money

You can arrange a home equity loan yourself or use a broker

Fact checked by Timothy Li

Arranging a home equity loan is usually a straightforward process because the loan is secured against your property. Nevertheless, you should shop around for the best deal because interest rates and loan terms vary among lenders. You can do this on your own, but some homeowners turn to a mortgage broker for help in smoothing the process and getting the right deal.

Key Takeaways

• Finding and closing on a home equity loan is similar to getting a mortgage.
• Borrowers can arrange the loan themselves or use a mortgage broker.
• A mortgage broker may or may not be able to secure better loan terms than you would get on your own.
• Mortgage brokers charge a fee for their services, which is paid by either the lender or the borrower. 

Mortgage Brokers and Home Equity Loans

Mortgage brokers are the middlemen in the mortgage loan process. They act as intermediaries between financial institutions that offer loans secured by real estate and individuals interested in financing real estate purchases.

Mortgage brokers make their money from lenders, who pay for the extra business they bring in. That might suggest that a mortgage broker adds costs to the deal, but that’s not always the case. Mortgage brokers often have relationships with many lenders and know the mortgage industry very well. This means that a good broker may be able to get you a better deal than you could get on your own.

That said, you should always do a little of your own research before contacting a mortgage broker. In addition to traditional banks, you can reach out to savings and loans, credit unions, and mortgage companies.

It’s wise to get at least three quotes, and a mortgage broker can help you compare offers. 

Important

Many mortgage and home equity loan customers assume that a broker can deliver a better deal but this is not always the case. Some lenders offer homebuyers the same or better terms and rates than they offer brokers. It never hurts to shop around on your own to see if your broker is really offering you a great deal.

Advantages of Mortgage Brokers

Working with a mortgage broker has advantages and disadvantages, and you should weigh these to work out what makes the most sense for you.

Working with a mortgage broker has benefits:

• It may save you work because they will contact lenders for you.
• They may have access to special offers and lenders that the average borrower doesn’t.
• They may be able to manage or reduce your fees.

Disadvantages of Mortgage Brokers

On the other hand, there can be drawbacks to using a mortgage lender:

• Your interests and theirs might not be aligned. You are looking for a loan that will be good years into the future, while an unscrupulous mortgage broker is looking for a quick payment for closing a loan.
• Most mortgage brokers charge fees, and you may have to pay some of them. Whether it makes sense to pay the fees depends on whether the broker is saving you money in other ways.
• Some lenders don’t work with mortgage brokers, so some offers will be available only if you go directly to a lender.

Ultimately, the decision on whether to work with a mortgage broker depends on personal preference. If you find a mortgage broker you trust, work with them. If you feel comfortable finding your own best deal, go for it.

How Much Does a Mortgage Broker Charge?

Most mortgage brokers work on commission and generally earn 1% to 3% of the amount of the loan. Some brokers are paid by the lender, others by the borrower.

When Should I See a Mortgage Broker?

You should see a mortgage broker only after you’ve done a little research for yourself. Get an idea of the rates that are available so that you’ll know you’re getting the best deal.

Do Mortgage Brokers Also Arrange Home Equity Loans?

Most mortgage brokers arrange home equity loans as well. A home equity loan is a type of mortgage. Moreover, many of the same lenders offer both. The broker’s connections with lenders are their biggest advantage for borrowers.

The Bottom Line

Finding and closing on a home equity loan is fairly similar to getting a regular mortgage. In either case, the borrower can choose to go through a mortgage broker or go it alone.

A mortgage broker won’t necessarily be able to get you better loan terms than you can get on your own. They will charge a fee for their services, to either the lender or to you. In the best-case scenario, a broker might be able to negotiate a better deal on your behalf.

Reviewed by Somer Anderson

Deflation vs. Disinflation: An Overview

Although they may sound the same, deflation should not be confused with disinflation. Deflation occurs when the inflation rate falls below zero, and prices generally decline throughout an economy. Disinflation is what happens when the inflation rate falls but remains positive. In disinflation, prices continue to increase but at a slower rate.

Key Takeaways

• Deflation is a general drop in price levels in an economy.
• Disinflation occurs when prices continue to grow, but at a slower rate than before.
• Deflation is harmful to an economy because it can cause a spiral of reduced economic activity.
• Central banks fight deflation by expanding the monetary base and lowering interest rates.
• Disinflation can be caused by a recession or when a central bank tightens its monetary policy.

Deflation

Deflation is the economic term used to describe the drop in prices for goods and services. Deflation slows down economic growth. It normally takes place during times of economic uncertainty when the demand for goods and services is lower, along with higher levels of unemployment. When prices fall, the inflation rate drops below 0%.

Deflation (and inflation) rates can be calculated using the Consumer Price Index (CPI). This index measures the changes in the price levels of a basket of goods and services. They can also be measured using the gross domestic product (GDP) deflator, which measures price inflation.

There are several different factors that can cause deflation, including a drop in the money supply, government spending, consumer spending, and investment by corporations.

Business productivity can also lead to a drop in prices. When a company uses more advanced technology in its production process, it may become more efficient, thereby reducing its costs. These cost savings may then be passed on to the consumer, resulting in lower prices.

Disinflation

Disinflation occurs when prices continue to increase, but at a slower rate than before. In mathematical terms, the inflation rate is positive but lower than a previous high.

This term is commonly used by the U.S. Federal Reserve when it wants to describe a period of slowing inflation. Unlike deflation, this is not harmful to the economy because the inflation rate is reduced marginally over a short-term period. The Federal Reserve normally targets an inflation rate of 2%–3% and will employ monetary policy to encourage disinflation when prices are increasing too fast.

Unlike inflation and deflation, disinflation is the change in the rate of inflation. Prices do not drop during periods of disinflation, and it does not signal an economic slowdown. While a negative growth rate—such as -2%—indicates deflation, disinflation is demonstrated by a change in the inflation rate from one year to the next. So disinflation would be measured as a change of 4% from one year to 2.5% in the next.

2%

The target inflation rate for the Federal Reserve. When inflation is high, the Federal Reserve may reduce interest rates or sell securities to reduce the money supply.

Example of Deflation

Consider the case of mobile phones. Cellphone prices have dropped significantly since the 1980s due to technological advances. This has allowed supply to increase at a faster rate than the money supply or demand for cellphones.

But bonds can perform well during times of deflation. More investors end up flocking to quality assets that promise a safer investment vehicle. By contrast, it can have a negative effect on the stock market. A drop in prices—and, therefore, supply and demand—will hurt the profitability of companies, leading to the erosion of share value.

To deal with deflation, a central bank will typically employ an expansionary monetary policy. This lowers interest rates and increases the money supply within the economy. In turn, demand for goods and services is boosted. Lower interest rates mean an increase in the spending power of consumers. More spending means price inflation and, therefore, higher demand for goods and services. Higher prices lead to higher profits for businesses.

Disinflation is caused by several different factors. A recession or a contraction in the business cycle may result in disinflation. It may also be caused by the tightening of monetary policy by a central bank. When this happens, the government may also begin to sell some of its securities and reduce its money supply.

Why Is Deflation Bad?

Deflation can cause a spiral of decreasing economic activity. When prices are falling in an economy, consumers will postpone their spending, resulting in even less economic activity.

For example, if you are planning to buy a car, you might delay your purchase if you believe that the price of cars will drop. That means less money for the car dealership, and ultimately less money circulating in the economy.

How Is Unemployment Related to Inflation?

Unemployment levels are tied to inflation through the Phillips curve. To put it simply, high levels of unemployment correlate with low inflation, and vice versa. When the unemployment rate is low, workers are able to bargain for higher wages and spend more money, causing the price of consumer goods (and the cost of producing them) to increase. These price increases result in inflation. Conversely, when there is high unemployment, consumers have less spending power, resulting in slower price growth.

How Does the Federal Reserve Adjust the Inflation Rate?

Central banks like the Federal Reserve use monetary policy to adjust the levels of spending and economic activity. One of the most commonly used tools is to buy and sell government securities. When the Fed buys Treasurys, it injects money into the economy, which can spur economic activity. When the Fed sells Treasurys, it removes money from the economy, causing a decrease in activity. The central bank can also adjust activity by lending money to banks at different interest rates, or changing the reserve requirements for commercial banks.

The Bottom Line

Deflation and disinflation are both economic terms that relate to the health of an economy. Disinflation occurs when price growth slows down after a period of high inflation, while deflation occurs when prices tend to decrease. Unlike disinflation, deflation can be damaging to the health of an economy.

Correction—Feb. 8, 2025: This article has been corrected to state that unemployment levels are tied to inflation through the Phillips curve.

