Investopedia

If you’re relocating for business, moving to another city, or simply planning a vacation, you might be curious about the most expensive cities in the United States. Understanding how much it costs to live in a town, and why, can make or break a decision to move.

Not surprisingly, New York and California cities dominate the list of America’s priciest cities. All figures are updated as of June 2024, unless otherwise specified.

Key Takeaways

• Cities offer a variety of employment opportunities along with cultural, sports, dining, and entertainment activities.
• New York City’s Manhattan borough is the most costly place to live, followed by Honolulu, Hawaii, and San Jose, California.
• Housing and taxes contribute to the high cost of living in major cities.

1. Manhattan

New York City’s Manhattan borough is the most expensive city in the United States. Out of the estimated 8.26 million people who call New York City home, about 1.60 million live in Manhattan. The cost of living in Manhattan is more than twice the national average.

Seemingly everything costs more in New York City, from groceries to housing. As of 2024, Manhattan’s median sold home price is $1.2 million compared with a national median of about $357,138. The city’s unemployment is 4.8% compared with a national unemployment rate of 4.0%. The city’s unemployment is 5.5% compared with a national unemployment rate of 4.1%.

2. Honolulu

Honolulu is the second most expensive place to live in the U.S. The U.S. Census Bureau estimated a population of nearly one million in the island city with an unemployment rate of 2.7%.

Groceries run about 24% higher than the national average, while utilities cost over twice as much. In 2023, the median household income in Honolulu is about $104,264, higher than the national median of about $78,538 but falling short of a median household income of about $141,446 for San Francisco.

3. San Jose

San Jose is in California’s Bay Area with number 4 on this list, San Francisco. It has a population of about 970,000. Home values hover around $1.5 million, according to Zillow. The median household income for the city is about $141,565 as of 2023.

4. San Francisco

The city’s estimated population is about 809,000 as of 2023. San Francisco’s staggeringly high cost of living and out-of-reach housing prices make median home prices nearly $1.3 million inside the city. Major industries include tourism, IT, and financial services.

San Francisco ranks among the top five most expensive cities for groceries and utilities. Grocery items cost roughly 23% above the national average, and utilities cost about twice the national average in 2024. Unemployment is at an estimated 4.0%.

5. Brooklyn

Brooklyn is the second borough of New York City on this list. The area is known for some key attractions, including Coney Island and Prospect Park.

The population in Brooklyn is higher than the more expensive Manhattan, with nearly 2.6 million residents.The median home value of Kings County is $854,797.The average rent in the borough is around $3,695, or a total of $44,340 for the entire year in 2025.

Note

Housing and taxes are two major contributors to the high cost of living in most of the expensive cities in the United States.

6. Orange County

If you plan to call this area home, you’ll join about 3.2 million other people. This California region includes Newport Beach, Laguna Beach, and Huntington Beach with a big concentration of Fortune 500 companies. Home values here top $1.1 million. The median household income is about $113,702 as of 2023. The unemployment rate is 4.1%.

7. Los Angeles

Los Angeles brings to mind movie stars, but the movie and television industry plays a small role in the city’s booming economy. The city’s shipping industry also plays a part, as the Port of Los Angeles is one of the busiest ports in the world. A bustling manufacturing sector and a noteworthy start-up scene contribute to the city’s high cost of living. Certain ZIP codes like the famous 90210, drive up housing costs.

About 3.8 million people are living in the city in 2023. The median home value in Los Angeles is about $973,393. The median household income is around $80,366. A family of four with two working adults would need a pre-tax income of roughly $140,000 to make ends meet in Los Angeles. Finally, 16.5% of the city’s residents live below the poverty line, compared with 11.1% nationally.

8. Queens

Queens is the third borough of New York City to be featured on this list. As the largest borough, it is home to the city’s two airports, John F. Kennedy International Airport and La Guardia Airport.

About 2,250,000 people live in Queens with a median household income of around $85,000. The borough has a median home value of about $712,439 in 2025. 13.8% of the borough’s residents live in poverty.

9. Washington, D.C.

As the center of the country’s political power, Washington, D.C. boasts a high cost of living. Government and private-sector jobs abound in the city, thanks to numerous federal agencies, think tanks, lobbying firms, and a robust tourism sector.

About 702,250 people call the area home. Median home values are approximately $602,135, and the median household income is about $106,287 in 2023. A family of four with both adults working needs about $143,000 in income before taxes to make ends meet in Washington, D.C.

10. Boston

Approximately 654,000 people live in Boston. Utilities and healthcare costs exceed the average national cost by 49% for utilities and nearly 24% for healthcare in 2024. Boston enjoys a robust higher education environment, a booming tech scene, and historic sites.

The unemployment rate is 3.9% in Boston and the surrounding areas as of 2024. The median home value hovers around $748,243. Household income is about $94,755, a little over half of what a family of four needs in pre-tax income (about $165,000) to make ends meet.

Tip

Are you curious about more affordable U.S. Retirement Destinations? Check out these spots.

How Are Statistics Compiled To Determine the Most Expensive Cities in the U.S.?

The Council for Community and Economic Research publishes quarterly updates about the cost of living in the most and least expensive cities.

Why Are Cities So Expensive?

Various factors affect the cost of living in cities, especially major metropolises, such as the cost of housing and whether you choose to rent or buy. Other considerations include the cost of gas and transportation, taxes, child care, insurance, and utilities. Supply and demand tend to dictate prices, and when more people want to live in a certain place, the more expensive it will be.

What Are the Least Expensive Cities to Live in?

According to the Council for Community and Economic Research, the three least expensive cities in 2024 are Decatur, Illinois; Ponca City, Oklahoma; and Edinburg, Texas.

The Bottom Line

City living can be expensive. According to the Council for Community and Economic Research, three New York City boroughs and four areas in California made the top 10 list of most expensive cities during the first quarter of 2024. Median incomes are relatively lower compared to the cost of housing, food, gas, and taxes. The overall cost of living in these 10 cities is higher than the national average.

Reviewed by Ebony Howard
Fact checked by Yarilet Perez

Ireland is referred to as a tax haven because of the country’s taxation and economic policies. The country’s tax laws heavily favor businesses, and the economic environment is very hospitable for all corporations, especially those invested in research, development, and innovation.

Key Takeaways

• Many people regard Ireland as a tax haven because of its taxation and economic policies, which favor the establishment and operation of corporations.
• The Irish economic economy is very hospitable for all corporations, especially those invested in research, development, and innovation.
• Ireland is particularly hospitable to research and development intensive start-ups, which can claim back taxes.

General Taxation

The United States has a flat corporate tax rate of 21%. Ireland’s taxation rate for corporations is 12.5%. In addition, Ireland only charges a corporate tax rate of 6.25% for revenue tied to a company’s patent or intellectual property. Ireland’s development as a low corporate tax regime can be traced to 1956 when it introduced tax relief on export profits.

Ireland’s taxation policies on research and development positions offer great incentives for corporations to invest in innovative ideas. Ireland has enacted policies allowing research and development-intensive start-ups the ability to claim back taxes. This is true even if the start-up incurs losses and cannot pay its corporate tax. In addition, the 25% tax credit is applied against the corporate tax rate of only 12.5%.

Ireland heavily relies on corporate tax and has a clear incentive to remain a corporate tax haven and not implement adverse policies. Ireland has a tax treaty with over 70 countries, over 25 of which are developed countries.

Note

In 2025, President Donald Trump accused Ireland of using favorable tax policies to unfairly attract U.S. companies: “Ireland was very smart. They took our pharmaceutical companies away from presidents that didn’t know what they were doing and its too bad that happened.”

Economic Policies

Transfer pricing allows corporations to shift profits from high-tax jurisdictions to low-tax jurisdictions. Thus, a corporation is trading with different subsidiaries rather than with external companies. This artificial shift, when performed by multinational corporations that produce up to 80% of the world’s trade, will result in lower taxes.

This transfer pricing policy resulted in a U.S. Senate investigation of Apple Inc. The Senate found that an Apple entity in Ireland received $74 billion in global receipts from 2009 to 2012, on which Apple paid a tax of less than 2% to Ireland. Another entity received $30 billion and paid nothing. In 2024, the European Court of Justice upheld the decision and required Ireland to collect 13 billion euros in unpaid taxes.

