Author: AskMyFinance Editorial Team

An IRA rollover is the process of moving money from one retirement account to another — typically from a 401(k) or other employer plan into an IRA when you change jobs or retire, or from one IRA to another. Done correctly, a rollover preserves your tax-advantaged status and gives you more control over your investments. Done incorrectly, it can trigger unexpected taxes and penalties. Knowing the rules before you move the money protects years of retirement savings.

Why Roll Over a Retirement Account?

The most common reason for an IRA rollover is leaving a job. When you leave an employer, you typically have four options for your 401(k):

1. Leave the money in your former employer’s plan (if allowed)
2. Roll it over into your new employer’s 401(k) plan
3. Roll it over into an IRA
4. Cash it out (usually the worst option — triggers taxes and a 10% penalty if under 59½)

Rolling into an IRA gives you the broadest investment options (any stock, bond, ETF, or mutual fund), the most provider choices, and full control over fees. Rolling into a new employer’s 401(k) preserves loan access and protection from creditors (in most states).

Direct Rollover vs. Indirect Rollover

Direct Rollover (Recommended)

In a direct rollover, funds move directly from your old retirement account to your new IRA — you never personally receive or touch the money. The check is made out to the new financial institution, not to you. No taxes are withheld, no penalties apply, and there is no deadline pressure. This is the cleanest and safest rollover method.

Indirect Rollover (Use with Caution)

In an indirect rollover, the distribution is paid to you personally. You then have 60 days to deposit the full amount into an IRA to avoid taxes and penalties. The catch: your employer is required to withhold 20% for federal taxes before issuing the check. Even though you can reclaim that withholding when you file your taxes, you must deposit the full original amount — including the 20% you did not receive — within 60 days. If you only deposit the amount you received (80%), the 20% withheld counts as a taxable distribution.

Additionally, you can only do one 60-day indirect rollover per 12-month period across all your IRAs. Direct rollovers have no such limit.

Rollover from 401(k) to Traditional IRA

Pre-tax 401(k) money rolls into a traditional IRA without any immediate tax consequences. The money stays pre-tax — you will pay income tax when you take distributions in retirement. This is the most common type of rollover and works seamlessly as a direct rollover.

Rollover from 401(k) to Roth IRA (Roth Conversion)

Rolling pre-tax 401(k) money into a Roth IRA triggers a taxable event — you owe income tax on the full amount rolled over in the year of conversion. This is called a Roth conversion. The logic: you pay taxes now at your current rate, then the money grows tax-free and qualified Roth distributions are tax-free in retirement. This strategy makes most sense when your current income (and tax rate) is lower than you expect in retirement — common in a gap year, early retirement, or a year with lower-than-usual income.

Rollover from Roth 401(k) to Roth IRA

If you have a Roth 401(k), rolling it into a Roth IRA is tax-free and penalty-free. One important benefit: Roth IRAs are not subject to Required Minimum Distributions (RMDs) during your lifetime. Roth 401(k)s were subject to RMDs before SECURE 2.0 eliminated that rule for Roth 401(k)s starting in 2024. Still, rolling a Roth 401(k) to a Roth IRA may improve your investment choices and simplify your accounts.

How to Execute an IRA Rollover

1. Open an IRA at your chosen provider (Fidelity, Vanguard, Schwab, or others) if you do not already have one.
2. Contact your old plan administrator and request a direct rollover to your new IRA. Provide the new account information.
3. The plan sends funds directly to your new IRA provider. Some plans send a check made out to the new institution — deposit it promptly.
4. Choose your investments within the IRA. Rolled-over funds often land in a money market fund by default until you invest them.

IRA Rollover Timing and Deadlines

Direct rollovers have no deadline — take your time and do it right. Indirect rollovers must be completed within 60 days of receiving the distribution. Missing the 60-day window converts the entire distribution into taxable income plus a 10% penalty (if under 59½). The IRS does grant hardship waivers in limited circumstances (natural disaster, hospitalization), but do not count on it.

Bottom Line

When changing jobs or retiring, always use a direct rollover to move your retirement funds — never have the check made out to you if you can avoid it. The direct rollover eliminates withholding complications and the 60-day clock. Move pre-tax money to a traditional IRA; weigh a Roth conversion carefully based on your current versus expected future tax rate. A rollover done right preserves decades of tax-deferred or tax-free growth without a penny in penalties.

Related: How to Open a Roth IRA: Step-by-Step Guide

The Child Tax Credit (CTC) is one of the most valuable tax breaks available to American families with children. It directly reduces the amount of income tax you owe — dollar for dollar — rather than just reducing taxable income. For millions of families, it is the single largest factor in determining whether they owe money at tax time or receive a refund. Understanding how it works, who qualifies, and how to claim it ensures you do not leave money on the table.