Fact checked by Kimberly Overcast
Reviewed by Ebony Howard

You may find yourself in a tough situation if you can’t pay the money you owe to the Internal Revenue Service (IRS). The difficulties can mount because it is harder to get or keep a job or obtain affordable credit of any kind with tax debt. Many tax experts and consumer advocates have accused the IRS of failing to assist those who are trying to pay off their taxes. But, there is a way to hit that tax debt without ruining your relationship with the IRS. Consider applying for an offer in compromise, which helps you settle your tax debt without creating a financial hardship.

Key Takeaways

• You may find yourself in trouble if you don’t pay off your tax bill to the IRS.
• An offer in compromise may allow you to pay off your outstanding tax bill at a lower amount.
• You must qualify and fill out the pre-qualifier tool to see if you’re eligible.
• If you are eligible, fill out Form 433-A and wait for the IRS to accept your offer.
• If you don’t qualify or your offer is rejected, you can apply to pay off your outstanding tax debt using a payment plan.

What Is an Offer in Compromise?

Avoiding your tax bill is never a good idea, especially when you owe a large sum of money. If the amount you owe is legitimate, you may face interest, penalties, and eventually liens and levies on your state tax refunds, wages, and property. Failing to pay your bill over a long period can lead to a complex case that can only be resolved to the taxpayer’s satisfaction in a tax court. But it doesn’t have to get to that point.

An offer in compromise is a tax settlement tool that allows you to pay off less than the full amount owed to the Internal Revenue Service. It works by having you pay when you can immediately, then choosing the best option to help you clear your balance off over time.

The offer in compromise replaced the Fresh Start program, which was established in 2011. The goal was to help those who were greatly impacted by the recession. The Fresh Start program was designed to give taxpayers who owed substantial back taxes the opportunity to consolidate their tax bills and pay them off in a convenient and orderly fashion.

Advisor Insight

If you genuinely feel that you don’t owe the amount of tax assessed to you, you may be able to find relief with the Taxpayer Advocate Service or the Appeals division within the IRS.

How to Qualify and Apply

To see if you qualify, you must use the offer in compromise pre-qualifier. This is a tool that determines your eligibility and tax filing status. It can also help you calculate a preliminary offer on your tax debt. Keep in mind that this tool is only available for individual taxpayers—not partnerships and corporations. You are also exempt from the tool if you live overseas, in a U.S. territory, or a military member who doesn’t qualify.

You are eligible if you meet the following requirements:

• You filed all required tax returns and paid all your estimated payments
• You do not have an open bankruptcy proceeding
• You received a valid extension for a current tax year

You must answer questions about the following:

• Your status
• Basic information, including information about your household and outstanding tax debt
• Your assets
• Your income
• Your total expenses

Once you input your answers, the tool will give you a proposal. In many cases, you’ll have an option to choose. You can then prepare your offer in compromise by filling out 433-A. You can use Form 656, which is the guide for an offer in compromise, to help you. The IRS will make a final decision based on the information provided on your form.

A $205 application fee applies to any offer in compromise.

If Your Offer Is Accepted

The IRS will notify you by mail if your offer in compromise is accepted. Your notice may indicate a request for additional information. If you make any initial payments, they will be applied to your outstanding debt along with any fees that you may submit. The IRS may also take other actions while your offer is pending, including:

• Filing notice of federal tax lien
• Suspending additional collection activity
• Extending the legal assessment and collection period

If the IRS doesn’t reply with a decision within two years of receiving your offer in compromise, it is automatically accepted.

If Your Offer Is Rejected or You Don’t Qualify

Not every offer in compromise is accepted or you may not qualify. If either of these situations apply to you, don’t fret. You still have options available. If you apply and aren’t eligible, the IRS will inform you in writing. The agency will also return your application fee or apply the fee directly to your outstanding tax balance.

If you are rejected, you can appeal the decision. Your appeal must be made in writing using Form 13711: Request for Appeal of Offer in Compromise within 30 days.

You can also apply for a payment plan to pay off your debt over time. Individual taxpayers can apply online to pay their tax bills in installments. If your payment plan is approved, you may be required to pay additional fees, penalties, and interest.

What Are the Fees Associated with Back Taxes?

The IRS imposes fines and penalties on people who don’t file their taxes and on balances that aren’t paid on time. You’ll also be penalized if you don’t file an accurate return. The IRS charges you interest on any balance owed from the due date. Interest rates are set each quarter. For returns that are filed on time but aren’t paid, the IRS imposes a penalty of one-half of one percent for each month up to a maximum of 25%. You are responsible for 5% of the tax owed each month if you don’t file on time and owe money to the IRS.

How Many Years Can the IRS go Back for Unpaid Taxes?

The IRS generally has 10 years to collect any unpaid taxes after completing an assessment. Keep in mind that the IRS has three years from your filing date to complete an assessment to see if you have any additional taxes owing.

Can I Set up a Payment Plan Through the IRS?

Yes, you can use a payment plan to pay your taxes to the IRS. You can apply to pay your taxes in installments by completing an application online. You may qualify for a short-term or long-term payment plan based on how much you owe. Plans vary and may come with a setup fee along with penalties and interest.

The Bottom Line

The offer in compromise was designed as a way to help thousands of delinquent taxpayers who are struggling to catch up on their tax debt. Taxpayers can settle their tax debt by paying less than they owe as long as they qualify. You must complete the qualifying tool and fill out Form 433-A to see if the IRS accepts your offer.

Reviewed by Margaret James
Fact checked by Suzanne Kvilhaug

The finance industry is famously hard-driving and high-paying. Even those starting on the bottom rung can expect to earn a good wage compared with other fields.

You may not walk into your dream job right away, but once you’re in the door there’s plenty of room to evolve, move up, and find your niche.

First, you have to get your foot in the door.

Key Takeaways

• Even at the entry level, finance sector jobs pay higher than the median U.S. salary.
• Junior positions are available as a financial analyst, tax associate, auditor, and financial advisor.
• The U.S. Bureau of Labor Statistics (BLS) estimates that financial analyst jobs will grow at a rate of 9% per year from 2023 to 2033.
• Racial and gender diversity in the finance industry is increasing only slowly.

Note

The BLS estimates that employment in business and finance occupations will grow faster than other U.S. industries, with 963,500 job openings projected every year until 2033. The median annual pay was $79,050 as of May 2023, compared to $48,060 in all occupations.

Education Requirements

An undergraduate college degree is required for nearly all positions at financial institutions. Ideally, your degree should demonstrate an aptitude for working with numbers. An academic background in economics, applied mathematics, accounting, business, or computer sciences is preferred for most jobs in finance.

When you’re just starting out in finance, a Master of Business Administration (MBA) degree is not critical. Several years of financial or business work experience before acquiring an MBA helps your career move forward.

Internships Are a Steppingstone

Internships are as prized as degrees. Many financial firms visit campuses to recruit for summer internships. Some hold symposia, workshops, or networking opportunities for potential hires. An example is the Goldman Sachs Possibilities Summit.

Internships are tough to secure, but they’re invaluable. They not only provide contacts and experience but often lead directly to a spot in the company’s training program after graduation—or, at least, into the inner circle of applicants.

Continuing Financial Education

If you have already graduated, continuing education is a way to boost your qualifications and demonstrate your commitment to a financial sector career. Industry-specific credentials such as a chartered financial analyst (CFA), certified public accountant (CPA), or certified financial planner (CFP) designation can help your job prospects, depending on the particular area of finance that you are targeting.

In the U.S., professionals who plan to deal with investments and finance must pass a series of licensing exams. In the past, you had to be sponsored by a financial institution even to take one of these tests. However, since 2018, when the Financial Industry Regulatory Authority (FINRA) finalized the Securities Industry Essentials (SIE) exam, it can be taken without sponsorship.

The 75-question, 105-minute SIE exam is ideal for “demonstrating basic industry knowledge to prospective employers,” according to the FINRA website.

$99,890

The median pay for a financial analyst with a bachelor’s degree in 2023, according to the most recent figure available from the U.S. Bureau of Labor Statistics.

Lack of Diversity in the Financial Industry

Progress is slowly being made in the historic lack of diversity in the financial industry.

According to the CFP Board, the professionals who received CFP certification in 2024 made up its most diverse group ever. The number of ethnic minorities who received certification totaled 10,239, a growth rate of 8.8% over the previous year. They now make up only 9.9% of all CFP-certified professionals.

The number of women in the group grew by 1,720, giving them 23.8% representation in the industry.

Nonprofits and advocacy groups like the Alliance of Black Women Accountants and the National Association of Black Accountants support people of color who are working in finance or want to work in it. 100 Women in Finance, the Greenwood Project, and Blackstone Future Women Leaders Program provide support to people of color and women in the workplace.

There are grants and scholarships designed to help finance majors earn their degrees. Among them are:

• National Association of Black Accountants National Scholarship
• Minorities in Government Finance Scholarship
• The American Institute of Certified Public Accountants Scholarship Award for Minority Accounting Students
• The Tang Scholarship

Looking for Finance Jobs: Best Entry-Level Positions

The key is to identify the most rewarding entry-level jobs in terms of salary and future career prospects and think hard about which might be the best fit for your abilities and interests. When you have narrowed down which interests you the most, you can begin your search.