The financial environment of Ireland allows for special-purpose vehicles (SPVs) to be established for the reduction of taxes. As of the third quarter of 2023, there were 3,608 special-purpose vehicles located in Ireland, holding a reported 1,147.5 billion euros in assets. The reason for the high usage of special-purpose vehicles relates to financial transparency, as Ireland has little to none. The government does not require transnational corporations to provide public accounts of turnover, subsidies received, profit, or amount of taxes paid.

Which Country Has the Lowest Corporate Tax Rate?

According to the tax foundation, Turkmenistan has the lowest corporate taxes, with a statutory rate of 8%. Barbados, Hungary, and the United Arab Emirates are close behind with tax rates of 9%. Ireland ranks at about 16th worldwide with a corporate tax rate of 12.5%.

How Do Companies Avoid Taxes in Ireland?

The “double Irish Dutch sandwich” was a tax avoidance scheme used by multinational companies to route their profits through low tax jurisdictions. Essentially, it works by using two Irish and one Dutch company. The Irish company owns the IP rights to a product, which it licenses to a Dutch company, which sells the product abroad and routs the profits back to a second Irish holding company, where they are taxed at Ireland’s low corporate tax rate.

How Do Corporations Avoid Paying Taxes?

Corporations can use a variety of accounting techniques to reduce their tax liabilities. These can include accelerated depreciation, or moving profits overseas to low-tax jurisdictions. They can also take advantage of tax credits and incentives designed to encourage economic activity.

The Bottom Line

Ireland has gained a reputation as a low-tax haven for multinational companies. Although it’s not quite as business-friendly as some jurisdictions, the low 12.5% tax rate has attracted major companies like Apple and Google.

As Tesla, Inc. (TSLA) stock plunged almost 50% in the first quarter of 2025 from its mid-December peak, board members and an executive at Elon Musk’s company off-loaded over $118 million in shares, with profits to them of about $100 million. The selloff raised the question: When should investors be worried about insider selling for stocks they own?

“If the executives are selling under a plan they filed six or nine or 12 months prior, that’s fundamentally a different thing from an open sale that wasn’t part of that plan,” said George Pearkes, a macro analyst at Bespoke Investment Group.

Key Takeaways

• Insider selling through predetermined 10b5-1 plans is often routine and less concerning than unexpected, unplanned sales.
• Several executives selling large portions of their holdings simultaneously outside of trading windows is a bigger warning sign than isolated transactions.
• Investors can track insider transactions through SEC Form 4 filings.

Pearkes highlighted the importance of Rule 10b5-1 trading plans, U.S. Securities and Exchange Commission (SEC)-approved arrangements that allow company insiders to schedule future stock transactions in advance. These plans create a legal shield for executives who might otherwise face scrutiny or insider trading allegations.

While some Tesla insiders’ sales were made under these preset plans, others weren’t and coincided with Tesla’s largest single-day decline in five years, raising eyebrows. Below, we take you through what to watch for when company leaders start selling their stock, and when these sales should—or shouldn’t—make you worry.

Why Insiders Sell Their Stock

When corporate insiders sell company shares, that’s not necessarily a sign of trouble.

“It’s important to understand nuance,” Pearkes said. “Are the [sales of] shares preplanned? How large are the sales relative to the insiders’ holdings? Have they historically sold shares on a consistent basis or not?”

The way executives are compensated at most public companies means much of it is in equity stakes. As such, many executives with their wealth tied up in a single company stock would want to diversify their portfolio.

Common reasons for insider selling include the following:

• Paying taxes on vested stock options
• Major personal expenses like buying a home or funding a child’s education
• Portfolio rebalancing for diversification
• Retirement planning

“The best scenario for a sale is that it’s a person with relatively large holdings, who takes a lot of their compensation in shares, and they’re doing 10b5 sales to get a bit of liquidity but aren’t really selling that much,” Pearkes said.

In Tesla’s case, board member James Murdoch’s $13 million sale in March 2025 (see below) came from exercising stock options that would expire in 2025.

Red Flags: When Insider Selling Is Concerning

While many insider sales are routine, certain patterns should raise concerns among investors.

“The worst-case scenario is when insiders all start selling in rapid succession, with large sales relative to what they hold, and on relatively short notice,” Pearkes said.

This could mean that they share knowledge about adverse developments that are not yet public. Other worrisome patterns include the following:

• Insiders selling in the face of optimistic public statements
• Unusually large volume sales representing significant portions of holdings
• Sales occurring outside normal company trading windows
• The cancellation of 10b5-1 plans followed by new sales

Important

Insider trading becomes illegal when a person buys or sells securities based on material, nonpublic information. 

Where To Find Insider Trading Information

An investor’s primary source is SEC Form 4, which insiders must file within two business days of any transaction. These forms are available to the public through the SEC’s EDGAR database.

Recent SEC rule changes now require a checkbox on Form 4 to explicitly reveal when transactions are made under 10b5-1 plans. That’s where you want to look first.

Other helpful resources include companies’ investor relations websites and financial news services that track insider transactions.

The Bottom Line

When company leaders sell their stock, context matters more than headlines. Insider selling through planned 10b5-1 arrangements more often than not represents normal portfolio management rather than a vote of no confidence. However, when multiple insiders are making large, unplanned sales—particularly during challenging times for the company—you should take notice and review your holdings.

Reviewed by Andy Smith
Fact checked by Suzanne Kvilhaug

The Value of Live Meetings

Carefully going through a company’s financial statements is a good way to research a possible investment.

But meeting members of a company’s management team and/or participating in an investor conference call can give you added confidence in your investment decision-making process.

All told, such efforts may encourage you to invest in a company or to look elsewhere, and even to drop a stock from your portfolio.

The more useful information that you can gather, the better prepared you can be to make your investment decisions.

There are many benefits to having one-on-one conversations with those at the head of the corporations you invest in.

You can obtain information without a middle man or gatekeeper, gain a sense of management’s strength of convictions, and build rapport with managers that may result in added insight.

In the past, earnings conference calls were only made available to analysts and institutional investors. However, thanks to the accessibility of the internet, almost all public companies allow individual investors to listen in on the call.

Here are 10 questions that could get more from the CEO than the standard company line, if you get the chance to interact live with management.

They could help you determine whether or not you want to put your faith and money into a particular company.

Key Takeaways

• The answers to well-prepared questions for management can help you determine whether to invest in a particular company.
• Ask about sales over the next 12 to 24 months if you want to know about a company’s opportunities and risks over the short- and intermediate-term.
• Questions about the best use of cash may indicate whether a company is planning a merger or acquisition, if it will buy back common shares in the open market, or if it plans to save cash for future expansion.
• Questions about emerging competitors can inform investors about a company’s future challenges and strategies.
• To directly ask management questions, try to arrange a meeting with executives; or attend an annual general meeting, if non-shareholders are allowed, and listen to how they answer others.

10 Questions to Ask Management Before Investing

1. Where Do You See Sales Trending in the Next 12 to 24 Months?

This time frame will give you a good glimpse of the opportunities and the risks that could present themselves over both the short-term and the intermediate-term.

Because this is an open-ended question, and not a simple yes or no or one-word answer question, it allows the manager to give a broad response. Perhaps they will touch on a variety of issues that could prove valuable to the your decision-making.

2. What Are the Risks of Sourcing Raw Materials or Holding the Line on Costs of Services?

This question allows the manager to potentially touch on a variety of factors that could have an adverse impact on raw material or labor costs related to sourcing.

The manager’s response may give you some valuable insight into the future direction of gross margins, which in turn will give some insight into future potential earnings.

Savvy investors will compare the answer to this question with the earnings projections that the sell-side is making.

3. What Is the Best Use of the Cash on the Company’s Balance Sheet?

The manager’s answer to this question may indicate whether the company is planning a merger or acquisition, if it will use its cash to buy back common shares in the open market, or if it feels it’s better off saving cash for future expansion.

This information is particularly valuable because it may alert the investor to potential catalysts that could drive the stock higher (or to potential risks that could depress it).

4. How Does the Company Plan to Raise Capital in Order to Fund Future Growth?

When asking about future growth, look for a response that could indicate that the company is taking steps to improve its place in the market. If the company isn’t growing and is losing cash, then you’ll know that its performance probably won’t be good.

