Author: AskMyFinance Editorial Team

This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

Two Powerful Retirement Accounts for the Self-Employed

If you work for yourself, you can save much more for retirement than most employees. A SEP-IRA and a Solo 401(k) are the two most popular options. Both let you save a large amount and reduce your tax bill. This guide compares them so you can pick the right one.

Rates and figures as of May 2026.

SEP-IRA at a Glance

SEP stands for Simplified Employee Pension. It is easy to set up, requires almost no paperwork, and is offered by most major brokerages.

2026 contribution limit: Up to 25% of net self-employment income, with a maximum of $69,000.

Eligibility: Any self-employed person, freelancer, or sole proprietor. If you have employees, you generally must contribute the same percentage of compensation for them as you do for yourself. This is why it is less popular for businesses with staff.

Setup: Fill out IRS Form 5305-SEP and open an account with a brokerage. Takes about 15 minutes.

Tax treatment: Contributions are pre-tax. Your money grows tax-deferred and you pay income tax when you withdraw in retirement. There is no Roth option for a SEP-IRA.

Solo 401(k) at a Glance

A Solo 401(k), also called an Individual 401(k) or i401(k), is a full 401(k) plan designed for self-employed people with no employees (other than a spouse).

2026 contribution limit: Up to $69,000, plus a $7,500 catch-up if you are 50 or older. You contribute as both employer and employee:

• Employee contribution: up to $23,500 (or 100% of net income, whichever is less)
• Employer contribution: up to 25% of net self-employment income

Combined, these can reach $69,000 in 2026.

Eligibility: Self-employed with no full-time employees other than a spouse. Must have earned business income.

Setup: More paperwork than a SEP-IRA. You need to adopt a plan document, open an account, and file Form 5500-EZ once assets exceed $250,000.

Tax treatment: Traditional (pre-tax) contributions reduce your taxable income now. Many providers also offer a Roth Solo 401(k) option, where you contribute after-tax dollars and withdrawals in retirement are tax-free.

Which Has Higher Contribution Limits?

At higher income levels, they reach the same maximum ($69,000). But at lower income levels, the Solo 401(k) lets you save more.

Example: If you earn $60,000 in net self-employment income:

• SEP-IRA max: 25% x $60,000 = $15,000
• Solo 401(k) max: $23,500 employee + a portion as employer = potentially $30,000+

For income below about $200,000, the Solo 401(k) usually allows a larger contribution.

Roth Option: Solo 401(k) Wins

This is the biggest advantage of the Solo 401(k). The Roth option lets you pay taxes now and withdraw money tax-free in retirement. There is no Roth SEP-IRA. If tax-free retirement income is important to you, the Solo 401(k) is the better choice.

Which Should You Choose?

• Choose a SEP-IRA if you want simplicity, have a higher income (above $200,000), or have employees you may need to cover.
• Choose a Solo 401(k) if you want higher contribution limits at lower income levels, want the Roth option, or plan to make larger contributions relative to your income.

Both accounts work alongside other retirement savings. Compare Roth IRA vs Traditional IRA to decide if you also want a personal IRA on top of your business account. See how your retirement savings compare against the benchmarks by age. And if you are just getting started with investing, check out the best investment apps for beginners.

Frequently Asked Questions

What is the maximum SEP-IRA contribution for 2026?

The maximum is $69,000, or 25% of net self-employment income, whichever is less.

Can I have both a SEP-IRA and a Solo 401(k)?

Generally no. Most self-employed people choose one or the other. Consult a tax advisor if you are considering both.

What is the Solo 401(k) contribution limit for 2026?

The 2026 limit is $69,000 total ($76,500 with the catch-up for age 50+). This combines employee contributions (up to $23,500) and employer contributions (up to 25% of net income).

Does a Solo 401(k) have a Roth option?

Many providers offer it. Roth Solo 401(k) contributions are after-tax, and withdrawals in retirement are tax-free. Check your provider before opening an account.

When is the deadline to contribute to a SEP-IRA?

You can contribute for a given tax year up to your filing deadline, including extensions. With an extension, that can be as late as October 15.

This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

Your Social Security Benefit Is Based on Your Work History

The amount you receive from Social Security depends on how much you earned throughout your working life. The more you earned (up to the annual limit), the higher your benefit. This guide explains how the calculation works in plain English.

Rates and figures as of May 2026.

Step 1: Your Top 35 Earning Years

The SSA looks at your 35 highest-earning years. If you worked fewer than 35 years, zeros are added for the missing years, which lowers your average. This is why it pays to work at least 35 years before claiming, if possible.

Each year’s earnings are adjusted for inflation, so older earnings are brought up to today’s dollars. This adjusted average is called your Average Indexed Monthly Earnings (AIME).

