Since its beginnings in 2010, Instagram has evolved as a photo-sharing app to become a social media powerhouse with 2 billion monthly active users worldwide. While Instagram started as a platform for sharing personal moments and filtered photos, it has transformed into an essential business tool used by both small startups and Fortune 500 companies for marketing, customer engagement, and direct commerce.

Key Takeaways

• Instagram has evolved from a photography app into a major social media platform with 2 billion active users.
• Unique features like filters and editing tools distinguish Instagram from other platforms.
• Businesses use Instagram for marketing through business accounts and advertising.
• A consistent content strategy is crucial for success on Instagram.
• Instagram Shopping allows users to make purchases directly from the platform.

History and Growth

Instagram was originally conceived as Burbn, a location-based check-in platform created by Kevin Systrom and Mike Krieger. Realizing how photo-sharing was growing in popularity, they pivoted their focus and renamed the app Instagram, a portmanteau of “instant camera” and “telegram.”

Instagram launched in October 2010 and immediately gained traction, amassing about 25,000 users on its first day. Its focus on mobile photo sharing and its suite of image-enhancing filters quickly brought users on board. Within three months, Instagram had already surpassed one million users.

Instagram expanded at a breakneck pace. By April 2012, Instagram was acquired by Facebook, now Meta Platforms, Inc. (META), for $1 billion, just a month before Facebook’s initial public offering. The new funding accelerated Instagram’s development, and soon it was part of a broader ecosystem of social media products. Today, Instagram has more than 2 billion active users.

Below is a timeline of the major changes to the platform over time:

Key Features of Instagram

Instagram’s success lies in how it blends visual storytelling and user-friendly features. Here are the major aspects of the platform today:

Visual-First Approach 

Instagram’s foundation remains its visual-centric nature, now enhanced with immersive features. The platform has expanded beyond static images to embrace audio and video through Stories and Reels, offering users diverse ways to share their narratives while keeping Meta competitive with TikTok.

Reels

As Instagram’s answer to short-form video content, Reels has become a primary engagement driver. Key aspects include the following:

• 60-second clips with interactive elements
• Augmented reality (AR) filters for enhanced creativity
• Live product tagging for seamless shopping
• Reel replies, which let businesses respond with video demonstrations

Interactive Features 

Instagram has pushed forward some notable community-building tools:

• Interactive polls in Reels for audience engagement
• Global communication support with translation features
• Content testing capabilities through trial reels
• Improved messaging features for direct communication

AI Integration

The platform’s signature filters and editing capabilities have evolved into tools powered by artificial intelligence (AI). Users can access features like “Movie Gen,” which enables dramatic video transformations through text prompts—from altering clothing to backgrounds or converting videos into animated styles. Users can also employ AI for the following:

• Automated performance insights
• Optimizing content visibility
• Image-to-video conversion

Instagram for Business

Instagram is an essential marketing and sales platform for many businesses. With improvements in profile features, companies can now offer immersive AR product demonstrations, use Meta’s AI to predict trends, and employ Instagram Shopping to integrate e-commerce possibilities. Detailed analytics provide crucial data on audience demographics, content performance, and engagement rates, while newer ad formats help target specific audiences.

Content Strategy and Engagement

The platform rewards content that drives meaningful interaction, with carousel posts and reels typically generating higher engagement rates. Strategic hashtag use remains crucial, with popular tags like “#Love” garnering over 2 billion posts.

Navigating Algorithm Changes

Brands using Instagram face the challenge of an ever-evolving algorithm. The algorithm that determines content visibility isn’t one-size-fits-all; Instagram uses different algorithms for feed posts, stories, the explore page, and reels. Understanding these distinctions is crucial for business success on the platform:

Feed posts:

The main feed prioritizes content based on user relationships and past interactions, engagement rates (likes, comments, saves, and shares), content relevance to user interests, and recency.

Instagram has placed renewed emphasis on photo content in the main feed following Instagram leader Adam Mosseri’s announcement about rebalancing content types. This shift is a time for brands to diversify their content strategy beyond just video. 

“This is definitely a work in progress—balancing the ability to reach followers and overall engagement is tricky,” Mosseri posted on Threads, Meta’s answer to Twitter (now X). This message served as a warning for content providers: The algorithm will be changing, and if your business relies on it, you’ll need to change with it.

Stories:

Stories visibility is determined by the viewing frequency of a creator’s content, the level of interaction with the account, relationship depth (including direct messaging), and content completion rates.

Explore page:

The explore page algorithm focuses on content that receives high engagement (particularly saves and shares), posts that align with users’ demonstrated interests, trending topics and hashtags within specific niches, and location relevance

Reels:

For reels, the algorithm prioritizes the following watch time and completion rates, user engagement patterns, audio track popularity, and content originality.

The Bottom Line

Instagram’s transformation from a simple photo-sharing app to a global commerce and communication platform reflects broader shifts in how businesses connect with consumers. Through AI-powered features, enhanced shopping capabilities, and sophisticated analytics, Instagram has become an essential tool in modern business.

While challenges exist—from algorithm changes to content saturation—Instagram’s ability to adapt suggests it will continue to dominate social media. For those willing to invest in authentic content creation and community engagement, Instagram will remain a place where you can connect with and convert audiences.

Fact checked by Vikki Velasquez

Stock volume is an important indicator that shows market sentiment towards a particular stock. It measures the total number of shares that were bought and sold during a specific time period, providing you with important information that could improve your trading decisions. 

Once you understand how to read stock volume, you will be able to track investment trends, spot possible reversals, and make smart inferences about the overall health of the market, making you a more confident trader. 

In this article, you will learn how to interpret stock volume data, read multiple volume indicators, and learn how to avoid common trading mistakes.

Key Takeaways

• Stock volume provides a snapshot of current market activity and price trends.
• Knowing how to read various indicators will help you understand trends in the overall stock market. 
• Avoid common pitfalls, such as overreacting to single-day volume spikes, by looking at long-term market trends.

What Is Stock Volume?

Stock volume is the total number of shares that are traded, usually within a single day. Stock volume is measured by counting the total number of shares that are transacted between buyers and sellers, also called absolute volume.

Relative volume, on the other hand, compares the current trading volume against the stock’s average volume over a certain time period, such as 30 or 60 days.

Find real-time trading data on broker and trading platforms like Charles Schwab, Fidelity, and Interactive Broker. For financial news, visit websites like Bloomberg, MarketWatch, and Yahoo! Finance. 

Why Stock Volume Matters in Trading

Stock volume is important because it tells you how interested people are in a particular stock. When a stock has a high trading volume, it indicates a strong interest as people are actively trading the stock. If a stock has a low trading volume, it indicates less public interest and slower investing activity.

Traders often look at stock volume alongside the stock’s price action or the daily fluctuation of a stock’s price. If a stock price closes at a higher price than it opened at the end of a trading day, it indicates an upward trend. If a stock closes for less than it opened, it’s in a downward trend. 

When a stock price changes direction, it’s referred to as a reversal. 

Key Volume Indicators and How To Use Them

Key volume indicators are tools that help you analyze market activity to make more informed trading decisions. Here are a few indicators that will make you a more confident trader: 

Volume Moving Average 

The volume moving average (VMA) is a time-based indicator that assumes all trading days are equal, smoothing out volume data over a specific time period to help identify normal vs. abnormal trading activity. The VMA creates an average price that is constantly being updated. 

On-Balance Volume

On-balance volume (OBV) is a trading indicator of momentum that uses volume flow to predict how a stock’s price will change. OBV calculates this by adding a stock’s volume on up days and subtracting it on down days to indicate how strong a trend is.

Volume-Weighted Average Price

The volume-weighted average price (VWAP) is a foundational concept in trading that shows you the price action throughout a single day, giving you insight into the overall price trends. 

Tip

Volume-weighted average price is a helpful indicator for short-term traders. 

Accumulation/Distribution Line

The accumulation/distribution line (A/D) is used to see how money flows in and out of a stock, helping traders see how strong a trend is, and the pressure to buy and sell that stock. Do not confuse this with the advance/decline index, which uses the same initials. 

Volume Spikes and Climax Moves

Volume spikes and climax moves happen when there is a sudden increase in trading volume or price movements, signaling to investors there is a potential trend exhaustion or reversal. 

How To Use Volume To Improve Your Trading Strategy

Understanding how to read a stock’s volume will not only make you more informed but also help you improve your trading strategy. Here are a few tools to add to your trading strategy tool belt: 

Confirming Breakouts and Breakdowns 

Take advantage of potential trading opportunities and avoid losses by knowing how to spot a breakout and a breakdown. When a stock moves past a defined price level, high volume indicates that the move is strong and will likely continue. This is known as a strong breakout.