Note

A company’s annual general meeting (AGM) offers shareholders the opportunity to hear directly from management and board members and to ask them questions. Depending on the company, non-shareholders may also have access to this meeting. But if they don’t, and if you’re interested in a company, investing in just one share should grant you entry to the meeting.

5. Who Are the Emerging Competitors in the Industry in Which You Operate?

Answers to this question could reveal who the company feels is its competition, and/or who it may be in the future.

They may also alert you to new products/services coming to the market, which could impact the company at some point down the road.

Consequently, management may also disclose plans on how it intends to deal with these emerging competitors.

6. What Part of the Business Is Giving You the Most Trouble Now?

The answer will identify potential weaknesses in the company’s organization and provide some insight into future earnings.

For example, say the manager indicates that Division XYZ was forced to pay more in the current quarter for its raw materials because of a supply problem. If you know that Division XYZ makes up 40% of the company’s total revenues, you could assume with reasonable confidence that there may be a near-term earnings shortfall.

Keep in mind that identifying problem areas is one thing. But it is far more important to hear what the company plans to do to resolve the problem area(s) in both the short and long term.

7. How Close Is Wall Street to Estimating Your Company’s Earnings Results?

With this question, you’re asking if the company will meet consensus estimates. Think about it. If the manager says that Wall Street analysts typically underestimate earnings, the implication is that they’ll keep on doing that and there could be some upside to future earnings.

Conversely, if the manager comments that analysts are sometimes a little too optimistic, the implication is that there could be an earnings shortfall at some point in the future.

8. What Part of the Business That’s Ignored Has More Upside Potential Than Wall Street Believes?

This question may lead the manager to reveal more about the company’s positive points. It may inspire a long answer about important aspects that aren’t being represented in the media.

The manager’s answer could also reveal the source of potential upside earnings surprises, which is important because it may allow you to buy the stock before the impact (of the earnings) is actually reflected in the share price.

9. Do You Have Any Plans to Advance or Promote the Stock?

Knowing if and when management plans to promote its stock to individual and/or institutional investors is valuable information.

That’s because the smart investor who likes the company’s fundamentals can buy the stock ahead of what could be a large amount of buying pressure.

Individuals looking to time an entry or an exit point in the stock may also find this particular question to be valuable.

10. What Catalysts Will Affect the Stock Going Forward?

This is an open-ended question, so the manager may give you a wealth of useful information.

In some cases, they might highlight the potential for new analyst coverage, the possibility that the company may have a stronger year than expected, or plans to promote the stock.

Conversely, the manager might yield information about negative catalysts that could adversely impact the share price.

Can I Ask Company Executives Questions Directly?

Normally, that can be difficult. But, depending on the company, you could try to set up a meeting or phone call where topics would be discussed and questions asked. You might also be able to submit questions for an upcoming conference call.

Are Answers to My Questions About a Company Readily Available?

Usually they are. You may need to dig through financial statements and potentially other sources such as articles and interviews in news publications to find the information you seek. In addition, you could try calling the investor relations department of your target company and request answers.

What’s the Point of In-Person Meetings if the Info Is Already Available?

It’s possible that engaging in a discussion with company executives in person can provide useful insight about a company you might not otherwise receive. You may get a feel for the vision, strength of mission, and confident outlook of those in charge. They may offer additional information you don’t expect. And in-person meetings may provide you with a connection that you won’t get just by reading through the financials.

The Bottom Line

One-on-one conversations with managers can be terrific opportunities to garner timely, valuable information about a company.

Remember, all of the information you receive from these managers is readily available elsewhere, but what you glean from hearing from them in person could impart more than any earnings report could.

So be proactive. Try calling the company managers to make an appointment to meet them. Attend annual general meetings. Participate in conference calls when possible. Above all, arrive prepared to ask plenty of solid questions.

Spouses, ex-spouses, children, and other dependents may be eligible

Reviewed by Thomas J. Catalano
Fact checked by Suzanne Kvilhaug

Social Security isn’t just for retirement. It also provides benefits to the dependents of covered workers, including spouses, dependent parents, children, and grandchildren. Ex-spouses may also qualify under certain circumstances. How much a dependent receives is determined by their relationship to the retiree. They may receive between 50% and 100% of the qualified retiree’s benefits.

Key Takeaways

• The spouses and other dependents of covered workers may be eligible for Social Security benefits while the worker is alive and after their death.
• Ex-spouses of retired workers may be entitled to a benefit equaling half the amount the retiree receives, provided the marriage lasted at least 10 years.
• Social Security imposes a maximum family benefit that can reduce benefits to some dependents if the family as a whole has exceeded that limit.

Who Qualifies as a Social Security Dependent?

For Social Security purposes, eligible dependents can include:

• Spouses
• Ex-spouses
• Dependent children or grandchildren
• Dependent parents

Dependents may be eligible to receive benefits if an eligible Social Security recipient retires, becomes disabled, or dies. Here is how the program works, based on the type of dependent.

Benefits for the Spouses of Retirees

You are eligible to receive a spousal benefit if your spouse is already drawing Social Security. The payment equals up to one-half of your spouse’s monthly payment or their primary insurance amount (PIA). To qualify, you must be at least 62 or care for a child who is under 16 or who receives Social Security disability benefits.

You must have reached your full retirement age (FRA) to receive the entire one-half of your retired spouse’s PIA. That age is 66 years and two months for people born in 1955 and rises by two months per year of birth until it reaches 67 for those born in 1960 or later. Your monthly benefit is reduced if you choose to receive it before that time—the same way reduced benefits are calculated for workers who retire early.  

At the time you are eligible for the spousal benefit, you may be eligible to receive more from Social Security based on your own earnings record than you would receive through that of your spouse. If this is the case, the Social Security Administration (SSA) automatically provides you with the greater benefit.

Your spousal benefits may be reduced if you’re still working. The threshold is $23,400 annually or $1,950 per month in 2025—up from $22,320 annually or $1,860 per month in 2024. Your benefits are reduced by $1 for every $2 you earn over the limit. When you reach your FRA, your benefits will be reduced by $1 for every $3 you earn over $56,520 in 2023, and $62,160 in 2025 (up from $59,520 in 2024), up until the month you reach your FRA. These penalties no longer apply after that.

Married couples should coordinate how and when they each begin to collect benefits. You can run these numbers yourself to see how it works by using a Social Security calculator.

Benefits for Surviving Spouses

Survivor benefits are available to widows or widowers. The amount is based on the late spouse’s earnings record. To receive these benefits, you must be at least 60 years old or 50 if disabled. (The disability must have begun before or within seven years of your spouse’s death.)

You may also qualify if you’re younger and are caring for your deceased spouse’s child. The child must be under 16 or disabled and receiving dependent benefits based on the late parent’s earnings record.

There are several other options for surviving spouses:

• If you reach your FRA can receive 100% of your deceased spouse’s benefit
• If you are at least 60, the benefit ranges from 71.5% to 99.6% of your deceased spouse’s benefit

The survivor has some additional options. For example, a 60-year-old spouse could apply for survivor benefits now and switch to a retirement benefit based on their own work history at age 62 (or later), if that would result in a higher monthly payment.

Social Security also provides a one-time lump-sum payment of $255 upon the death of a spouse, provided the spouses were living in the same residence at the time of the spouse’s death.

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

Benefits for Divorced Spouses

If you are divorced from a retired worker, you’re eligible to receive an amount equal to one-half of your former spouse’s PIA, provided you were married for at least 10 years.

The rules are similar to those for spousal benefits described above, with one notable exception: You can begin receiving benefits even before your former spouse starts drawing their benefits. But, you must be at least 62, and the divorce must have been finalized for at least two years if you have not yet reached your FRA.

Divorced spouses who had more than one marriage that lasted at least 10 years do not receive multiple benefit checks or one for each marriage. The SSA automatically chooses the former marriage that will yield the largest benefit to the ex-spouse.

Benefits for Children and Grandchildren

Children can qualify for a benefit as the survivor of a deceased worker or as the dependent of a living parent who receives Social Security retirement or disability benefits. Children need to be one of the following:

• Unmarried
• Under 18 (or 19 if they are a full-time student in elementary or secondary school)
• 18 or older and disabled from a disability that started before age 22

Benefits paid to a child don’t decrease a living parent’s retirement benefit. The value of the benefits the child could receive, added to the parent’s benefits, may help the parent decide if taking their own benefits sooner may be more advantageous.