Aside from your network of friends and family, online job sites are a logical place to search for entry-level finance roles. LinkedIn, Indeed, and Monster are among the biggest job sources.

You might also scour sites that specialize in financial industry jobs or resources, such as eFinancialCareers, BrokerHunter, or 10X EBITDA (for investment banking).

Below are some of the job titles that include positions for entry-level candidates.

Financial Analyst

Financial analysts work for investment companies, insurance companies, consulting firms, and other corporate entities.

They are responsible for consolidating and analyzing budgets and income statement projections. They prepare reports, conduct business studies, and develop forecast models. Financial analysts research economic conditions, industry trends, and company fundamentals.

Financial analysts often recommend a course of action for corporate investing, reducing costs, and improving financial performance.

Along with a bachelor’s degree in finance, accounting, or economics, a candidate should have robust information technology (IT) skills.

The BLS estimated that there were about 404,800 financial analyst jobs in the American economy in 2023, and projects an average growth rate of 9% for the profession through 2032. According to the BLS, financial analysts earned a median salary of $99,890 in 2023.

Financial careers flourish in major financial hubs like New York, Chicago, London, and Tokyo. Seeking out college internships at the headquarters of the big firms can get you in the door.

Investment Banking Analyst

Investment banking is one of the most prestigious areas of the financial sector. These institutions (or divisions of bigger institutions) help corporations, venture capital firms, wealthy individuals, and even governments with their capital requirements.

Investment banks underwrite new debt and equities, prepare for issuing securities, manage the process of taking companies public, facilitate mergers and acquisitions, and broker trades.

An investment banking analyst usually fills an entry-level role at an investment bank, hedge fund, or venture capital firm. The analysts produce deal-related materials, perform industry research and financial analyses of corporate performance, and collect materials for due diligence.

Their recommendations based on the interpretation of financial data often play a role in determining whether certain deals will go forward.

The average investment banking analyst’s starting salary was $81,207 in 2025, according to Payscale, a compensation analysis site.

Candidates should have a bachelor’s degree in economics, finance, or management, and this is one job for which a master’s degree helps.

Junior Tax Associate/Accountant

Financial services professionals with a deep knowledge of taxation are in constant demand given the need to comply with changing Internal Revenue Service (IRS) regulations as well as local and state laws.

Accountants routinely calculate and estimate payments, conduct research, review internal fiscal systems, prepare returns and other tax documents, and work with auditors.

They may also develop and propose tax-related company policies.

Tax-related jobs can lead to higher-level corporate positions such as controller (or comptroller), accounting manager, budget director, and even treasurer or chief financial officer (CFO).

Candidates need a bachelor’s degree in accounting or other evidence of accounting skills. A CPA license is necessary if you want to advance, but many companies offer the opportunity to obtain a license on the job.

With this in mind, a junior tax associate’s role is ideal for college graduates seeking work experience in the financial sector.

According to the BLS, the annual median salary was $58,530 in 2023. The field is expected to grow a lower-than-average 2% per year by 2033.

Important

Though financial jobs often come with high pay and prestige, they are also among the most stressful, and early career burnout is not uncommon.

Personal Financial Advisor

Personal financial advisors evaluate the financial priorities of individuals and help them make decisions about investing, budgeting, and saving over the long term.

Advisors help clients strategize for short- and long-term financial goals, such as tax planning, retirement planning, and estate planning. Many provide tax services or sell insurance in addition to providing financial counsel. They might offer financial products such as mutual funds, directly manage investments, or serve as a liaison between the individual and an asset manager.

The BLS estimated the median annual wage in 2023 for personal financial advisors was $99,580, and it projects a much faster-than-average growth of 17% per year through 2033.

The BLS cites demographic trends such as the retirement of the baby boomer generation, the growing numbers of self-employed people, and the dwindling of private-sector employer pension plans as driving a need for financial advisory services.

Candidates need to be good communicators because they must interpret and explain complex subjects to their clients. The profession doesn’t require any specific bachelor’s degree. Economics, math, or finance degrees all look good on a resume. However, the critical thinking and writing skills honed in liberal arts fields can be helpful, too.

Personal financial advisors who directly buy or sell stocks, bonds, or insurance policies or provide specific investment advice must pass various licensing examinations. Most of these will be acquired on the job because you have to be employed or sponsored by a securities or investment firm to take them.

The exception is the basic SIE exam, which should be taken before your job hunt begins.

How Many Jobs Are Available in Finance?

The finance industry in the U.S. is vast. The field ranges from accountants to investment bankers to financial advisors and beyond. The number of available jobs in the finance industry is growing faster than in most fields. For example, according to the U.S. Bureau of Labor Statistics (BLS), 404,800 financial analysts were working in the U.S. in 2023. By 2033, there will be 442,800 of them.

What Is the Entry-Level Salary for a Finance Job?

The National Association of Colleges and Employers (NACE) lists an expected average first-year salary of $64,887 for finance majors as of 2024. The compensation-tracking website Glassdoor estimates that average entry-level finance positions pay a base salary of around $52,936 plus bonuses and additional compensation of $11,303, for a total of $64,239.

Where Do I Look to Find a Finance Job?

Online websites are an excellent resource. LinkedIn, Monster, and Indeed are all helpful job search sites. Don’t neglect the sites that specialize in finance industry jobs or resources. These include eFinancialCareers, BrokerHunter, and 10X EBITDA (for investment banking).

Personal connections are pure gold. Nothing is more effective than a useful network of friends.

The Bottom Line

Getting your foot in the finance door takes serious preparation and commitment. It’s a highly competitive industry, so treat the process as a job in itself, leave no networking stone unturned, and keep up to date with all the latest finance news.

Develop your knowledge, pursue further education if required, be as proactive as possible, and remember to stay positive.

The tax consequences of 401(k) rollovers depend on the option you pick

Fact checked by Skylar Clarine
Reviewed by Marguerita Cheng

Employees who participate in their company 401(k) plans have a few options available when they leave the company. The tax consequences depend on which option they choose. The rules that govern this type of transaction can be complex and, in some cases, restrictive. It is important to understand these rules to avoid costly tax errors that can substantially disrupt your retirement plan.

Key Takeaways

• If you cash out your 401(k) after leaving your employer, you will be subject to taxes and possibly early withdrawal fees.
• Leaving your funds in your former employer’s 401(k) means you won’t pay taxes or fees, but you can no longer make contributions to the plan.
• If you roll over your funds into an IRA or a 401(k) plan sponsored by your new employer, you should do it directly from one plan to the other without ever handling the money to avoid potential taxes and fees.

3 Options

Generally, participants in a 401(k) plan have three alternatives when they leave their employers. Different tax rules pertain to each option.

Cash Out

This is perhaps the most straightforward choice when it comes to taking money out of a 401(k) or another retirement plan. The check from the plan is either made payable directly to the plan owner or is deposited into the owner’s bank or retail investment account.

It is also the most expensive option, as the participant will pay tax at ordinary income rates on the balance withdrawn. Participants younger than 59½ will also face an additional 10% penalty for early withdrawal. When you factor in state taxes, the total tax bill can easily reach 45% or higher, depending on which tax bracket the participant is in.

The real cost of this choice comes from the lost opportunity for that money to continue growing tax-free or tax-deferred, as this can reduce the participant’s nest egg in their later years by thousands of dollars.

Leave It Alone

With this simplest option, the participant does nothing and leaves their 401(k) funds with the former employer’s plan custodian. There is no tax consequence for this option, but you cannot continue to make contributions to the plan.

Roll It Over

This is probably the most common choice made by former plan participants. Those who choose this route will direct the plan custodian to send their money either to another 401(k)—if they become employed at a company that offers a plan that accepts rollovers from other plans—or to an individual retirement account (IRA).

If the rollover funds come to the participant in a check, it will be made out to the next plan or account custodian and not to the participant. The participant then has 60 days to deposit the money with that custodian. If the participant fails to do this, the entire amount of the check will be considered a distribution by the Internal Revenue Service (IRS) and subject to applicable taxes and penalties.

Those who wish to avoid this possible cost can do a direct rollover, electing to have the money rolled over directly into the new plan or account with no check mailed to the participant. Most financial planners and retirement plan experts recommend direct rollovers rather than indirect rollovers.

Also, participants can only do an indirect 401(k) plan rollover once in a 12-month period. If they do this again before a year has elapsed, the entire balance of the second rollover will be counted as a distribution. This time limit must be met between every indirect rollover.

Important

Once you make an indirect rollover, you cannot execute another one for 12 months.