Note

A breakdown occurs when a stock’s price moves downward, usually with high trading volume, signaling a fast decline that is likely to continue. 

Spotting Trend Reversals

If a stock’s price is rising but volume is going down, it could be a warning signal that the trend is losing strength and could reverse soon.  

Identifying Market Strength and Weakness

Look at trading volume over various time periods to see how strong a market move is. High volume over time indicates strong interest, while low volume could indicate a stock is losing steam. 

Timing Entries and Exits

Market timing is an important part of every trader’s strategy, and stock volume can help you decide when it’s a good time to buy or sell. The key is to enter a trade when volume supports the general trend and consider existing if volume suggests a change is coming. 

Common Mistakes Traders Make With Volume

There are some common mistakes that traders make when they first begin tracking stock volume. 

Misinterpreting a price change on low-volume stocks as significant, when the change is in fact not sustainable due to a lack of strong market interest. 

Ignoring other technical indicators outside of stock volume, like price patterns and moving averages, and basing your investment decisions solely on volume. This can lead you to have an incomplete picture of a stock’s performance. 

Overreacting to a single-day volume spike. A spike could be caused by a number of temporary factors rather than a reflection of a true shift in market sentiment, so look at the broader context and market activity before panicking. 

What Other Indicators Can Be Used With Volume?

Other indicators that can be used to track stock volume include the Chaikin Money Flow, Klinger Oscillator, Relative Strength Index (RSI), Bollinger Bands, and Moving Average Convergence Divergence (MACD). 

How Much Volume Is Good for Trading?

High-volume stocks trade at more than 500,000 shares per day, while low-volume stocks trade below this threshold, though there is no officially established cutoff.

What Is the Formula for Trading Volume?

Trading volume equals the total number of shares traded during a specific time period. 

Is Low Trading Volume Bad?

Trading low volume is often seen as more risky due to low liquidity, but it can also have some benefits and result in profit if done strategically.

The Bottom Line

Stock volume is an important tool for understanding market activity and helping you make informed investing decisions. If you want to use stock volume effectively, learn how to spot trend reversals, strategically time your entries and exits, and use volume to confirm breakouts and breakdowns. 

It’s important to combine volume analysis with other trading tools to have a comprehensive view of the market and help you make informed decisions. Consider tools like moving averages, RSI, and MACD, and keep up with stock volume changes on financial websites and brokerage platforms. 

Once you know how to use stock volume, the next step is to use volume-based strategies by monitoring volume patterns on a regular basis, staying updated on market trends, and continuing to adapt your approach. 

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

The Family and Medical Leave Act (FMLA) is a federal law providing eligible employees up to 12 weeks of unpaid, job-protected leave per year. The law allows employees to take time off for qualified family and medical reasons and still keep their jobs and health benefits. 

The Department of Labor (DOL) has optional certification forms, but your employer may have its own paperwork for certification or to document your leave. Some forms only need to be filled out by your employer or healthcare provider, but others ask you to provide basic details about your situation.

Key Takeaways

• FMLA gives eligible employees up to 12 weeks of unpaid, job-protected leave for bonding time after birth or adoption, serious health conditions, caregiving responsibilities, or military-related family needs.
• Employers may require certification to verify the need for leave but can’t demand a medical diagnosis or extra details beyond what FMLA requires.
• Mistakes in FMLA paperwork, such as unprovided details or vague medical certifications, can lead to denials.
• You can correct and resubmit forms or challenge a denial if necessary.

Understanding FMLA Eligibility

The four main FMLA eligibility criteria relate to your employment history and your employer’s company characteristics. According to the Department of Labor, you’ll need to meet these requirements: 

1. Work for a covered employer: Private employers must have had 50 or more employees in the 20 or more workweeks in the current or previous calendar year.
2. Have worked for that employer for at least 12 months before your FMLA leave starts: The 12 months don’t have to be consecutive; any combination of 52 weeks total is acceptable.
3. Have 1,250 hours of service for the employer in the 12 months immediately before your FMLA leave starts (about 24 hours per week for 12 months): PTO doesn’t count toward your hours of service. 
4. Work for an employer that employs at least 50 people within 75 miles of that worksite as of the date you give notice about your need for FMLA leave: If you work from home, your worksite is where you report to or receive assignments from. If you have no fixed worksite (like construction workers), then it could also be the location assigned as your home base.

Types of FMLA Leave

Parental, medical, caregiver, and military family leave are the four types of FMLA leave. Below is a closer look at each type of leave. 

Note

You must generally give your employer at least 30 days’ notice, except in cases of emergency. 

Parental Leave

You can apply for parental leave within one year of your child’s birth. This covers the birth itself and bonding with your baby. You also have one year to apply to take parental leave to bond with a child placed with you for adoption or foster care. 

Medical Leave for Personal Health

Medical leave for personal health reasons is reserved for serious health conditions that temporarily prevent you from performing your job or regular daily activities, whether because of the condition or its treatment. 

These are illnesses, injuries, impairments, or mental or physical conditions requiring overnight hospital stays or continuing treatments. Examples include pregnancy-related issues, chronic conditions like diabetes and asthma, or permanent conditions like terminal cancer. 

Your employer may ask for medical certification, which is a verification from your doctor that you have a serious health condition. 

Important

Elective surgeries with overnight hospital stays are classified as a serious health condition.

Caregiver Leave

Caregiver leave is FLMA leave taken to care for an immediate family member’s health condition. It generally applies only to your spouse, children, and parents but also includes children you financially support or provide day-to-day care for. 

You’ll have to meet additional criteria if your child is 18 or older. For instance, they may need to have a serious health condition and be unable to care for themselves because of the condition. 

Military Family Leave

Military family leave is another type of caregiver leave, except it’s to provide care for a serious condition arising from the family member’s military service. The family under this leave is defined as your spouse, child, parent, or next of kin. You can take up to 26 workweeks of leave instead of the usual 12. 

Qualifying exigencies also let you take time off to handle urgent or personal family matters resulting from your spouse, child, or parent being deployed for active duty. 

Unlike caregiver leave, your child can be of any age for both these types of leave.

How to Get FMLA Forms

Your employer may use the Department of Labor’s optional FMLA forms or their own, which you can get from its Human Resources (HR) department. Some employers use a third party, such as an insurance company, to handle FMLA requests. 

Note that there is no legal requirement to fill out any particular form. “Your employer has to accept a request that meets all the certification requirements,” said Michal Shinnar, senior counsel with Joseph Greenwald & Laake, a law firm that operates in Maryland, Virginia, and the District of Columbia. “Employers are allowed to accept less than the certification information; they just can’t require more to approve FMLA.”

Note

Your employer can’t request medical certification for parental leave to bond with a child. They can only ask you to confirm the family relationship by providing a court document or birth certificate. 

How to Complete FMLA Forms

FMLA forms have up to three sections to complete: one for your employer, one for the healthcare provider, and usually one for you. Form WH-380-E, used for a serious health condition, is the only one that doesn’t have anything for you to fill out. Your employer fills out the top part, and your healthcare provider fills out the second part. 

Here are more details on how to fill out these forms.

Fill in Section 2: Personal Information and Reason for Leave

Section 2 varies depending on the form:

FMLA Form WH-380-F for Family Health Condition

Section II of this form asks for your family member’s details. You’ll need to know:

• Their name and relationship to you
• The type of care you’re providing and how much time off you need

FMLA Form WH-384 for Military Family Leave for Qualifying Exigency

Section II of this form asks you to detail why you’re requesting leave and provide proof of the military family member’s order or military documentation proving they’re on active duty or have been called to active duty. This is the lengthiest section 2 of all the forms. 

Initially, you’ll need to fill out their full name and describe your relation to them.

Part A then asks for their active duty service dates and the type of documentation you’re providing as proof. 

Part B asks for which of the qualifying reasons you’re asking for leave and if there’s documentation that supports the reason for the leave. 

Part C is where you detail your leave or reduced work schedule, including your best estimates of how long it will last and whether it will be a continuous or intermittent absence.

Part D is where you provide your contact information and sign the form.  

FMLA Form WH-385 for Servicemember Care

This form starts by asking for your and the service member’s name and how you’re related. 

Part B is where you detail the service member’s status, what care you’re providing, and your best estimate of how long you’ll need the leave or reduced work schedule. 

FMLA Form WH-385-V for Veteran Caregiver Leave

Part A of this form asks for the veteran’s name, your name, and your relationship to them.  

In Part B, you’ll provide more details about:

• The veteran’s service
• Whether they are receiving medical treatment
• How you will care for them
• Your best estimate of how long you’ll need the leave or reduced work schedule. 

Get a Healthcare Provider’s Input

Your healthcare provider will fill out the healthcare provider section on the forms. “When asking a doctor to complete an FMLA medical certification, it’s best to schedule an appointment or check their process in advance with their office,” said Stephanie Reitz, director of client services at myHR Partner. You should clearly explain why you need the leave and give your medical provider the correct form, she said. Before you leave the office, make sure all questions are answered. 