A dependent child can receive up to half of the benefit of a parent receiving retirement or disability benefits. Dependent children of a deceased parent can receive up to 75% of the worker’s benefit, calculated as a percentage of the benefit that the worker would have received if they continued working until retirement. If you care for a child and receive benefits, then their benefits may stop at a different time than your own.

If grandchildren become dependents of their grandparents due to the death of their parents or for other reasons, they can be eligible to receive benefits based on the earnings record of either of their grandparents. Great-grandchildren do not qualify for dependent benefits.

Benefits for Disabled Children

Children with disabilities can be eligible for Social Security benefits, but the requirements and application process can be arduous. Social Security says the child must have a physical or mental condition that severely limits their activity and is expected to last more than one year or result in the child’s death.

The family must also have few, if any, other financial options for providing care. Social Security considers the family’s household income, additional resources, and other factors to make that determination.

If the child and their family qualify, the child may receive up to half of the parent’s full retirement or disability benefit. A disabled child could receive a benefit of 75% of the worker’s benefit if the worker is deceased. A child who is 18 or older is also eligible if they live from a disability that began no later than age 22.

For families in this situation, it’s worth noting that there are other government programs, such as Medicaid, that have provisions to assist children and adults with disabilities.

Note

Benefits to former spouses are not counted in your family maximum benefit, so they do not affect that maximum.

Family Benefit Maximum

Benefits to dependents are subject to a maximum monthly retirement and survivor payout from Social Security to the family as a whole. This total figure is based on the worker’s own monthly payment. The total payout to the family varies, but dependent benefits typically range between 150% to 180% of the worker’s payment.

The Social Security Administration uses a complex formula to calculate the family benefit maximum. The families of disabled workers are subject to a different formula, one that typically sets the maximum at between 100% and 150% of the worker’s payment.

Do Dependent Parents Qualify for Benefits?

Some parents legally depend on a child due to economic circumstances or disability. The dependent parents of a deceased worker who is 62 or older can receive 82.5% of the worker’s benefit for one parent or 75% each for two parents.

How Safe Is Social Security?

According to the most recent report on its future, the Social Security fund is expected to pay 100% of scheduled benefits until 2033. The fund has enough reserves to pay 79% of scheduled benefits after that.

Are Social Security and Supplemental Security Income (SSI) the Same?

No. Social Security and supplemental security income (SSI) are two different benefits programs. Social Security provides benefits for retired workers and their qualified dependents. SSI, on the other hand, pays monthly benefits to individuals who cannot meet their basic needs because of their age or disability. People can receive both Social Security and SSI benefits.

The Bottom Line

Social Security provides benefits for retired workers. But, most people probably don’t know that these benefits can also be paid to their dependents. This includes spouses, ex-spouses, children, grandchildren, and dependent parents. You must qualify to receive the retired worker’s benefits and you may be limited to how much you can receive.

One of the primary objectives of any market analyst is to determine what exactly the market is doing. Is it rising or falling, trending or consolidating? And how do you know? For most, that analysis begins with moving averages. In fact, a commonly accepted definition of a bull market is one that is trading above its 200-day moving average—and the inverse is true for a bear market.

Moving averages are a staple of technical analysis because they help traders determine what is happening in the market by smoothing out price data and filtering out short-term volatility. Traders use them to determine if a market is trending and, if it is trending, as dynamic support and resistance levels.

Many traders also use moving averages as the basis of a trend-following trading system, with a shorter-term moving average crossing over a longer-term average taken as an entry signal.

Key Takeaways

• Moving averages smooth out price data to help identify trends.
• Types of moving averages include the simple moving average (SMA) and the exponential moving average (EMA).
• Moving averages can indicate support and resistance levels, especially in trending markets.
• Strategies include price crossovers and dual moving average crossovers.
• Combining moving averages with other indicators can enhance trading signals.

Understanding Moving Averages

Definition and Purpose

A moving average smooths out price fluctuations by averaging prices over a set period, reducing noise and helping traders determine whether a market is trending or not. They are “moving” because they’re constantly being recalculated with the latest price data. They also frequently serve as support and resistance in trending markets. Additionally, traders watch for crossovers as signals of a shift in trend.

Types of Moving Averages

The most common moving averages are:

• Simple moving average (SMA)
• Exponential moving average (EMA)
• Weighted moving average (WMA)
• Smoothed moving average (SMMA)

Simple Moving Average (SMA)

The SMA represents the average closing prices of the previous n periods. It appears as a smoothed line that shows the average price movement over time. Old data is dropped as new data is added, creating a moving average. Most moving averages are based on closing prices, so only one data point is needed per day. For example, for a 10-day SMA, you would take the closing price of each of the e last 10 days and divide by 10. The calculation is repeated each day, with the oldest date dropping off as a new day is added, creating an average that “moves.”

With the SMA, all the data points within the period are equally weighted. The SMA is a lagging indicator that reacts relatively slowly to price changes.

Exponential Moving Average (EMA)

The EMA is a weighted moving average that prioritizes recent price data. This means it reacts more quickly to price changes than the SMA, thereby helping to reduce the lag.

There are three steps to calculating the EMA:

First, calculate the SMA average. This is used for the initial EMA value.

Second, determine and calculate the weighting multiplier.

Third, calculate the EMA for each day.

Calculation:

Initial SMA: 10 period

Multiplier: (2/ (Time periods + 1) ) = (2/(10+1) ) = 0.1818 or 18.18%

EMA: (Close – EMA (of the previous day) x multiplier + EMA (of the previous day).

The EMA helps traders respond more quickly to price changes as it captures momentum shifts sooner than the SMA. However, that means it also generates more false signals in choppy markets.

Weighted Moving Average (WMA)

As with the EMA, the WMA assigns greater importance to recent price data. However, unlike the EMA, the weights of the values are adjusted linearly rather than exponentially.

The characteristics of the WMA are very similar to those of the EMA. But the difference occurs in their calculations. WMAs smooth out price data linearly and are not as dynamic as EMAs.

Smoothed Moving Average

This Smoothed Moving Average is a variation of the SMA and the EMA with a greater smoothing effect. By incorporating more past data into its calculation, it reduces price fluctuations and market noise more effectively than the SMA and EMA.

The Smoothed Moving Average includes more data than the WMA, EMA, and SMA and filters out a lot of noise. However, this also makes it much slower to react to price movements.

How Moving Averages Work in Stock Trading

Trend Identification

Moving averages are ideal for identifying market trends. For this reason, they are used by virtually every market analyst and are generally the first indicator to go on any price chart.

A rising moving average indicates an uptrend, with momentum favoring buyers as long as price remains above that moving average. A falling moving average indicates a downtrend. If a moving average is flat, the market is likely consolidating, meaning trend-following strategies will be ineffective.

Support and Resistance Levels

MAs can also act as dynamic support and resistance levels when markets are trending. In an uptrend they can serve as support, with price frequently bouncing off the major moving averages, creating opportunities for traders. Similarly, in a downtrend, MAs can be used as resistance levels, preventing breakouts and signaling selling pressure.

At least part of the reason moving averages consistently provide support and resistance is because traders expect them to, creating a self-fulfilling prophecy. In other words, if everyone thinks price will reverse at a certain level, it probably will because traders will look to enter (or exit) at that level.

Also, depending on the strength of the trend and the time frame of the moving average (20-, 50- or 200-period), price will often behave differently around different moving averages. At the 20-day, for example, it might find support or resistance and reverse quickly, resuming its previous trend. But at the 50-day or 200-day, it’s more likely to consolidate for some time before continuing with the longer-term trend.

Strategies for Using Moving Averages

When it comes to executing a trading system, as opposed to just getting a read on a market, moving averages are most useful with trend-following or as support or resistance in counter-trend pullbacks.

Price Crossovers

Price crossing over a moving average could provide a signal in itself, one of a trend reversal or continuation. A bullish crossover occurs when the price moves above a moving average, signaling potential upside momentum. A bearish crossover happens when the price drops below a moving average, indicating a possible downtrend.

