at 50-plus.”

Important

Shroders found that 35% of Gen X workers were holding their retirement savings in cash in 2024 and 64% reported that they were doing so because they were afraid of stock market losses.

Annual and Catch-Up Contributions

One sure way to prepare for retirement is to contribute as much as allowed to your retirement accounts.

For 2025, Gen Xers who have reached age 50 can contribute an additional $1,000 beyond the annual limit ($7,000) for their individual retirement accounts (IRAs). That’s a total of $8,000 for the year.

Similarly, 401(k) participants can contribute an additional $7,500 catch-up amount beyond the annual limit of $23,500, which means a total contribution of $31,000.

Taking advantage of their retirement accounts’ maximum contribution amounts, as well as the tax benefits and compounding, can help Gen Xers better position themselves for retirement as the clock ticks down.

Ways to Catch Up

Gen Xers may be at the top of their careers by now, with higher salaries and fewer expenses as childcare costs are no longer an issue. So they should focus on putting more money away.

After maxing out their retirement accounts, they can consider taxable brokerage accounts (which have no limits on deposits and no required minimum distributions).

There are also investments available through their banks, such as certificates of deposit (CDs) and high-yield savings accounts.

Just be sure to use these other options after stashing as much as possible in work and individual retirement accounts.

“They need to sign up for and utilize everything their employer’s plan offers: catch-up contributions, tax deductions, all of it,” Parks says.

Avoid Taxes Where Possible

Taxes eat away at investment returns. That’s why tax-advantaged retirement accounts are so vital for Gen Xers.

Traditional IRAs and 401(k)s offer a tax deduction for the money you contribute. That reduces your taxable income. Then, your account’s contributions and earnings grow undiminished by taxes for years until you take withdrawals in retirement. At that point, they’re taxed as ordinary income.

A Roth IRA or Roth 401(k) is slightly different. The money you contribute to a Roth is money you’ve already paid taxes on. So there’s no tax break there. However, your contributions and earnings grow tax-free, and you’ll owe no taxes on your withdrawals in retirement.

Tax-free, compounding growth is an exceptional way to grow the value of your savings. So Gen Xers should max out their retirement account contributions whenever possible.

Alternative Investments

Pavone stresses the idea of diversifying beyond traditional retirement investments. The National Association of Realtors indicates that Generation X is doing just that.

They account for about 24% of all homebuyers and many own additional properties for investment and income-generating purposes.

In addition, a diversified portfolio of stocks and bonds can provide a higher annual return over the long term even if returns don’t consistently boom early on.

Interest in Crypto

Another way Gen Xers are working to increase their savings and investments is by investing in cryptocurrencies. In fact, as of December 2024, 24% of them were so invested.

According to a Morgan Stanley October 2024 article, Bitcoin had an eye-catching 49% average annual return from 2014 through 2024. But the firm warned that this probably would not be sustained over the next 10 years.

In fact, it estimated future 10-year annualized returns for bitcoin at 1% to 10%. This can be a comfortable range if you reinvest rather than spend your profits.

The Bottom Line

Generation X is heading toward retirement. These 45- to 60-year-olds face a looming Social Security crisis, and almost half of them have no retirement strategy in place.

But Gen Xers have solid options. Investing is easier than ever with internet access. They may have more cash available to invest as their children fly the nest.

Once they reach age 50, they can make sizable catch-up contributions to their retirement accounts. And they can invest additional money through brokerage accounts. So they may be in better shape than they perceive.

However, if you feel overwhelmed by a lack of savings and your retirement timeline, seek advice from a financial professional to stay focused and on track.

It can be done, but do it only as a last resort

Reviewed by Ebony Howard
Fact checked by Kirsten Rohrs Schmitt

If your employer allows it, getting money from a 401(k) plan before age 59½ is possible. However, early withdrawals deplete retirement savings permanently and, minus a few exceptions, carry a 10% penalty and an income tax bill. Your company’s human resources department can help you explore your options.

