Strategies to help you plan now for care later

Fact checked by Vikki Velasquez

A 50-year-old man today has a future life expectancy of around 28 years. For women, that number increases to 32, according to the Actuarial Life Table data collected by the Social Security Administration. As members of Generation X (those born between 1965 and 1980) prepare for the decades ahead, they need to consider the potential circumstances and challenges that could impact their well-being in retirement. Namely, the future need for long-term care. 

The longer a person lives, the more likely they are to develop health concerns. In fact, someone who is 65 years old has a 70% chance of needing long-term care in their lifetime.

With some time to think about your potential future care needs, you may want to consider incorporating long-term care strategizing into your greater financial plans. Here are some critical insights and tips for long-term care planning in your 40s and 50s.

Key Takeaways

• Long-term care planning is essential for Gen X due to the rising costs of care and insurance coverage.
• Understanding the scope of long-term care services is crucial for effective planning.
• Despite common misconceptions, Medicare and employer-sponsored insurance do not cover most long-term care costs.
• Financial strategies, including insurance and HSAs, can help manage future care costs.

Understanding Long-Term Care

Long-term care refers to the ongoing care needs a person may have beyond medical treatment and recovery. In most cases, long-term care does not involve medical care, though it may be provided by nurses or facilities with in-house medical care teams. 

Those who receive long-term care may need help completing activities of daily living (ADLs), which are the basic personal tasks that, under normal circumstances, an able-bodied person should be able to complete on their own. 

These can include:

• Feeding yourself
• Bathing and brushing your teeth
• Getting dressed
• Going to the bathroom
• Moving from the bed to a chair

In addition, there may be instrumental activities of daily living (IADLs) that require more physical or cognitive function than the basic necessities, which some long-term care programs can assist with.

Examples of IADLs include:

• General housework, cleaning, maintenance, and upkeep
• Shopping for groceries and preparing meals
• Caring for pets
• Paying bills and managing the household finances
• Communicating with others over the phone or via email or text
• Handling an emergency

Note:

While the term “long-term care” is often associated with a long-term care insurance policy, it’s actually used to describe any service offering, assistance program, or support an individual can use to address their care needs (in the event they need assistance with ADLs or IADLs).

Types of Long-Term Care

Those seeking long-term care have many options, depending on their specific care needs, timeline, support system, and financial resources. 

At-Home Care

Long-term care is often provided in the individual’s home, either by an unpaid caregiver (like a son or daughter) or a home health aide. If a professional is coming to the home, they are typically trained in basic medical care, though it will depend on their job title and general responsibilities.

The annual median cost of a home health aid is $77,792, keeping in mind rates will depend on the responsibilities and hours required.

Community-Based Care

Depending on what’s available in your area, you may be able to find community-based support services, such as an adult care center or a home care agency. An adult care center does require the individual to physically go to the facility, which may be a challenge depending on physical and cognitive ability. However, these types of services can be used to supplement ongoing care or provide some care relief for family members (say the caregiver must go to work during the day and can’t leave the individual home alone for an extended period of time).

While the cost of an adult day center will vary significantly, the annual median cost is around $26,000.

Facility-Based Care

There may come a time when you’re unable to live at home or require continuous care—or perhaps you feel more comfortable moving to a location with access to medical professionals on-site. Facility-based long-term care programs include nursing homes, assisted living facilities, and continuing care retirement communities. 

These will typically be the most expensive options, though the cost may be inclusive of care, food, medication, lodging, and more. Facility-based programs vary greatly, and you’ll need to consider what specific factors matter most when deciding on a facility that suits your care requirements and lifestyle needs.

If you’d prefer a private room in a nursing home, the annual median cost is just shy of $128,000. Assisted living communities are a little less expensive at $70,800 annually—though they generally include fewer services and care.

Remember, these costs—much like anything else—are likely to rise over time. By the time the youngest members of Gen X start looking into long-term care, it’s safe to assume prices will have climbed even higher.

Why Gen X Should Plan Now

“Gen X is really seeing firsthand what long-term care can cost as their parents get older. It’s bringing up some serious worries about how quickly assets can disappear, the quality of care available, and whether parents can stay in their homes,” said Jennifer Kirby, managing partner and senior wealth advisor at Talisman Wealth Advisors.

Kirby said that she always urges her Gen X clients to “look at what’s happening and start planning now,” while they still have time to create a strategy that can help cover some potentially significant expenses.

Members of Gen X are often referred to as the sandwich generation, metaphorically stuck between the financial pull of raising a family and caring for aging loved ones. Being in a place where their own priorities are often pushed to the back burner can make it especially challenging for Gen Xers to save for retirement and strategize for their future care needs. But as even the youngest members approach their mid-40s, time is one commodity they can’t earn back. Yet, it’s the tool that makes saving for the future most achievable. 

“The risk of delaying long-term care planning is the cost. Waiting to start makes saving for any financial goal harder and more expensive,” said Frank Iozzo, CPWA, founder of FMI Financial. 

Health Insurance, Medicare, and Long-Term Care

Perhaps one of the most compelling reasons to start preparing for long-term care? Insurance (almost) never covers it.

Despite common misconceptions, Medicare and private insurers (like the policy you receive through your employer) only cover a limited amount of long-term care services, and none that assist with ADLs or IADLs.

Once you’re enrolled in Medicare, you may be eligible for some skilled services or rehabilitative care, say if you suffer from a severe injury or surgery. These services are offered either at home or in a nursing home, and coverage only lasts for a short period of time (usually 100 days maximum). Most private insurers will offer coverage under similar circumstances.

Again, this coverage is not meant to provide ongoing care, and it is strictly limited to medical recovery and rehabilitation.

Note:

For individuals who meet the income requirements for Medicaid, more long-term care coverage may be available—though the majority of your resources will need to be exhausted before Medicaid kicks in.

Financial Planning for Long-Term Care

“The longer you wait, the tougher long-term care planning becomes,” said Kirby. “Insurance gets more expensive, it’s harder to qualify, and you have less time to save. The sooner you start, the more options you’ll have.”

Some common strategies for addressing long-term care include obtaining a separate long-term care insurance policy, funding a health savings account (HSA), and adding a long-term care rider to an existing life insurance policy.

Long-Term Care Insurance

Depending on your current health status, you may have the option to purchase a separate long-term care insurance policy—either independently or through your employer (if you’re still working). 

A long-term care policy will provide the more comprehensive coverage that your traditional Medicare or health insurance policy lacks, though the specifics will vary by provider and policy terms.

Iozzo explained the potential downsides of a long-term care policy, including a lack of availability and affordability: “One of the biggest risks with traditional long-term care insurance policies is premium increases. Insurance companies have historically underestimated their liabilities, and they have passed on their losses to policy owners in the form of premium increases.”

He said there are a few specific factors to look for in a standalone or hybrid policy such as, “Fixed premiums, inflation protection, and guarantee return of premiums (if you no longer want the policy).”

Health Savings Accounts (HSAs)

If you participate in a high-deductible health plan and are eligible to contribute to an HSA, or you’ve been accumulating savings in one for a while now, you may want to consider setting aside the account to self-fund your future long-term care needs. 

As a bonus, HSAs offer triple tax advantages:

• Contributions (up to the annual limit) are tax-deductible
• Earnings within the account grow tax-deferred
• Withdrawals used for qualifying medical expenses are tax-free

Once the account holder turns 65, withdrawals are no longer limited to medical expenses. They can be used on anything without incurring penalties, making an HSA an effective tool for building retirement savings as well. 

“An HSA is arguably the most powerful account out there because you may never pay taxes,” said Iozzo. “The sooner you contribute and invest to an HSA, the sooner you can have a tax-free balance working for your long-term health needs.”

Life Insurance Long-Term Care Rider

If you have a whole or permanent life insurance policy, you may have the option to add a long-term care rider to your policy. As with any change to insurance coverage, this will impact your monthly premiums and depends on several factors including your age and health history. 