The DOL has a handout for healthcare providers that you can print and bring to your appointment. 

Note

Your doctor doesn’t have to include your diagnosis, and your employer can’t reject your certification only because it lacks one. 

Be prepared that you may have to pay something for this service. “Some healthcare providers charge a fee for FMLA paperwork, usually because insurance doesn’t reimburse for this time,” said Shinnar. Ask ahead if yours does and, if so, how much they charge.

Turn in the Form and Wait for Approval

Return any forms and documentation to your employer or HR department. Don’t send them to anyone else, including the DOL or your supervisor.

“You are entitled to your medical privacy when it comes to FMLA leave, just like under the [Americans With Disabilities Act],” Shinnar said. “Your supervisor gets to know the ‘what’ (i.e., when you will be on leave), but not the ‘why’ (i.e., what the medical conditions or specific symptoms are).”

Your employer may use the WH-382 Designation Notice form to let you know if your request was approved. If denied, they can use this form to tell you whether the certification was incomplete or if additional information is needed. 

What If Your Request Is Denied? 

If you want more clarification about your denial, ask your human resources representative for a detailed written explanation, Reitz said. You may need your physician to update and resubmit the form or get a second opinion.

If you feel the denial was unfair, you do have legal options. You can submit a complaint to the U.S. Secretary of Labor or file a civil lawsuit. The lawsuit must be filed within two years after the denial—or three years if you can prove the employer’s violation was willful. “An attorney can provide you with more specific advice,” said Shinnar. “Best practice is to mark your calendar for the two-year deadline to avoid having to prove a violation was willful.”

Common Mistakes and Tips for Accurate Form Completion

Reitz said that, in her experience, denials usually happen because of problems with medical certification. “The information provided in the request is too vague or incomplete, such as missing specifics related to how long the needed leave is or whether the leave will be intermittent or taken all at once,” she said.

Another common mistake is saying that you’ll be out for more than 12 weeks when that’s not definitely the case. Your employer doesn’t have to hold your job if you’re out for more than 12 weeks.

The Bottom Line

Most FMLA leave forms require you to fill out a section on your own, with your medical provider and employer filling out the rest. These forms are optional but may be part of your company’s standard procedure.

If you qualify, you can take unpaid leave for the time specified, up to 12 or 26 weeks, depending on your type of leave. A few states are implementing their own paid family and medical leave policies, although policies vary by state.

Reviewed by Chip Stapleton
Fact checked by Vikki Velasquez

If you live and work in the U.S. on a visa, you may be considered a non-resident alien. The Internal Revenue Service (IRS) defines a non-resident alien as a non-U.S. citizen who is legally present in the U.S. without a green card or who doesn’t pass the substantial presence test.

As a non-resident alien, you may invest in a 401(k) offered by your employer. But, this can be complicated if you deplete your account when you return to your home country because you will be taxed and penalized. Keep reading to learn how to solve this non-resident 401(k) conundrum.

Key Takeaways

• The early withdrawal rules for retirement accounts are the same for U.S. residents and non-residents.
• Your entire 401(k) withdrawal is taxed as income by the U.S. even if you’re back in your home country when you withdraw the funds.
• If you’re a non-resident with a 401(k) and plan to return to your home country, you can cash it out, do an IRA rollover, or leave the funds until you turn 59½ and take penalty-free withdrawals.

Cashing Your Funds Out

The rules for early withdrawals are the same for U.S. residents and non-resident aliens. According to the Internal Revenue Service, you can’t withdraw money from a traditional or Roth 401(k) plan until you reach age 59½ or become permanently unable to work due to disability.

Beware the Early Withdrawal Penalty

If you are younger than 59½, not disabled, and take cash from your 401(k), you’ll be subject to a 10% early withdrawal penalty. So, if your 401(k) is worth $15,000 and you decide to liquidate the account, you’ll be required to pay an additional $1,500 in taxes. That means your withdrawal is essentially slashed to $13,500.

Your entire 401(k) withdrawal is taxed as income by the U.S. even if you return home. Because contributions to traditional 401(k) accounts are made with pretax dollars, this means any withdrawals are included in your gross income for the year you take the distribution.

Let’s say your income tax rate is 22% in the year you liquidate your 401(k). This drives the total tax impact up to 32% for that withdrawal (the 10% early withdrawal penalty + the 22% income tax rate).

So when you withdraw $15,000 from your 401(k), you’ll have to pay a total of $4,800 in taxes, which whittles down the total of your take-home amount to $10,200. This is precisely why many financial advisors tell U.S. residents that cashing out their 401(k) before they hit 59½ isn’t the smartest option.

The Delaying Game

A tax expert may offer different advice if you’re a non-resident planning to return home. If you move back and wait until the next tax year to cash out your 401(k), you will most likely fall into a lower tax bracket since you won’t be working and earning income in the U.S.

This could greatly reduce the amount of income tax owed on the distribution. Remember: No matter where you live when you cash out your account, you’ll still have to pay the 10% early withdrawal penalty if you’re younger than 59½. 

Warning

As a non-resident alien, the IRS requires you to pay income tax only on the money you earn from a U.S. source.

Rolling Your Funds Over

Another way to lower your tax payment on a 401(k) withdrawal is to transfer the funds to another tax-advantaged account, such as an individual retirement account (IRA). When you take a direct rollover from your 401(k) to an IRA, you avoid the 10% early withdrawal penalty. To pull this off, you’ll need to open the IRA first and fund it with the 401(k).

The Penalty-Free Withdrawal

You still incur the early withdrawal penalty but there’s “more flexibility in terms of exceptions for avoiding the penalty like unreimbursed medical expenses, first-time homebuyer, disability” if you take a distribution from your IRA before 59½, according to Mark Hebner, founder, and president of Index Fund Advisors and author of “Index Funds: The 12-Step Recovery Program for Active Investors.”

You can make a penalty-free early withdrawal from an IRA for qualified higher-education expenses, such as tuition, books, and supplies for enrollment at an eligible institution–plus a specified amount for room and board if you attend at least half-time. The IRS notes that some overseas educational institutions participate in Federal Student Aid programs so check with the school first to see if it is considered an eligible educational institution.

Keep in mind that IRA distributions sent to an address outside of the U.S. are subject to mandatory federal withholding of 10%. However, some financial institutions allow you to waive this withholding by filing special documents. If you take this route, your distribution will be subject to the treaty rate of your current country. The treaty rate ranges from zero to 30%.

The Home Country Option

Once you roll your 401(k) into an IRA, you may also choose to transfer the IRA funds to a retirement account in your home country. For example, Canadian citizens can roll over their U.S. IRA plans to a registered retirement savings plan (RRSP). As a Canadian resident, not only do you end up with the 10% early withdrawal penalty if you aren’t 59½, but you’ll also have to pay taxes to both the U.S. and Canada.

Do Non-Residents Qualify for 401(k) Participation?

Non-residents who work for a U.S. employer may qualify for a 401(k) if the plan allows it. There may be certain eligibility requirements, including earning income from a U.S.-based source. Contribution and distribution rules apply to citizens, residents, and non-residents alike.

How Does the IRS Define a Non-Resident?

According to the IRS, a non-resident is anyone who isn’t a U.S. citizen or a legal permanent resident. People who fall into this category don’t have a green card or pass the substantial presence test. Non-residents must pay taxes if they receive income in the U.S. from an employer or through a business. Tax rates for non-residents are similar to citizens and green card holders.

Can I Keep my 401(k) If I Leave the US?

Yes, you can have a 401(k) and keep it as is if you leave the U.S. If you decide to cash out your account before you turn 59½, though, your distribution is taxed as income at your normal tax rate and you will incur a 10% early withdrawal penalty along with a 30% federal withholding. You may also be liable for taxes in your home country if it applies.

The Bottom Line

Withdrawals from 401(k)s are taxed the same way for residents and non-residents. If you plan to return home, you can cash out the account, roll it over into an IRA, or leave the funds until you turn 59½ and can start taking penalty-free withdrawals.

“Although you are allowed to leave your funds in the 401(k) until turning age 59½ or later, the funds would be subject to your employer’s options and fees,” says Carlos Dias Jr., founder and managing partner of Dias Wealth. It is also important to note that some investment firms are reluctant to have an investment account held by an individual no longer living in the U.S.

Before you make this important decision regarding your 401(k) withdrawals, consider speaking with a financial professional or tax attorney.

The March 2023 collapse of Silicon Valley Bank shone a light on how a bank’s financial vulnerabilities, when left unaddressed, can lead to ruin. The bank, the 16th largest in the United States, was shuttered after rising interest rates caused its investments to plunge in value and depositors withdrew huge amounts of cash.