2026 Child Tax Credit Amount

For tax year 2025 (filed in 2026), the Child Tax Credit is $2,000 per qualifying child under age 17. Up to $1,700 of that amount is refundable as the Additional Child Tax Credit (ACTC) — meaning you can receive it even if you owe less than $2,000 in taxes.

Note: The doubled Child Tax Credit from the 2017 Tax Cuts and Jobs Act is scheduled to revert to $1,000 per child after 2025 unless Congress acts. Legislation to extend or expand the credit has been actively debated. Check the IRS website or a tax professional for the latest status when you file.

Who Qualifies as a Qualifying Child

To claim the credit, the child must meet all of the following IRS tests:

• Age: Must be under age 17 at the end of the tax year
• Relationship: Must be your child, stepchild, foster child, sibling, step-sibling, half-sibling, or a descendant of any of these
• Dependent: Must be claimed as a dependent on your tax return
• Residency: Must have lived with you for more than half the tax year
• Financial support: Must not have provided more than half of their own financial support
• Social Security number: Must have a valid SSN issued before the due date of your return
• Citizenship: Must be a U.S. citizen, U.S. national, or U.S. resident alien

Income Limits and Phase-Out

The full $2,000 credit is available to taxpayers with modified adjusted gross income (MAGI) below:

• Married filing jointly: $400,000
• Single, head of household, married filing separately: $200,000

Above these thresholds, the credit phases out by $50 for every $1,000 of income over the limit. At $440,000 (married filing jointly) for two children, the credit phases out entirely.

The Additional Child Tax Credit (Refundable Portion)

The refundable portion — up to $1,700 per child in 2025 — is called the Additional Child Tax Credit. This matters if your total tax liability is less than the credit. For example, if you owe $800 in taxes and have a $2,000 Child Tax Credit, the first $800 eliminates your tax bill; you can then receive up to $1,700 of the remaining $1,200 as a refund through the ACTC.

To claim the ACTC, you must have earned income of at least $2,500. The refundable amount is calculated as 15% of your earned income above $2,500, up to the per-child limit.

How to Claim the Child Tax Credit

The credit is claimed on your federal tax return (Form 1040). Attach Schedule 8812, Credits for Qualifying Children and Other Dependents, to calculate the credit and the refundable portion. If you use tax software (TurboTax, H&R Block, FreeTaxUSA), it calculates and applies the credit automatically when you enter your dependents’ information.

Other Child-Related Tax Benefits

The Child Tax Credit is the largest, but not the only child-related tax benefit:

• Child and Dependent Care Credit: Covers up to 35% of qualifying childcare expenses (up to $3,000 for one child, $6,000 for two or more) to enable you to work or look for work. Separate from the CTC.
• Dependent Care FSA: Up to $5,000 per household in pre-tax dollars through your employer to pay for qualifying childcare expenses.
• Earned Income Tax Credit (EITC): A separate credit for low-to-moderate income workers. Having children significantly increases the EITC benefit amount.
• Education credits: The American Opportunity Tax Credit and Lifetime Learning Credit apply to college-age dependents.

Bottom Line

The Child Tax Credit is one of the most straightforward and high-value tax benefits available to families. If you have a qualifying child under 17, claim it. If your income is below the phase-out thresholds, the full $2,000 credit directly reduces your tax bill — and up to $1,700 comes back as a refund even if you owe little or nothing in taxes. Use tax software or consult a tax professional to ensure you capture every dollar you are entitled to.

A home warranty is a service contract that covers the repair or replacement of major home systems and appliances when they break down from normal wear and tear. It is distinct from homeowners insurance, which covers damage from events like fire, theft, or storms. A home warranty covers the things homeowners insurance does not — your HVAC system dying in August, your refrigerator stopping, your water heater failing. Whether it is worth the cost depends on your home, your risk tolerance, and the specific contract terms.

What a Home Warranty Typically Covers

Coverage varies by plan and provider, but most standard home warranties include:

Systems Plans

• Heating and central air conditioning (HVAC)
• Electrical systems
• Plumbing systems
• Water heater
• Ductwork

Appliance Plans

• Refrigerator
• Dishwasher
• Oven, range, and cooktop
• Washer and dryer
• Garbage disposal
• Built-in microwave

Comprehensive plans bundle systems and appliances together. Optional add-ons may cover pools, septic systems, well pumps, and additional refrigerators.

What a Home Warranty Does NOT Cover

Reading the exclusions is critical before buying. Common exclusions include:

• Pre-existing conditions known before coverage began
• Improper installation or code violations
• Cosmetic defects (knobs, handles, door handles)
• Damages caused by misuse or neglect
• Items not properly maintained (e.g., HVAC without annual service)
• Secondary damage caused by a covered failure (e.g., water damage from a burst pipe)
• Structural components

The exclusions are where home warranty companies deny most claims. Understanding them before you buy prevents expensive surprises.

How Much Does a Home Warranty Cost?