Key Takeaways

• If you withdraw money from a 401(k) plan before age 59½, you may incur a 10% early withdrawal penalty along with income taxes on the distribution.
• The IRS allows certain exceptions to the penalty, such as for medical bills and natural disasters.
• You may qualify for a hardship withdrawal for certain expenses, but you will still owe the 10% penalty unless it meets one of the exceptions.
• Even if the IRS permits an early distribution, your 401(k) plan may not, so check your plan document for specifics.

Penalties for Early Withdrawals

Withdrawing money from a 401(k) early means you will owe income taxes on the distribution along with a 10% tax penalty on the amount withdrawn unless it qualifies for an exception to the penalty under IRS rules.

Taking an early withdrawal “really should be your last resort,” says Eric Droblyen, CEO of 401(k) provider Employee Fiduciary. “Once you take that money out, it can’t keep earning compound interest.”

Even though the IRS does allow penalty-free withdrawals in certain cases, those distributions come with a large cost in future retirement income. “If you take a $10,000 distribution now, it could have been $20,000 or $30,000 by the time you retire,” Droblyen adds.

$6,300

The approximate amount you will clear on a $10,000 withdrawal from a 401(k) if you are under age 59½ and subject to a 10% penalty and taxes.

Exceptions to Early Withdrawal Penalty

The IRS permits early withdrawals without a penalty for medical bills, natural disasters, and certain other contingencies. In addition, if you leave or lose your job before age 59½, the age threshold drops to 55.

You may also withdraw up to $5,000 without penalty to pay expenses related to the birth or adoption of a child under the terms of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.

Here’s the full list of possible exceptions:

Exceptions to Early Withdrawal Penalties
Reason	Notes
Birth or Adoption	Up to $5,000 per child for qualified expenses
Automatic enrollment	Participants can choose to withdraw contributions if they are automatically enrolled in the plan, but must do so by their second pay date (or within 30 days of the first pay date, whichever is sooner)
Corrective Distributions	If you exceed contribution limits, you can withdraw the excess without penalty within time limits
Death or disability	If the account owner dies or becomes totally and permanently disabled
Disaster recovery	Up to $22,000, if you sustain losses because of a federally declared disaster where you live
Domestic Abuse	Up to $10,000 or 50% of the account, whichever is lower.
Domestic relations	When a marriage is dissolved, a court may order distributions to a former spouse or dependent.
Emergency personal use	One distribution per year, up to $1,000 for personal or family medical emergencies.
Equal payments	As part of a substantially equal periodic payments (SEPP) plan
Dividends	If received through an employee stock ownership plan
Levy	If the IRS levies the plan
Medical expenses	The amount of unreimbursed medical expenses, exceeding 7.5% of your AGI
Military	For qualified reservists called to active duty
Rollovers	Within 60 days of distribution
Separation	If the employee leaves their job after age 55
Terminal illness	If certified by a physician as being terminally ill prior to the distribution

Note, however, that even if a distribution is covered by one of these exceptions, it may not be permitted under the terms of your 401(k) plan. Check your plan document to determine what types of withdrawals are allowed.

Hardship Distributions

A retirement plan may also allow early distributions in the event of an “immediate and heavy financial need.” These are called hardship distributions. An employee is automatically considered to qualify for a hardship distribution to pay for the following expenses:

• Medical expenses for the employee or their family (spouse, children, dependents, or beneficiary)
• Purchase of a primary residence (excluding mortgage payments)
• Tuition and related expenses for the employee, their spouse, or their children or dependents
• Payments to prevent foreclosure or eviction
• Funeral expenses for the employee or their family members
• Certain expenses to repair damage to the primary residence

Note, however, that these distributions are limited to the amount needed to cover the financial need, along with any tax they incur. Hardship withdrawals are still subject to the 10% penalty, unless they meet one of the exceptions. In addition, hardship distributions cannot be repaid to the plan or rolled into another tax-advantaged plan.

Important

With an early distribution, you will still owe the income taxes on the distribution even if the penalty is waived. If it’s a traditional 401(k), you will owe taxes on the entire withdrawal. For a Roth 401(k), you’ll only pay taxes on the earnings.