Management errors, investment missteps, market volatility, and regulatory changes all turned a financial success story into a 21st-century disaster. At the time, it was the largest bank failure since Washington Mutual closed its doors during the 2008 financial crisis.

Federal regulators took extraordinary steps to prevent a widespread financial contagion in the market, and subsequent regulatory measures have reduced the risk of similar bank failures in the future.

Key Takeaways

• Silicon Valley Bank catered to tech and bio-tech startups, the vast majority of whose deposits were larger than the $250,000 insured by the FDIC.
• The bank invested heavily in long-term securities, which tanked in value when interest rates rose in 2022 and had to be sold at a loss when depositors lost faith in the bank.
• On a single day in March 2023, depositors withdrew $42 billion from the bank, leading to its shut-down the next day.
• The FDIC applied the systemic risk exception rule to cover insured and uninsured Silicon Valley Bank deposits.
• Poor risk management, lax federal regulation, and the rapid spread of information on social media platforms all played a role in the bank’s failure.

What Was Silicon Valley Bank?

Silicon Valley Bank (SVB) was a subsidiary of Silicon Valley Bank Financial Group (SVBFG), a bank holding company, financial holding company, and financial services company. Silicon Valley Bank was a state member bank of the Federal Reserve System, which held the lion’s share of SVBFG’s assets.

SVBFG provided commercial and private banking services to the life sciences and technology sectors, including a substantial number of early stage startup companies and venture capital-backed firms. The financial group derived nearly all its revenue from American clients.

“By the first quarter of 2022, its total assets peaked at $218 billion, ranking it as the 16th largest bank in the United States,” said Dr. Lai Van Vo, associate professor of finance at Western Connecticut State University. He pointed out that by 2023, SVB was on Forbes’ list of the world’s best banks, saying the publisher cited “its robust growth, strong credit quality, and profitability as evidence of its industry prominence and stability.”

History of Silicon Valley Bank

In 1983, Bill Biggerstaff and Robert Medearis founded Silicon Valley Bank in Santa Clara, California, after conceiving the idea while playing poker.  With CEO Roger Smith at the helm, SVB sought to provide banking services and credit to Silicon Valley-based tech startups. The first year, SVB held around $18 million.

Between 2019 and 2021, SVB experienced tremendous growth, and its parent company tripled in size due in part to low interest rates. Deposits increased substantially in 2021 as SVB clients got additional funding through acquisitions, initial public offerings (IPO), secondary offerings, special purpose acquisition company (SPAC) fundraising, and venture capital investments. By the end of 2021, the financial group’s assets had grown 271%, compared to 29% in the overall banking industry.

Why Did Silicon Valley Bank Fail?

A major turning point for the bank was 2022, when the Federal Reserve hiked interest rates, squeezing growth throughout the technology sector. Although the financial group’s deposits decreased in 2022, it still reported record high total assets–nearly $212 billion–for the year. However, by the end of that year, around 94% of SVB’s deposits were uninsured, making them more vulnerable to a bank run.

During a two-day period in March 2023, depositors’ substantial withdrawals made Silicon Valley Bank insolvent. On March 10, 2023, federal regulators shut down its operations.

Investment Losses

The financial group invested a large percentage of its deposits in long-term bonds and mortgage-backed securities with a maturity of 10-plus years. “Substantial investments in debt securities in 2021, made during a period of low interest rates, triggered significant losses when rates spiked in 2022,” Vo said. “A depositor base heavily concentrated among interconnected venture capitalists heightened the risk of a bank run, especially as the bank’s performance weakened.”

As interest rates rose, the value of SVB’s bond portfolio fell. When the financial group liquidated $21 billion in bond holdings, its losses came to light and sparked depositor withdrawals. 

Bank Run

Silicon Valley Bank clients continued to take their money out throughout the first quarter of 2023. Slow growth within the technology sector prompted the bank’s parent company to inform investors that it expected reduced growth and income for the fiscal year. Additionally, the financial group advised investors that it expected credit rating companies to downgrade its credit status. Customers took these announcements as signs SVB was severely distressed financially, and the withdrawals spiked dramatically.

On March 9, 2023, SVB depositors withdrew $42 billion. Bank supervisors reported that they expected depositors to remove more than $100 billion by March 10. Since SVB was heavily invested in long-term securities with low interest rates, it did not have the capital or collateral to meet the outflows. On March 10, the California Department of Financial Protection and Innovation deemed SVB insolvent and appointed the Federal Deposit Insurance Corporateion (FDIC) to oversee its assets and liabilities.

Regulatory Environment

Following the 2008 financial crisis, Congress passed the Dodd-Frank Act. The law’s provisions sought to prevent financial institutions from engaging in the types of risky activities that created that catastrophe. The new law also required financial institutions that held $50 billion or more in consolidated assets to undergo annual Federal Reserve-supervised stress tests—and semiannual in-house stress tests—to help identify risks that could threaten their solvency.

In 2018, Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act, also called the Crapo bill after its author, Republican Senator Mike Crapo of Idaho.  It modified the Dodd-Frank Act and increased the $50 billion stress test threshold to $250 billion in consolidated assets. At the end of 2022, SVB reported total assets of $212 billion, placing its holdings below the newer stress test threshold. 

“Inadequate risk management exacerbated these vulnerabilities,” Vo said. “Ultimately, this mismanagement of assets and liabilities, compounded by weak corporate governance, led to the bank’s failure.”

Who Was to Blame?

In its April 28, 2023, press release, the Federal Reserve’s Board of Governors concluded that  Silicon Valley Bank fell into insolvency due to:

• Poor internal risk management
• Failure of the Federal Reserve to understand SVB’s vulnerabilities
• Failure of SVB supervisors to quickly address vulnerabilities when they were discovered
• Reduced standards and supervision created by the Crapo Act. 

The Federal Reserve also noted that the rapid spread of information through social media networks exacerbated the speed and severity of deposit outflows.

A Timeline of the Collapse

Over a period of months, market conditions increased SVB’s vulnerability, but its collapse occurred within the course of just a few days:

• March 8, 2023: SVBFG announced a $1.8 billion loss on its bond holdings and informed investors that it projected lower-than-expected earnings for the fiscal year. The news quickly spread on social media networks, prompting uninsured depositors to withdraw their funds from SVB.
• March 9, 2023: SVB customers withdrew $42 billion from their accounts.
• March 10, 2023: The California Department of Financial Protection and Innovation shut down SVB and appointed the FDIC as receiver.
• March 12, 2023: The FDIC announced that it had granted insured depositors full access to their insured deposits, while issuing receivership certificates on uninsured funds.
• March 13, 2023: The FDIC reopened all 17 SVB branches, resuming banking activities under the administration of the Deposit Insurance National Bank of Santa Clara (DINB).
• March 26-27, 2023: First Citizens Bank purchased SVB’s assets and liabilities. The deal included $110 billion in assets, $56 billion in deposits, and $72 billion in loans.

Impact on Depositors and Investors

The FDIC is an independent agency of the U.S. government. FDIC insurance covers deposits up to $250,000 per depositor per bank for each account type when FDIC-insured banks fail. This protection covers principal deposits, plus accrued interest. Let’s say you deposit $100,000 in an FDIC-insured bank and over time your money accrues $3,000 in interest. If the bank fails, FDIC insurance will cover the entire $103,000 loss.

The majority of SVB deposits exceeded the FDIC coverage limit. Typically, the FDIC would not cover losses over the $250,000 threshold. But in the SVB case, the FDIC did, by applying the systemic risk exception, which applies when losses due to failure could seriously impact the financial stability of the overall market. 

Applying the systemic risk exception requires the approval of two-thirds of FDIC board members, the Treasury Secretary, and the president of the United States. Prior to the SVB failure, the FDIC had applied the systemic risk exception five times after 1991, all during the 2008-2009 financial crisis.

“[More than] 90% of SVB’s $175 billion in deposits exceeded the FDIC’s $250,000 insurance limit, leaving most funds uninsured and at risk in a typical failure,” Vo said. “This posed a severe threat to depositors, particularly tech firms dependent on these accounts.” 

He noted that SVB’s collapse, given its position as the 16th largest bank in the U.S., “threatened systemic stability and risked contagion to other regional banks.”

But the systemic risk exception only applied to depositor funds. The FDIC did not cover losses suffered by investors and shareholders. “SVB’s stock plummeted after the March 8 announcement, dropping 60% on March 9 and halting trading on March 10 as the bank failed,” Vo said. “After its closure, shares became effectively worthless, wiping out equity investors.” 

First Citizens’ acquisition of SVB’s assets and liabilities did not include equity stakes, so shareholders received no recovery.

Who Paid for the Rescue?