“If you have cash value and a history of good health, it might be worth researching if you can use that cash value to pay for the rider or a new policy with a long-term care rider,” said Iozzo. “Depending on the cash value amount, it can help keep the premiums within your budget or even reduce them.”

What Are the Latest Trends in Long-Term Care Services that Gen X Should Be Aware Of?

Options for covering long-term care costs are changing, especially as the cost of care continues to rise. 

“Depending on the type of service, the cost of care has increased between 3% and 10% in the past year, and the cost of long-term care insurance coverage has increased as well,” said Steve Pedicini, senior wealth advisor of AlphaCore Wealth Advisory. “Many people already covered by insurance have received notices with options to either accept increased premiums for the same level of coverage or decreased coverage.”

How Can Gen X Balance Current Financial Obligations With Saving for Long-Term Care?

The key to addressing your future long-term care needs is to think proactively and use the time you have now to plan ahead. The sooner you can start building a long-term care fund (perhaps in an HSA or other tax-advantaged account) or obtain a policy, the more impactful your actions will be on your long-term financial well-being. For example, a policy that costs you $400 a month to obtain in your 40s will cost you more once you hit your 50s or 60s (or following a new diagnosis).

What Are the Tax Implications of Using HSAs for Long-Term Care?

The funds from an HSA can be withdrawn tax-free prior to age 65 as long as they’re used to cover qualified medical expenses. You may use your HSA withdrawals to cover long-term care insurance premiums (though there are monthly limits), as well as qualified long-term care services. To qualify, the care must be required by someone who is chronically ill and prescribed by a licensed health care provider.

The Bottom Line

There’s a statistical likelihood you (or your partner) will require some level of long-term care in the future. Exactly when—and for how long—however, are both unknown factors, which makes planning and preparing now all the more important. 

Taking simple steps like padding your savings account or obtaining a policy while you’re still in good health can help ease the long-term financial burden. Having a financial safety net for your future care needs can create some much-needed peace of mind as you approach retirement.

These are some of the best-performing stocks for companies involved in gold production.

Gold is one of the most famous of all safe-haven assets, traditionally included in portfolios as a hedge against inflation and market turbulence. Investors have many ways to access gold—as a physical commodity in the form of jewelry or bullion, through specialized exchange-traded funds (ETFs), and indirectly via investments in the stocks of companies that mine and produce gold.

Key Takeaways

• The top gold-mining companies for April 2025, based on 30-day returns, include Fortuna Mining Corp. (FSM), Perpetua Resources Corp. (PPTA), and DRDGOLD Ltd. (DRD).
• Investors looking for exposure to gold without making a direct investment in the commodity itself might consider gold-mining company stocks.
• The price of gold is roughly $3,028 per ounce, as the precious metal has repeatedly set all-time high records in recent months.

We explore the best gold stocks for investors to watch in April 2025, based on 30-day returns. Our screen focuses on mining companies that target gold, although many also include other precious metals. Below is a detailed explanation of the methodology we utilize to create our ranking of gold mining company stocks. All data are current as of March 25, 2025.

Best Gold Stocks to Watch in April 2025
Ticker	Company	Market Cap ($B)	Price ($)	30-Day Return (%)	P/E Ratio
FSM	Fortuna Mining Corp.	1.9	6.11	28.1	16.0
PPTA	Perpetua Resources Corp.	0.8	11.20	24.9	N/A
DRD	DRDGOLD Ltd.	1.2	14.05	22.1	13.0
BVN	Compañía de Minas Buenaventura S.A.A.	3.8	15.50	20.2	9.8
SAND	Sandstorm Gold Ltd.	2.2	7.37	19.6	161.2
TFPM	Triple Flag Precious Metals Corp.	3.9	19.44	17.4	N/A
EGO	Eldorado Gold Corp.	3.4	16.59	17.3	12.3
AU	AngloGold Ashanti PLC	17.6	35.62	13.7	436.5
AGI	Alamos Gold Inc.	11.0	26.20	13.3	39.8
OR	Osisko Gold Royalties Ltd.	4.0	21.16	11.9	259.2

What to Know About Investing in Gold

The price of gold was about $3,028 per ounce as of late March 2025. The metal has repeatedly set new records in recent months. Ongoing inflation concerns, market instability due to domestic and international geopolitical tensions, and a shifting interest rate environment in 2024 and early 2025 all helped to push gold higher, as investors sought out a stable place to park assets.

While investors typically look to avoid entering a new position while it’s close to a record high, there are many reasons why it may still pay to invest in gold. First, there is no guarantee that gold will fall from its high price point. Further, it can still offer a hedge against inflation, despite the fact that gold is quite expensive. But while gold does not offer some of the benefits of stock investments—such as the prospect of dividend payments—investors looking for indirect access can find it by looking to companies involved in mining and producing this precious metal.

How We Chose the Best Gold Stocks

In our screen, we considered gold-mining companies with shares trading on the Nasdaq or the New York Stock Exchange. We excluded firms with stock prices under $5, with less than 100,000 in average daily trading volume, or with a market capitalization under $300 million. These measures help ensure that our list includes only well-established companies. Finally, we ranked all remaining gold mining companies based on highest 30-day return and excluded any with a negative return during that period.

Following this search, we found a number of gold mining companies with 30-day returns as high as 28.1%. Notably, some of the companies on this list do not have a P/E ratio. This is sometimes the result of a company experiencing net losses in the current and/or prior-year quarter, making it impossible to calculate this metric.

Gold Advantages and Disadvantages

Before investing in gold mining companies, investors should consider a few important benefits and risks. Advantages of these firms may include their potential to be a leveraged play on gold. As the price of gold rises, the share prices of these companies may rise as well—and they may experience even higher returns thanks to their crucial role in producing gold for physical investment. Rising gold prices can also lead to significant capital gains for gold mining firms when their profits increase as well. Another benefit of gold mining firms is their higher liquidity compared to physical gold. Lastly, investing in bullion, jewelry, or other physical gold products also requires paying for transportation and storage costs—not required when investing in gold mining stocks—and carries the risk of loss or theft.

One of the key potential disadvantages of an investment in a gold-mining stock is that most of these companies do not focus exclusively on gold. This means they are not pure-play gold investments and that they are also subject to fluctuations in other minerals covered by the operations as well. Mining firms tend to have operations scattered around the world in many different locations, so regulations can vary dramatically from one site to another. Monitoring the impact of these regulations can be difficult for investors. Of course, mining firms are also exposed to many other risks and factors that may separate their performance from that of physical gold. And when gold rises, there is no guarantee that the price of shares of a mining firm will also climb.

The stocks listed above are at the top of our list for this month. However, past performance is not a guarantee of any future returns.

The Bottom Line

For investors seeking an alternative to physical gold investments, gold-mining stocks offer an alternative. These companies may provide some degree of indirect access to the gold market. While their prices may correlate with the price of physical gold, that’s not always the case. Still, for some investors, the opportunity to avoid the logistical considerations, liquidity limitations, and other concerns associated with a physical investment in gold makes gold-mining firms a worthwhile alternative.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the securities listed above.

Fact checked by Suzanne Kvilhaug
Reviewed by David Kindness

Private companies often choose to go public to generate capital for expansion, reduce debt, or fund other business operations. The transition from private to a public, known as an initial public offering (IPO), comes with advantages and disadvantages. It’s a major decision that requires careful consideration, as the price of raising capital can be steep.

Key Takeaways

• Going public is primarily a way for companies to raise capital for growth.
• Not all companies are suited to going public due to the high costs and complex requirements involved.
• Company founders must give up a certain degree of control and accept public scrutiny when they go public.
• Public companies are subject to stricter regulations and disclosure requirements.
• Going public can encourage companies to focus more on short-term results and, in some cases, even engage in deceptive creative accounting.

Advantages and Disadvantages of Going Public

Before deciding whether or not to go public, companies must weigh the pros and cons. This usually happens during the underwriting process as the company works with an investment bank to determine whether going public is in the best interest of the company for that time period.