For example, following a pullback in a trending market, an asset again rises above its 20-day EMA. That can be considered a bullish signal, indicating potential upside momentum to follow. A stop-loss order just below the 20-day will help manage risk.

Traders also often use price crossovers as a filter. For example, from a technical standpoint, it would be unwise to short an asset that is rising above a steadily rising 20-day SMA and vice versa.

Moving Average Crossovers

The dual moving average strategy involves a short-term MA crossing a longer-term MA. For some traders, this alone can serve as a buy or sell signal, indicating the start or end of a trend.

When the short-term average moves above the long-term average—say, the 50-SMA crosses above the 200-SMA—it’s called a golden cross and signals the start of a possible uptrend. Conversely, a death cross happens when the 50-SMA crosses below the 200-SMA, indicating a downtrend.

Traders use dual crossovers across virtually every asset class, adjusting the moving averages’ periods to fit their strategy and market. This method is effective for trend following but can also frequently produce false signals and whipsaws. The key to profitability is position sizing and making sure the winners are far bigger than the losers. Generally, traders risk 1% to 2% of capital per trade and set minimum risk-reward ratios.

Pros and Cons of Using Moving Averages

Pros

• Trend Identification

• Dynamic Support and Resistance Levels

• Helps Reduce Market Noise

• Trade Signal Generation

• Works Across Different Timeframes and Markets

• Can be Used with Other Indicators

Cons

• Lagging Indicator

• Ineffective in Sideways or Choppy Markets

• False Signals and Whipsaws

• Lacks Predictability

Enhancing Moving Average Strategies

Combining with Other Indicators

Combining MAs with other indicators enhances accuracy by filtering out false signals. It also helps with trend confirmation. Moreover, volume analysis strengthens MA crossovers as high volume supports bullish or bearish moves, while low volume may indicate a false breakout.

The Moving Average Convergence Divergence (MACD) helps confirm momentum shifts, while the Relative Strength Index (RSI) ensures MAs are signaling trades when there is negative or positive divergence. Bollinger Bands validate breakouts, helping traders avoid weak signals in sideways markets. Average True Range (ATR) adjusts MA sensitivity based on volatility, ensuring traders use shorter MAs in quiet markets and longer MAs in volatile conditions.

The Bottom Line

Moving averages are quite useful in recognizing the state of the market. However, their effectiveness as trading signals depends on market conditions and risk management. Traders adjust the types of moving averages they use and the number of periods based on their trading strategy and frequently combine them with other indicators such as the MACD, RSI, and Bollinger Bands.

Finally, as MAs tend to lag in choppy markets, combining them with risk management tools like stop-losses and position sizing helps ensure better decision-making.

Reviewed by Erika Rasure
Fact checked by Vikki Velasquez

Some characteristics of a “good” company may include competitive advantage, above-average management, and market leadership. However, investors commonly look to financial indicators such as stable earnings, return on equity (ROE), and a company’s relative value compared with those of other companies to determine a firm’s potential.

Key Takeaways

• Earnings reports help investors the financial success of a company.
• Earnings may be measured with three metrics: growth, stability, and quality.
• Investors can use Return on Equity to estimate a stock’s growth rate and the growth rate of its dividends. 

Company Earnings

Earnings are essential for a stock to be considered a good investment. Without stable earnings, it isn’t easy to evaluate the financial success of company A versus company B, and what a company is worth beyond its book value. Earnings may be measured with three metrics: growth, stability, and quality.

Important

An earnings report is how publicly traded companies report financial results for a specific period. Public companies are required to file a 10-Q, quarterly report, and an annual report, or 10-K, with the Securities and Exchange Commission (SEC).

Earnings Growth

Earnings growth is shown as a percentage, in periods like year-over-year, quarter-over-quarter, and month-over-month. Growth means that current reported earnings should exceed the previously reported earnings. This metric establishes a pattern that can be charted and confirms a company’s historic ability to increase earnings. 

The relative relationship of the growth rate matters. For example, if a company’s long-term earnings growth rate is 5% and the overall market averages 7%, the company’s number is not impressive. However, an earnings growth rate of 7% when the market averages 5% means the company is growing faster than the market. The company should also be compared to its industry and sector peers.

Earnings Stability

Earnings stability measures how consistently earnings have been generated over time. Stable earnings growth typically occurs in industries where growth has a predictable pattern.

Earnings can grow at a rate similar to revenue growth; this is usually referred to as top-line growth. Earnings can also grow because a company is cutting expenses to add to the bottom line. Investors need to verify where the stability is coming from when comparing one company to another. 

Earnings Quality

Quality of earnings evaluation is usually left to a professional analyst, but the casual analyst can take a few steps to determine the quality of a company’s earnings. For example, if a company is increasing its earnings but has declining revenues and increasing costs, investors should research if growth is an accounting anomaly or long-lasting. 

Return on Equity

Return on equity (ROE) measures the ability of a company’s management to turn a profit on the money that its shareholders have entrusted it with. In the absence of any earnings, ROE would be negative. ROE is calculated as:

ROE = Net Income / Shareholders’ Equity

Return on equity (ROE) is a snapshot of a company’s valuation. Like earnings growth, ROE can be compared to the overall market and peer groups in the sector and industry. To this point, it is also important to examine the company’s historical ROE to evaluate its consistency.

Investors can use ROE to estimate a stock’s growth rate and the growth rate of its dividends. These two calculations make an easier comparison between similar companies. To estimate a company’s future growth rate, investors multiply the ROE by the company’s retention ratio. The retention ratio is the percentage of net income that is retained or reinvested by the company to fund future growth.

See Investopedia’s choices for Best Online Brokers and Trading Platforms.

Researching Company Data

The world of stock picking has evolved. Historically, stock analysts and brokerage firms held all of the data for investors. In 2024, only 9% of American investors surveyed used a human financial advisor to manage their investments, according to a study by ComparisonAdviser.

Since the majority of online information is free, the debate is whether to use free information or subscribe to a premium service. A rule of thumb is, “You get what you pay for.” A free site commonly provides raw data across company sectors. However, a financial advisor might be a better source to “scrub” the data or point out the accounting anomalies, enabling a clearer comparison.

Why Is Historical Earnings and ROE Data Important for Investors?

When investors see consistent earnings and ROE data, they validate that a company has established a pattern that it can consistently deliver to shareholders.

What Comparisons Should Investors Make When Evaluating a Company’s Financial Data?

None of the metrics used to value a company should stand alone. Investors should not overlook relative comparisons when evaluating whether a company is a good investment. This means comparing financial data with a company’s competitors within its sector and with the overall market.

What Does a High Return on Equity Mean?

ROE measures a company’s profitability and how efficiently it generates profits. The higher the ROE, the more efficient a company’s management is at generating income and growth from its equity financing.

The Bottom Line

Stable earnings growth is important, but its consistency and quality need to be evaluated to establish a pattern. ROE is one of the most basic valuation tools in an analyst’s arsenal but should only be considered the first step in evaluating a company’s ability to return a profit on shareholder’s equity.

To assess a company’s financial health, you have to understand its cash flow statement. It reveals how cash moves through a business, including operations, investments, and financing activities. The cash flow statement highlights liquidity, showing whether a company can generate enough cash to sustain itself, invest in growth and meet its financial obligations.

Whether you’re an investor, business owner, or analyst, learning how to prepare, read, and analyze a cash flow statement will help you identify trends, spot red flags, and make informed financial decisions with confidence.

Key Takeaways

• Cash flow statements are essential to understanding a company’s financial health.
• They consist of three main sections: operating, investing, and financing activities.
• There are two methods for preparing cash flow statements: direct and indirect.
• Analyzing cash flow statements helps identify financial trends and potential problems.

Understanding Cash Flow Statements

The cash flow statement is a part of a company’s financial statement that tracks its actual cash movements, providing a clear picture of liquidity and its financial lifeblood. Unlike the income statement, which records revenues and expenses based on accrual accounting, the cash flow statement focuses on actual cash inflows and outflows, helping stakeholders assess a company’s ability to sustain operations, invest in growth, and manage obligations.

It complements the balance sheet by explaining changes in cash balances and reconciling non-cash transactions from the income statement to reveal how much profit actually converts into cash. By analyzing these activities, investors can identify trends, detect potential cash flow issues, and make informed financial decisions.