Exceptions

Although most withdrawals from 401(k) or other qualified plans by participants who are younger than 59½ are subject to the 10% early withdrawal penalty, there are exceptions to this rule, each with its own rules and limits on the amount you can withdraw. Penalty-free withdrawals are allowed in the following instances:

• To pay back taxes to the IRS
• Birth or adoption of a child
• Personal or family emergency expenses (one distribution per calendar year)
• Distributions to qualified military reservists called to active duty
• Withdrawals following a doctor-verified diagnosis of a terminal illness
• Distributions to the participant’s estate after their death
• Distributions to a participant who has become permanently disabled
• Distributions for unreimbursed medical expenses that exceed a maximum of 7.5% of the participant’s adjusted gross income for that year
• Distributions resulting from a qualified domestic relations order (QDRO) during a divorce
• Distributions to a victim of domestic abuse by a spouse or domestic partner
• Distributions for those who live in a federally declared disaster area and have suffered economic losses
• Distributions taken as part of a series of substantially equal periodic payments approved by the IRS

The NUA Rule

Employees who purchased shares of their company’s stock inside their 401(k) plan can receive favorable tax treatment on their shares when they roll over the rest of their plan balances, as long as certain rules are followed.

If your account includes publicly traded stock in the company you work for, you can withdraw it from your 401(k) and put it in a taxable brokerage account for more favorable tax treatment. The difference between the stock’s value when acquired and its current value, aka the net unrealized appreciation (NUA), is then subject only to capital gains tax rather than more costly income tax.

This rule can lower the overall tax bill for employees who have accumulated large numbers of shares in their company plan over time.

Does Vesting Affect Whether or Not You Can Leave a 401(k) Account With a Former Employer?

It may, depending on how much is vested in your account. Here’s how vesting works: If your employer contributes to your 401(k), vesting is the process by which those contributions becomes yours. This can happen gradually, over a period of years. One vesting formula an employer might use would be to give you ownership of 20% per year of the amount it has contributed to your 401(k). In this scenario, you would own all of those contributions after five years and from there on. (You always own 100% of whatever you have put into your account.)

If your account has less than $1,000 vested in it at the time of your departure, your former employer can cash out your account or roll it into an individual retirement account (IRA).

How Can You Avoid Paying Taxes on a 401(k) When You Leave a Job?

The easiest way to avoid taxes in this scenario is to leave your 401(k) funds in your former employer’s plan. The downside is that you cannot continue to make contributions to the plan. Another option is to roll over the funds into your new employer’s 401(k). Be sure to follow the rules carefully in order to avoid both taxes and penalties.

When Can You Withdraw Funds From a 401(k) Without Paying a Penalty?

If you are over the age of 59½ you can take money out of a 401(k) without paying a 10% penalty to the IRs. If you are younger than that, there are also a number of exceptions to this rule, allowing you to make withdrawals penalty-free. Among them are giving birth or adopting a child, paying back taxes to the IRS, becoming disabled, and having unreimbursed medical expenses that exceed a maximum of 7.5% of your adjusted gross income for the year.

The Bottom Line

The tax rules for 401(k) rollovers can be straightforward for those who elect to take cash distributions or leave their plan balances where they are. The rules for those who decide to preserve the tax-advantaged status of their plan balances can be complex, but opting for a direct rollover will usually steer the participant clear of any potential tax pitfalls. For more information, visit the IRS website. It also makes sense to consult a retirement plan custodian or financial advisor.

Fact checked by Melody Kazel
Reviewed by Lea D. Uradu

If you need cash for a major home remodeling project or other expense, you may be worried about the rates on home equity loans and cash-out refinance mortgages, which have been rising. But which of these two financing options has lower fees and rates? 

Home equity loans are usually more expensive than mortgages, but they may have more fees. However, your cost will depend on the lender, your creditworthiness, and your desired loan term. So, you’ll have to do your research to determine whether home loans or mortgages offer you the lowest rates. 

Key Takeaways

• Home equity loans are usually more expensive than mortgages.
• As of Feb. 2025, the average annual percentage rate (APR) for a 30-year fixed-rate mortgage was 6.91%. 
• The average rate for a home equity loan is 7.57%.
• Loans without closing costs are available, but lenders charge higher interest rates on those loans.

What Is a Mortgage? 

Mortgages are specific types of loans used to purchase property. With a conventional mortgage, you borrow money to buy a house. The amount you borrow is based on the value of the home minus your down payment. 

However, a cash-out refinance mortgage is a tool you can use to get a large amount of cash. You take out a new mortgage for more than you owe on the existing one, and you get the difference to use for your expenses or projects.

What Is a Home Equity Loan? 

A home equity loan is for current homeowners who have accumulated equity in their property, meaning it’s worth more than they owe on their current mortgage. In general, lenders require you to have built up at least 20% of loan equity to qualify for a loan.

How Do Home Equity Loans Differ From Mortgages? 

Both home equity loans and cash-out refinance loans use your home as collateral. But there are some major differences to keep in mind: 

• Terms: A cash-out refinance loan is a type of mortgage. Like conventional mortgages, they usually have terms of 15 or 30 years. 
• Closing costs: Although home equity loans tend to be more expensive than mortgages, they usually have lower closing costs.
• APR: Home equity loans usually have fixed interest rates. Cash-out refinance loans, like other mortgages, can be fixed- or adjustable-rate mortgages. 

Typical Rates for Home Equity Loans and Mortgages

When it comes to rates, home equity loans, and cash-out refinance mortgages can differ significantly. The rates on home equity loans tend to be higher than those for cash-out refinance mortgages.

As of Feb. 2025, the average rate for a 30-year fixed-rate mortgage was 6.91%, while the average rate for a home equity loan was 7.57%.

If you can afford the payments on a shorter loan term, consider a 15-year mortgage. They have substantially lower rates than 30-year mortgages. As of Feb. 2025, the average rate on a 15-year mortgage was 6.14%.

Home Equity Loans vs. Mortgages: Which Is Right for You? 

Now that you know the typical interest rates for home equity loans and mortgages, you can think about which loan option makes the most sense for you. If you’re still not sure, ask yourself the following three questions: 

Do I Have Cash for Closing Costs? 

Although home equity loans have higher rates than mortgages, they usually have lower fees. That’s because you have to pay closing costs as a percentage of the entire loan amount. 

For a home equity loan, you can choose exactly how much money you want to borrow and pay closing costs only on that amount. But with a cash-out refinance loan, you have to pay closing costs on the entire loan: the amount that covers your current mortgage and the additional sum you’re adding to it.

If you don’t have the cash handy in savings, you may be better off with a home equity loan or finding a lender that allows you to roll closing costs into the loan. 

How Much Money Do I Need? 

Think about how much money you need. If you’re planning home renovations or a vacation, create a budget—and add some wiggle room to give yourself some cushion. 

The amount—and the available equity in your home—will help determine which loan option is right for you. Cash-out refinance loans can typically get you more money than home equity loans.

Does My Existing Loan Have a Low Rate? 

Depending on when you took out your current mortgage, you may have a rate that is substantially lower than the rates available today. If that’s the case, utilizing a cash-out refinance loan may not make sense; you’d move your loan to a higher rate and pay that rate on a larger loan balance. 

Instead, using a home equity loan—and leaving your existing mortgage in its current state—may lower your overall repayment cost. 

Are Mortgage Rates Rising Now?

While mortgage rates are higher right now than they were a few months ago, they are nowhere near the historical high. In the 1980s, mortgage rates were as high as 18%.

What If My Cash Needs Are Unpredictable?

If you aren’t sure how much money you need, a home equity line of credit (HELOC) may be a better choice for you. They are revolving forms of credit, so you can tap into them again and again during the draw period.

How Can I Build Equity in My Home?

Home equity rises based on two factors: the mortgage being paid down and the property value increasing. Paying off your mortgage more quickly—by making larger payments, extra payments, or both—can build up equity. If you want to increase the value of your property, consider remodeling or making some home improvements.

The Bottom Line

Mortgages can have lower interest rates than home equity loans, but that doesn’t mean they’re always a better choice. When deciding which loan type is best for you, consider your goals, credit, and current loan terms. Keep in mind that the rates for home equity loans and mortgages are always changing, so it’s important to shop around with multiple lenders to see the latest rates.

A review of history indicates a strong case—but mixed public support

Reviewed by Robert C. Kelly

What Are Slavery Reparations?

Slavery reparations are restitution payments for slavery remitted to the descendants of enslaved people. In theory, American slavery reparations would be paid by entities that participated in slavery, such as the federal government, local governments, corporations, and universities.

The history is complicated, but the overall principle is simple: Slavery helped the United States become a formidable economic power. It had the opposite effect on enslaved people and their descendants, stripping them of wages, property, civil rights, and freedom. Since the 13th Amendment to the Constitution was passed and ratified in 1865, ending legal slavery in the U.S., no sustained attempt has been made to right this disparity, lending additional weight to the strong case that reparations would still be beneficial today.