U.S. taxpayers did not directly fund Silicon Valley Bank depositor losses. According to the Federal Reserve, the bank’s failure cost the Deposit Insurance Fund around $16.1 billion. The FDIC manages the Deposit Insurance Fund, which is funded through assessments on FDIC-insured banks. Banks pay assessments based on their insured deposits and their total liabilities.

Impact on the Banking Industry 

Banks use depositor money to make loans and invest in securities, typically long-term investments. Federal banking laws require banks to retain a portion of their deposits to cover customer withdrawals. But when a bank run occurs, depositors may seek to withdraw more money than is available.

Prompted by the SVB failure, the Federal Reserve established the $25 billion Bank Term Funding Program, which provides loans to financial institutions when they are unable to meet their depositor withdrawal demands. The loan terms extend for up to one year and require qualified collateral such as U.S. agency mortgage-backed securities or U.S. Treasuries.

While the funding program can serve as a stopgap for future bank failures, Vo noted that the SVB collapse impacted the banking industry in several ways. “Regional bank stocks plummeted,“ he said. Customers fled smaller banks for big players such as JPMorgan and Wells Fargo. “Mid-sized banks faced higher funding costs and deposit rate hikes to retain customers.”

Other Bank Failures

While the FDIC’s actions helped prevent widespread financial contagion, the SVB failure did prompt bank runs that rendered two other banks insolvent. “Social media and digital banking accelerated deposit withdrawals, spreading panic across regional banks fast,” Vo said.

On March 12, 2023, the New York State Department of Financial Services closed Signature Bank after it failed to meet its depositor obligations. Again, the FDIC declared a systemic risk exception to cover uninsured Signature deposits. The SVB and Signature collapses resulted in combined losses of approximately $22.5 billion, $19.2 billion of which was attributed to systemic risk exception payouts.

Depositor panic initiated by the SVB and Signature failures prompted a run on First Republic Bank of San Francisco, too, causing it to collapse in May 2023. Once again, federal regulators found that First Republic had grown rapidly and over-relied on uninsured deposits.

What Happens to Your Money If Your Bank Collapses?

Bank failures—particularly those involving large financial institutions—do not occur often. When they do, the FDIC steps in to protect insured depositors. The FDIC insures deposits up to $250,000. Typically, the FDIC will not cover funds that exceed this threshold except when it declares a systemic risk exception.

So, if a customer deposits $300,000 in an FDIC-insured bank, the Deposit Insurance Fund will only cover $250,000. However, the FDIC will issue depositors a receiver’s certificate, which provides proof of a claim against the bank. After the bank’s assets are liquidated, the claimant may recoup some or all of their remaining uninsured deposits.

The Bottom Line

The collapse of Silicon Valley Bank highlights how quickly a seemingly stable financial institution can fail. In its review of the collapse, the Federal Reserve noted that SVB’s managers did not manage risks and did not act swiftly when vulnerabilities arose. The bank relied on uninsured deposits and invested heavily in long-term securities. The rapid spread of information on social media also played a significant role in the speed and severity of the SVB failure.

The FDIC’s systemic risk exception helped rescue many of SVB’s uninsured depositors while preventing widespread financial contagion. The Federal Reserve determined that the provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act weakened protections within the banking system. Subsequently, the establishment of the Bank Term Funding Program promised to provide relief for banks facing insolvency, with the goal of preventing future bank failures.

When you refinance your home, you’re replacing your existing mortgage with a new one that, ideally, has a lower interest rate, better terms, or both. While this can lower your mortgage payment, you should only refinance when it makes sense. For example, it might be a good time to refinance if interest rates have dropped or your credit score has improved.

Key Takeaways

• Refinancing can help you secure more favorable rates or get cash from your home equity.
• Comparing offers from several mortgage refinance companies or working with a mortgage broker can help you find the best deal.
• Refinancing is generally worth it if you stay in your home long enough for savings to equal costs.

5 Reasons to Refinance

Refinancing your home can be a smart financial move, making it easier to manage your mortgage or saving you money. Here are some key reasons to consider refinancing:

1. Falling interest rates: When mortgage rates drop, you can take advantage of lower rates to reduce monthly payments and overall loan costs.
2. Replacing an adjustable-rate mortgage (ARM): If you expect ARM rates to rise soon, locking into a fixed-rate mortgage can provide a stable interest rate and predictable  monthly payment.
3. Your credit has improved: A higher credit score can help you qualify for a lower interest rate, better terms, and lower monthly payment compared to your current mortgage.
4. Lengthening the loan term: Extending the loan term can reduce monthly payments, making your mortgage more affordable. However, this may increase the total interest paid over time.
5. Taking cash out of your home: You can access home equity with a cash-out refinance and use those funds for major expenses like home improvements or debt consolidation.

Warning

Refinancing costs can offset potential savings. Always recalculate the breakeven point to make sure it’s a smart decision.

Getting the Best Deal on a Refinance

In order to get the best possible deal when refinancing, start by checking your credit score so you know where you stand. If your credit score has improved since you locked in the rate on your current mortgage, you may qualify for better interest rates.

Shop around with a variety of providers, including banks, credit unions, and mortgage brokers. Also be sure to compare good faith estimates from a variety of lenders, considering the interest rate, closing costs, and fees.

Closing costs can reach up to 5% of the loan’s value. Common fees include:

• Origination fee
• Appraisal fee
• Title search fee
• Title insurance premium

Note

Quotes from online marketplaces are typically only an estimate. Be aware that these platforms may share your personal information with third-parties.

To protect your credit score and mortgage rate prospects, keep your loan shopping within a short time frame. Mortgage inquiries made within a 30–45 day window are treated as a single inquiry.

Is a Mortgage Broker Worth It for a Refinance?

Working with a mortgage broker to refinance your home can be beneficial. Brokers can access multiple lenders on your behalf, in addition to handling paperwork and communication, saving you a significant amount of time. Brokers are typically compensated by loan originators, so you usually don’t have to pay for their services directly.

There are, however, some potential downsides of working with a mortgage broker. For example, a broker may be incentivized to recommend loans from lenders that offer them higher commissions. These loans may not align with your best interests. Additionally, not all lenders work with brokers, so you may miss out on certain options if you don’t also shop around on your own time.

When Should You Lock Your Rate?

Mortgage rates can change often. Once you have an offer you like, lock in your rate 30–60 days before closing to protect against increases.

Only get a mortgage rate lock for as long as you need for closing. Lenders may charge a higher rate or additional fees for a longer lock period.

Are Points Worth the Costs?

You can secure a lower interest rate by paying “points,” or prepaying interest, equal to 1% of your loan value. Buying points can be beneficial if you remain in your home long enough. Points may also be tax-deductible, should you itemize rather than take the standard deduction. 

However, buying points comes with higher upfront costs, which may not be ideal if your funds are limited. It’s generally best to buy points only if you plan to stay in the home at least long enough to break even.

How to Find Your Breakeven Point

The breakeven point of a refinance is the amount of time it takes for your savings to equal your costs. If you sell your home before the breakeven point, you may lose money.

To determine your breakeven point, start by adding up the total fees and closing costs of a refinance. Next, calculate your monthly savings by subtracting the new mortgage payment from your current one, including private mortgage insurance (PMI) savings and potential tax benefits. Divide the total refinancing costs by the monthly savings to get the number of months it will take to breakeven with a refinance.

Note

No-closing-cost loans don’t have a breakeven point since costs are either rolled into the loan or charged as a higher interest rate. Consider comparing the total interest on a no-closing-cost loan to a standard refinance to determine which option would offer you greater savings.

The Bottom Line

Refinancing your home can be an effective way to save money or access home equity, but it’s typically only a good idea when the savings outweigh the costs. If you shop around for the best terms and stay in your home long enough, refinancing can be worth it. However, if closing costs are too high or you can only get a minimal rate reduction, keeping your current mortgage may be the better option.

Understanding the Cost of Solar Panels for Your Home

Fact checked by Skylar Clarine
Reviewed by Samantha Silberstein

Homeowners who install solar power systems can receive numerous benefits: reduced electric bills, lower carbon footprints, and potentially higher home values. However, these benefits typically come with significant installation and maintenance costs, and the magnitude of the gains can vary widely from one house to another.

The power of just an hour and a half of sunlight shining across the surface of the Earth is equal to a year’s worth of global energy consumption, but to harness that power, we must convert it into electricity. Home solar power systems use energy from the sun to create electrical charges that move, which results in electricity flowing.

Key Takeaways

• A home solar energy system is one of the most popular and efficient alternatives to traditional power sources.
• Solar panels have many environmental benefits and can save homeowners money over the long term.
• While costs have decreased over the past years, installing and maintaining solar panels can still be expensive.
• Solar panels are best suited to homes with certain kinds of roofs and in environments with plenty of sun exposure.
• Before committing to solar power, understand both the environmental and economic factors, particularly financing options and possible subsidies or tax credits.