Components of a Cash Flow Statement

The cash flow statement has three main sections: operating activities, investing activities and financing activities. Each segment provides a detailed breakdown of how cash is generated and used within a company over the stated period.

Operating Activities

This section of the cash flow statement shows how cash flows from a company’s core business operations, and whether the company can sustain itself without external financing. Cash inflows come from revenue, interest, and dividends. Cash outflows include payments to suppliers. employee wages, rent, utilities, and taxes.

Positive operating cash flow means a business is generating enough cash to cover expenses, whereas negative cash flow may signal inefficiencies in working capital.

Investing Activities

The investing activities section of the cash flow statement tracks cash movements related to long-term investments that affect a company’s growth. In this section, cash inflows come from selling assets, divesting subsidiaries, or collecting payments on loans. Cash outflows include capital expenditures (capex), investments in securities, and business acquisitions.

High capex can indicate expansion, but excessive spending without strong operating cash flow may strain liquidity. Conversely, frequent asset sales to generate cash might warn of financial distress.

Financing Activities

This segment shows how a company raises and repays capital through debt and equity financing. In this segment, cash inflows come from issuing stock or borrowing, while cash outflows include loan repayments, dividend payments, and stock buybacks. Raising cash through financing can support expansion, but excessive debt without revenue growth may pose risks. On the other hand, consistent dividends and stock buybacks signal financial strength and a commitment to shareholder value.

Preparing a Cash Flow Statement

Creating a cash flow statement involves gathering relevant financial data, choosing a preparing method, and categorizing cash flows into operating, investing and financing activities. The general steps are as follows:

• Step 1. Collect financial data: Collect the necessary data. This includes net income and non-cash expenses from the income statement, changes in assets and liabilities from the balance sheet, and bank statements to track the movement of cash.
• Step 2. Choose a preparation method: There are two methods to prepare a cash flow statement—direct and indirect.
• Step 3. Calculate cash flow from operating activities: If using the indirect method, begin with net income, add back non-cash expenses, and adjust for changes to working capital. If using the direction method, record actual cash inflows and outflows from customers, suppliers, and operating expenses.
• Step 4. Calculate cash flow from investing activities: Next, identify any cash spent on capex from long-term assets. Additionally, record cash inflows from asset sales, divestitures, or loan collections from outflows for acquisitions or new investments.
• Step 5. Calculate cash flow from financing activities: Include cash inflows from issuing stocks or borrowing funds. Deduct cash outflows from debt repayments, dividend distributions, and stock buybacks.
• Step 6. Reconcile and validate the cash flow statement: Add operating, investing, and financing cash flows to determine net change in cash. Ensure that the ending cash balance matches the balance sheet’s cash account.
• Step 7. Review and analyze: Look for negative cash flow trends that may indicate financial distress. Assess if operating cash flow is sufficient to cover investments and financing obligations. Identify unusual or inconsistent cash movements that may require further investigation.

Direct and Indirect Method

As mentioned previously there are two ways to build a cash flow statement: the direct method and the indirect method. Both methods yield the same net cash flow but they differ in presentation and the information required.

The direct method presents actual cash receipts and payments from operating activities. Instead of starting with net income, it lists cash inflows and outflows to core business operations. Alternatively, the indirect method starts with net income from the income statement and adjusts it for non-cash items and changes in working capital to arrive at cash flow from operations.

Direct Method

• Approach: Lists actual cash transactions from operating activities

• Transparency: Provides clearer visibility of cash movements

• Use of Accrual Accounting Adjustments: Not required

• Ease of Preparation: More complex, requires detailed cash tracking

• Regulatory Preference: Preferred under International Financial Reporting Standards (IFRS) but rarely used

• When Generally Used: Cash-heavy industries and when IFRS compliance is required

Indirect Method

• Approach: Starts with net income and adjusts for non-cash items

• Transparency: Less transparent but easier to prepare

• Use of Accrual Accounting Adjustments: Required

• Ease of Preparation: Easier, uses existing financial statements

• Regulatory Preference: Accepted by IFRS and GAAP, widely used by companies

• When Generally Used: Used by most companies, especially large corporations as it aligns with accrual-based financial reporting

Analyzing a Cash Flow Statement

By analyzing a cash flow statement, firstly with operating cash flow, investors can assess whether a company is generating enough cash from its core business, with positive operating cash flow indicating financial strength and negative signaling potential distress.

Additionally, investing cash flow shows how a company allocates funds for growth. High capex often indicates expansion, while frequent asset sales may indicate liquidity concerns. Moreover, financing cash flow reveals how a company raises and repays capital, with excessive debt issuance posing risks but steady dividend payments suggesting financial stability.

A strong company typically has positive operating cash flow, strategic investments, and balanced financing activities. On the other hand, cash burn, heavy reliance on debt, or frequent asset sales could indicate trouble.

Common Indicators and Red Flags

Strong indicators of financial stability include:

• Consistently positive operating cash flow
• Strategic capex
• Balanced financing activities, such as debt repayments and shareholder returns

Red flags include:

• Declining or negative operating cash flow
• Excessive reliance on external financing
• Frequent asset sales for liquidity
• High cash burn rate

Generally, a company with strong free cash flow and sustainable debt management is in good financial standing, while persistent negative trends in cash flow indicate distress.

Example of a Cash Flow Statement

The image above shows the cash flow statement for company XYZ. The analysis of cash flow activities is as follows:

Operating Activities

Net Earnings = $2,000,000

Depreciation = $10,000

Change in Inventory = -$30,000

Changes in Working Capital = Decrease in Accounts Receivable + Increase in Accounts Payable + Increase in Taxes Payable = $15,000 + $15,000 + $2,000 = $32,000

Net Cash Flow from Operating Activities = $2,000,000 + $10,000 + $32,000 – $30,000 = $2,012,000

Investing Activities

Proceeds from Equipment Purchase = -$500,000

Financing Activities

Capital Raising: Notes Payable = $10,000

Net Cash Flow =  Net Cash Flow from Operating Activities + Net Cash Flow from Investing Activities + Net Cash Flow from Financing Activities
= $2,012,000 – $500,000 + $10,000 = $1,522,000

Therefore, the net cash flow for the fiscal year in this example was $1,522,000.

The Bottom Line

Altogether, a well prepared cash flow statement can greatly assist in analyzing a company’s financial health, ensuring that cash is being managed effectively, and identifying potential risks or opportunities. By scrutinizing the operating, investing, and financing cash flows, businesses can make informed decisions, investors can assess sustainability, and analysts can detect trends that might affect long-term performance.

What Is Group Term Life (GTL) Insurance on a Paycheck?

Group term life insurance (GTL), which pays a benefit to your beneficiaries if you die, is listed on your paystub to show how much is deducted to pay for your coverage. While you can buy individual term life insurance, group term life insurance—usually a benefit offered to employees of a company—can be more affordable than individual coverage. If you elect this benefit, you’ll usually see the group term life coverage listed on your paycheck along with your other benefits.

Key Takeaways

• Group term life insurance is an affordable way to make sure your loved ones are financially protected if you die.
• As shown on your paycheck, group term premiums are usually low or fully covered by your employer. However, GTL coverage amounts may not be enough for your family’s needs.
• Group term life insurance can supplement your individual term life insurance policy or other employer-sponsored benefits without necessarily creating an additional financial burden.

How Group Term Life Insurance (GTL) Works

Group term life insurance protects your loved ones by paying them a death benefit if you die while your coverage is active. Many employers offer group term life insurance coverage as a benefit to their employees.

Because employer-sponsored group term life insurance is usually offered to all employees of the company, it’s typically more affordable than buying term life insurance as an individual, although it may have lower coverage amounts as well. You also won’t need to undergo a medical exam, as you usually do for individual term life insurance.

If you elect group term life coverage, you’ll see it listed on your paystub or other summary of benefits and deductions from your employer, along with the amount you pay each month in premiums (if any). Sometimes, the description is shortened to “GTL,” but it may be written out in full or noted in some other shorthand way, such as “life deduction.”

Your employer—and the benefits provider it chooses—will dictate the terms of your life insurance coverage. Group policies offer either a flat-rate benefit amount or one that is a multiple of your salary, albeit with a maximum coverage cap. Typical GTL coverage ranges from $50,000 to $500,000. 