Withdrawal Alternatives

Loan: You can take a 401(k) loan to make an early withdrawal. Essentially, you’re loaning money to yourself, with a commitment to pay it back. A loan allows you to replace the money, which you can do through payments deducted from your paycheck. Check with your employer to see if you’re eligible.

SEPP withdrawals: Substantially equal periodic payments (SEPPs) are an option for withdrawing funds from an IRA without paying the early distribution penalty of a 401(k). Withdrawals are not allowed while working for your employer. If the funds are from an Individual Retirement Account (IRA), you may start SEPP withdrawals at any time.SEPP must be calculated using one of three methods approved by the IRS: fixed amortization, fixed annuitization, or required minimum distribution (RMD).

Do I Have To Pay Back a 401(k) Loan?

Any money not repaid on a 401 (k) loan, plus interest will be considered a plan distribution. Some plans may even require you to repay the entire loan if you leave your job.

How Much Tax Do I Pay on an Early 401(k) Withdrawal?

With a traditional withdrawal, the money will be taxed as regular income, just as it would in retirement. That’s from 10% to 37%, depending on your taxable income. The taxes will be due for the tax year you take the distribution. If your withdrawal does not meet the qualifications for a penalty-free distribution, you will also pay an additional 10% tax.

What Are the Pros and Cons of a Withdrawal vs. a 401(k) Loan?

A withdrawal is a permanent hit to your retirement savings. By pulling out money early, you’ll miss long-term growth. Though you won’t have to pay the money back, you will have to pay the income taxes due, plus a 10% penalty if the money does not meet the IRS rules for a hardship or an exception. A loan against your 401(k) has to be paid back. If the money is repaid on time, you won’t lose much of that long-term growth.

The Bottom Line

To withdraw from your 401(k), speak to your human resources department first to explore your options. Withdrawing money early from your 401(k) can carry serious financial penalties, tax implications, and missed long-term growth.

Imagine always making financial decisions that are actually in your best interests, instead of justifying any impulse. Imagine accepting your financial situation—the good and bad—without blaming yourself or giving up responsibility and control.

If you could live like that, you’d probably be happier and better off financially. That’s the premise of financial mindfulness, which combines traditional mindfulness practices with financial decision-making to help people develop a more balanced, intentional relationship with money.

Researchers have found that people with financial mindfulness experience positive financial outcomes, such as higher credit scores and more rational investment decisions.

Key Takeaways

• Financial decisions are often wrapped up in emotions—like stress, anxiety, frustration, and guilt—which can make it difficult to act rationally.
• Financial mindfulness applies traditional mindfulness practices—awareness and acceptance—to financial decision-making.
• Research has found that higher levels of financial mindfulness are associated with positive financial outcomes, such as higher credit scores.

What Is Financial Mindfulness?

A 2023 study defined financial mindfulness as “the tendency to be highly aware of one’s current objective financial state while possessing an acceptance of that state.”

Practicing financial mindfulness means having a clear understanding of your current financial situation and acknowledging that situation without judgment. This involves observing spending patterns, emotional triggers around money, and financial habits with curiosity rather than criticism.

Unlike traditional budgeting, which might focus solely on numbers, financial mindfulness encompasses the psychological and emotional aspects of our relationship with money, helping us understand the deeper motivations behind our financial choices.

In the 2023 study, Simon Blanchard, a professor at Georgetown University’s McDonough School of Business, and Emily Garbinsky, a professor at Cornell University’s SC Johnson College of Business, collected data from 2,000 consumers to understand the concept of financial mindfulness and its impact on financial outcomes.

According to their research, some of the key benefits of practicing financial mindfulness include:

• Higher credit scores as a result of better financial acceptance
• Less financial avoidance, like ignoring credit card statements
• Better ability to handle market volatility without overreacting
• More rational investment decisions, avoiding traps like the sunk cost fallacy
• Improved emotional relationship with money

Overall, the study emphasizes that financial mindfulness is about how someone interacts with their finances, regardless of how much money they have.

How to Practice Financial Mindfulness

To practice financial mindfulness, you first need to develop regular practices that foster awareness of your financial situation. This might mean weekly or monthly money check-ins, where you spend a few minutes reviewing your income, spending, assets, and liabilities.