How Do Solar Panels Work?

Home solar panel setups use photovoltaics (PV), a technology used to convert sunlight into electricity. Solar panels contain photovoltaic cells that are often made out of silicon and grouped into larger modules or arrays. When light from the sun interacts with these cells, it causes electrons to move and electricity to flow. Other components of the solar panel then help harness and control this electricity to serve the practical purpose of powering a home.

Solar energy systems can provide numerous environmental benefits compared with other power sources. These include:

• Renewable energy source: Solar power is a renewable energy source, meaning that it cannot be used up. By contrast, fossil fuels have a finite supply, and as the supply dwindles, prices may increase significantly. Some estimates suggest that the global oil supply may be exhausted by 2052.
• Reduced carbon emissions: Solar energy generation reduces greenhouse gas emissions and the production of various pollutants associated with other power sources.
• Reliability: Solar power systems work in most environments worldwide and in droughts, heat waves, and other conditions that may strain traditional power grids.

Besides the many environmental and public health benefits of solar power, it also can lead to various cost savings and financial benefits for homeowners. These include:

• Tax credits: Homeowners can claim a 30% tax credit on their income taxes for the cost of installing a solar system.
• Reduced utility costs: Electricity with solar systems tends to cost less than that from traditional utilities. These systems also provide homeowners added flexibility, including the possibility of hosting a third-party system and buying the electricity it generates at a reduced rate.
• Reduced costs during grid outages: Solar setups with batteries can provide stable electricity even when the broader power grid goes down, saving residents on costs associated with generators or emergency housing.
• Increased home value: Many buyers view solar panels as an upgrade and are willing to pay more for a home with a solar system than one without.
• Sell surplus electricity: Most states allow homeowners with surplus electricity generated by solar panels to sell that energy back to the grid.

Before getting solar panels, get quotes from several reputable installers to compare.

How Much Do Solar Panels Cost for Homeowners?

The average upfront cost of a residential solar power system in the United States ranges from about $10,700 to nearly $17,000, depending on location and other factors.

Although the price of installation will depend on your home, your location, the size of the system, and other factors, expect to include some or all of these costs:

• Upfront costs: At the time of installation, you’ll pay for the solar energy system and also the labor and installation fees, permits, and paperwork necessary to install the system, as well as dealer fees. You may also need to pay for other equipment required to operate the solar system, including metering equipment, inverter, and battery storage.
• Long-term costs: Most solar panel setups are designed to last for 20 to 30 years without requiring significant updates, but there will likely be some maintenance needed due to regular usage, including occasional cleaning, that might incur additional costs after installation if you decide to outsource.

Potential Return on Investment

Homeowners investing in a solar power system for their homes will expect there to be potential for return on their investment. While there is no guarantee that a solar panel setup will recoup costs, you might expect these systems to return about 10% annually. This means it can take around 10 years to cover your initial investment.

Factors to Consider Before Going Solar

If you are thinking of moving toward green energy by investing in a solar power system for your home, consider several factors first. These include the suitability of your house, the kinds of incentives and rebates that may be available to you to keep costs down, and what you’ll need to do after the installation is complete.

Suitability of Solar Panels for Your Home

Solar panels can work in all climates. However, for a few reasons, your home may not be ideally suited to this type of power. The age, size, and slope of your roof, the amount of shade due to trees close to your home, the amount of sunlight in your location, and the cost of electricity in your area are all important factors. Professional solar installers can offer guidance on how suitable your home is for solar and how much you may stand to save in electricity costs.

For homeowners wondering whether they live in a region well-suited to solar power, the National Renewable Energy Laboratory (NREL) produces maps showing solar radiation levels, and the tools on its website provide detailed solar information for specific locations within the U.S.

Maintenance and Upkeep

Most solar panel systems do not require much regular maintenance or upkeep. For instance, you may opt to wash off the panels if they are obscured by debris, but you also can pay for professional cleaning. Perhaps more importantly, as the homeowner, you’ll want to monitor the generation capacity of your panels regularly; if the capacity starts to drop and it is not due to weather events, you may need to consult with a professional.

You can help maximize your panels’ life span by ensuring that no one steps or walks on them, that they remain clean and free from debris and dirt, and that any branches or other larger items that fall on them are removed.

Government Incentives and Rebates

Before installing a solar energy system in your home, be sure you are well-versed in all available government incentives and rebates—they can significantly lower the cost and potentially increase the financial benefits of solar panels.

With the Inflation Reduction Act, the federal tax credit for solar systems installed through 2032 was increased to 30% of the cost of the equipment, installation and labor, balance-of-system equipment, sales taxes, and certain energy storage devices. These tax credits can help reduce the federal income taxes you will owe to the Internal Revenue Service (IRS).

Your electric utility company may also provide a subsidy in exchange for installing a solar energy system. Similarly, many state governments offer rebates to reduce the cost of installation and tax credits. More details on incentive programs in the U.S., including programs within each state, can be found on the Database of State Incentives for Renewables & Efficiency (DSIRE) website.

Solar Financing Options

Even with subsidies and tax credits, the cost of installing solar panels may be prohibitive. Fortunately, there are a variety of financing options available. Here are some of the most common:

Cash Option

The simplest, and typically cheapest, option for buying a solar energy system for a home is to make a cash purchase. This approach is suitable for homeowners with the flexibility to spend the money to own their system outright. Avoiding financing through an outside source means you’ll spend less money overall. However, upfront costs can be significant, and homeowners must have a sufficient federal tax liability to take full advantage of tax credits.

Home Equity Loan or HELOC

Some homeowners may be able to take advantage of home equity loans or home equity lines of credit (HELOCs) to self-finance their solar purchase. Banks and credit unions across the country provide these, making them easily accessible. To take advantage of this option, you’ll need sufficient equity in your home and good credit.

Important

Interest on a HELOC is only tax-deductible if the funds are used to buy, build or substantially improve the taxpayer’s home that secures the loan—and a solar panel installation would qualify. You may be able to get additional tax incentives if you itemize your return, too.

Solar PPA or Lease

A solar power purchase agreement (PPA) is an agreement in which a third-party developer designs, permits, finances, and installs a solar system on a home. The homeowner does not own the system and buys electricity from the developer, typically at a reduced rate compared with local utilities. This is an option for customers without the means to buy their solar panel systems outright, although it is not available in every market.

Utility or Government Loans

Some utility companies offer loans to support the installation of residential solar systems. Similarly, state and local governments may also provide loan options. This heavily depends upon your utility company and the area in which you live.

How Much Can Solar Panels Save You?

Once you know how much a solar power system will cost upfront and how much energy it will produce, you can (theoretically) predict how much you can save in energy costs per year. Put simply, your savings with a solar panel system are equal to what you would have paid for utility electricity minus the amount you paid for the installation and maintenance of the system.

In practice, however, this is a tricky calculation because a lot depends on how you pay for electricity at the moment and because you typically pay for the system at once upon installation. Utilities often charge residential consumers a flat rate for electricity, regardless of the time of consumption. This means that instead of offsetting the expensive cost of peak electricity production, homeowners’ solar power systems merely offset the price they are charged for electricity, which is much closer to the average cost of power production.

However, many utility companies in the U.S. have introduced pricing schemes that allow homeowners to be charged at different rates throughout the day to mirror the actual cost of electricity production at different times. This can mean higher rates in the afternoon and lower rates at night. A PV solar array may be beneficial in areas where this time-variable rate is used, since the solar power produced would offset the most costly electricity.

Exactly how beneficial this is for a given homeowner depends on the timing and magnitude of the rate changes under such a plan. Similarly, utilities in some locations have pricing schemes that vary over different times of the year due to regular seasonal demand fluctuations. Those with higher rates during the summer make solar power more valuable. Many states provide solar cost calculators that can help you determine how much you’ll save based on your particular situation.

Pros and Cons of Solar Panels for the Home

Once you’ve worked through all of these calculations, you’ll likely end up with a single number—the number of years it will take for a solar system to pay for itself in savings from your energy bills. If you live in a sunny part of the country and have high utility bills, you could be looking at a system that will reach this point in five years. Other homeowners may have to wait 10 or 15 years.

In other words, most homeowners will eventually see a benefit from a solar power system; it might just take decades for this to be realized. Whether it is worth installing such a system, therefore, often comes down to a number of much less technical factors than those we’ve listed above: how long you are going to stay in your home, the subsidies available in your area, and simply whether you want to do your bit for the environment.

Like most things, solar power has its benefits and drawbacks. At the same time, some economic costs may be defrayed by the social benefits to the environment and lowering your carbon footprint, which may be more important to you than a purely monetary evaluation.