In 2026, most home warranty plans range from $400–$900 per year for a standard plan, depending on the provider, coverage level, and your location. You also pay a service call fee (similar to a deductible) each time a technician comes out — typically $75–$150 per visit. Some providers let you choose between lower annual premiums with higher service fees, or higher premiums with lower service fees.

Top Home Warranty Providers in 2026

• American Home Shield (AHS): One of the oldest and largest providers. Known for covering older systems and appliances without excluding them for age.
• Choice Home Warranty: Competitive pricing, simple plan structure. Some customer service complaints in reviews.
• Select Home Warranty: Lower-cost plans, frequently offers discounts. Coverage caps can be lower.
• First American Home Warranty: Strong reputation for HVAC coverage. Good option for newer homes.

Before buying, check each company’s Better Business Bureau (BBB) rating, customer reviews, and the specific coverage limits and exclusions in the sample contract — not just the marketing summary.

Is a Home Warranty Worth It?

The honest answer: it depends.

Home warranties tend to be worth it when:

• You bought a home with older appliances and systems (8–15 years old) that may be nearing end of life
• You have limited cash reserves and could not easily absorb a $3,000–$8,000 HVAC replacement
• You are buying a home and the seller offered a home warranty — accepting it costs you nothing
• You own rental property and want predictable maintenance costs

Home warranties tend to be poor value when:

• All your systems and appliances are new or under manufacturer warranty
• You have a healthy emergency fund and can self-insure major repairs
• Your home warranty contract has low coverage caps that would not cover a major failure anyway
• You are handy and can handle many repairs yourself

Consumer advocacy organizations note that home warranties frequently deny claims on technicalities. Statistically, many homeowners pay more in premiums over 5–10 years than they ever receive in covered repairs.

Tips for Getting the Most from a Home Warranty

• Read the full contract before signing, not just the summary brochure
• Document maintenance on your systems (HVAC tune-ups, appliance records) to prevent denial of claims for lack of maintenance
• Always call the warranty company before getting any repair done — unauthorized repairs are typically not reimbursed
• If a claim is denied, escalate — ask for a supervisor and cite the specific contract language you believe supports your claim
• Compare total cost of ownership (premiums + service fees) over 3 years against the actual repair or replacement cost you are trying to protect against

Bottom Line

A home warranty can provide real financial protection for homeowners with aging systems and limited reserves. But the value depends entirely on the specific contract terms and the claims experience with the provider. Do your homework before buying: read the exclusions, check reviews, and run the math against realistic repair costs for your home’s specific systems and appliances.

Related: What Is a Money Market Account?

The debt avalanche method is a debt payoff strategy that prioritizes your highest-interest debt first. By directing extra payments toward the account charging you the most interest — while making minimum payments on everything else — you minimize the total interest you pay over time. It is the mathematically optimal approach to paying off debt, and for people with high-interest credit card balances, the savings can be substantial.

How the Debt Avalanche Works

The strategy has four steps:

1. List all your debts with their current balance, minimum payment, and interest rate.
2. Make minimum payments on all debts every month to avoid late fees and damage to your credit score.
3. Direct all extra money toward the debt with the highest interest rate.
4. When that debt is paid off, roll its payment to the next-highest-rate debt. This is the “avalanche” — each payoff frees up more money for the next target.

You continue this process until all debts are eliminated. The key is that you never reduce the total amount you pay each month — you just redirect it as balances fall to zero.

Debt Avalanche Example

Suppose you have three debts and $500 per month to put toward debt repayment:

• Credit card A: $4,000 balance, 24% APR, $80 minimum payment
• Credit card B: $7,000 balance, 18% APR, $140 minimum payment
• Student loan: $12,000 balance, 6% interest, $130 minimum payment

Total minimums = $350. Your extra payment = $150. With the avalanche method, you put that $150 toward Credit Card A (24% APR). Once Card A is paid off, you roll its freed-up payment to Card B, then eventually to the student loan. Compared to paying only minimums, this approach can save thousands of dollars and shave years off your payoff timeline.

Debt Avalanche vs. Debt Snowball

The debt snowball method (popularized by Dave Ramsey) targets the smallest balance first, regardless of interest rate. It pays off fewer dollars of debt per dollar spent in total, but delivers faster early wins that can boost motivation.

• Avalanche wins on math: You pay less total interest and become debt-free faster (assuming consistent execution).
• Snowball wins on psychology: Paying off a small balance quickly creates momentum and a sense of progress that helps some people stay on track.

Research suggests the snowball method has a slightly higher completion rate because motivation matters — people who quit before finishing pay far more than either method projects. Choose the approach you will actually stick to.