The second component of financial mindfulness is acceptance: acknowledging your financial state without judgment. 

Taking mindful pauses before purchases allows you to evaluate whether they align with your values and long-term goals. These pauses can also help you make better-informed decisions without being swayed by emotions, positive or negative.

Additionally, practicing gratitude for current financial circumstances—while still maintaining clear awareness of areas for improvement—can help balance any extreme emotions surrounding money matters. Regular meditation or reflection on financial goals and behaviors can also help identify patterns and triggers that may be hindering your financial progress.

Blanchard offered some additional pieces of advice for anyone interested in incorporating financial mindfulness into their lives:

If you find yourself encountering strong emotions around financial decisions, consider pairing the routine of weekly or monthly financial check-ins with something enjoyable. For example, do it while treating yourself to a pastry at your favorite bakery, so there’s a positive incentive to sit down and look over your accounts.

“Notice whether you feel anxious, guilty, or pressured. Recognizing these emotions—rather than ignoring or being overwhelmed by them—can help you make decisions more calmly,” Blanchard told Investopedia. “Over time, adding small moments of emotional awareness to everyday choices fosters a healthier relationship with money and strengthens your overall financial mindfulness.”

The Bottom Line

Maintaining awareness and acceptance of your financial situation without judgment can lead to better financial outcomes and help you make sound financial decisions. Developing a more conscious relationship with money can help create sustainable financial habits that support both our economic goals and mental well-being.

Are you paying for the “moron risk premium”? Originally coined to describe major increases in bond interest during U.K. Prime Minister Liz Truss‘s “mini-budget” crisis in 2022—her government’s unpredictable, so-called “moronic” policies pushed the yields sky‐high—the phrase came back into wider use in 2025 in light of the market chaos set off by Trump administration changes to U.S. tariff policy.

The moron risk premium is the extra yield investors demand on sovereign debt because of policy missteps or unpredictable fiscal policy. Understanding this premium can help you protect your portfolio during periods of government policy-produced market chaos.

Key Takeaways

• First coined in reference to a failed fiscal policy roll-out in the U.K. in 2022, the “moron risk premium” is the extra interest demanded on bonds for bad governance.
• The term has been used to describe global markets’ reactions to the Trump administration’s unpredictable shifts in tariff policies, which lifted bond interest rates significantly.

What Is the ‘Moron Risk Premium’?

The phrase was first popularized during the British mini-budget crisis in 2022, when Prime Minister Liz Truss released a series of unfunded tax cuts that caused long-term U.K. government bond yields to soar and the British pound to plunge. As U.K. markets went into freefall, Dario Perkins of TS Lombard christened the increased yields as the “moron risk premium.”

In 2025, on the heels of the Trump administration’s tariff announcements, some market watchers noticed the extra compensation demanded for buying American assets, including Treasurys. At that point, the phrase returned. “The moron risk premium is back, on steroids,” noted Jo Michell, a professor of economics at the University of West England on Bluesky.

Thus, the “moron risk premium” is now a pointed shorthand for a government’s self-inflicted wounds to its bond markets.

Anger Over the Trump Tariffs

Many market observers grew exasperated with the quick and deep shifts in the Trump administration’s tariff policies in 2025. Soon, widespread anger was reported all over Wall St. as both the bond and stock markets careened like a speeding car without a driver.

Trump’s own supporters reacted by seeming to rival one another inventing new names for the “moron premium.” Elon Musk, a close administration advisor, called Peter Navarro, senior counselor to the president and widely seen as a major driver of the tariff policies, “truly a moron” and “dumber than a sack of bricks.” Hedge fund manager Bill Ackman took to X to warn of an “economic nuclear winter.” Meanwhile, Republican Senator Rand Paul said the tariffs could lead to the “political decimation” of the Republican Party as conservatives who had already fallen out with Trump over policy, including the National Review‘s Charles C. W. Cooke, returned to the language of the Truss era, referring to “Trump’s moronic tariffs.”

Those in a position to demand the “moron premium” might include the so-called “bond vigilantes.” While there’s some controversy about whether they exist as an intentional group, they are bond traders who sell government debt to protest poor fiscal policy.