Can I Convert My Group Term Life Insurance to an Individual Policy?

Your group life insurance coverage ends when the policy term ends or you leave your job. Group term policies are not portable: When you leave your employer, you’ll lose your coverage, However, you may have the option to convert your policy into an individual policy as long as you apply with the insurer within 31 days.

Note that the type of life insurance policy you can convert your group term policy into may differ from insurer to insurer. If you’re only allowed to convert to a whole life insurance policy, it will probably be more expensive than taking out a new individual term life policy.

How Is Group Term Life Insurance Taxed?

For group term life insurance coverage under $50,000, there are no immediate tax implications. Per your agreement with your employer, you’ll have your premiums deducted from your paycheck if you’re responsible for any costs outside of what your employer pays, and that amount won’t be part of your taxable income.

If your coverage is higher than $50,000, a specific amount determined by the IRS must be figured as part of your wages; this amount is taxable. The IRS assigns a monthly cost for every $1,000 of coverage in excess of $50,000, and the cost increases with successive age brackets.

Here’s how it breaks down.

Monthly Cost Per $1,000 of Group Term Life Coverage, Per IRS

Age	Cost
Under 25	$0.05
25 through 29	$0.06
30 through 34	$0.08
35 through 39	$0.09
40 through 44	$0.10
45 through 49	$0.15
50 through 54	$0.23
55 through 59	$0.43
60 through 64	$0.66
65 through 69	$1.27
70 and older	$2.06

Now, take the amount of policy coverage in excess of $50,000, divide it by 1,000 (because the cost is only calculated per $1,000 of excess), multiply it by the IRS’ cost for your age bracket, then multiply it by the number of months for which you’re receiving coverage (for simplicity’s sake, let’s say it’s a full year). That means if you’re 42 years old and receive $250,000 of group term life insurance coverage, your employer will need to include $240 ($0.10 x 200 x 12) minus whatever you paid in premiums on your W-2 as taxable income.

How Do I Choose the Right Amount of Group Term Life Insurance for My Needs?

Everyone’s needs are different. To estimate how much life insurance coverage you need, add up your debts and expenses (including some that may not have been incurred yet, such as college tuition for any children you may have). Then, compare those costs to the number of years you expect your income would be needed to help pay them. That’s likely the baseline level of coverage you need.

Advantages and Disadvantages of Group Term Life Insurance

The life insurance death benefit can help your family cover expensive bills if you’re no longer around to support them, including, but not limited to, mortgage, rent, medical expenses, and college tuition. That makes group term life insurance an attractive option if you’re not ready to pay for an individual term policy or if you don’t think you’d qualify.

Advantages of Group Term Life Insurance

• Group term life insurance is affordable, with rates as low as five cents per $1,000 of coverage. It may even be free for you if your employer covers the full cost.
• GTL is typically “guaranteed issue,” which means everyone who applies is approved. Pre-existing conditions won’t preclude you from receiving coverage or result in high premiums.
• Group term life insurance can complement other employer-sponsored benefits (such as health insurance and disability insurance) to maximize your financial protection.
• You can have both group term life insurance and individual life insurance policies.

Disadvantages of Group Term Life Insurance

• Group term life insurance tends to have lower coverage amounts, so it may not provide the right amount of financial protection you need.
• Group term policies aren’t portable, so when you leave your job, you may need to convert the coverage to a whole life insurance policy, which is typically more expensive. Plus, not all group term policies even allow conversion.
• Some group term policies reduce the benefit as you age, potentially introducing confusion as you try to figure out how much coverage you have.
• Some group term policies will increase your premium as you age, usually in five-year age groupings.

The Bottom Line

Employer-sponsored group term life insurance provides affordable coverage for employees and their families. Its lower costs, guaranteed qualification, and automatic payroll deductions complement other employee benefits, such as health insurance, to provide solid financial protection for your loved ones. However, GTL has drawbacks, including limited coverage amounts and a lack of portability if you leave the company. While it serves as a good basic safety net, you may need additional coverage to fully meet your dependents’ long-term financial needs.

Fact checked by Ariel Courage
Reviewed by Erika Rasure

A recession is a significant, persistent, and widespread contraction in economic activity. Since the Great Depression, the United States has suffered 14 official recessions. Here, we break down each one.

Key Takeaways

• A recession is an economic downturn that typically lasts for more than a few months.
• Recessions in the United States have become shorter and less frequent in recent decades.
• The COVID-19 recession was the shortest on record, while the Great Recession of 2007-2009 was the deepest since the downturn in 1937-1938.

What’s a Recession?

Recessions are sometimes defined as two consecutive quarters of decline in real gross domestic product (GDP), which measures the combined value of all the goods and services produced in an economy.

In the U.S., the National Bureau of Economic Research (NBER) dates recessions based on indicators including GDP, payroll employment, personal income and spending, industrial production, and retail sales.

Important

Recessions have grown increasingly infrequent over the past four decades.

Surveying Past U.S. Recessions

Let’s take a look at all of the official U.S. recessions since the Great Depression, focusing on common measurements of their severity as well as causes.

• Duration: How long did the recession last, according to NBER?
• GDP Decline: How much did economic activity contract from its prior peak?
• Peak Unemployment Rate: What was the maximum proportion of the workforce left jobless?
• Reasons and Causes: What unique circumstances contributed to the recession?

The Own Goal Recession: May 1937–June 1938

• Duration: 13 months
• GDP Decline: 10%
• Peak Unemployment Rate: 20%
• Reasons and Causes: Expansionary monetary and fiscal policies had secured a recovery from the Great Depression after 1933, albeit an uneven and incomplete one. In 1936-1937 policymakers changed course, more preoccupied with cutting budget deficits and heading off inflation than with the dangers of a depressive relapse. Following a tax increase in 1935 and Social Security payroll deductions starting in 1937, the budget deficit shrank from 5.4% of GDP in 1936 to 0.1% of GDP by 1938. Meanwhile, the Federal Reserve in 1936 doubled the reserve requirement ratios for banks, thus curbing lending with the stated aim of preventing “an injurious credit expansion.” Perhaps most damaging of all, the U.S. Treasury began the same year to sterilize gold inflows, ending brisk money supply growth that had supported the expansion. Industrial production began falling in September. It would decline 32% in the course of the recession. The stock market crashed in October. The recession ended after policymakers rolled back the increase in reserve requirements and gold sterilization as well as fiscal austerity.

The V-Day Recession: February 1945–October 1945

• Duration: Eight months
• GDP Decline: 10.9%
• Peak Unemployment Rate: 3.8%
• Reasons and Causes: The 1945 recession reflected massive cuts in U.S. government spending and employment toward the end and immediately after World War II. Federal spending fell 40% in 1946 and 38% in 1947 while the private sector’s output grew rapidly. The severity of the downturn remains open to question because much of the eliminated spending represented wartime production that did not serve to increase living standards. The elimination of price controls in 1946 artificially depressed output as adjusted for inflation, while the unemployment rate remained low in part because women left the workforce in large numbers.

The Post-War Brakes Tap Recession: November 1948–October 1949

• Duration: 11 months
• GDP Decline: 1.7%
• Peak Unemployment Rate: 7.9%
• Reasons and Causes: The first phase of the post-war boom was in some ways comparable to the economic recovery from the COVID-19 pandemic. Amid a backlog of consumer demand suppressed during the war and a shortage of production capacity, the collapse of wartime price controls fueled an abrupt surge of inflation by mid-1946. The annualized inflation rate rose from 3.3% in June 1946 to 11.6% two months later and 19% at its peak in April 1947. Policymakers only responded in the second half of 1947, and when they did their efforts to tighten credit ultimately led to a relatively mild recession as consumers and producers retrenched.

The Post-Korean War Recession: July 1953–May 1954

• Duration: 10 months
• GDP Decline: 2.7%
• Peak Unemployment Rate: 5.9%
• Reasons and Causes: The wind-down of the Korean War caused government spending to decline dramatically, lowering the federal budget deficit from 1.7% of GDP in fiscal 1953 to 0.3% a year later. Meanwhile, the Federal Reserve tightened monetary policy in 1953.