When the Debt Avalanche Makes the Most Sense

• You have high-interest credit card debt (18–29% APR) where the interest savings from targeting the highest rate are large
• You are disciplined and do not need the emotional boost of quick wins
• Your highest-interest debt also happens to have a manageable balance (making it your first avalanche target easier to finish)

How to Accelerate the Avalanche

• Increase your income: Every extra dollar from a side hustle, overtime, or selling unused items accelerates the payoff.
• Cut discretionary spending: Redirect money from subscriptions, dining out, and non-essential purchases to debt.
• Balance transfer: Transfer high-interest balances to a 0% APR credit card (watch the transfer fee and the end of the promo period).
• Debt consolidation loan: Replace multiple high-rate debts with a single lower-rate personal loan to simplify and reduce interest costs.
• Avoid new debt: Stop adding to balances while paying down existing debt. Freeze or remove credit cards from your wallet if needed.

Tracking Your Debt Avalanche

A simple spreadsheet works well. List each debt, balance, rate, and minimum payment. Each month, update the balance and note the extra payment going to your top-priority debt. Seeing the high-interest balance shrink is motivating even without the instant gratification of eliminating a small account entirely.

Bottom Line

If you want to minimize the total cost of your debt and have the discipline to stay the course, the debt avalanche is the right strategy. The interest savings compared to paying only minimums — or even compared to the snowball — can be meaningful on large credit card balances. Calculate your payoff timeline with an online debt payoff calculator to see exactly how much the avalanche saves you versus other approaches.

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a retirement savings plan designed for small businesses with 100 or fewer employees. It works like a 401(k) — you contribute pre-tax money, it grows tax-deferred, and you pay income tax on withdrawals in retirement — but with simpler administration and lower setup costs. If you work for a small employer or own a small business, the SIMPLE IRA is one of the most accessible retirement plan options available.

How a SIMPLE IRA Works

Employees contribute a portion of their salary to the plan through payroll deductions, just like a 401(k). Contributions go in pre-tax, reducing your taxable income for the year. Employers are required to make contributions — either matching employee contributions or making non-elective contributions for all eligible employees. This employer contribution requirement is what sets the SIMPLE IRA apart from many other retirement plans.

There is no annual tax filing requirement for employers (unlike a 401(k) plan, which requires Form 5500), which makes administration much simpler and less expensive.

2026 SIMPLE IRA Contribution Limits

• Employee contribution limit: $16,500 per year
• Catch-up contribution (age 50–59 and 64+): Additional $3,500, for a total of $20,000
• Enhanced catch-up (age 60–63): Under SECURE 2.0, employees age 60–63 can contribute an additional $5,250 catch-up, for a total of $21,750

Note: SIMPLE IRA limits are lower than 401(k) limits ($23,500 for employees in 2026). This is one reason high earners at larger companies prefer 401(k) plans.

Employer Contribution Requirements

Employers must choose one of two contribution formulas and apply it consistently:

• Matching contribution: Match employee contributions dollar-for-dollar up to 3% of the employee’s compensation. This can be temporarily reduced to as low as 1% in two out of any five-year period.
• Non-elective contribution: Contribute 2% of each eligible employee’s compensation (up to $350,000 in compensation), regardless of whether the employee contributes anything.

The matching contribution rewards employees who participate. The non-elective option benefits employees who cannot afford to contribute but still receive a retirement benefit.

SIMPLE IRA Vesting

All SIMPLE IRA contributions — both employee and employer — are 100% immediately vested. You own the money the moment it goes into your account. This is a significant advantage over many 401(k) plans with multi-year vesting schedules.

The Two-Year Rule and Early Withdrawal Penalties

SIMPLE IRAs have a notably harsh early withdrawal rule. During the first two years of participation, withdrawals before age 59½ are subject to a 25% penalty (versus the normal 10% for most retirement accounts). After the two-year period, the standard 10% early withdrawal penalty applies. This rule makes it especially important to treat SIMPLE IRA funds as long-term retirement savings from day one.

SIMPLE IRA vs. SEP IRA vs. Solo 401(k)

• SIMPLE IRA: Best for small businesses with employees. Requires employer contributions. Lower contribution limits than a 401(k). Easy to administer.
• SEP IRA: Best for self-employed individuals or businesses with few or no employees. Higher contribution limits (up to 25% of compensation or $70,000 in 2026). Only the employer contributes — no employee salary deferrals.
• Solo 401(k): Best for self-employed individuals with no employees other than a spouse. Highest contribution limits. More paperwork than a SEP IRA or SIMPLE IRA.

Investment Options in a SIMPLE IRA

Employees generally hold SIMPLE IRA funds at a financial institution of the employer’s choosing, though many plans allow employees to transfer funds to their own preferred institution after two years of participation. Investment options vary by institution — look for low-cost index funds at providers like Vanguard, Fidelity, or Schwab.

Bottom Line

A SIMPLE IRA is a practical, low-cost retirement plan for small businesses. If your employer offers one, contribute at least enough to capture the full employer match — it is an immediate 100% return on that portion of your savings. If you are a small business owner deciding between plan types, the SIMPLE IRA works well when you have employees and want minimal administration, but evaluate the SEP IRA or solo 401(k) if you are self-employed without staff.