How To Protect Yourself From ‘Morons’

Like any risk premium, the moron risk premium increases costs, in this case, those related to government borrowing, which can put a drag on stocks and long-term growth. Here are some protective measures to take:

• Diversification across geographies: Spreading risk across different markets can help mitigate the impact of a single government’s incompetence.
• Shift to safety: Consider safe, high-yielding alternatives such as money market funds or CDs.
• Keep the long term in view: Despite volatility in the short term, long-term investors can benefit from buying shares and other assets while they are “on sale.” Most should avoid timing the market, though, and you might consider dollar-cost averaging (buying a fixed dollar amount of shares in a mutual or exchange-traded fund at regular intervals), which is often very effective over the long term.

The Bottom Line

While you alone can’t prevent those you think are morons from getting elected to have power over the markets, you can protect your portfolio. The moron risk premium thus serves as more than just a catchy insult—it’s a market signal that savvy investors can use to navigate through periods of policy-induced volatility.

Reviewed by Andy Smith
Fact checked by Suzanne Kvilhaug

Mortgages provide ample opportunity for bad actors to steal, defraud, or cut corners. According to 2024 data, one out of every 123 mortgage applications had indications of fraud, and cases increased by more than 8% year over year.

Fraud can be committed by borrowers falsifying loan applications or industry professionals in more complex schemes. Identity theft also can target borrowers or homeowners.

Key Takeaways

• Common individual mortgage fraud scams are identity theft and income/asset falsification, while industry professionals may use appraisal frauds and air loans to dupe the system.
• Mortgage fraud continues to be a problem in America. According to CoreLogic’s data in 2024, one in every 123 mortgage applications shows indications of fraud.
• There are professional organizations that monitor and investigate mortgage fraud, along with the FBI.

What Is Mortgage Fraud? 

Mortgage fraud includes predatory lending practices that target certain borrowers, but it also can include deceptive practices such as providing false information. According to the Federal Bureau of Investigation (FBI), this involves any sort of “material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase, or insure a loan.”

This means mortgage fraud can be committed by both individual borrowers and industry professionals. And the sums involved are high. For example, in Sacramento, Calif., seven people were convicted in a $10 million mortgage scam in early 2019.

There are two distinct areas of mortgage fraud:. 

1. Fraud for profit: Those who commit this type of mortgage fraud often are industry insiders using their specialized knowledge or authority to commit or facilitate it. This can involve collusion by industry insiders, such as bank officers, appraisers, mortgage brokers, attorneys, loan originators, and other professionals engaged in the industry. Fraud for profit aims to misuse the mortgage lending process to steal cash and equity from lenders or homeowners. The FBI prioritizes fraud for profit cases.
2. Fraud for housing: This type of fraud is typically represented by illegal actions taken by a borrower motivated to acquire or maintain ownership of a house. The borrower may, for example, misrepresent income and asset information on a loan application or entice an appraiser to manipulate a property’s appraised value.

Important

Housing or mortgage fraud can be committed by individuals who intend to occupy a property as a primary residence or by groups of investors who defraud via rental properties or commit appraisal fraud when flipping homes.

Why Commit Mortgage Fraud? 

Fraud for housing is committed by borrowers who, often with the assistance of loan officers or other personnel, misrepresent or omit relevant details about employment and income, debt and credit, or property value and condition with the goal of obtaining or maintaining real estate ownership. Fraud for profit is committed by industry professionals who misstate, misrepresent, or omit relevant details about their personal or their clients’ employment and income, debt, and credit, or property value and condition with the goal of maximizing profits on a loan transaction.

Fraud for profit can be committed by any professional in the loan transaction chain, including the builder, real estate sales agent, loan officer, mortgage broker, credit/debt counselor, real estate appraiser, property inspector, insurance agent, title company, attorney, and escrow agent. Industry professionals also can work in concert, as a network, to defraud underwriters, lenders, and borrowers, and maximize fees and share profits on all mortgage-related services. These actions are motivated either by the desire to gain extra sales commissions or simply increase an investment position.