Here are some of the main pros and cons they have to consider.

The Advantages

Raising capital is the most distinct advantage of going public. When companies go public, they sell shares of ownership to the public in exchange for cash. The raised capital can be used to fund research and development (R&D) and/or capital expenditure, or pay off existing debt.

Another potential advantage is increased public awareness. IPOs often generate publicity, making the company’s products and services known to a broader audience. Subsequently, this may lead to an increase in market share for the company.

An IPO also may be used by founding individuals as an exit strategy. Many venture capitalists have used IPOs to cash in on successful companies that they helped start up.

Important

If a company wants to raise more capital sometime after an IPO, it can do a secondary public offering, selling new shares to investors.

The Disadvantages

Going public can also come with several disadvantages. One of the biggest factors that puts companies off going public is the need for added disclosure for investors. When companies go public, they are required to regularly keep the public updated about their activities and financial performance and do so in a certain way. These obligations are costly and can create public scrutiny.

Public companies are regulated by the Securities Exchange Act of 1934 in regard to periodic financial reporting, which may be difficult for newer public companies. They must also meet other rules and regulations that are monitored by the Securities and Exchange Commission (SEC).

The cost of complying with regulatory requirements can be very high, and as rules to protect investors continue to be added, these costs keep increasing. Some of the additional costs include the generation of financial reporting documents, audit fees, investor relation departments, and accounting oversight committees.

Pros

• Ability to raise money from a wide audience

• Increased visibility and brand awareness

• Exit strategy for venture capitalists and early investors

Cons

• Strict regulation and associated costs

• Loss of complete ownership and control by the founders

• Public scrutiny and pressure to meet short-term financial goals

Special Considerations

Public companies also are faced with the added pressure of the market, which may cause them to focus more on short-term results rather than long-term growth. As investors push for rising profits, company management may feel compelled to take actions—sometimes questionable ones—to boost earnings. This can lead to unethical practices like “creative accounting.”

Real-World Example

One of the most interesting IPOs of recent years was Snap Inc.’s. The company, best known for its flagship product Snapchat, raised $3.4 billion in March 2017.

Being in the public eye has presented challenges. In its first quarterly report as a public company, Snap reported disappointing user growth figures. In May 2017, investors sued, alleging the company had made “materially false and misleading” statements regarding user growth. Snap settled for $187.5 million in January 2020.

The share price has continued to be volatile ever since with financial performance disclosures and other external events triggering the occasional big swing in sentiment. However, the capital that Snap raised has helped the company expand and improve parts of the business. By Jan. 2024, its market cap was over $3 billion higher than its IPO valuation.

Why Would a Company Not Want to Go Public?

A company may choose not to go public for many reasons. These reasons include the tedious and costly task of an IPO, the founders having to give up total control, and the need for more stringent reporting to comply with SEC rules.

When a Company Goes Public, Who Gets the Money?

When a company goes public, the company initially gets all of the money raised through the IPO. When the shares trade on a stock exchange after the IPO, the company does not get any of that money. That is money that is exchanged between investors through the buying and selling of shares on the exchange.

Is It Better for a Company to Be Public or Private?

Whether it is better for a company to be public or private depends on the company’s goals. Remaining private allows the founders to run the company as they wish and not have to meet the many regulatory requirements of being a public company. Going public allows a company to raise significant capital to grow the business. At the end of the day, the best decision is the one that is best for the founders and their vision of the company.

The Bottom Line

Taking a private company public raises capital so that a business can fund its growth or use the money for other business needs. It is a common step for many companies that grow out of the startup phase.

Though taking a company public does bring in more capital, there are also significant drawbacks. These include the time-consuming process of an IPO, ensuring the company meets strict regulatory rules, giving up complete ownership and total control, and being under the scrutiny of the public and investors.

It’s important to weigh the pros and cons and have a vision of what the founders want the company to be before deciding whether or not to go public.

Investing for the future takes time, discipline, and (of course) money. If you’re wondering whether you can get help from someone else to contribute to your retirement nest egg, the short answer is yes. This means your spouse, parent, or grandparent can give you the money to deposit into your Roth individual retirement account (IRA). Keep reading to learn more about how you can use a gift to add to your Roth IRA.

Key Takeaways

• Roth IRAs are funded using after-tax dollars and allow your money and earnings to grow on a tax-advantaged basis.
• The amount you can contribute to a Roth IRA depends on your tax filing status and your modified adjusted gross income.
• Someone else can give you a check or transfer the money to you so you can contribute to your Roth IRA.

Roth IRA Contribution Requirements

A Roth individual retirement account is a tax-advantaged account that you can use to save for your retirement. The contributions are made using after-tax dollars, which means you do not get a tax deduction. But this type of account gives you the benefit of tax-free growth and withdrawals. Your earnings also grow tax-free as long as the account is open for at least five years and you are at least 59½.

You must have earned income to be able to contribute to a Roth IRA. This includes salary, wages, tips, and any self-employment income you earn during the year. The amount you can contribute depends on your tax filing status and your modified adjusted gross income (MAGI). These are highlighted in the tables below.

2024 Roth IRA Phase-out Ranges and Contribution Amounts
Filing Status	MAGI Range	Allowable Contribution
Single	Less than $146,000	$7,000 or $8,000 if 50 and older
	$146,000 to $161,000	Partial contribution
	$161,000 or more	$0
Married Filing Separately (if you didn’t live with your spouse at any point during the year)	Less than $146,000	$7,000 or $8,000 if 50 and older
	$146,000 to $161,000	Partial contribution
	$161,000 or more	$0
Married filing separately (if you lived with your spouse during the year)	Less than $10,000	Partial contribution
	$10,000 or more	$0
Married Filing Jointly	Less than $230,000	$7,000 or $8,000 if 50 and older
	$230,000 to $240,000	Partial contribution
	$240,000 or more	$0
Surviving Spouse	Less than $230,000	$7,000 or $8,000 if 50 and older
	$230,000 to $240,000	Partial contribution
	$240,000 or more	$0
Head of Household	Less than $146,000	$7,000 or $8,000 if 50 and older
	$146,000 to $161,000	Partial contribution
	$161,000	$0

2025 Roth IRA Phase-out Ranges and Contribution Amounts
Filing Status	MAGI Range	Allowable Contribution
Single	Less than $150,000	$7,000 or $8,000 if 50 and older
	$150,000 to $165,000	Partial contribution
	$165,000 or more	$0
Married Filing Separately (if you didn’t live with your spouse at any point during the year)	Less than $150,000	$7,000 or $8,000 if 50 and older
	$150,000 to $165,000	Partial contribution
	$165,000 or more	$0
Married filing separately (if you lived with your spouse during the year)	Less than $10,000	Partial contribution
	$10,000 or more	$0
Married Filing Jointly	Less than $236,000	$7,000 or $8,000 if 50 and older
	$236,000 to $246,000	Partial contribution
	$246,000 or more	$0
Surviving Spouse	Less than $236,000	$7,000 or $8,000 if 50 and older
	$236,000 to $246,000	Partial contribution
	$246,000 or more	$0
Head of Household	Less than $150,000	$7,000 or $8,000 if 50 and older
	$150,000 to $165,000	Partial contribution
	$165,000	$0

Note

Individuals 50 or older can make an additional catch-up contribution of $1,000 to their Roth IRAs.

How Someone Can Contribute to Your Roth IRA

As noted above, you need earned income during the year, and your MAGI must fall within the ranges set by the Internal Revenue Service (IRS) according to your filing status so you can contribute to a Roth IRA. In some cases, someone else may contribute to the account for you.

For instance, if you’re married and file a joint return, the income your spouse earns allows you to contribute to your Roth IRA even if you have no income yourself. If you go this route, make sure your combined MAGI meets the threshold for contributing.