Key Takeaways

• Reparations would compensate Black Americans for the lost wages and suffering of their ancestors, American slave laborers.
• The U.S. has received an enormous, unacknowledged economic boost from slavery even though it has been abolished for many years. 
• Subsequent biased policies—including segregation, labor discrimination, redlining, and mass incarceration—have disadvantaged Black Americans, preserving a racial wealth gap.
• The one federal reparations attempt was discontinued after President Lincoln was assassinated.
• In the past, members of Congress supported a bill to create a commission to study the issue; a slight majority of Americans favored this approach, as well.

The History of Reparations

On Jan. 16, 1865, from a mansion in Savannah, Georgia, Union General William Tecumseh Sherman issued Field Order No. 15, announcing the award of large tracts of confiscated land to newly freed Black populations. The roughly 400,000 acres to be awarded: “The islands from Charleston, south, the abandoned rice fields along the rivers for thirty miles back from the sea, and the country bordering the St. Johns River, Florida.”

The land, which included Georgia’s Sea Islands, was to be given out in parcels of “not more than (40) acres of tillable ground.” The new owners’ rights were to be protected by the military authorities until they could protect themselves or Congress could “regulate their title.” And they were to govern those lands themselves: “…sole and exclusive management of affairs will be left to the freed people themselves, subject only to the United States military authority and the acts of Congress,” the order declared.

The land grant idea came about in a meeting four days earlier, according to historian Henry Louis Gates Jr. Sherman and Lincoln’s Secretary of War, Edwin M. Stanton, met with an invited group of 20 leaders of the Black community of Savannah, many of them Baptist and Methodist ministers. These leaders explained that the newly freed people wanted to have their own land and live on it in communities, managing their own affairs.

The land grant program became colloquially known as “40 acres and a mule”—the mule part coming later when, according to Gates, Sherman subsequently ordered that the Army could lend mules to the settlers. Word of Sherman’s order spread quickly, and the islands seemed to transform into Black autonomous farming communities overnight. The inhabitants of the islands renamed them Sherman Land in gratitude.

The federal reparations experiment was short-lived, however. After Abraham Lincoln was assassinated in April 1865, his successor, Andrew Johnson, canceled the program and returned the land to the planters who had originally owned it. Since then, for more than 150 years, groups have been advocating for reparations.

Slavery Reparations Today

The effect of generations of enslavement on the wealth and economic standing of Black Americans—and the structural racism following emancipation—has never been fully mitigated and exists to this day. With the increased attention on race relations and equality brought on by the Black Lives Matter movement, the issue of reparations came back into focus.

• In the 2020 Democratic primary, presidential candidate Marianne Williamson campaigned on paying $500 billion in reparations, and candidates were asked about their stance on the issue during the debates. As a candidate in 2024, Williamson proposed “a minimum of $1 trillion.”
• Some institutions that enslaved people or participated in slavery have begun reparations programs. In 2005, JP Morgan Chase acknowledged that two predecessor banks—Citizen’s Bank of Louisiana and New Orleans Canal & Banking Company—accepted more than 13,000 enslaved persons as collateral and once held around 1,250 enslaved persons when borrowers defaulted. Chase started a scholarship program for Black students in Louisiana as a form of reparations.
• Evanston, Illinois became the first city in the United States to offer reparations. On March 22, 2021, it approved the first round of reparations, which made a total of $400,000 available via homeownership and home improvement grants of $25,000 each to qualifying Black households. The first phase was part of $10 million in reparations the city plans to distribute over 10 years. It will be funded by a 3% annual tax on recreational marijuana. To qualify, applicants are required to show that they are a resident of African descent who lived in Evanston between 1919 and 1969, or a direct descendant who faced housing discrimination. Between the program’s start and Feb. 6, 2025, $5.2 million was paid to just over 200 people.
• On March 15, 2021, the Jesuit Conference of Canada and the United States promised to raise $100 million in reparations for descendants of 272 enslaved people once held and sold by the Jesuit owners of Georgetown University. As of February 2025, the Jesuits and Georgetown University have contributed $45 million to the Descendant’s Truth and Reconciliation Foundation (DTRF) to help finance scholarships for descendants of what are known as the Georgetown University 272 (GU272). GU272 descendants can apply for scholarships via the GU272 Descendants Association.
• On Nov. 14, 2024, Palm Springs, California, approved a $27 million reparations package for primarily Black and Latino residents who were residents of Section 14, an area of the resort town that was razed in the 1960s to make way for commercial development. The package has earmarked $6 million for families who lost their homes and $10 million each for a first-time home-buyer-assistance program and a community land trust for affordable housing.
•  Other entities—including several states; the city of Asheville, North Carolina; Chicago, Illinois; Palm Springs, California; and the University of Virginia—have apologized and taken responsibility for their role in enslavement.

However, the United States government has not attempted reparations since the Lincoln administration. A bill to study reparations called H.R. 40 was introduced in 1989, but the U.S. House of Representatives has never voted on it.

Important

Eight states have changed their constitutions to outlaw slavery and involuntary servitude: Colorado (2018), Utah and Nebraska (2020), Alabama, Oregon, Tennessee, and Vermont (2022), and Nevada (2024). Voters in Louisiana (2022) and California (2024) rejected an amendment to prevent involuntary servitude as punishment for crimes.

The Case for Reparations

Examining the role of slavery in building the economic predominance of the United States, the role of the federal government in establishing the laws that allowed it and other large institutions to profit from the labor of enslaved people, and the lingering effects of both slavery and post-slavery structural racism on the descendants of enslaved people establish a strong argument for reparations.

The U.S. Was Built at the Expense of Enslaved Black People

The federal government and other large domestic institutions were participants and stakeholders in the practice of enslavement. The savings produced by using enslaved workers spurred economic growth for the country as a whole—and slave owners, particularly—while impoverishing generations of Blacks by depriving them of fundamental rights, freedom, and compensation.

It was near the turn of the century in 1793 when Massachusetts-born Eli Whitney invented the cotton engine, the machine that automated the painstaking task of removing the seeds from raw cotton by hand. Nicknamed the cotton gin, the invention revolutionized American cotton production. In short order, the U.S. became the leading cotton producer in the world.

The cotton boom created a demand for labor to work on cotton farms, which cotton growers met by purchasing slaves. According to census records, the number of slaves in America went from 894,452 in 1800 to 3,953,587 in 1860. During that same period, the per capita gross domestic product (GDP) of the United States more than doubled, going from $58 ($1,453 in 2025 dollars) in 1800 to $125 ($4,725 in 2025 dollars) in 1860.

During the slavery era in the United States, enslaved Black workers made up much of the workforce in the Southern states. Unlike the White labor pool, these workers received no wages or profit-sharing and lived and worked in bondage. The U.S. cotton industry, which depended on enslaved plantation labor in the Deep South, accounted for at least 5% of the U.S. GDP. All slave-related productivity accounted for as much as 50% of the GDP, according to author and historian E.E. Baptist.

Enslaved people worked in many different jobs, ranging from manual labor to highly skilled trades. The most common jobs for enslaved people were as farmhands or domestic workers. Enslaved Black people also worked blue-collar jobs like construction and coal mining. There were also thousands who worked in skilled trades such as cooking, carpentry, shipbuilding, blacksmithing, and masonry.

Slavery was a wealth transfer from enslaved Black laborers to America’s antebellum ownership and managerial class. For example, Natchez, Mississippi, the cotton-growing capital of the 19th century, had more millionaires than any other city in the world. Today, Natchez’s Black population, who are mostly descended from its enslaved workers, still disproportionately live in poverty.

Enslaved Black laborers also built much of the infrastructure of the United States, including much of New York City, the White House, and the Capitol. They also quarried the sandstone used to build the Smithsonian.

These unpaid wages erased the labor costs of businesses that used slave labor and increased their profit margins.

Note

Abraham Lincoln opposed slavery in part because he believed it was wage theft.

The Federal Government Benefited Directly From Slavery

The government played a direct role in maintaining slavery and also reaped immediate benefits from it. Under the Fugitive Slave Acts of 1793 and 1850, U.S. Marshals were mandated to recover slaves who escaped and return them to enslavement.

When the U.S. Constitution was signed into law in 1787, it included language that permitted the government to collect taxes on people trafficked to America via the transatlantic slave trade, permitting a tax “not exceeding ten dollars for each person” on “importation of such persons” in Article I, Section 9. From 1798 to 1802 and 1813 to 1816, the United States Treasury collected taxes on slaves as one of its chief sources of revenue, along with taxes on land and houses. Many slave states collected as much as 2% of the valuation of each enslaved person per year as a tax.

History has understated how much the United States government used slavery to generate revenue during the antebellum period. As a starting point for reparations, it seems logical to posit that the revenue generated from taxes on enslaved people could be returned to their descendants.