Related: How to Open a Roth IRA: Step-by-Step Guide

See also:

• What Is a 457(b) Plan? How It Works in 2026

Car insurance is a required expense for most Americans, but that does not mean you should overpay for it. The average driver pays over $1,700 per year for full coverage — but rates vary by hundreds of dollars for identical coverage depending on your insurer, state, driving history, and the discounts you claim. A few strategic moves can cut your premium significantly without giving up the coverage you need.

Shop and Compare Every Year

Insurance loyalty rarely pays. Insurers often raise rates at renewal for existing customers while offering competitive quotes to new customers. The single highest-impact step you can take is to get quotes from at least three insurers every year before your policy renews. Sites like The Zebra, Insurify, and NerdWallet let you compare multiple quotes at once. Even saving $20–$40 per month adds up to $240–$480 per year.

Bundle Policies

Bundling auto and homeowners (or renters) insurance with the same insurer typically earns a 5–15% discount on both policies. Most major insurers — State Farm, Allstate, Farmers, USAA, Liberty Mutual — offer bundling discounts. If you already have separate policies, call your insurer or get a bundled quote online.

Increase Your Deductible

Your deductible is what you pay out of pocket before insurance kicks in on a claim. Raising your comprehensive and collision deductible from $500 to $1,000 can lower your premium 15–30%. This strategy works best if you have an emergency fund to cover the higher deductible if needed. On an older car, evaluate whether comprehensive and collision coverage is worth keeping at all — if your car is worth less than $4,000, the cost of coverage may exceed the payout.

Maintain a Good Driving Record

At-fault accidents and moving violations raise your premium significantly — often 20–50% or more. A single at-fault accident can raise rates for 3–5 years. Safe driving is the most durable way to keep insurance costs low. If you have older violations that are about to age off your record, shop for new quotes right after they clear.

Ask About Every Available Discount

Insurers offer many discounts that are not automatically applied. Ask specifically about:

• Good driver discount: 3–5 years without accidents or violations
• Good student discount: Students with a B average or better
• Low mileage discount: Driving fewer than 7,500–10,000 miles per year
• Telematics / usage-based discount: Installing a tracking app or device to prove safe driving habits (e.g., Progressive Snapshot, State Farm Drive Safe & Save)
• Defensive driving course discount: Completing an approved course, often 5–10% off
• Paid-in-full discount: Paying your annual premium upfront instead of monthly
• Paperless / auto-pay discount: Enrolling in electronic billing and autopay
• Affinity discounts: Through employers, alumni associations, credit unions, or professional organizations

Improve Your Credit Score

In most states, insurers use a credit-based insurance score to set rates. Drivers with excellent credit can pay 40–50% less than drivers with poor credit for the same coverage. Improving your credit score over time — by paying bills on time, reducing credit card balances, and not opening multiple new accounts — will lower your insurance rates as your score improves.

Drive a Car That Is Cheaper to Insure

When buying a new or used vehicle, check insurance costs before you buy. Sports cars, luxury vehicles, and vehicles with high theft rates cost more to insure. Practical sedans, minivans, and SUVs with good safety ratings typically cost less. Your insurer can give you a rate estimate for any vehicle before purchase.

Remove Unnecessary Coverage on Older Cars

If your car is worth less than $4,000–$5,000, dropping comprehensive and collision coverage may be the financially smart move. You still need liability coverage (legally required), but paying $400–$600 per year for comp and collision on a car worth $3,000 is a bad deal — the most the insurer will pay is the car’s actual cash value, minus your deductible.

Bottom Line

The biggest savings come from shopping annually, bundling policies, raising your deductible, and claiming every discount available. Most people can cut their car insurance by 15–30% with an hour of comparison shopping and a few phone calls. Set a calendar reminder to compare quotes 30 days before your renewal date every year.

Related: What Is a Money Market Account?

Estate planning is the process of deciding what happens to your money, property, and responsibilities after you die or become incapacitated. Without a plan, the courts decide — a process called probate that is slow, public, and expensive. A basic estate plan puts you in control, protects the people you care about, and makes a difficult time less chaotic for your family. You do not need to be wealthy to need one.

The Core Documents of an Estate Plan

Last Will and Testament

A will is the foundation of an estate plan. It specifies who inherits your assets, names a guardian for minor children, and names an executor (the person responsible for carrying out your wishes). Without a will, your state’s intestacy laws determine who gets what — which may not match your wishes at all. A basic will can be created through an estate planning attorney or online legal services like Trust & Will or LegalZoom.

Revocable Living Trust

A trust is a legal arrangement where you transfer assets to a trustee who manages them for your beneficiaries. A revocable living trust keeps you in control during your lifetime — you are the trustee — and passes assets to heirs after death without going through probate. Trusts are especially valuable if you own real estate in multiple states, want privacy (wills are public records; trusts are not), or have a complex family situation.