Someone, such as a parent or grandparent, can also give you the money to contribute yourself. Or, they can contribute on your behalf. The funds must generally come from a brokerage or deposit account—not another retirement account—and can be deposited with a check or electronically. Keep in mind that the contribution cannot exceed the limit and that you qualify based on the filing status and income limits outlined above.

Be sure to research and understand how your plan works, as some Roth IRA administrators may have different rules about who can contribute to your account.

Warning

Make sure you and anyone else contributing to your Roth IRA are aware of how much you’re allowed to contribute. You can incur a 6% penalty on any excess contributions to your account. The penalty is based on the over contribution every year until it is corrected.

Special Considerations: Gift Taxes

The IRS imposes a limit on how much money someone can gift you each year. The maximum amount you can receive is $19,000 in 2025, which is an increase from the 2024 limit of $18,000—anything over these amounts triggers the gift tax.

The donor can avoid incurring the gift tax by giving you any amount up to the exclusion. For instance, your father can write you a check for $17,000 in 2025 ($7,000 of which you can contribute to your Roth IRA) without incurring the gift tax. But if he gives you $20,000 in 2025, he’ll end up having to pay the gift tax.

The Bottom Line

Roth IRAs can help you save money for retirement. Since you use after-tax dollars, you don’t get an immediate tax deduction. Rather, your contributions and earnings grow tax-free, and you can make tax-free withdrawals when you retire. If you have earned income, someone else can make contributions for you. But before they do, make sure you check with your plan administrator if there are any rules about third parties making contributions on your behalf.

We compare membership fees, savings, and services

If you’ve ever wandered the wide aisles of a warehouse club, you may have wondered whether you get better deals at Costco Wholesale Corp. (COST) or Sam’s Club, which is owned by Walmart Inc. (WMT). While both retail giants promise bulk savings and exclusive deals, the differences extend far beyond the price tag.

Whether you’re drawn to Costco’s famous $1.50 hot dog and soda combo (unchanged since 1985) or Sam’s Club’s Scan & Go technology, which lets you skip the checkout line entirely, understanding their key differences can help you decide where to shop.

Key Takeaways

• Costco and Sam’s Club offer different membership tiers, starting at $65 and $50, respectively.
• Both retailers have seen strong financial growth in the past year, with Costco reporting net sales of $249.6 billion for fiscal year 2024 and Sam’s Club reporting net sales of $90.2 billion for fiscal year 2025.
• Costco operates 617 U.S. locations, while Sam’s Club has 600 U.S. stores.
• The retailers differ in their service focus: Costco emphasizes travel and insurance services, while Sam’s Club concentrates on health-related services.

Costco Overview

Founded in 1983 by Jim Sinegal and Jeffrey Brotman, Costco has transformed from a single Seattle warehouse into a global retail powerhouse. The company made history by becoming the first retailer to reach $3 billion in sales in less than six years. A pivotal merger with Price Club in 1993 significantly expanded its market presence, setting the stage for continued growth.

As of February 2025, Costco had 897 warehouses worldwide, including 617 in the U.S. and Puerto Rico. The company also has a strong presence in Canada and Mexico and has been strategically expanding into new markets, opening two more stores each in China and Japan in 2024. Costco’s net sales for 2024 totaled $249.6 billion, a 5% increase from the previous year.

Sam’s Club Overview

Founded by Walmart’s Sam Walton in 1983 in Midwest City, Oklahoma, Sam’s Club has grown into a major player in the warehouse retail sector. The company expanded rapidly through both organic growth and strategic acquisitions, including Walmart’s 1987 acquisition of SuperSaver Wholesale Warehouse Club.

As of January 2025, Sam’s Club had 600 locations in 44 states in the U.S. and Puerto Rico, with a significant international presence in Mexico (173 stores) and China (50 stores). The company continues to expand, and Sam’s Club U.S. had net sales of $90.2 billion for fiscal year 2025.

Costco Membership Options

Costco has a two-tiered membership system for different shopping needs. The basic Gold Star membership, priced at $65 annually, gives you access to all Costco warehouses worldwide, its online shopping platform, and its warehouse-adjacent gas stations. For frequent Costco visitors, there’s the Executive membership at $130 per year, which includes all Gold Star benefits plus a 2% annual reward on qualified Costco purchases (up to $1,250 back).

Sam’s Club Membership Club

Sam’s Club, like Costco, has two membership tiers. The basic Club membership, priced at $50 annually, gives you access to all Sam’s Club locations and its online shopping platform, along with perks like Scan & Go and fuel savings. The Plus membership at $110 per year includes all Club benefits and free shipping on most items, free curbside pickup, early shopping hours, and 2% cash back on qualifying purchases (up to $500 annually).

Sam’s Club occasionally runs promotions where you can snag a membership for as low as $25.

Comparison of Membership Value

While both retailers offer a two-tiered membership system, Costco’s Executive membership ($130 annually) provides a 2% reward on qualifying purchases with a generous $1,250 annual cap. In contrast, Sam’s Club Plus membership ($110 annually) provides a similar 2% cash back but caps rewards at $500 annually. To make that more actionable: Members who spend about $3,000 yearly break even on the premium fee (the extra cost you pay for premium or executive memberships) at both stores.

Both premium memberships include free shipping on most items, but Sam’s Club adds free curbside pickup for Plus members. Costco Executive members receive additional perks like travel discounts and enhanced service benefits. For budget-conscious shoppers, Sam’s Club’s basic membership ($50) offers a more affordable entry point than Costco’s Gold Star membership ($65). However, both provide access to bulk pricing and core warehouse benefits.

Both Costco and Sam’s Club have extra perks beyond bulk shopping. Costco members can jet off with Costco Travel, which offers deals on vacations, cruises, and rental cars. They also offer insurance options, including home, auto, and pet insurance. Sam’s Club is better known for its pharmacy and health care offerings.

There are ways to shop Costco and Sam’s Club without a membership. Nonmembers can go with someone who is a member, shop with a branded gift card, use their pharmacies, and buy alcohol (in states where it’s legally required to sell to nonmembers).

Shopping Experience

The shopping experience between the two is very different. Sam’s Club stands out for convenience, offering both curbside pickup and “Scan & Go” technology that lets shoppers skip what can often be massive checkout lines. Nevertheless, despite its notoriously longer lines, Costco maintains loyalty through its premium product selection and well-liked Kirkland Signature brand.

Store location can be a deciding factor: Costco’s 897 worldwide locations tend to dominate coastal areas and urban centers, while Sam’s Club’s 600 U.S. stores have a stronger presence in the South and Midwest. Both retailers offer generous return policies with a 100% satisfaction guarantee, though Sam’s Club has a stricter 14-day return window for cell phones.

For many shoppers, the decision often comes down to the difference between Costco’s Kirkland and Sam’s Club’s Member’s Mark private labels. Many online reviewers claim Sam’s Club is generally cheaper but with less overall quality, though many still hold to old reports that Costco limits its markup on brand names to 14% (that’s not something Costco publicly confirms, nor could it be a rigid policy in any event).

Consumer tastes vary enough that you’ll want to check online and compare the prices for the stuff you buy most—it’s no good to you if one store wows people with deals on things you won’t use. The upshot is that both retailers tend to deliver savings compared with traditional retailers, which is why they’ve been mainstays for budget-conscious consumers for decades.

Financial Performance and Market Position

In fiscal year 2024, Costco’s net sales reached $249.6 billion, a 5% increase from the previous year. The company’s net income rose to $7.4 billion, a 17% increase. Membership fee revenue also had a healthy 5% bump to $4.8 billion, as membership grew to nearly 137 million cardholders. Costco’s ecommerce sales were particularly strong, growing by 16% year-over-year.

For the fiscal year ending Jan. 31, 2025, Sam’s Club reported net sales of net sales of $90.2 billion, up from $86.2 billion in the previous year. The chain’s comparable sales, excluding fuel, grew by 4.7%, and e-commerce sales rose 22% from $9.9 billion in fiscal year 2024 to $12.1 billion in fiscal year 2025.