The Investment Bust Recession: August 1957–April 1958

• Duration: Eight months
• GDP Decline: 3.7%
• Peak Unemployment Rate: 7.4%
• Reasons and Causes: The end of the Korean War unleashed a global investment boom marked by a surge in exports of U.S. capital goods. The Fed responded by tightening monetary policy as the inflation rate rose from 0.4% in March 1956 to 3.7% a year later. Fiscal policy focused on limiting budget deficits produced a surplus of 0.7% of GDP in 1957. The 1957 Asian Flu pandemic killed 70,000 to 100,000 Americans in 1957, and industrial production slumped late that year and early in 1958. The dramatic drop in domestic demand and evolving consumer expectations led to the failure of the Ford Edsel, the beginning of the end for Detroit’s auto industry dominance. The sharp worldwide recession contributed to a foreign trade deficit. The recession ended after policymakers eased fiscal and monetary constraints on growth.

The “Rolling Adjustment” Recession: April 1960–February 1961

• Duration: 10 months
• GDP Decline: 1.6%
• Peak Unemployment Rate: 6.9%
• Reasons and Causes: This relatively mild recession was named for the so-called “rolling adjustment” in U.S. industrial sectors tied to consumers’ diminished demand for domestic autos amid growing competition from inexpensive imports. Like most other recessions, it was preceded by higher interest rates, with the Fed increasing the federal funds rate from 1.75% in mid-1958 to 4% by the end of 1959. Fiscal policy also tightened at the end of President Dwight Eisenhower’s second term, from a deficit of 2.6% of GDP in 1959 to a surplus of 0.1% a year later.

The Guns and Butter Recession: December 1969–November 1970

• Duration: 11 months
• GDP Decline: 0.6%
• Peak Unemployment Rate: 5.9%
• Reasons and Causes: Military spending increased in the late 1960s amid growing U.S. involvement in the Vietnam War and alongside high expenditures on domestic policy initiatives. As a result, the federal budget deficit rose from 1.1% of GDP in 1967 to 2.9% in 1968, while inflation increased from 3.1% in 1967 to 4.3% a year later and 5.3% by 1970. The Federal Reserve increased the federal funds rate from 5% in March 1968 to more than 9% by August 1969. By early 1971, the Fed had lowered the federal funds rate back below 4%, aiding the recovery.

The Oil Embargo Recession: November 1973–March 1975

• Duration: 16 months
• GDP decline: 3%
• Peak Unemployment Rate: 8.6%
• Reasons and causes: This long, deep recession began following the start of the Arab Oil Embargo, which would quadruple crude prices. That tipped the balance for an economy struggling with the devaluation of the dollar amid high U.S. trade and budget deficits and slipping domestic crude output. The collapse of the Bretton Woods Agreement fixing currency exchange rates contributed to a rise in U.S. inflation from 2.4% in August 1972 to 7.4% a year later, causing the Fed to double the federal funds rate to 10% between late 1972 and mid-1973. After increasing the federal funds rate to 13% in the first half of 1974, the Fed cut it to 5.25% in under a year. Inflation and unemployment remained elevated after the recession ended, ushering in stagflation. Unemployment reached 9% in May of 1975, after the declared end of the recession.

The Iran and Volcker Recession, Part 1: January 1980–July 1980

• Duration: Six months
• GDP Decline: 2.2%
• Peak Unemployment Rate: 7.8%
• Reasons and Causes: Accommodative monetary policy aimed at alleviating rising unemployment pushed U.S. inflation to 7% by early 1979, just before the Iranian Revolution caused oil prices to double. The Federal Reserve was already raising rates when Paul Volcker was named Fed chair in August 1979, and the rate went from 10.5% at the time of his appointment to 17.5% by April 1980. This short recession formally ended as the Fed dropped the fed funds rate back down to 9.5% by August of 1980, but inflation stayed high and the Volcker Fed wasn’t done.

Part 2 of Double-Dip Recession: July 1981–November 1982

• Duration: 16 months
• GDP Decline: 2.9%
• Peak Unemployment Rate: 10.8%
• Reasons and Causes: By the fourth quarter of 1980 inflation was up to 11.1%, prompting the Federal Reserve to raise the fed funds rate to 19% by July 1981. As the downturn worsened and joblessness climbed, Volcker resisted repeated demands in Congress to change course. By October 1982 inflation had declined to 5%, while unemployment would remain above 10% until mid-1983. Most economists today accept Volcker’s arguments at the time that failure to control inflation and restore the Fed’s credibility would have led to continued economic underperformance.

The Gulf War Recession: July 1990–March 1991

• Duration: Eight months
• GDP Decline: 1.5%
• Peak Unemployment Rate: 6.8%
• Reasons and Causes: This relatively mild recession began a month before Iraq invaded Kuwait, and the resulting oil price shock may have contributed to a frustratingly lackluster recovery. The Fed had raised the federal funds rate from 6.5% in February 1988 to 9.75% in May 1989 in an effort to contain inflation, which rose from 2.2% in 1986 to 3.9% for 1990.

The Dot-Bomb Recession: March 2001–November 2001

• Duration: Eight months
• GDP Decline: 0.3%
• Peak Unemployment Rate: 5.5%
• Reasons and Causes: The collapse of the dot-com bubble contributed to one of the mildest recessions on record following what was then the longest economic expansion in U.S. history. The Fed raised the fed funds rate from 4.75% in early 1999 to 6.5% by July 2000. The September 11 attacks and the associated economic disruptions may have hastened the recession’s end by encouraging the Fed to keep cutting the fed funds rate. The benchmark rate reached a low of 1% by mid-2003.

The Great Recession: December 2007–June 2009

• Duration: Eighteen months
• GDP Decline: 4.3%
• Peak Unemployment Rate: 9.5%
• Reasons and Causes: The nationwide downturn in U.S. housing prices triggered a global financial crisis, a bear market in stocks that had the S&P 500 down 57% at the lows, and the worst economic downturn since the recession of 1937-38. Global investment flows into the U.S. had kept market rates low, likely encouraging unscrupulous mortgage underwriting and mortgage-backed securities marketing practices. Oil prices spiked to record highs by mid-2008 and then crashed, depressing the U.S. oil industry. Dropping oil and commodity prices led to deflation and strained the U.S. economy.

The COVID-19 Recession: February 2020–April 2020

• Duration: Two months
• Peak Unemployment Rate: 14.7%
• Reasons and Causes: The COVID-19 pandemic spread to the U.S. in early 2020, and the resulting travel and work restrictions caused employment to plummet, triggering an unusually short but sharp recession. The unemployment rate climbed from 3.5% in February 2020 to 14.7% in April 2020 but was back below 4% by the end of 2021, capped by $5 trillion in pandemic relief spending. In addition, quantitative easing by the Federal Reserve expanded its balance sheet from $4.1 trillion in February 2020 to nearly $9 trillion by the end of 2021, complementing a federal funds rate that remained near zero until March 2022.

What Is the Average Length of a Recession?

The U.S. has experienced 34 recessions since 1857 according to the NBER, varying in length from two months (February to April 2020) to more than five years (October 1873 to March 1879). The average recession has lasted 17 months, while the six recessions since 1980 have lasted less than 10 months on average.

Which Stocks Tend Fare Better During a Recession?

Companies in the consumer staples, health care, and utilities sectors, which see relatively small fluctuations in demand for economic reasons, tend to fare best during recessions, and their stocks have outperformed during past downturns as a result.

Do Recessions Always Coincide With Bear Markets?

A bear market is commonly defined as a sustained drop of 20% or more from a market peak. Of the 25 bear markets since 1928, 14 have overlapped with recessions.

The Bottom Line

As the history of recessions over the past century or so suggests, they’re almost always preceded by monetary policy tightening in the form of rising interest rates. Fiscal contractions, whether they involve lower government spending, higher taxes, or both, have also played a role.

This is not to automatically deprecate such policies when they lead to a recession. In some cases, as during the 1970s, the long-run alternative to immediate economic pain may be even less palatable. In others, as with the end of World War II and the Korean War, there may be no easy way or no will to find immediate alternatives to high military spending.

That doesn’t change the fact that most modern recessions have occurred in response to some combination of rising interest rates, lower budget deficits, and higher energy prices.