Common Mortgage Fraud Schemes and Scams 

Common mortgage fraud schemes include different types of property flipping, occupancy fraud, and identity theft.

Property Flipping

Property flipping is generally not illegal when associated with purchasing a house, holding/fixing it, and then reselling it for a profit. On the other hand, when a property is bought below market and immediately sold at profit with the help of a corrupt appraiser who “verifies” that the value of the property is actually double the initial purchase amount, mortgage fraud is indicated.

In the case of the same-day close property flipping scheme, the chain of title and the appraisal are often fraudulent and include three parties—the seller, the flipper, and the unsuspecting end buyer. The seller makes a contract with the flipper to purchase the property at below market value. The flipper provides the end buyer with a fraudulent title insurance commitment, showing the flipper as the owner (though that’s not the case) and an appraisal is made at the inflated price the flipper and end buyer have agreed on.

Occupancy Fraud

Occupancy fraud is a scheme used by investors to qualify for higher loan-to-value ratios and lower out-of-pocket costs on purchases, in addition to lower mortgage rates. Occupancy fraud occurs when a borrower claims that the home will be owner-occupied to obtain favorable bank status when the property will actually remain vacant. The straw buyer uses or allows someone to use their identity, credit score, and income to obtain property for another buyer who may not qualify for a mortgage (or qualify for the best rates). Straw buyers are often used by investors, either willingly or unknowingly, to cover up other forms and multiple layers of fraud.

Identity Theft and Income/Asset Falsification

The most common individual mortgage fraud scams are identity theft and income/asset falsification. Identity theft occurs when the real buyer fraudulently obtains financing using an unwilling and unaware victim’s information, including Social Security numbers, birth dates, and addresses. Identity theft for mortgage purposes may also include stolen pay stubs, bank records, tax returns, W-2s, and falsified employment verification letters. Even property ownership records can be falsified, and borrowers can obtain a fraudulent mortgage on a property that they neither own nor occupy.

Air Loan vs. Appraisal Fraud

Common industry professional mortgage fraud scams include air loan and appraisal fraud.

An air loan is obtained on a nonexistent property or for a nonexistent borrower. A group of professionals will often work together to create a fake borrower and a fake chain of title and to get a title and property insurance binder. Additionally, the fraud chain may include phone banks and mailboxes to create fake employment verifications, home addresses, and borrower telephone numbers. The air loan scam simply puts cash into the hands of the perpetrators, and no property is ever bought or sold.

Appraisal fraud often involves a real estate agent, builder, appraiser, and loan officer working together to maximize a purchase price and loan amount in order to increase their commissions. On the other hand, corrupt appraisers will often undervalue a property to ensure that a fellow investor will be able to purchase the asset.

Some forms of predatory lending activities, foreclosure rescue, and mortgage reduction scams depend heavily on the aforementioned mortgage fraud practices. Predatory lending typically involves falsifying lenders’ income figures to inaccurately reflect their ability to assume additional debt. Such activities heavily contributed to the Great Recession.

How Can You Avoid Being a Victim of Mortgage Fraud?

Do thorough research on the lenders, real estate agents, and other professionals you are working with. Be sure you are dealing with individuals or agencies that are licensed or certified. If you have questions, you can seek assistance from a HUD-certified counselor..

What Is HELOC Fraud?

HELOC fraud typically involves identity theft as a means of targeting your home equity line of credit. Once perpetrators get access to your personal information, they use it to access funds from your HELOC. You can combat this by diligently protecting passwords and other personal information and closely monitoring your account balances.

Is Straw Buying Illegal?

Using a straw buyer is a deceptive practice because it conceals the identity of the real buyer. Even if the parties involved have every intention of repaying the loan, this type of deception can open them up to criminal prosecution.

The Bottom Line

Mortgage fraud takes a lot of different forms from identity theft to falsified applications to industry insiders trying to dupe the system. One of the best ways to combat mortgage fraud is to be diligent about making sure you are working only with licensed and trusted professionals and seeking professional assistance if anything looks unusual or suspicious. CoreLogic data reports that nearly 1% of mortgage applications show some indication of fraud.