The Bottom Line

The choice between Costco and Sam’s Club comes down to three key factors: location, shopping style, and rewards. Costco edges ahead on premium products and higher reward caps ($1,250 vs. $500), making it better for high-spenders and brand enthusiasts. Sam’s Club wins on convenience with Scan & Go technology and lower entry-level membership costs. Both deliver solid bulk-buying savings—just don’t let the temptation to stock up overwhelm your actual storage space and needs.

Reviewed by Michael J Boyle
Fact checked by Jiwon Ma

Gross domestic product (GDP) is the value of the finished domestic goods and services produced within a nation’s borders. Gross national product (GNP) is the value of all finished goods and services produced by a country’s citizens, domestically and abroad. GDP and GNP are calculated differently, but each represents the total market value of all goods and services produced over a certain period.

Key Takeaways

• Gross domestic product (GDP) and gross national product (GNP) measure a country’s aggregate economic output.
• GDP measures the value of goods and services produced within a country by citizens and non-citizens.
• GNP measures the value of goods and services produced by a country’s citizens, domestically and abroad.

Gross Domestic Product (GDP)

GDP helps indicate the health of a country’s economy. This metric counts the market value of all goods and services produced domestically. The gross domestic product measurement shows whether the economy is growing or contracting. The components of GDP include:

• Consumption: The value of the consumption of goods and services acquired and consumed by the country’s households.
• Government Spending: All consumption, investment, and government payments for current use.
• Capital Spending by Businesses: Spending on purchases of fixed assets and unsold stock by private businesses.
• Net Exports: The country’s balance of trade (BOT), or the difference between exports and imports. A positive number indicates that the country exports more than it imports.

Important

The United States has used GDP as its key economic metric since 1991; it replaced GNP to measure economic activity because GDP was the most common measure used internationally.

Nominal GDP and Real GDP

GDP is analyzed as real GDP or nominal GDP. A country’s real GDP is the economic output with inflation factored in, while nominal GDP does not account for inflation. When the GDP rises, it means the economy is growing. Conversely, if it drops, the economy is shrinking. If the economy grows to full production capacity, inflation may rise.

During inflationary periods, central banks may step in to tighten their monetary policies to slow growth. When interest rates rise, consumer and corporate confidence drops. During these periods, monetary policy is eased to stimulate growth. Long periods of negative GDP, indicating more spending than production, can damage the economy. This can lead to job losses, business closures, and idle productive capacity.

The nominal GDP is usually higher than the real GDP because inflation is usually a positive number, even if relatively low. GDP is used to compare the performance of two or more economies, acting as a key input for making investment decisions. It also helps the government draft policies to drive local economic growth.

Gross National Product (GNP)

Where GDP looks at the value of goods and services produced within a country’s borders, GNP is the market value of goods and services produced by all citizens domestically and abroad. GNP measures how its nationals are contributing to the country’s economy. It factors in citizenship but overlooks location.

GNP does not include the output of foreign residents. A U.S.-based Canadian NFL player who sends their income to Canada or a German investor who transfers their dividend income to Germany will be excluded from the U.S. GNP but included in the country’s GDP.

GNP is the sum of consumption, government spending, business capital spending, net exports, and the net income of domestic residents and businesses from overseas investments. This figure is then subtracted from the net income earned by foreign residents and businesses from domestic investment.

GNP is synonymous with GNI, or gross national income. Both measure domestic productivity plus net income by a country’s citizens from foreign sources.

Example

According to the most recent data compiled by the World Bank, GDP and GNP numbers moved in sync in 2023 for these selected countries. Many American businesses, entrepreneurs, service providers, and individuals who operate globally helped the nation secure a positive net inflow from overseas economic activities and assets. This makes the U.S. GNP higher than the GDP for 2023.

GDP and GNP Figures for Select Countries, 2023
Country	GDP	GNP
United States	27,360	27,525
United Kingdom	3,340	3,296
China	17,794	17,663
Israel	509	508.9
India	3,549	3,497
Greece	238.2	236.4
Saudi Arabia	1,067	1,073

Data Sources: World Bank DataBank.

Saudi Arabia’s GNP is higher than its GDP. The Kingdom is a major oil exporter with enterprises and businesses spread around the globe. The income from these enterprises may be higher than the income lost due to foreign citizens and businesses operating in Saudi Arabia. Other nations like China, the U.K., India, and Israel have lower GNPs to their corresponding GDPs. This may indicate these nations are seeing a net overall outflow from the country.

Where Is the GDP Published for the United States?

The Bureau of Economic Analysis compiles GDP data quarterly and annually, and it is available online.

What Is the Difference Between GNP and GNI?

The 1993 System of National Accounts replaced the term “gross national product” with the new term “gross national income.” Both represent a country’s domestic output plus net income from the businesses or labor of a country’s citizens abroad.

Is GDP a Better Measurement Than GNP?

GDP is the most popular metric for the overall productivity of a country’s economy. GNP was formerly the default measure for a country’s economic production, but it fell out of favor by the 1990s.

The Bottom Line

Gross national product (GNP) and gross domestic product (GDP) are popular metrics for measuring the productivity of a country’s economy. GDP measures productivity within a country’s geographical boundaries, and GNP records economic activity by that country’s citizens and businesses, regardless of location.

Fact checked by Betsy Petrick

Drowning in credit card bills can feel overwhelming with no way out, and you may be tempted to use your retirement savings to pay down your debt. However, that’s not a good idea, and you should think twice before you tap into your nest egg.

Using money from an individual retirement account (IRA) can have major consequences. Doing so depletes your savings, foregoes future capital gains, and can lead to serious tax implications. Consider alternatives before taking this extreme step to paying off your credit card balances.

Key Takeaways

• Paying off your credit card debt using money from your IRA may require paying income taxes, plus a 10% penalty, on the money withdrawn.
• Consider alternatives like debt consolidation loans, balance transfer credit cards, or a loan against your 401(k).
• Bankruptcy may be an option if you have exhausted all other avenues.

Why You Shouldn’t Use Your IRA to Pay Off Credit Card Debt

If you have trouble dealing with your credit card debt, you’re not alone. According to the Federal Reserve, credit card balances in the U.S. reached $1.21 trillion at the end of the fourth quarter of 2024, which is an increase of $45 billion from the previous quarter. The average credit card balance per consumer was $6,380 at the end of September 2024.

Given their high interest rates and the impact your balances can have on your debt-to-income (DTI) ratio and your credit score, it may seem like there’s no way out. But you have options that do not include using your IRA, no matter how tempting it might be.

Reasons to avoid using your retirement account include:

• An IRA is meant to help you save for retirement. Raiding your nest egg means that you’re taking away money for future use.
• You’ll lose out on any future earnings. Not only does the principal balance in your IRA earn interest, but this interest also earns interest through compounding. This boosts your earnings even more. By taking money out, you don’t give your money a chance to grow.
• The government imposes fines and penalties on withdrawals from IRAs if they aren’t used for retirement.

Note

Almost half of households in the U.S. (46%) have credit card debt. Most of this debt is being carried by middle-income households.

What Are the Tax and Penalty Implications of Using Your IRA to Pay Off Credit Card Debt?

The point of having an IRA (or any other retirement account) is to help you save for retirement, so it shouldn’t be treated like a savings account. The government has put measures in place, including taxes, penalties, and age limits, to make them less attractive to use. The Internal Revenue Service (IRS) sets the age limit at 59½.

The taxes and penalties, though, depend on how old you are for traditional IRAs:

• If you are under 59½: Your withdrawal counts as gross income. This means it is taxed at your normal income tax rate at the federal and state levels. You also are responsible for paying an additional 10% penalty on that amount.
• If you are over 59½: There are no restrictions or penalties. Withdrawals made using pre-tax dollars may incur income taxes at your normal rate at the federal and state levels.