Pros

• Green energy that lowers your carbon footprint

• Net metering allows you to sell back excess energy produced.

• You may be eligible for certain tax breaks and subsidies.

• Reduced electricity costs

Cons

• Installation and maintenance costs are still high.

• Solar only works when the sun is out and on certain types of roofs.

• Maintenance may be required.

• Tax breaks will not last forever.

How Do Solar Panels Work, and What Is Their Purpose?

Home solar panels use photovoltaic cells to convert sunshine into electricity. These panels also have equipment used to harness this electricity and make it effective at powering a home. Solar panels are designed to take advantage of the sun’s massive and renewable energy output and represent a more environmentally friendly alternative to fossil fuel sources.

What Factors Should I Consider When Deciding If Solar Panels Are Worth It?

Most homes will find that the savings from solar panels will outweigh the costs, although it may take anywhere from a few years to decades to achieve. Solar systems are costly to install but require little maintenance over a lifespan of 20 to 30 years. Homeowners should consider the amount of money they have to spend on solar, whether financing options are available, the benefits they may receive in terms of subsidies or tax credits, and how long they plan to stay in their homes. They should also consider how suitable their home is for solar.

What Are the Environmental Benefits of Solar Panels?

Solar panels provide many environmental benefits, including reduced carbon emissions, an alternative to polluting fuel sources, reliability even during traditional power outages, and more. Oil and gas are finite resources that demand invasive processes for extraction from the earth, while solar energy is plentiful and not in danger of being exhausted.

Considering home renovations to personalize or boost property value? Check out our guide—Owning It: Investing in Your Home—to learn more about how to plan and pay for your project. 

The Bottom Line

Determining whether to install a PV solar system may seem daunting, but it is important to remember that such a system is a long-term investment. Solar power is a good choice in many locations from a financial perspective.

Solar power often costs a lot upfront at the time of installation, which can be prohibitive for some homeowners. However, with many subsidies, tax credits, and financing options available, it’s worth exploring your options even if you aren’t sure whether you can purchase and install a system outright. Homeowners may wish either to install solar power to avoid future potential fluctuations in energy costs, or to look beyond their personal financial motivations and use solar for green living.

Reviewed by David Kindness
Fact checked by David Rubin

If you haven’t gotten around to writing your last will and testament, you should be aware that there are three systems of inheritance laws in the United States. It’s important to know which one affects your state—and your assets after your death.

Key Takeaways

• There are three systems in the U.S. governing how individuals receive assets from a deceased family member.
• The three systems are community property, elective community property, and common law.
• Most states are governed by common law.

Understanding Inheritance Laws

Inheritance laws are statutes and regulations that determine how individuals receive assets from the estate of a deceased family member. These laws ensure that beneficiaries can acquire some form of inheritance in the event that a will was never written or doesn’t cover all of the deceased person’s assets. In some cases, these laws also provide certain relatives with the right to claim an inheritance, which they can exercise regardless of the actual terms of the deceased’s will.

In the context discussed here, inheritance laws typically pertain to the spouse/partner of the deceased individual. While there are fewer rules regarding children, it is common for them to be able to receive a share of a decedent’s property.

Most states do have laws to protect against accidental disinheritance, should a will predate the birth of a child and fail to be revised before the death of the relative. That way, if property isn’t left for one child but is left for their siblings, it’s assumed this omission was accidental and the child in question will be given an equal share. In some jurisdictions, these laws can also apply to grandchildren.

When an individual passes away without a will, their estate is considered “in intestacy.” This means that a court-appointed administrator will compile all of the deceased’s assets, pay any debts or taxes, and distribute what remains to the beneficiaries based on the laws of their state. A will may also be considered intestate if it is declared invalid for a variety of reasons. In either case, only the probate court with jurisdiction over the estate is responsible for distributing the deceased’s assets.

State-by-State Breakdown

Make sure you know which of these three systems of inheritance law governs your state. Here’s how each one works.

Community Property

The first type of inheritance law is what’s known as community property. Under this system, each spouse automatically owns half of what they each earned while married. So when one spouse dies, half of their estate automatically goes to their partner, while the latter half may be distributed to other beneficiaries.

Of course, this is only a minimum requirement. If a will has been written, then the deceased had the option of reserving more than half of their assets for their spouse.

Important

The nine community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

For the purposes of inheritance, community property laws consider income received from employment, property bought during the marriage (with income from work), and separate property that a spouse gives to the marriage (and therefore will be obliged to share with their spouse) as being “shared” between partners (i.e., going toward each of their “halves” should the other die).

Property that doesn’t apply to this policy includes anything acquired prior to the marriage, inheritances or gifts, and anything covered under an agreement between the spouses that’s to be kept separate from the marriage.

Common Law

38 of the remaining 41 states operate under common law policies. In the context of inheritance, spouses living in these states aren’t automatically entitled to half of the assets obtained throughout the marriage.

That said, many states will still give the surviving spouse the right to claim a third or even half of the deceased’s estate, also regardless of the terms of the will. However, these provisions only apply if the surviving spouse petitions the court for their share. Under common law, the ownership of property is determined by the name on the title of the property or by whoever’s income was used to purchase it.

Elective Community Property

Three states don’t fit neatly into either of these two categories. Alaska, for instance, adopted an elective community property system in 1998. It’s still effectively a common law state, but a spouse may also have an automatic right to an inheritance, so long as they sign a written agreement with their partner or create a community property trust together.

Tennessee established a similar law in 2010, while Kentucky adopted its elective community property system in 2020. In each state, both residents and nonresidents may create community property through a community property trust.

How Many States Use the Community Property System for Inheritance?

There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

How Many States Use Common Law for Inheritance?

Inheritance is governed by common law in 38 states.

How Many States Use an Elective Community Property System for Inheritance?

In three states, inheritance is governed by an elective community property system: Alaska, Kentucky, and Tennessee.

The Bottom Line

The last thing anyone would want to deal with while mourning is complications in the inheritance process. As such, even though it isn’t fun to think about, it’s crucial to ensure that you have your affairs in order as soon as possible to avoid confusion and make sure that your will can be carried out as written. To that end, make certain you understand the inheritance laws of your state when planning for your estate. That will give you the best chance that your plan for your assets won’t be overridden.

Fact checked by Suzanne Kvilhaug

You’ve started a new job and your company offers a 401(k) plan, an employer-sponsored retirement savings plan. This is a great opportunity to save for retirement. Here are the steps you need to take to get your 401(k) off the ground.

Key Takeaways

• A 401(k) plan is a retirement savings plan sponsored by your employer.
• In 2025, most workers can contribute up to $23,500 to their 401(k) plans, and workers older than 50 can contribute an extra $7,500.
• As a general guideline, it’s a good idea to contribute 10% to 15% of your salary if possible.
• Some employers offer a contribution match, which can boost your retirement savings.
• Choose your investments wisely—stock funds are riskier but offer more growth, while bond funds are more conservative.

Step 1: Get Enrolled

You may not need to do anything to get on your employer’s 401(k) plan. “Employers these days tend to auto-enroll new employees into the 401(k) plan, while giving them an option to actively opt out if they so choose,” says Carla Adams, founder and financial advisor at Ametrine Wealth.

If you are not auto-enrolled, you’ll need to take a few steps to sign up.

“This usually involves filling out forms, either online or on paper. You’ll need to provide basic personal information such as name, address, date of birth, Social Security number, and beneficiary,” says Carl Holubowich, certified financial planner at Armstrong Fleming & Moore. “Don’t delay signing up, as the sooner you start contributing, the more time your money has to grow through compound interest.”

You may also have a choice of plans. Many companies allow employees to choose between a traditional 401(k) and a Roth 401(k). With a traditional 401(k), you make contributions using pre-tax dollars and lower your taxable income in the current year. Contributions to a Roth 401(k) are taxed, but your withdrawals in retirement are tax-free.

“Keep in mind you don’t have to choose 100% pretax or Roth contribution, you can split them between both options,” Holubowlich says.

Step 2: Choose Your Contribution Amount

The next step is to decide how much you want to contribute each pay period. You can invest a percentage of each paycheck or a fixed dollar amount. Take a close look at your current budget and decide how much of your salary you can save.

“Start with a percentage you are comfortable with, even if it’s small, and increase it over time,” Holubowich says. “The good thing about selecting a percentage rather than a dollar amount is the amount you contribute will increase whenever you receive a bump up in salary.”

But the more you can save, the more you will be able to enjoy in retirement. “Ideally you want to be contributing 10 (to) 15% of your pay to your 401(k), though this number can include any employer matching contributions,” Adams says.

If your employer offers a matching contribution, that’s another opportunity to grow your savings. Let’s say an employer offers a 3% matching contribution. When you contribute 3% of your salary to a 401(k) your employer will contribute 3% of your salary as well, doubling your retirement savings.