You’d be surprised how much aid is out there

Reviewed by Ebony Howard

Let’s say you don’t reach retirement with all the money that you’re supposed to have saved and end up with a low income in retirement. Though the stock market has been very successful for many, the last few decades haven’t exactly been without financial shocks.

Many households felt the effects of the 2007-2008 financial crisis and the Great Recession. People reaching retirement age thought they were set until financial markets crashed, wiping out much of their retirement funds. Many recovered, but for others, the timing was disastrous. More than a decade later, the world faced a new crisis.

The economic fallout of the pandemic and lockdown rocked the stock market, threw millions out of work, and isolated many Americans, especially older people who are more vulnerable to serious effects. While the market recovered many of its losses, not everyone was able to benefit. Here are some strategies for those who may need a little assistance in retirement.

Key Takeaways

• Older adults with lower incomes have a number of financial options available to help in retirement.
• Programs such as Medicare, Social Security, food stamps, Medicaid, and Supplemental Security Income (SSI) are available to those who qualify.
• Older people with lower incomes may be able to find help with job training, housing, tax relief, and legal services.
• Many of the programs available to older people are at the state and local level.
• Growing vegetables and cooking meals at home can help substantially lower food bills.

Understanding Low Income in Retirement

How many people get to retirement with low income? The National Council on Aging tracks economic security for older adults and found that 17 million Americans over the age of 65 live below the poverty level of $30,120 per year (2024 federal poverty level).

Millions of older adults are economically insecure as they struggle with issues such as inadequate nutrition and soaring healthcare costs.

If you (or a loved one) do not have enough money to meet basic needs, you need to know about programs that can provide retirement assistance. At the same time, when the most immediate needs have been filled, it also makes sense to stand back and think about the next steps.

Note

Order your copy of the print edition of Investopedia’s Retirement Guide for more assistance in building the best plan for your retirement.

Government Benefits and Programs

You’re probably familiar with a number of the following programs that help lower-income retirees.

Social Security

Throughout your working years, you paid into Social Security. The average retiree received $1,980.86 in monthly benefits as of February 2025.

If your spouse passed away or you’re disabled, you may qualify for benefits, too. For many, Social Security is the cornerstone of their income, but it’s not meant to be the primary income source.

Medicare

You paid into Medicare during your working years, just as you did with Social Security. You should receive Part A benefits at zero cost. Premiums for Parts B and C will vary. Part D, better known as the prescription coverage part, has a low-income subsidy called Extra Help.

Extra Help

Older people receiving Medicare Part D coverage may receive assistance from the Extra Help plan, which includes $0 premiums and $0 deductibles, as well as low-cost prescriptions. Married couples living together must have a combined worth of $31,725 or less, and single people must have $23,475 or less to qualify for this plan.

Medicaid

Medicaid, not Medicare, is where you go if you need assistance with medical costs. The program provides coverage for “children, pregnant women, parents, seniors, and individuals with disabilities,” provided you are under certain income limits. You can receive Medicare and Medicaid benefits at the same time.

Food Stamps

Older adults are eligible for the food stamp program, which is now titled the Supplemental Nutrition Assistance Program (SNAP). You must apply in the state in which you live and meet specific income and resource criteria.

Supplemental Security Income (SSI)

SSI is not Social Security. Instead, it’s a public assistance program that provides aid to the aged, blind, or disabled and is intended to meet basic needs such as food, clothing, and shelter.

Benefitscheckup.org

Benefitscheckup.org is a website sponsored by the National Council on Aging that includes information on public and private assistance programs for adults over 55, including nutrition, legal, housing, and education. Complete the short form, and the site will list any programs that may apply to you.

Eldercare Locator

The U.S. Department of Health and Human Services sponsors Eldercare, a website similar to the above. Enter your city or zip code, and the site will return local assistance programs available to you.

Commodity Supplemental Food Program

The U.S. Department of Agriculture administers the Commodity Supplemental Food Program (CSFP). Similar to food stamps, this program is available to people at least 60 years old and is administered at the state level.