Corporations and Academic Institutions Profited From Slavery

A number of multinational corporations owned enslaved people in their early history. In addition to JPMorgan Chase, the companies that became Bank of America, Lehman Brothers Holdings Inc., Aetna Inc., New York Life Insurance Company, and Lloyds Banking Group participated in slavery. Cotton commodities and plantation shares and bonds—sometimes underwritten with deeds to enslaved people—were traded on the New York Stock Exchange in the antebellum era.

Some of America’s oldest colleges and universities, including Harvard, Yale, Brown, the University of Virginia, Columbia, and Princeton, were built by enslaved workers and partially funded by the slave trade.

Note

Many institutions have yet to try to make amends for their role in slavery.

Slavery Led Directly to Modern Inequality

Despite their two centuries of contributions, hundreds of thousands of Black Americans were left destitute after they were emancipated. After 1865, many free Black people faced starvation and homelessness and were forced to go back to work as sharecroppers on plantations for subsistence wages.

The gap in wealth between the free White population and the newly emancipated Black population became generational through laws that mandated segregation, disenfranchisement, and economic oppression for the next 100 years. This crystallized a stubborn racial wealth gap that still exists today.

Instead of attempting to close the gap between the Black population and the White population created by enslavement, racist laws began to go into effect almost immediately after slavery ended to limit Black people’s access to benefits such as education and trades. This effort culminated in 1892 with the Supreme Court case Plessy vs. Ferguson, which legalized segregation, establishing the notorious doctrine of “separate but equal.”

For the next 70 years, Black Americans would be denied access to jobs, schools, and labor unions. When President Roosevelt passed the New Deal programs in the 1930s, the original legislation excluded domestic workers and farmworkers—occupations that employed roughly 65% of African American workers. The GI Bill, signed in 1944, also was structured in a way that shut out many Black veterans. The Federal Housing Administration, a government agency created to promote homeownership, often refused to underwrite mortgages for Black homebuyers, a practice known as redlining.

Even after the Civil Rights Act became law in 1964, attempts to disadvantage the Black population continued. In 1971, President Nixon launched the war on drugs, which began an era of mass incarceration that disproportionately jailed Black individuals. In a 1994 interview reported in 2016, Nixon’s domestic policy chief, John Ehrlichman, stated the program was designed to criminalize Black people.

In concert, more than 100 years of discriminatory policies after emancipation worked effectively to prevent Black Americans from fully closing the racial income and wealth gap that originated with slavery. The numbers say it all: When slavery ended in 1863, Black people owned roughly 0.5% of the nation’s wealth. In a report written by the U.S. Census Bureau in April 2024 using 2021 census data, it was 4.7%.

13.6%

Percentage of U.S. population with a “Black householder” in 2021, according to the U.S. Census Bureau.

What Reparations Could Look Like

Slavery reparations are often proposed as a cash payout to the descendants of enslaved people. A few universities and corporations that owned enslaved people have started granting scholarships to the descendants of the people they enslaved. Other than cash payments to Black Americans, proposals have included an extensive federal government economic development program that benefits Black communities. Additionally, some proponents have called for a reparation program of payments to Black Americans directly from White Americans, but these proposals are outliers.

The exact dollar amount of slavery reparations would need to be calculated as part of a government study on reparations by a federal commission, such as the one proposed by the reparations bill H.R. 40. Estimated costs for the program fell somewhere around $16 trillion, the entire current-day book value of the four generations of slaves who lived in the United States from 1776 until the Emancipation Proclamation in 1865. Another way of determining the amount would be to determine the amount in lost wages, which would yield a similar figure.

Previous Reparations Programs

A reparations program for Black Americans would not be unprecedented; the United States has paid reparations in other instances.

• In 1946, an Indian Claims Commission was established, which awarded more than $818 million to 176 different Native American tribes and groups over its 31 years of existence for lands that had been taken. In 1994, a Court of Claims settled 10 remaining cases for $400-$500 million, for a total of $1.3 billion.
• The money was given to individual groups and tribes to distribute. It equated to about $1,000 ($16,185 in 2025 dollars) per person.
• In 1988, the United States paid reparations to Japanese-Americans who were interned during World War II. Reparations came in the form of a $20,000 check to people who were imprisoned in the camps. 

In addition to the U.S. government, the state of Florida paid restitution to those who survived the Rosewood massacre of 1923, in which White mobs burned the Black community of Rosewood and murdered at least six people. It took until 1994 for a law to be passed approving these payments, which gave the nine survivors $150,000 each and provided up to $100,000 from a pot of $500,000 to descendants for property damages, in addition to establishing a scholarship fund for descendants.

Funding Slavery Reparations

How would a slavery reparations program be funded? Deficit spending is the most feasible approach. The taxes needed to support such an expensive program would be onerous. And there is precedent for it: In 1833, the United Kingdom passed the Slavery Abolition Act across much of the British Empire. It paid to liberate its enslaved population by compensating slave owners to the tune of £20 million through deficit spending (£3 billion/$3.72 billion in 2025).

To put the cost of slavery reparations in context: The program would be less pricey than the proposed outlays for proposals for Medicare for All at $20.5 trillion and the Green New Deal at $50-$90 trillion (both estimated in 2019).

Where the Campaign for Reparations Stands Now

H.R. 40, a bill proposing a federal commission to examine slavery reparations, previously garnered the endorsement of former President Joe Biden and former House Speaker Nancy Pelosi. Initially, the bill had 157 co-sponsors and held the support of 114, all Democrats. The bill, which was under consideration for over three decades without leaving committee, made progress on April 19, 2021, when it was moved forward by the Judiciary Committee with a 25-17 vote. However, the bill is stalled in Congress due to a lack of legislative action.

In 2023, Senator Cory Booker introduced S.40, the Commission to Study and Develop Reparation Proposals for African Americans Act, which would establish a commission to explore reparations for descendants of slavery. This bill is a Senate companion to H.R. 40, focusing on the impact of slavery and ongoing discrimination, with an aim to propose reparations. It emphasizes the need to address the historical oppression of African Americans and proposes a comprehensive study to assess and repair the impacts of slavery in the U.S.

The high cost isn’t the only obstacle to slavery reparations. Low support for slavery reparations among White Americans and questions about logistics are also obstacles to moving forward.

Mixed Support for Reparations

While awareness of racial disparities in the U.S. is increasing, opinions on reparations remain divided. A 2024 Princeton University poll, in partnership with Liberation Ventures, found that 24% of White respondents versus 72% of Black respondents support reparations. Among Blacks, 57% support direct cash payments.

A 2022 Pew Research report found a significant majority of Black Americans (85%) recognize the ongoing impact of slavery’s legacy on their community’s status, with 77% endorsing some form of reparations for descendants of enslaved people in the U.S. Party affiliations also influence views on this issue, as 14% of Republicans, 55% of Democrats, and 30% of Independents (or no party affiliation) supported the idea at the time.

Some Americans have expressed opposition to paying out reparations because the people who were enslaved are dead. These beliefs ignore the debilitating effect of more than two centuries of enslavement and economic discrimination on Black Americans. They also do not weigh the fact that instead of making efforts to remedy the damage caused by slavery, the government moved to make those injuries permanent by creating a racial caste system through legal segregation and discrimination.

Attitudes about slavery reparations also vary by age, with younger people being more supportive than older generations. For example, the Princeton–Liberation Ventures poll found that among 18- to 25- year-olds, 48% (47% for 25- to 35-year-olds) were in favor of reparations compared to only 21% of those ages 56 to 65 (21% for 66- to 75-year-olds).

Deciding Who Would Be Eligible

Another obstacle would be establishing eligibility. Though it could be labor-intensive to determine which Americans are the descendants of enslaved people, it is possible. A majority of Black Americans fall into this category. The remaining Black Americans are the descendants of immigrants, mostly from Africa and the Caribbean, and could be determined as such via immigration and vital records.

What’s Next for Slavery Reparations

Though many Americans continue to view reparations as unnecessary, attitudes are shifting, as a greater focus is put on a legacy of slavery and racial discrimination in America. Institutions revealing their enslavement of people or otherwise profiting from the trade of enslaved labor is bringing into ever greater focus the unacknowledged role that enslaved people played in building the United States.

The political landscape for reparations legislation, particularly H.R. 40, has recently changed. While the bill previously had 157 co-sponsors, in 2023-2024, it had 130, reflecting a shift in congressional support. With Republican majorities in the House and Senate in 2025, the bill’s progress faces new challenges.

In June 2020, while running for re-election, Donald Trump said, “I don’t see [reparations] happening.” Reparations advocates are concerned that in his second term, President Trump may slow or cancel the progress that has been made. During the 2024 campaign, he called for dismantling diversity, equity, and inclusion (DEI) programs that were intended to address slavery and government-sanctioned discrimination against Blacks. He signed executive orders in January 2025, ending DEI programs in the federal government.