Step 2: The Bend Point Formula

The SSA uses a formula with “bend points” to turn your AIME into your Primary Insurance Amount (PIA), which is your benefit at full retirement age. The formula is progressive, meaning lower earners get a higher percentage of their income replaced.

For 2026, the formula works like this:

• 90% of the first $1,226 of your AIME
• 32% of AIME between $1,226 and $7,391
• 15% of AIME above $7,391

Add these three amounts together to get your PIA. That is your full retirement benefit, payable at your full retirement age (67 for anyone born in 1960 or later).

What the Average Person Gets

As of 2026, the average Social Security retirement benefit is about $1,950 per month. The maximum possible benefit for someone claiming at age 70 is around $5,108 per month. Most people fall well below the maximum.

How to Use the SSA Estimator Tool

The Social Security Administration has a free online estimator at ssa.gov. Here is how to use it:

1. Go to ssa.gov/estimator or sign into your my Social Security account.
2. The tool pulls your actual earnings record automatically.
3. Enter the age you plan to stop working and claim benefits.
4. The tool shows your estimated monthly benefit at several claiming ages.

The my Social Security account also shows your full earnings history. Check it once a year to make sure all your income is recorded correctly. Errors are rare, but they do happen.

What Reduces Your Benefit

• Years with zero or low earnings (fewer than 35 years of work)
• Claiming before full retirement age (age 62 costs you about 30%)
• Working in a job not covered by Social Security (some government and railroad jobs)

What Increases Your Benefit

• More high-earning years in your record
• Waiting past full retirement age (8% increase per year up to age 70)
• Cost-of-living adjustments (COLA) that the SSA applies each year

Social Security is one part of your retirement plan. Also think about your retirement savings benchmarks and whether you should open a Roth IRA. If you are close to retirement, compare Roth vs Traditional IRA options to reduce your future tax burden.

Frequently Asked Questions

How is my Social Security benefit calculated?

The SSA takes your 35 highest-earning years, adjusts them for inflation, and produces your Average Indexed Monthly Earnings. It then applies a progressive formula to calculate your monthly benefit at full retirement age.

What is the average Social Security benefit in 2026?

The average monthly retirement benefit is about $1,950. The maximum for someone claiming at age 70 is around $5,108 per month.

What happens if I worked fewer than 35 years?

The SSA fills in zeros for the missing years, which lowers your average and reduces your benefit. Working at least 35 years helps you maximize what you receive.

How do I check my Social Security earnings record?

Create a free account at ssa.gov/myaccount. You can view your earnings history and see estimated benefits at different claiming ages.

Does working while receiving Social Security change my benefit?

If you earn more than one of your previous 35 recorded years, the SSA can recalculate and increase your benefit going forward.

This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

Medicare Has Four Parts and They All Do Different Things

Medicare can seem confusing because it is broken into parts. Each part covers different medical costs. This guide explains Parts A, B, C, and D in simple terms so you know exactly what you are signing up for.

Rates and figures as of May 2026.

Part A: Hospital Insurance

Part A covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health care.

Cost: Most people get Part A for free. If you or your spouse worked and paid Medicare taxes for at least 10 years (40 quarters), you do not pay a monthly premium. If you worked fewer than 40 quarters, you pay up to $505 per month in 2026.

Part A has a deductible of $1,632 per benefit period in 2026. This is not an annual deductible. It applies each time you start a new benefit period.

Part B: Medical Insurance

Part B covers doctor visits, outpatient care, preventive services, medical equipment, and some home health care.

Cost: The standard Part B premium in 2026 is $185.00 per month. Higher-income enrollees pay more through Income-Related Monthly Adjustment Amounts (IRMAA). Part B also has a $240 annual deductible, after which Medicare pays 80% of approved costs and you pay the remaining 20%.

Most people should enroll in Part B when they first become eligible. Delaying can result in a permanent premium penalty of 10% for each 12-month period you were eligible but did not enroll.

Part C: Medicare Advantage

Part C, called Medicare Advantage, is an alternative to Original Medicare. Instead of getting coverage directly from the government, you get it through a private insurance company that contracts with Medicare.

Medicare Advantage plans typically bundle Part A, Part B, and usually Part D (drug coverage) together. Many plans also offer extras like dental, vision, and hearing coverage that Original Medicare does not cover.

Costs vary widely by plan and location. Some plans have $0 premiums, but you still pay the Part B premium.

Part D: Prescription Drug Coverage

Part D covers prescription medications. You buy it as a standalone plan to pair with Original Medicare, or it is bundled into a Medicare Advantage plan.

Premiums vary by plan, but the national base premium for 2026 is around $36 per month. Plans have formularies, which are lists of covered drugs. Check that your prescriptions are on the formulary before you enroll.

Starting in 2025, out-of-pocket drug costs are capped at $2,000 per year under the Inflation Reduction Act. This cap remains in effect for 2026.