Roth IRA withdrawals are a little different. Contributions made in the year before you file your taxes can be withdrawn without incurring any taxes or penalties. That’s because they are after-tax contributions, so the IRS considers they were never made. Any earnings on those contributions, though, are taxed as ordinary income and may be subject to a 10% penalty if you haven’t held the account for five years, regardless of your age.

Say you’re 45 and plan to retire at 65. You decide to withdraw $10,000 from your traditional IRA to pay off your credit cards. Your account holds $25,000, leaving you with $15,000. Let’s assume that your federal tax rate is 22% and that your IRA will grow annually at 6%.

• You’ll owe $2,200 for federal income taxes and $1,000 for the 10% early withdrawal penalty. This leaves you with only $6,800 from your withdrawal. Keep in mind that we haven’t factored in state income taxes if applicable, so you may owe more.
• You stand to lose a little over $32,000 in earnings if you withdraw $10,000 at 45 and plan to retire at 65.

So remember: just because you can use your IRA doesn’t mean you should.

Alternatives to Using Your IRA to Pay Off Debt

Consider options other than your IRA if you want to pay off your credit card balance. Some of these alternatives may require you to do some work and have a good credit score, such as a debt consolidation loan or a balance transfer credit card. You may also want to think about taking a loan against your 401(k). Then there’s the last resort: bankruptcy.

Debt Consolidation

Debt consolidation involves taking out a personal loan to pay off all your existing credit card debt. If you qualify and are approved for the loan, the lender issues you a lump sum that you can use to pay off all your credit cards. You are only responsible for making a single payment to the new lender instead of to multiple card issuers. The terms of these loans tend to be more favorable—usually lower rates and a lower payment.

Balance Transfer Credit Card

Consider transferring your balances to another credit card, especially one with a lower interest rate. You may qualify for a new card that comes with intro offers, such as 0% interest on balance transfers for a certain period—usually from six to 21 months. In some cases, an existing credit card company may extend you favorable balance transfer terms if you have a good relationship with them. Keep in mind that most companies charge a fee, which is a percentage of the amount being transferred.

401(k) Loan

You can borrow against your 401(k) if you have one. Unlike a traditional loan, there is no credit check, and unlike some IRA withdrawals, this type of loan is tax-free. You can borrow up to $50,000 or 50% of your vested balance—whichever is less. You must apply for the loan through your plan administrator and repay the loan within five years. Interest is also due on the loan (usually at 1% to 2% above the prime rate) but is added to your 401(k) balance.

Filing for Bankruptcy

Bankruptcy always should be your last resort. It is filed through the federal court system by a trustee, a professional who oversees your affairs. People with a lot of credit card (and other unsecured) debt generally file for Chapter 7 bankruptcy. If you have any non-exempt assets with value, they are sold to pay off some of your creditors. If you have exempt items like furniture and clothing, your creditors won’t get paid. Remember, bankruptcy stays with you for up to 10 years.

The Bottom Line

Credit cards can help you pay for everyday purchases and emergencies. But they can be problematic if you overspend and/or don’t have the income to repay them. Paying off your troubling credit card debt should never be an excuse to raid your IRA. Doing so not only defeats the purpose of saving for retirement, but it also comes with hefty fines or penalties. Consider some of the alternatives, including debt consolidation loans, balance transfer cards, and loans against your 401(k). If all else fails and there is no other option left, talk to a financial advisor about bankruptcy.

Many banks don’t limit the amount of cash you can deposit. However, depositing more than $10,000 will subject your deposit to extra rules and regulations from the bank and the federal government. 

If you have a substantial deposit to make, know that holding more than $250,000 at the same bank—even in multiple accounts—may not be in your best interest. FDIC insurance doesn’t protect additional amounts over this threshold.

Key Takeaways

• The majority of banks don’t limit how much cash you can deposit, but all institutions have to report deposits of $10,000 or more to the federal government. 
• It’s safest to deposit large sums in person, but you could opt for an armored transport for sums greater than $50,000. You could ask your bank or use another service; just know there may be a fee. 
• Structuring cash deposits to avoid reporting is illegal, even if your money is from legitimate sources. You could face severe penalties, including prison time and hefty fines.

Bank Deposit Limits

Most banks don’t have cash deposit limits, but ATMs might only be capable of accepting a certain number of bills at a time, such as 40. This would limit the amount you’d be able to deposit in one transaction, depending on the denominations of the bills. For example, with a limit of 40 bills, the maximum you could deposit would be $4,000 (in $100 bills). You might be able to deposit more by doing a second transaction. 

Here are some examples of institutions that do have cash deposit limits:

Sample Bank Deposit Limits
Institution	Cash Limit
Capital One	$5,000 in one-time deposits; no daily limit at ATMs
Chime	Up to $1,000 per day at Walgreens cash registers
Alliant Credit Union	$20,000 per day at ATMs
Navy Federal Credit Union	$10,000 per card per day at a CO-OP ATM

Important

If you need to deposit a large amount of cash, it’s best to check with your institution about its policies for your account.

Why Are Banks Required to Report Cash Deposits of More Than $10,000?

Federal law requires banks to report deposits of more than $10,000. No matter where the money came from or why it’s being deposited, your bank must report it by filing a Currency Transaction Report (CTR).

Under the Bank Secrecy Act and the USA PATRIOT Act, the government tracks the money to make sure it isn’t from crimes like money laundering or terrorist activity. The law applies to both single deposits and multiple deposits in a day that add up to more than $10,000.

Important

Banks keep records of deposits over $100 for at least five years but can keep them longer if they choose.

How Can I Deposit More Than $10,000 in Cash?

The best way to deposit large amounts of cash is to visit a branch in person. It’s safer, and a banker can count the money in front of you in a more private area to ensure you agree on the deposit amount. 

Alex King, former vice president in Trade & Working Capital at Barclays Bank, chartered accountant, and founder of Generation Money, also advised in an email to Investopedia to make sure to use a briefcase or non-transparent and secure bag to make it less obvious that you’re carrying a large amount of cash. He also recommended bringing a valid ID and records showing the source of the cash, such as business invoices or legal documents. 

Businesses sometimes use armored transports for large cash deposits, but they’re available for personal deposits as well. King said armored transports might make sense if you’re depositing at least $50,000. You can ask your bank to arrange them or work with another company. 

“You’ll need to pay a fee which, for a one-off cash deposit, is either a fixed fee or a percentage of the amount of cash you’ll be transporting,” King explained. “Or, if you’re a business owner who needs to regularly deposit large sums of cash, you can sign up for a regular armored transport service where you’ll pay a subscription fee.”

What Happens When Large Deposits Are Reported?

Financial institutions use Currency Transaction Reports to inform the federal government about deposits greater than $10,000. These reports go to the Financial Crimes Enforcement Network (FinCEN).

In most cases, a CTR must be filed for each currency transaction that exceeds $10,000. This includes bank deposits, withdrawals, currency exchanges, payments, and transfers.

Federal law requires financial institutions to gather personal information about the depositor. This might be a Social Security number, driver’s license, or government-issued ID. This information must be obtained whether or not the depositor has an account at the receiving financial institution.

What Is Structuring?

Structuring is when you divide a large deposit into smaller amounts to avoid CTR reporting requirements. It seems innocent enough if your money is from legitimate sources, but it’s still illegal. You could face up to five years in prison and a fine of up to $250,000. These penalties are doubled if you structure more than $100,000 over 12 months or combine structuring with breaking another federal law.

“Even without legal action, banks can still freeze or close accounts if a customer is structuring deposits. This is another reason it’s important to keep good records and have all relevant documentation to show the source of the cash deposits,” advised King.

What Is IRS Form 8300?

IRS Form 8300 is a tax form for businesses to report cash payments of more than $10,000 received in a single transaction. Multiple related transactions totaling more than $10,000 also require businesses to file this form. Cash payments include U.S. or foreign currency and cashier’s checks, bank drafts, traveler’s checks, and money orders with a face value of $10,000 or less.