Durable Power of Attorney

A durable power of attorney (POA) designates someone to make financial and legal decisions on your behalf if you become incapacitated. Without one, a court must appoint a conservator — a time-consuming and costly process. “Durable” means the POA remains effective even if you become mentally incapacitated.

Healthcare Proxy / Medical Power of Attorney

A healthcare proxy designates someone to make medical decisions for you if you cannot make them yourself. This is different from a financial POA and specifically covers healthcare choices.

Advance Healthcare Directive / Living Will

An advance directive (also called a living will) specifies your wishes for end-of-life medical treatment — whether you want life support continued, under what circumstances, and other medical preferences. It guides both your healthcare proxy and medical providers.

Beneficiary Designations

Not all assets pass through your will. Retirement accounts (IRAs, 401(k)s), life insurance policies, and accounts with payable-on-death (POD) designations transfer directly to the named beneficiary — regardless of what your will says. Keeping beneficiary designations updated is one of the most important and overlooked parts of estate planning. Review them after every major life event: marriage, divorce, birth of a child, death of a beneficiary.

The Probate Process and How to Avoid It

Probate is the court-supervised process of validating a will and distributing assets. It can take 6 months to 2 years, costs 3–8% of the estate in fees, and is a public record. You can largely avoid probate by:

• Using a revocable living trust to hold major assets
• Naming beneficiaries on all financial accounts and life insurance
• Titling assets jointly with right of survivorship
• Using payable-on-death (POD) or transfer-on-death (TOD) designations on bank accounts and brokerage accounts

Estate Taxes in 2026

Federal estate taxes apply only to very large estates. For 2026, the federal estate tax exemption is $13.61 million per individual (or approximately $27.2 million for married couples). Estates below these thresholds owe no federal estate tax. Twelve states plus the District of Columbia have their own estate or inheritance taxes with lower exemption thresholds — check your state’s rules if you have significant assets.

Note: The Tax Cuts and Jobs Act’s doubled exemption is currently set to revert to roughly $7 million (adjusted for inflation) after 2025 unless Congress acts. This could affect high-net-worth families. Consult an estate planning attorney if your estate is above $5 million.

When to Update Your Estate Plan

Major life events should trigger a review: marriage or divorce, birth or adoption of a child, death of a beneficiary or executor, moving to a different state, significant change in assets, or starting or selling a business. Aim to review your estate plan every 3–5 years even without a triggering event.

Bottom Line

An estate plan is not just for the elderly or wealthy. If you have children, own property, or have any assets worth passing on, you need at minimum a will, durable power of attorney, and healthcare directive. A basic estate plan through an attorney costs $500–$2,000 depending on complexity — a small price for the certainty and protection it provides your family.

Related: How to Open a Roth IRA: Step-by-Step Guide

See also:

• What Is a Beneficiary? How to Choose and Update Yours in 2026
• What Is an Annuity? Types, Pros and Cons in 2026

An annuity is a contract between you and an insurance company. You give the insurer a lump sum or series of payments, and in return they promise to pay you income — either immediately or at a future date. Annuities are used primarily for retirement income planning. They can solve a real problem (running out of money in retirement) but they come in many forms, carry significant fees and complexity, and are frequently oversold. Understanding the basics helps you decide if an annuity belongs in your plan.

The Main Types of Annuities

Immediate Annuity

You hand the insurer a lump sum, and they start paying you income right away — usually within a month. The payment amount depends on your age, the deposit amount, current interest rates, and the payout option you choose. A life annuity pays as long as you live. A joint-and-survivor annuity continues payments to a spouse after you die. An immediate annuity provides the simplest, most predictable income stream but gives up control of the principal.

Deferred Annuity

You contribute now, the money grows inside the contract, and income payments begin at a future date you choose. Deferred annuities have an accumulation phase (growth) and a distribution phase (income). Within deferred annuities, there are three main subtypes:

• Fixed annuity: Grows at a guaranteed interest rate set by the insurer. Predictable, low risk, no market exposure. Works similarly to a CD but offered by an insurer.
• Variable annuity: Invested in subaccounts (similar to mutual funds). Returns vary with market performance. Higher upside but also downside risk. Typically the most expensive type due to subaccount fees plus insurance charges.
• Fixed-indexed annuity (FIA): Returns are linked to a stock market index (like the S&P 500) but with a floor (you cannot lose principal in down years) and a cap or participation rate that limits upside. A middle ground between fixed and variable.

How Annuities Grow Tax-Deferred

Inside an annuity, gains grow tax-deferred — you do not owe taxes on interest, dividends, or gains each year. You pay ordinary income tax on earnings when you withdraw them. Unlike IRAs and 401(k)s, there are no annual contribution limits on non-qualified (after-tax) annuities. This makes them useful for high earners who have maxed out other tax-advantaged accounts and want additional tax deferral.

However: when you withdraw earnings from a non-qualified annuity, they are taxed as ordinary income — not at the lower capital gains rate. Long-term capital gains are taxed at 0%, 15%, or 20%, while ordinary income can be taxed up to 37%. This is an important disadvantage versus a taxable brokerage account for investors in high brackets.