California is a leader in researching and addressing the issue of slavery reparations. Following two years of hearings, a state task force established by Assembly Bill 3121 released a report with significant findings. The task force recommended reparations amounting to an estimated $1.2 million per individual, a landmark decision in the reparations movement. This state-level initiative is distinct from any federal reparations actions and sets a precedent for similar studies and actions across the country.

Both Evanston’s and Palm Springs’ reparations programs, which focus on economic development, are viewed as models for other cities considering reparations. But there have been challenges: A class action lawsuit brought by Judicial Watch, a conservative advocacy group, in June 2024 aimed to kill the program, arguing that it discriminates against Evanston’s non-Black residents.

Other cities, such as New York City and Tulsa, Oklahoma, have set up commissions to study their role in slavery and to look into reparations.

What Are Slavery Reparations?

Reparations for slavery are proposed compensations aimed at the descendants of enslaved individuals, acknowledging the unpaid labor and hardships endured by their ancestors. The idea is that entities such as the federal and local governments, corporations, and educational institutions, which historically benefited from slavery, would provide these reparations.

What Is the Historical Background of U.S. Slavery Reparations?

The idea of reparations for slavery in the United States originated during the Civil War era. One example is General Sherman’s Field Order No. 15, which aimed to provide land to emancipated slaves. The order ultimately redistributed 400,000 acres of land to newly freed Black families in 40-acre segments. However, lasting reparations were not established.

What Are Some Current Proposals Regarding Slavery Reparations?

Recent proposals for federal reparations include direct payments to descendants of enslaved people and economic development investments in Black communities. Some institutions and local governments have started their own reparations programs. For example, a California task force that studied and developed reparations proposals released a comprehensive report in June 2023, which resulted in 14 bills being put forward in 2024. Evanston, Illinois, has initiated a reparations program funded by a tax on recreational marijuana. Palm Springs, California, has agreed to pay reparations to residents who lost their homes in the 1960s in an area of the resort town where commercial buildings were planned.

The Bottom Line

The issue of slavery reparations in the United States centers on addressing the long-standing economic and social disparities caused by slavery and ongoing discrimination against African Americans. Recent years have seen a growing recognition of these injustices, with some local governments and institutions beginning to implement reparations programs.

However, the conversation around federal reparations remains complex and polarized. As public opinion and political support fluctuate with changing political landscapes, the concept of reparations is increasingly viewed as a means to address long-standing injustices and their ongoing effects on Black communities.

Reviewed by Michael J Boyle

Vanguard Mutual Funds

The Vanguard mutual fund family is one of the largest and most recognized fund families in the financial industry. As of Nov. 30, 2024, Vanguard had 428 mutual funds and $10.4 trillion of assets under management.

Its funds are considered extremely liquid. The large number of shares traded day-to-day is an indicator of the substantial liquidity of the market for its mutual funds. In other words, an investor could easily buy shares or sell their holdings.

Vanguard manages dozens of funds with varying investment objectives to fit any investor profile. Its offerings range from managed funds to index funds that track specific indexes such as the S&P 500.

Vanguard also offers exchange-traded funds (ETFs) that can meet additional investor needs.

Key Takeaways

• Liquidity refers to how easily a security can be bought or sold.
• Mutual fund liquidity can be indicated by the number of fund shares that trade daily and the liquidity of underlying securities.
• Vanguard manages well-capitalized funds; they are considered some of the most liquid on the market.
• All buy and sell orders are executed at the end of the trading day, after a fund recalculates its net asset value.
• Mutual funds will never be as liquid as stocks or ETFs that trade continuously on the open market. However, Vanguard’s funds are about as liquid as they come.

Understanding Liquidity

Liquidity refers to how quickly and easily an asset can be bought or sold. When buying, the concern is whether the market for the security is liquid enough to execute an order at the investor’s desired price or near the current market price.

When selling, the question is how easily the security that the investor owns can be exchanged for cash.

With mutual funds, liquidity can be sized up by the number of shares that trade daily as well as the liquidity of the securities in a fund’s portfolio.

For Specifics About a Particular Vanguard Fund’s Liquidity

Look to the fund prospectus for information about:

• How easy it is to buy and sell shares
• The liquidity of the securities in its portfolio
• Indications about liquidity in the investment strategy
• Any restrictions on redeeming shares

Pressure on Mutual Fund Liquidity

When the market is particularly volatility, more mutual fund investors may decide to sell some or all of their mutual fund shares. This greater redemption demand could cause problems, depending on a fund’s liquidity.

To address this scenario, fund managers regularly analyze their funds’ liquidity profile. They consider the allocation of its holdings among highly liquid and less liquid securities. The greater number of highly liquid investments, the more easily a fund can meet customer redemption demands during times of market stress.

Vanguard Fee Cuts

In February 2025, Vanguard announced major reductions in costs to invest in its domestic and international equity mutual funds and money market funds. These also apply to its ETFs and bond mutual funds.

Trading, NAV, and Liquidity

Like all mutual funds, Vanguard fund shares are priced at the net asset value NAV. This price is set once the NAV is recalculated each day. This is when orders to buy and sell shares are executed by a Vanguard fund.

If the market experiences high volatility, investors will quickly understand the lack of control they have over the prices and times at which they can redeem (or buy) mutual fund shares.

Though you have to settle for a sale price that is the NAV, you should bear in mind that mutual funds usually hold very liquid securities to meet redemption requests. This diversification also provides a portfolio with stability in volatile times, which is an advantage for those who remain invested.

Once shares in a mutual fund are sold, it generally takes just a few days for an investor to receive their money.

Fees

One thing investors need to watch for is fees associated with buying and selling shares in a Vanguard mutual fund.

All funds, even the passively managed index funds, have expense ratios associated with them. But some also come with purchase fees, redemption fees or in some cases, both.

The average Vanguard mutual fund expense ratio was 0.08% as of December 2023. According to Vanguard, this is 82% less than the industry average.

Most Vanguard funds have zero commission fees. The costs of the few with fees range from 0.25 to 1% of the transaction amount. Others may charge a redemption fee of 0.25%.

So, despite Vanguard funds being very liquid, it can be costly to trade in and out of these types of funds often.

Advisor Insight

Rebecca Dawson

Dawson Capital, Los Angeles, CA

All mutual funds are liquid in the sense that they are easy to buy and sell. At the end of each trading day, all mutual fund orders are executed at the fund’s net asset value. Vanguard or any other mutual fund will be just as liquid as stock.

The only difference is that a stock is sold at different prices over the course of a trading day, whereas mutual fund orders are cleared only once per day. There are different redemption fees according to which share class of the fund you buy, and this will determine what and how much you pay in sales charges.

Additionally, mutual funds are required to maintain liquidity and the capacity to accommodate withdrawals. Funds typically have to keep a portion (around 8%) of their portfolio as cash.

Are Mutual Funds Obligated to Meet Investors’ Redemption Requests?

According to the Securities and Exchange Commission (SEC), “A mutual fund company generally must pay redemption proceeds to a shareholder within seven days of receiving a redemption request from the shareholder. Exceptions apply on days when the New York Stock Exchange is closed, during certain emergencies, or when the SEC issues an order delaying redemptions to protect shareholders in the fund.”

How Long Has Vanguard Offered Mutual Funds?

Vanguard was established in 1975. It introduced the first index mutual fund available to retail investors in 1976. It assumed management of the mutual fund industry’s oldest balanced mutual fund in the U.S., the Wellington Fund, introduced in 1929.

Does Vanguard Mutual Fund Liquidity Matter?

Yes, it does, as it would for any mutual fund company. Investors want to feel assured that they can get their money out of a Vanguard mutual fund quickly, when they need or want it. That requires that a mutual fund have liquidity. Some mutual funds might have redemption restrictions that could reduce liquidity. Investors agree to these restrictions when they purchase shares.

The Bottom Line

Vanguard mutual funds on the whole are known to be popular and highly liquid mutual funds. Liquidity relates to how quickly and easily an investor can buy or sell a security.

For mutual funds, liquidity is determined by the number of shares that are executed daily, the liquidity of a fund’s underlying securities, and the allocation of its portfolio to liquid securities.

To be sure that you understand the liquidity profile of any Vanguard mutual fund, read the information provided by the fund’s prospectus.

Reviewed by Lea D. Uradu
Fact checked by Suzanne Kvilhaug

The U.S. Department of the Treasury’s Bureau of the Fiscal Service (BFS) is the federal entity that issues tax refunds. It also has the authority to hold back all or part of your refund to repay debts you owe. This is known as an “offset.”

The BFS can seize your refund for one or more of six reasons. Each reason is related to a personal debt owed to state or federal entities or a court-ordered debt. Here’s what they are and what you can do about them.