Warning

You have 15 days after receiving the payment to file Form 8300 with FinCEN either electronically or on paper with the IRS. You also have to provide a copy to the person or business that made the payment by January 31 of the following year.

The Bottom Line

While most banks don’t impose strict limits on cash deposits, some ATMs can only handle a limited number of bills at a time. If you’re not sure about your bank’s limits, it’s worth checking with customer service.

Understanding federal reporting requirements for deposits over $10,000 is crucial. Always deposit large sums safely, either in person at your bank branch or through an armored transport service for very large cash deposits. 

You should also document your cash source and avoid structuring deposits to get around reporting requirements. Doing so can result in severe legal penalties, regardless of whether your funds are legitimate. 

By following proper procedures and maintaining transparency with financial institutions, you can safely deposit large cash amounts without breaking the law or your bank’s policies.

Leasing and buying each have their pros and cons, so your financial situation and priorities will help you decide which is the right choice. For example, if you have a long commute or love road trips, financing and/or owning a car might be a better option. But if you’d like to drive a brand-new car every few years and you don’t drive a ton of miles, leasing could be a great fit.

Before you start checking out online ads and visiting dealerships, here’s how to decide if you should lease or buy your next ride.

Key Takeaways

• Leasing a car is like a long-term rental in that you pay a fee to drive a car for a certain length of time.
• Buying a car is paying to own it, whether you pay in full or finance the purchase with an auto loan. 
• Leasing typically has lower monthly payments and lets you drive a new car every few years, but comes with restrictions on mileage and doesn’t let you build equity.
• Buying often costs more but allows you to build equity, have complete control over your car, and drive as much as you’d like.

Leasing vs. Buying a Car: What’s the Difference?

Leasing a car is similar to renting: You pay a fee in exchange for the ability to use the car for a certain amount of time, such as three years. 

During that time, your lease agreement dictates how you can use the vehicle, such as whether you can modify it and how many miles you can drive. At the end of the lease period, you return the car, hand over the keys, and stop making payments. Depending on your agreement, you may also have the option to buy the vehicle at the end of the lease period.

Buying a car means you own it. If you pay cash, such as for a used car, you might own your vehicle outright from the start. If you finance the purchase with a car loan, you’ll build equity in the vehicle as you make payments. At the end of the loan term, you’ll own it outright and you can choose to sell it, keep it, or trade it in toward the cost of another vehicle.

Either way, when you buy a car, you can drive as many miles as you’d like. You can also make modifications to better suit your needs, such as upgrading a vehicle’s suspension or getting a custom paint job.

Leasing	Buying
Pay to drive a car for a specific amount of time	Own and drive for as long as you want
Payments don’t build equity; you don’t own the car	Loan payments build equity until you own the car outright
Lower monthly payments and low or no down payment	Higher monthly payments and higher down payment typically required
New car every few years, on a specific timeline	Can sell or trade in anytime, or keep as long as you’d like
Warranty-covered repairs	Typically need to cover maintenance and repair costs yourself
Restrictions on mileage and allowable modifications	Total control: You can drive as much as you want and make any changes you desire
Early cancellation penalties	Flexibility to change vehicles as needed
May have special fees at lease end, such as for damage beyond normal wear and tear	No special fees, but depreciation affects value over time

Pros and Cons of Leasing

At first glance, leasing might seem like a great deal. You get a new car every couple of years, and the monthly payments you’ve seen advertised seem cheaper than what you’d pay for a car loan.

Pros of Leasing

• Lower monthly payment: A lease payment is typically cheaper than a monthly auto loan payment for the same vehicle. That’s because you’re only paying for the expected depreciation of the vehicle during the lease period, rather than the full purchase price.
• No down payment: You typically don’t need to make a down payment, although you can if you’d like to reduce your monthly payments (you won’t save any money on interest if you do that, however, so it doesn’t usually make sense to put down a down payment).
• New vehicle every couple of years: If you love that new car smell, a lease lets you enjoy it on a regular basis. When your lease ends, typically after two to four years, you can return the car and pick up a new one.
• Warranty-covered repairs: Many new cars are covered by a factory warranty, and some dealer warranties may cover other maintenance and repairs. 
• No need to resell: When the lease ends, you can simply walk away—no need to negotiate with a dealer for a trade-in or deal with the hassle of selling the car yourself, although you can trade it in if you wish.
• Easier business deduction: If you use your leased vehicle for business purposes, you can claim the costs as a tax deduction from your business income. 

Important

Before you sign a lease, make sure you fully understand the tradeoffs.

Cons of Leasing

• No equity: Your lease payments are like rent. They cover the costs of depreciation during the lease, but they don’t help you build any equity or ownership. At the end of the lease, you don’t own the vehicle (though you may have the option to purchase it).
• Restrictions on use: Leases typically cap the number of miles you’re allowed to drive each year, such as 10,000 to 15,000. You’re also not usually allowed to make modifications and you’ll need to pay a fee for any damage beyond what the leasing company considers normal wear and tear. 
• Early cancellation penalties: If life happens and you need to end a lease early, such as to get a vehicle that can accommodate carseats, you may pay hefty fees. But you might be able to avoid them by trading the car in.

Pros and Cons of Buying

It often costs more to buy a car than it would to lease the same vehicle, both in terms of a higher down payment and higher monthly payments on a car loan. But it’s important to weigh the pros and cons to understand whether that extra cost might be worth it for you to enjoy the benefits of owning a car, whether you buy it outright or finance it with a loan.

Pros of Buying

• Ownership and control: Every payment on your auto loan builds equity, and you own the car outright once you pay off the loan (or from the start, if you paid cash). You can drive as many miles as you’d like and modify your car in any way you want.
• Option to sell, trade, or keep: Whenever you’re ready, you can choose to trade in your car toward a new vehicle, sell it, or give it to a family member. You can also aim to drive it as long as it lasts, with no more payments once your loan is paid off.
• Flexibility: It’s typically easier to get out of a car loan than a lease. If your needs change and you want to sell the car or trade it in, you can usually pay off your loan anytime without incurring pre-payment penalties. 

Cons of Buying

• Higher costs: Your loan may require you to pay a down payment, such as 20% of the purchase price. Monthly loan payments may also be higher on an auto loan than they would be to lease a comparable car. 
• Depreciation: A 2024 AAA analysis estimated that a new car would lose an average of $4,680 in value per year over the first five years and 75,000 miles due to depreciation. That was nearly half the average MSRP used in the study.
• Maintenance and repair costs: Unless you buy a new vehicle covered by a factory warranty, you’ll need to pay for regular maintenance and to fix any damage. 

Leasing vs. Buying: How to Decide

Whether you should lease or buy depends on your situation and needs. If you need a new vehicle at a lower cost and don’t plan to drive more than 10,000 or 15,000 miles per year, leasing could be a good option. 

Leasing a car allows you to drive a new vehicle for less than it would cost to buy (or finance) it. At the end of your lease, you hand over the keys without the hassle of negotiating a trade-in or selling a car yourself. You can then start a new lease in a brand-new vehicle. 

But if you’ve saved up enough for a car loan down payment and value the flexibility and control that come with ownership, buying could be a better fit.

After all, a lease is like a long-term car rental in that you’re paying to drive the car, not building any equity or ownership of it. At the end of the lease, you don’t own the car. Most leases also cap the number of miles you can drive each year and don’t allow you to make modifications. 

If you decide that buying a car is a better option for you, use our auto loan calculator to consider your options based on your purchase price, down payment, term, and credit score.

The Bottom Line

Leasing a car is like a long-term rental, and may be a cheaper way to drive a new vehicle. Buying a car gives you ownership and control, but it may cost more upfront and, if you finance a vehicle, your monthly loan payments may be higher than leasing. Buying and leasing are both great options—neither one is better in every case. The best choice for you depends on your lifestyle and financial situation.