Important

For tax year 2025, the maximum contribution for most workers is $23,500. If you are over age 50, you can make an additional catch-up contribution of $7,500 for $31,000 total.

Step 3: Choose Your Investments

A 401(k) plan includes a variety of investments, including stock funds, bonds, and target date funds. The investments you choose will depend on how close you are to retirement and your capacity for handling volatility in your investments.

“Employees are typically automatically set up to be invested in a target date fund, which is a great set-it-and-forget-it investment option that I believe makes sense for most people,” Adams says. 

“However, you do have the opportunity to choose from a whole list of investment options. Younger employees should ideally be invested heavily in stock funds, whereas it is typically more appropriate for employees closer to retirement to be invested in a mix of both stock and bond funds.” 

The investments in target-date funds become more conservative as the investor’s target retirement date approaches. If this type of fund sounds too conservative, you have options.

 “If you have a higher risk tolerance and want the convenience of a target date fund, you can combat the conservative investment allocation by selecting a target date 5 (to) 15 years later than your actual target retirement date,” advises Samantha Mockford, a certified financial planner at Citrine Capital.

You should also consider the expense ratio—the annual fee each fund charges to pay for management and administration. “Checking the expense ratio on the investment options is key and often overlooked,” Adams says. “Opting for lower cost funds will keep more money in your pocket and benefit you greatly over the long term.”

Take the time to review your 401(k) investments a couple of times a year.

“Some plans automatically rebalance your portfolio, but others require you to adjust it yourself,” says John Abernethy, director of financial planning at Together Planning. “Check in once or twice a year to ensure your investments are still aligned with your goals and, if needed, rebalance or increase your contributions.”

The Bottom Line

Enrolling in a 401(k) plan is easy, and many employers automatically enroll their employees. Try to contribute as much as your budget allows, especially if you can get a matching contribution from your employer. The more you save, the more you will have to enjoy your retirement.

Fact checked by Suzanne Kvilhaug

Supplemental Security Income (SSI) is a federal program administered by the Social Security Administration to help certain individuals who suffer from financial need. SSI was created in January 1974 to replace and consolidate three similar assistance programs. It provides relief to those who are blind, disabled, or age 65 and older and have minimal income and resources.

SSI is available for individuals who don’t earn more than $2,019 from work each month. (The cap increases if you’re married or applying for your child or children, or decreases if you’re disabled.) The rules for qualifying for this assistance can be complex.

Key Takeaways

• Supplemental Security Income (SSI) provides relief to those who are blind, disabled, or age 65 and older and have limited income and resources.
• SSI beneficiaries receive funds from the government to help them pay for their basic living expenses.
• The cap on earned income from working is $2,019 per individual per month as of 2025, but this increases if you’re married or you’re applying for your children or child, or decreases if you’re disabled.
• Some income isn’t included in this cap.
• Resources are limited to $2,000 for individuals and $3,000 for couples.

Understanding Supplemental Security Income (SSI)

In order to qualify for SSI monthly benefits, an individual must have ‘limited income and resources’, according to the Social Security Administration. Additionally, an individual must be blind, disabled, or age 65 or older to qualify. Only one of the conditions is required in tandem with the income and resource limits.

The Social Security Administration defines a disability as a “medical condition that keeps them from performing substantial gainful activity, which is expected to last one year or result in death.” For children, a disability is a considered a condition that “severely limits daily activity” . Disabled and/or blind children qualify for SSI based on their parents’ income and resource levels.

Income Limits for SSI Eligibility

SSI income limits are strict. The cap on income earned from working is $2,019 per individual per month as of 2025. However, the cap is higher if you’re married or you’re applying for your children or child. For disabled individuals, the income threshold is $1,550, which means you’ll need to prove you earned less than that in the month you apply.

“Income is divided into four categories by the Social Security Administration,” says Arron Bennett, a strategic finance expert and founder/CEO of Bennett Financials. “Earned income (wages or self-employment income), unearned income (Social Security benefits, pensions, or gifts), in-kind support (food or housing provided for free), and deemed income (for children, the income of a spouse or parent).”

A portion of your spouse’s income will be included with yours if you’re married. Some of your parents’ income will be calculated into your total if you’re younger than age 18. Disability and unemployment benefits are included in the income totals.

“The specific financial situation will determine eligibility and benefit amounts,” Bennett says.

Important

Your state of residence may affect these limits to an extent. Call the Social Security Administration at 1-800-772-1213 to inquire about any additional restrictions or flexibility that might apply where you live.

Exclusions From Income

Not all income is included in these limits. Some exclusions apply:

• The first $20 of monthly income
• The first $65 a month of earned income from working, plus half of any amount over $65
• Supplemental Nutrition Assistance Program (SNAP) benefits
• Most home energy assistance benefits
• Some wages and scholarships received by students

The Social Security Administration provides an online tool that you can use to enter your personal information and find out if you qualify.

Resource Limits for SSI Eligibility

Your income isn’t the only qualifying consideration for SSI—the Social Security Administration evaluates your resources, too.

“There are resource limits: $2,000 for an individual and $3,000 for a couple,” Bennett says. “This includes cash, bank accounts, stocks, bonds, and other such assets. However, some assets are excluded from the list: the primary residence, one vehicle, household goods, personal effects, and burial expenses up to a certain limit.”

The Social Security Administration won’t count burial funds you have saved up as a resource as long as those funds don’t exceed $1,500 as of 2025. This doubles to $3,000 if you’re married: $1,500 each for you and your spouse. Life insurance policies can be excluded as well, but only up to a face value of $1,500. You can add $2,000 if you’re applying for a child.

SSI Work Incentives

The Social Security Administration doesn’t discourage recipients from working. It provides several incentive programs for those who do.

Student Earned Income Exclusion (SEIE)

The Student Earned Income Exclusion (SEIE) allows blind or disabled students to exclude $2,350 per month from their incomes up to a total of $9,460 per year as of 2025.

“This means that students can work part-time or even accept internships and receive SSI benefits without having to worry about losing them,” Bennett says.

Ticket to Work

This program is designed to help individuals find work under the terms of the Ticket to Work and Work Incentives Improvement Act of 1999. You can receive employment services from an approved service provider at no charge.

The Social Security Administration will pause their medical disability reviews while you’re participating in the program. These reviews are normally performed on an ongoing basis to determine whether your condition has improved.

Plan to Achieve Self-Support (PASS)

“Another important program is the Plan to Achieve Self-Support (PASS),” Bennett says. “It enables SSI beneficiaries to set aside money toward education or job training only. PASS funds aren’t considered as income, so an individual can use the money to enroll in vocational activities and still be eligible for SSI.”

Blind Work Expenses (BWE)

Another important policy is Blind Work Expenses (BWE). “It allows certain work-related expenses to be deducted before the countable income is determined,” Bennett says. “Some of these costs can include transportation to and from work, guide dog and other orientation and mobility expenses, assistive technology, and even some meals that are consumed at work. These deductions help the blind person work while maintaining necessary financial support.”

The expense doesn’t have to be related to the individual’s blindness to qualify, according to the Social Security Administration.

Impairment-Related Work Expenses (IRWE)

This income exemption is similar to the exemption provided to blind individuals. Wages that are used to purchase or pay for certain items or services that allow you to work are exempt from income calculations.

The Social Security Administration provides these examples of the types of expenses that can be deducted from an individual’s earned income:

• Co-pays
• Medications
• Counseling services
• Car modifications
• Assistive technology that people with disabilities use for employment-related purposes such as software applications and computer support services
• Special tools that have been designed to accommodate the person’s impairment or attendant care services

Other Requirements

If you’re age 65 or older and haven’t yet applied for Social Security retirement benefits, your SSI application may also serve as an application for retirement benefits. However, note that there’s different eligibility criteria for Social Security retirement benefits and SSI.

You must be a U.S. citizen or national to be eligible, although some noncitizens in an alien classification granted by the Department of Homeland Security can qualify as well. You must reside in a U.S. state, the District of Columbia, or the Northern Mariana Islands. This excludes those who live in Guam, Puerto Rico, American Samoa, or the U.S. Virgin Islands. You can’t leave the United States for 30 or more consecutive days or a full calendar month.

How to Apply for SSI

The Social Security Administration provides an application form on its website. You can also visit your local Social Security office, but be sure to call ahead for an appointment.

You must receive your SSI benefit payments electronically if you’re approved.

The Bottom Line

Qualifying for SSI can be a bit of a challenge, and it begins with understanding all these rules.

“The income and resource limits that are used to determine eligibility help to ensure that it goes to those who are most in need,” Bennett says. “It can provide a cushion of comfort if you’re blind, disabled, or age 65 or older with limited income and resources.”