Key Takeaways

• The BFS can seize some or all of your refund if you owe federal or state back taxes.
• It also can seize your refund if you default on child support or student loan debts.
• Owing your state unemployment compensation can trigger a refund offset.
• You can contact the BFS and IRS if you think a mistake has been made.

You Owe Federal Income Taxes

Your refund can be taken to pay or offset the amount due if you owe back income taxes. Anything that’s left will be refunded as requested on your tax return, either by direct deposit or by check. You should also get a notice from the IRS explaining why the money was withheld.

You can contact the Internal Revenue Service (IRS) if you believe a mistake was made. Call (800) 829-1040. Other tools and resources are available on its website as well.

You Owe State Income Taxes

The feds can also withhold money from your tax refund to cover any unpaid state income taxes.

Your first call should go to the IRS at (800) 829-1040 in this case. Contact your state’s tax authority after you’ve made that call and your options have been explained. Be prepared for a run around on this one.

You Owe State Unemployment Compensation

Your state can ask the U.S. Treasury to offset your tax refund by the amount in dispute if it believes that you collected more in unemployment compensation than you were entitled to receive, either due to outright fraud or a failure to properly report your earnings.

Your first step is again to call the IRS at (800) 829-1040. You should be ready with documentation to prove that you rightfully received that unemployment compensation.

Note

E-filing allows you to check the status of your return and track its progress. This can be helpful if you’re concerned about your refund being withheld.

You’ve Defaulted on a Student Loan

The government can seize your tax refund to offset the amount you owe if you’ve defaulted on a federally insured student loan. An exception exists if you qualify for and have applied for loan forgiveness. The Treasury Department must send you advance notice of its intention in this case and provide you with an opportunity to challenge the claim or pay it off before your refund is withheld.

Your state is also authorized to withhold money from your state tax refund for this purpose. The U.S. Department of Education and the guaranty agency that holds your loan also have the authority to order your employer to withhold up to 15% of your disposable income until the loan is paid off.

You Owe Child Support

A state’s child support agency can request that the Treasury Department withhold money from a parent’s tax refund to cover the back payments when they’re delinquent in paying court-ordered child support.

You should receive a pre-offset notice explaining how much is owed in this case, as well as how the offset process works and how to contest the debt. You should also receive an offset notice from the BFS showing how much money was withheld from your refund.

Anyone in this situation should contact their state’s child support agency for further information.

You Owe Spousal Support

An award for spousal support that is part of a child support order can also result in a tax refund offset if the payments are overdue.  

You can request your portion of the refund back from the IRS if you filed a joint tax return with your spouse and your refund was offset because of debts belonging only to your spouse. You can file Form 8379: Injured Spouse Allocation to make this claim.

How Do I Know If the IRS Will Take My Refund?

The BFS will likely take your refund If you’re delinquent on any of the abovementioned payments. You should receive an offset notice after you file your tax return.

How Do I Stop the IRS From Taking My Refund?

Your best chance is to ensure that you make payments on the six types of debt for which the BFS will hold a refund. Notify the IRS, then contact the BFS and talk to a debt analyst if you can’t do this.

How Do I Know If the IRS Is Giving Me a Refund?

You should be able to tell when you file your tax return. You should receive a refund if you’ve paid more than you owe unless you meet one of these six reasons that the IRS and BFS can withhold some or all of your refund.

The Bottom Line

You’ll receive a tax refund if you’ve paid more tax than you owe over the year, either through payroll withholding or because you made estimated payments. But the IRS and BFS can withhold your refund to make the payments for you if you have specific debts that you haven’t paid.

It’s best to call the BFS at 1-888-826-3127 if you find yourself in a situation where you think it might hold your refund. The BFS can work with you to set up an installment plan or guide you on the best options for your situation.

They can help you shop multiple lenders to get the best loan

Fact checked by Skylar Clarine
Reviewed by Doretha Clemon

When you’re buying or refinancing a home and need to get a mortgage, you have a number of options. You can shop around and apply directly to the lender of your choice. Or, you can go to a mortgage broker, who will work with you to find a lender and assist in the application process. You can search for mortgage brokers online or ask for broker recommendations from your realtor, family, or friends.

Key Takeaways

• Mortgage brokers are licensed professionals who work with a variety of lenders to find a mortgage for their clients.
• Mortgage brokers are paid by either the lender or the borrower and commonly charge about 1% to 2% of the mortgage amount. 
• When searching for a mortgage broker, ask your real estate agent or neighbors for recommendations, or search online.

What Is a Mortgage Broker?

A mortgage broker is a licensed professional who can work with multiple lenders to find, at least in theory, the best possible mortgage for their client. By contrast, a mortgage loan officer works for a particular lender, such as a bank, and can only recommend that lender’s mortgage products. A mortgage broker should not be confused with a mortgage banker, who closes and funds a mortgage with its own funds.

Why Use a Mortgage Broker?

The advantage of using a mortgage broker is that they have relationships with multiple lenders and should be able to match you with the best and/or least expensive lender for your needs. A broker may be particularly helpful if, for example, you’ve had credit difficulties in the past and need a lender that is amenable to working with borrowers in your situation. Mortgage brokers can also help you collect the documentation that you need and fill out your mortgage application, which is often a headache, especially for first-time borrowers. 

How to Find a Good Mortgage Broker

Depending on where you live, you may have several mortgage brokers to choose from in your local area. Here is how to narrow the field.

Ask Locally

If you’re using one, your real estate agent should be able to recommend one or more mortgage brokers in your area. Friends and neighbors who have recently used a broker can also be good sources of referrals.

Search Online

If you’re new to the area and don’t have any local contacts, you can look for a mortgage broker online. There are many websites offering lists of the “best” local brokers, although their criteria for selecting them aren’t always clear. One well-known site is FindAMortgageBroker.com, which cautions, “The listing of a mortgage broker on this site does not constitute an endorsement or recommendation.”

Online review sites like Yelp also list local mortgage brokers, often accompanied by useful comments from past customers.

$447,300

Average size of a mortgage in the United States, as of Feb. 5, 2025.

Check Them Out

While shady or incompetent mortgage brokers no doubt exist, state and federal law does provide some protection. Mortgage brokers are regulated under the SAFE (Secure and Fair Enforcement for) Mortgage Licensing Act of 2008, which sets standards for the licensing and registration of state-licensed mortgage loan originators. Among other requirements, mortgage brokers must complete certain courses, pass a written test, and submit to an FBI background check. States can also impose stricter requirements than federal law provides for.

To find out whether a mortgage broker is authorized to conduct business in your state, plug their name into the Nationwide Multistate Licensing System’s free online tool, Consumer Access. It will also tell you whether there have been any disciplinary actions against that broker.

The Better Business Bureau also has a large listing of mortgage brokers you can search by location, including their BBB letter-grade ratings where applicable.

Shop Around

Bear in mind that you can shop for a mortgage broker just as you would for a mortgage. If you aren’t comfortable with the first one with whom you interview, try another.

Questions you might want to ask include:

• How many lenders do you work with?
• Have you had clients with similar mortgage needs to mine?
• How much do you believe you might be able to save me?
• What do you charge, and who pays?
• What is your usual process, and how long does it typically take?

Even if you’ve decided to go with a certain mortgage broker, it’s to your advantage to visit a few mortgage websites to make certain that whatever interest rate your broker comes up with is competitive in the current market.

What Do Mortgage Brokers Charge?

Mortgage brokers are paid by either the borrower or the lender. By law, they can’t be paid by both. They are also required to disclose their fees upfront.

Typically, the broker will receive about 1% to 2% of the amount of the loan. For example, on a $300,000 mortgage, they might make $3,000 to $6,000. If you’re the one footing the bill, the fee usually will be due at closing or may be rolled into your loan.

The federal Dodd-Frank Act in 2010 imposed a number of new rules on mortgage brokers to attempt to protect consumers from predatory practices. One of them is that lenders can’t tie a broker’s compensation to the interest rate on the loan. That rule was intended to keep mortgage brokers from steering clients into high-interest loans, as sometimes happened in the past.

Do I Need a Mortgage Broker?

Whether having a mortgage broker will be helpful depends mostly on you. If you’re familiar with the different types of mortgages, are comfortable shopping for a lender, and have the time to put into the process, then hiring a mortgage broker may be of little value to you.

Are Mortgage Brokers Worth It?

Mortgage brokers typically charge 1% to 2% of your mortgage amount. If they do their job well, they can often save you enough money and time to more than pay for their services.

Where Do I File a Complaint About a Mortgage Broker?

Mortgage brokers are licensed by the states, so if you’ve had a problem with one and wish to make a complaint, that would be a good place to start. The American Association of Residential Mortgage Regulators has a list of member agencies and links to their home pages on its website.

The Bottom Line

If you’re shopping for a new mortgage, a mortgage broker may be able to save you time and money. The best way to find one is to ask locally for recommendations. You can also go online to look for a broker and check whether there have been any disciplinary actions against them.