Contribution amounts and tax treatments stand out

Fact checked by Jared Ecker

Roth IRAs and traditional 401(k)s are popular retirement savings options. Even though the end goal is the same, these options both offer very different tax benefits and have distinct requirements. Utilizing one or both of these investment vehicles to prepare for retirement can be quite advantageous, and making the most of their benefits requires understanding the differences between how each works. We will take an in-depth look at both types of plan to help you understand the intricacies of each. That will help you decide which type of retirement savings would be best for you.

Key Takeaways

• Roth IRAs and traditional 401(k)s both provide tax-free growth year by year once money is invested in them.
• Contributions to a Roth IRA do not entitle the account owner to a tax deduction in the year of contribution. Contributions are made with money left over after tax has been paid and are known as after-tax contributions.
• A traditional 401(k) account is funded with pre-tax money, which entitles the account owner to a tax deduction for the contribution amount in that year. 
• Anyone can open and contribute to a Roth IRA as long as their modified adjusted gross income (MAGI) meets certain income eligibility limits.
• A 401(k) is an employer-sponsored retirement plan in which many employers offer matched employee contributions up to a certain level. 
• Required minimum distributions (RMDs) are not mandatory from a Roth IRA
• Required minimum distributions generally must begin from a 401(k) by age 73, but you can delay the start if you’re still working at that workplace. 

Understanding Roth IRAs

A Roth IRA is a specific type of individual retirement account (IRA) in which you contribute after-tax dollars and enjoy tax-free growth of your investments. Because you are investing money on which you have already paid tax, you will not get an upfront tax deduction for your contribution. However, this also means that when you withdraw the funds during retirement you will not pay taxes on the earnings if you are at least age 59 ½ and have owned this or another Roth IRA for at least five years; the five-year clock starts January 1 of the year of your first contribution. 

Because you are investing with after-tax funds, you can withdraw Roth IRA contributions tax-free at any time and age, if necessary. The right to withdraw Roth IRA earnings tax-free after you’ve owned the Roth IRA for at least five years and you are 59 1⁄2 can be especially beneficial if you end up in a higher tax bracket during retirement. It is important to note that you are never required to take a distribution from your Roth IRA. In this way, investing in a Roth IRA can also be a useful estate planning tool. Not only are required minimum distributions (RMDs) not mandatory, but you can pass along the account tax-free to your beneficiaries someday.

Required minimum distribution rules do apply to any heirs, but their withdrawals would be tax-free. Still, a Roth IRA inherited by a non-spouse must be emptied within 10 years, although no distributions are required until the tenth year. A spousal beneficiary of an inherited Roth IRA can either take distributions based on their own life expectancy (starting the year after the owner’s death) or empty the account within 10 years of the owner’s death.

Contribution Limits and Rules

• Married joint filers or qualifying surviving spouses, with a modified adjusted gross income (MAGI) of at least $236,000 (up from $230,000 in 2024): You can’t make a Roth IRA contribution if your MAGI is $246,000 (up from $240,000 in 2024) or more.
• Singles, heads of household, or marrieds filing separately and you didn’t live with your spouse at any time in 2025 and your modified AGI is at least $150,000 (up from $146,000 in 2024): You can’t make a Roth IRA contribution if your MAG is $165,000 (up from $161,000 in 2024) or more.
• Marrieds filing separately is the same for 2025 as it was for 2024—you lived with your spouse at any time during the year, and your modified AGI is greater than $0: You can’t make a Roth IRA contribution if your modified AGI is $10,000 or more.

Investment Options and Flexibility

A Roth IRA is an individual retirement account that you can set up on your own, regardless of whether you work for an employer or you are self-employed. Because it is an individual account, you invest directly through a brokerage—which provides you with many investing options. Your only investment limit is determined by the investment options that your brokerage offers. Typically, your Roth IRA can invest in any of the following:

• Stocks
• Bonds
• Mutual funds
• ETFs
• Cryptocurrency
• Options
• REITs
• Money market funds
• Alternative investments

Understanding 401(k)s

A traditional 401(k) is an employer-sponsored retirement plan. This means that only active employees of a company are eligible to participate. With this type of retirement plan, employees can elect to contribute pre-tax dollars for investment, thereby lowering their current taxable income. Because you get a tax break for the year you contribute, you will pay taxes on earnings when you withdraw the funds, which customarily happens in retirement. This type of retirement plan is especially beneficial to people who expect to be in a lower tax bracket during retirement. When investing in a 401(k) plan, you will generally be required to start taking minimum distribution amounts at age 73.

One of the biggest benefits to participating in a 401(k) plan is that many companies offer a matching contribution up to a certain percentage. For example, if an employee contributes 3% of each paycheck, some employers match that portion for a total of 6% going into the employee’s retirement account. Companies that match often match different amounts, so make sure you know how much your employer offers. Additionally, companies may have rules for vesting schedules regarding employer contributions and the time frame in which an employee will be fully vested in those contributions.  

Contribution Limits and Employer Matching

The 401(k) contribution limit for 2025 is $23,500 (up from $23,000 from 2024) for employee salary deferrals, and defined contribution limits of $70,000 for 2025 (up from $69,000 for 2024) for the combined employee and employer contributions. The limit on total employer and employee contributions for 2025 is $77,500 with catch-up contributions for members aged 50 through 59 or 64 and older, or $81,250 for plan members aged 60 through 63, if your plan allows. The annual compensation limit for 2025 is $350,000 (up from $345,000 in 2024).

The catch-up contribution of up to $11,250 for people ages 60 through 63 is a new change for 2025, making eligible employees’ maximum contribution levels for 2025: 

• $31,000 for ages 50 and older
• $34,750 for ages 60 through 63

Depending on your plan, you may be able to make post-tax contributions beyond the pretax and Roth contribution limits, however the total contributions cannot exceed your annual employee compensation. 

Investment Options and Flexibility

Investing in your employer’s 401(k) plan makes it easy to set aside money for retirement. Most companies will help you set up automated deductions that come right out of your paycheck and go directly into the company sponsored retirement plan. If your employer offers a contribution matching program,it is advantageous to invest through the 401(k) plan because you are getting additional money added to your retirement account by your employer. That helps you save at a faster rate and enjoy the benefit of compound growth over time. 

While the process of investing in your employer’s 401(k) program is convenient, you are limited to the investments that are offered by the plan. Most employer-sponsored 401(k) plans offer employees limited selections of investments, which are intended to be suitable for all plan participants. The investments range from long-term growth securities to assets focused on short-term stability:

• Mutual funds
• Growth stocks
• Value stocks
• Bonds
• Stocks—it is somewhat rare that individual stocks are offered in a 401(k) plan; however, some publicly traded companies offer their stock to employees
• Money market funds

Factors to Consider Choosing Between a Roth IRA and 401(k)

There are benefits to both types of retirement savings plans. Participating in your employer’s 401(k) may allow you to boost your retirement savings by taking advantage of your employer’s matching contribution program. It also gives you the benefit of using pre-tax money to invest and enjoying tax-deferred growth on your investments. A Roth IRA can also be very beneficial. It can provide years of tax-free growth of your investments, although you do not get an up-front tax deduction because you are investing using after-tax dollars. If you expect your tax bracket during retirement to be higher than it is now, then a Roth IRA can be good for you. If you expect your bracket to be lower than it is now, then a traditional 401(k) is a sweet deal.

The Bottom Line

The key difference between a Roth IRA and a 401(k) is when you get your main tax break. You must decide if it is more meaningful to you to get a tax break now in the form of an up-front tax deduction for your contribution. If so, then contribute to a 401(k) with pre-tax money and pay tax during retirement. On the other hand, if it is more advantageous to invest using after-tax dollars now and enjoy years of tax-free growth plus tax-free withdrawals, use a Roth IRA. Another major consideration is whether you want to pass the investment along to your heirs. If so, a Roth is a better tool. The retirement vehicle that is best for you will depend on your specific financial situation. You may find it beneficial to consult with a tax professional or financial advisor to help you weigh your options and put a plan in place.