Annuity Fees

Variable annuities in particular are known for high costs. Common charges include:

• Mortality and expense (M&E) fee: 1–1.5% annually — the core insurance charge
• Subaccount expense ratios: 0.5–2% annually for the underlying investment funds
• Rider fees: 0.5–1.5% per year for guaranteed income riders or death benefit riders
• Surrender charges: If you withdraw too much too early (usually within the first 5–10 years), you pay a penalty — often starting at 7–8% and declining each year

The total annual cost of a variable annuity can easily exceed 3%, which significantly erodes long-term returns compared to low-cost index funds.

When an Annuity Makes Sense

• You have maxed out your IRA and 401(k) and want additional tax deferral
• You are approaching retirement and want to guarantee income you cannot outlive
• You are risk-averse and value principal protection (fixed or fixed-indexed annuities)
• You are concerned about longevity risk — the risk of living longer than your money lasts

When to Be Cautious

• You are young — tax deferral in a taxable brokerage account with index funds (at capital gains rates) often beats an annuity’s ordinary income tax treatment over decades
• You need liquidity — surrender charges lock up your money for years
• You are being sold a variable annuity inside a 401(k) or IRA — the tax deferral is redundant and you are paying extra fees for no benefit

Bottom Line

Annuities are tools, not investments. The right annuity in the right situation — particularly a simple fixed or immediate annuity for retirement income guarantees — can provide real peace of mind. Variable annuities with high fees and surrender charges often benefit the salesperson more than the buyer. Before purchasing any annuity, understand all fees, surrender periods, and how the tax treatment compares to alternatives. Get a second opinion from a fee-only fiduciary financial advisor.

For more on this topic, see our guide on how variable annuities work and when they make sense.

A 403(b) plan is a tax-advantaged retirement savings account available to employees of public schools, universities, hospitals, nonprofits, and certain other tax-exempt organizations. It works similarly to a 401(k) — you contribute pre-tax money, it grows tax-deferred, and you pay income tax only when you withdraw funds in retirement. If you work in education, healthcare, or the nonprofit sector and your employer offers a 403(b), it is one of the most powerful retirement tools available to you.

How a 403(b) Works

Contributions come from your paycheck before income taxes are calculated. This lowers your current taxable income — if you contribute $5,000 in a year, you pay income tax on $5,000 less of your earnings. Inside the account, investments grow without being taxed annually. When you retire and take withdrawals (after age 59½), you pay ordinary income tax on the amount withdrawn.

Many employers also offer a Roth 403(b) option. Roth contributions are made with after-tax dollars, grow tax-free, and qualified withdrawals are completely tax-free in retirement. This mirrors the 401(k) vs. Roth 401(k) choice.

2026 Contribution Limits

For 2026, the 403(b) contribution limits are the same as the 401(k):

• Employee contribution limit: $23,500 per year
• Catch-up contribution (age 50+): Additional $7,500 per year, for a total of $31,000
• Special catch-up (age 60–63): Under SECURE 2.0, employees age 60–63 can contribute an enhanced catch-up of $11,250 starting in 2025, for a total of $34,750
• Total combined limit (employee + employer contributions): $70,000

The 15-Year Rule: Extra Catch-Up for Long-Tenured Employees

One feature unique to 403(b) plans is the 15-year catch-up provision. If you have worked for the same qualifying employer for at least 15 years and have averaged less than $5,000 in annual contributions over your career, you may be able to contribute an extra $3,000 per year (up to a lifetime total of $15,000). This provision is not available in 401(k) plans.

Employer Matching and Vesting

Many 403(b) plan sponsors offer employer matching contributions — free money added to your account based on how much you contribute. Common match structures include 50% of your contribution up to 6% of salary, or dollar-for-dollar up to 3%. Always contribute enough to capture the full employer match before doing anything else.

Employer contributions may be subject to a vesting schedule — you earn full ownership of matching funds over time (e.g., 20% per year over 5 years, or 100% immediately with cliff vesting at 3 years). Check your plan documents.

Investment Options in a 403(b)

403(b) plans traditionally offered only annuity products from insurance companies, which often carry high fees. Today, many plans also offer mutual funds and index funds. Unfortunately, 403(b) plans — especially in K-12 education — have historically included high-cost investment options. If your plan offers low-cost index funds, prioritize those. If options are limited and fees are high, contribute enough to get the match, then consider maxing out an IRA (Roth or traditional) in a lower-cost account like Fidelity or Vanguard.

403(b) vs. 401(k): What’s the Difference?

• Both have the same contribution limits and tax treatment.
• 403(b) is available to nonprofit, education, and healthcare employees. 401(k) is for most private-sector employers.
• 403(b) plans have the 15-year catch-up provision; 401(k) plans do not.
• 403(b) plans have historically had fewer investment options and more annuity products.
• Both can offer traditional and Roth contribution options.