Tax Relief

Older adults may be eligible for tax relief, often on property or real estate taxes, vehicle license fees, and solid waste fees. Certain income caps may apply, and each state has varying laws and eligibility requirements. You may also apply for a federal tax credit if your income falls below certain levels.

Senior Community Service Employment Program

The United States Department of Labor administers the Senior Community Service Employment Program (SCSEP), a program that provides training and part-time job placement for people age 55 and up under certain income limits. Jobs pay minimum wage but serve as a way to provide training that may lead to a better job in the future.

Housing Choice Voucher Program

The Housing Choice Voucher Program (HCVP) offers assistance for anybody living in certain properties run by local public housing agencies. Vouchers are income-based and often have a long waiting list. Your local government office has all the details. 

Other Help for Older Adults

Internet and Broadband Support

There are also a number of programs that help older adults afford Internet services if they are priced out of reach, as can be the case in rural areas, especially. Your local provider may even offer one of these plans.

Low-Cost Legal Services

Many attorneys and practices will provide legal services to older people for free or at a discounted rate.

Utilities Assistance

Many utility companies around the country provide assistance programs to older people who can’t afford to pay their utility bills. Contact your utility company and ask whether it has an assistance program. If not, the company might suggest other ways to lower your utility bills.

Living a Low-Cost Lifestyle 

Spending less isn’t just about government or private programs, and you can build in a lot of fun. You now have time to smell the roses—and even grow some—in your own garden or a community garden. You can grow vegetables, too, and those vegetables can replace some of what you buy at the supermarket.

With a little creativity, you can create four meals out of one broiler chicken, for example—plus healthy soup from the bones. Set to work polishing your cooking skills or learning some new ones because cutting back on takeout and restaurant meals can save you a lot of money.

If you live near a university, you can attend free student concerts, art shows, and lectures. Some volunteer programs include lunch for the volunteers—and they’re a good way to meet new people in your community, even if you didn’t move after you retired.

Important

Older adults are entitled to many different discounts for things such as transportation and entertainment, including many deals you might not know about.

The best exercise, if you can manage it, is walking, and all you need are adequate shoes. Look into the Silver Sneakers fitness programs, sponsored through many Medicare health plans in more than 22,000 locations. These programs allow you to work out at home or at the gym with friends and offer access to many different instructor-led fitness classes.

Controlling Your Finances

If you haven’t done so already, take control of your retirement finances. If you’re married, make sure both spouses are involved because one of you will probably have to take the primary role at some point. It’s important to discuss everything thoroughly, especially when money is tight and there isn’t much room to recover from mistakes.

This is also the time to discuss whether you plan to stay where you are or relocate to a smaller home or less expensive community. The factors to consider are too numerous to list, but try to discuss them as fully and as early in your retirement as possible.

What Happens If You Don’t Retire at 65?

If you delay retirement past age 65, you can take home more in Social Security each month, as the benefits increase the longer you put off claiming them until age 70. Continuing to work past 65 might also increase your benefits because Social Security uses your earnings and years of work to calculate what you’ll receive.

What’s a Good Monthly Income in Retirement?

What is considered a “good” monthly retirement income will vary greatly depending on the individual. Factors such as one’s savings, debt, dependents, plans for retirement (such as travel), and other factors will greatly shift how much money a person needs in retirement. A general rule is that approximately 80% of one’s pre-retirement income will be needed in retirement.

When Should I Start Collecting Social Security?

You can start collecting Social Security at age 62 if you want—but you’ll get a bigger monthly benefit if you can hold off for a few years. The maximum monthly benefit is available to you if you delay retirement until age 70, if you can. For example, if you were born in 1960 or later, full retirement age is considered to be 67. If you retire before full retirement age, you’ll get reduced benefits; retire early, at age 62, and your benefits are reduced by a full 30%. The Social Security Administration website explains how early retirement affects your benefits according to your birth date.

The Bottom Line

With a little bit of digging, older adults can find a host of targeted programs designed to assist with living expenses. Many of these programs are administered by your state or local government.

Contact the appropriate government offices for more information or go to their websites. If you need help getting online, many public libraries have extensive computer facilities and staff trained to help you learn how to use it.