Withdrawals and RMDs

Withdrawals before age 59½ are subject to ordinary income tax plus a 10% early withdrawal penalty (with exceptions for disability, death, certain medical expenses, and others). Required Minimum Distributions (RMDs) must begin at age 73. Roth 403(b) contributions are no longer subject to RMDs starting in 2024, thanks to SECURE 2.0.

Bottom Line

A 403(b) is among the most valuable retirement tools available to public-sector and nonprofit workers. Contribute at least enough to capture the full employer match, choose low-cost index funds whenever available, and consider using a Roth 403(b) if you expect your tax rate to be higher in retirement. If your plan’s investment options are poor, supplement with a Roth IRA for better fund selection.

Related: What Is a Money Market Account?

Related: How to Open a Roth IRA: Step-by-Step Guide

Long-term care insurance pays for help with daily activities — bathing, dressing, eating, and moving around — when you can no longer do them yourself due to aging, illness, or injury. It is one of the most overlooked parts of retirement planning, yet long-term care is one of the largest financial risks most Americans face. Understanding how it works, what it costs, and when to buy it can protect your savings from a catastrophic expense.

What Does Long-Term Care Insurance Cover?

Most policies pay for care in multiple settings:

• Nursing home care (24-hour skilled and custodial care)
• Assisted living facilities
• Memory care units (for dementia and Alzheimer’s)
• Adult day care centers
• Home health aide services
• Informal caregiver support (family members, in some policies)

Benefits are triggered when you need help with at least two of six “activities of daily living” (ADLs) — bathing, continence, dressing, eating, toileting, and transferring — or when you have a cognitive impairment like dementia.

Why Long-Term Care Is a Real Financial Risk

The numbers are striking. According to AARP and the U.S. Department of Health and Human Services:

• About 70% of people who reach age 65 will need some form of long-term care in their lifetime.
• The average nursing home stay costs over $9,700 per month for a private room (2025 Genworth Cost of Care Survey).
• The average length of care need is around 3 years. Many people need care for 5 years or more.

Medicare covers only short-term skilled nursing care after a qualifying hospital stay. It does not cover custodial long-term care. Medicaid does pay for nursing home care, but only after you have spent down nearly all of your assets to qualify. Without insurance, you pay out of pocket.

How Long-Term Care Insurance Works

You buy a policy before you need it — typically in your 50s or early 60s. You pay annual or monthly premiums. When you need care and meet the benefit trigger (2 of 6 ADLs or cognitive impairment), the policy pays a daily or monthly benefit toward qualifying care costs. Policies typically have:

• Benefit amount: A daily or monthly dollar amount the policy pays (e.g., $200/day or $6,000/month).
• Benefit period: How long the policy pays benefits (e.g., 2 years, 4 years, unlimited).
• Elimination period: A waiting period before benefits start — typically 30, 60, or 90 days that you cover out of pocket.
• Inflation protection: An optional rider that grows your benefit over time to keep pace with rising care costs. Strongly recommended.

How Much Does Long-Term Care Insurance Cost?

Premiums depend heavily on age at purchase, health status, gender, coverage amount, and benefit period. Rough 2025 benchmarks from AARP:

• A 55-year-old male buying a policy with $165,000 in initial benefits: roughly $950–$1,400 per year.
• A 55-year-old female: roughly $1,500–$2,200 per year (women pay more because they tend to live longer and use more care).
• Couples can often get discounts of 15–30%.

Waiting until your 60s or 70s significantly increases premiums — or disqualifies you entirely if your health has declined. The best time to buy is typically your mid-50s when you are still healthy and premiums are manageable.

Alternatives to Traditional Long-Term Care Insurance

• Hybrid life/LTC policies: A life insurance policy with a long-term care rider. If you do not use the LTC benefit, the death benefit goes to your heirs. More predictable costs than traditional LTC insurance.
• Annuity with LTC rider: A deferred annuity that can accelerate payments if long-term care is needed.
• Self-insuring: Building a dedicated pool of savings (often $500,000+) to cover potential care costs. Viable for high-net-worth individuals.
• Medicaid planning: With proper estate planning, some people strategically position assets to qualify for Medicaid LTC benefits. Requires an elder law attorney and long lead time.

Is Long-Term Care Insurance Worth It?

LTC insurance makes the most sense if you have assets worth protecting (roughly $200,000+), you want to avoid burdening family members with caregiving, you are in good health and can still qualify, and you can sustain premiums long-term. It makes less sense if your assets are modest (Medicaid may cover you) or if your health makes coverage unaffordable.

Bottom Line

Long-term care is among the largest uncovered financial risks in retirement. The earlier you plan for it — through insurance, a hybrid policy, or a dedicated savings strategy — the more options you have and the less it costs. Start researching in your 50s, before health issues narrow your choices.

See also:

• What Is Umbrella Insurance? Do You Need It in 2026?