Medigap vs Medicare Advantage: The Big Choice

If you stick with Original Medicare (Parts A and B), you can add a Medigap (Medicare Supplement) policy to cover the gaps, mainly the 20% coinsurance under Part B and the Part A deductible.

• Medigap: Higher monthly premium, but very predictable costs. You can see any doctor who accepts Medicare. No network restrictions.
• Medicare Advantage: Often lower monthly premium or $0 premium. May include dental and vision. But you are limited to a network of doctors and may need referrals.

There is no universally better option. It depends on your health needs, budget, and where you live.

When to Enroll

Your Initial Enrollment Period is a 7-month window around your 65th birthday: three months before, the month of, and three months after. Missing this window can mean higher premiums and delayed coverage. If you are still working and have employer coverage, different rules apply.

Medicare planning fits into a bigger retirement picture. Make sure your savings are on track by checking the retirement savings benchmarks by age. A Roth IRA can provide tax-free income in retirement that does not affect your Medicare premiums. You should also have a solid emergency fund for unexpected medical costs not covered by Medicare.

Frequently Asked Questions

When can I sign up for Medicare?

Your Initial Enrollment Period is a 7-month window around your 65th birthday. Missing it without qualifying employer coverage can result in permanent late penalties.

Is Medicare free?

Part A is free for most who worked at least 10 years. Part B costs $185/month in 2026. Part D and Medicare Advantage vary by plan.

What does Medicare not cover?

Original Medicare does not cover dental, vision, hearing, or most long-term care. You need separate coverage for those services.

What is the difference between Medicare Advantage and Medigap?

Medicare Advantage replaces Original Medicare through private insurers, often with networks. Medigap supplements Original Medicare by covering cost gaps and has no network restrictions.

Is there a cap on prescription drug costs under Medicare in 2026?

Yes. Out-of-pocket drug costs are capped at $2,000 per year under Part D, thanks to the Inflation Reduction Act.

This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

Freelancing Means You Handle Your Own Taxes

When you work for an employer, they take taxes out of every paycheck. As a freelancer or self-employed worker, nobody does that for you. You have to track your income, pay taxes on time, and handle deductions yourself. This guide covers everything you need to know.

Rates and figures as of May 2026.

Self-Employment Tax

Self-employment tax covers Social Security and Medicare. When you work for an employer, they pay half of this (7.65%) and you pay the other half. As a freelancer, you pay the full 15.3% yourself.

You pay self-employment tax on net self-employment income (after deductible expenses). If you earn $50,000 in freelance income with $10,000 in expenses, you pay self-employment tax on $40,000.

There is a deduction you can take for half of the self-employment tax you pay. This reduces your income tax bill somewhat.

Quarterly Estimated Tax Payments

Freelancers are required to pay estimated taxes four times a year. The 2026 due dates are:

• April 15 (for Jan 1 – Mar 31)
• June 16 (for Apr 1 – May 31)
• September 15 (for Jun 1 – Aug 31)
• January 15, 2027 (for Sep 1 – Dec 31)

If you underpay your estimated taxes by too much, the IRS charges a penalty. A safe approach is to pay at least 90% of your current year tax bill, or 100% of last year’s tax bill, whichever is smaller.

Schedule C: Reporting Your Business Income

You report freelance income and expenses on Schedule C, which attaches to your Form 1040. Schedule C is straightforward:

1. List your total gross income from freelance work.
2. List all business expenses (see below).
3. Subtract expenses from income to get your net profit.
4. That net profit flows to your Form 1040 as taxable income.

Deductible Business Expenses

You can deduct legitimate business expenses from your freelance income. Common deductions include:

• Home office (dedicated workspace used only for business)
• Computer, phone, and internet (business use percentage)
• Software subscriptions and tools
• Business mileage or vehicle expenses
• Health insurance premiums (self-employed deduction)
• Professional development and education
• Marketing and advertising costs
• Professional services (accountant, lawyer)

Keep receipts for everything. Use a separate bank account and credit card for business expenses to make tracking easier.

SEP-IRA: Cut Your Tax Bill and Save for Retirement

A SEP-IRA lets self-employed people set aside up to 25% of net self-employment income, up to $69,000 in 2026. Contributions are tax-deductible, which directly reduces your taxable income. It is one of the most powerful tax tools available to freelancers.

Once you have your freelance finances in order, think about where to keep your business money. Check out our picks for the best high-yield savings accounts for your cash reserves. A solid emergency fund is especially important for freelancers since income can vary month to month. And if you do end up owing the IRS money, read our guide on IRS tax debt options.

Frequently Asked Questions

How much should I set aside for taxes as a freelancer?

A common rule is 25-30% of every payment. This covers federal income tax, self-employment tax (15.3%), and state taxes.

Do I need to pay estimated taxes if I also have a regular job?

You may be able to avoid quarterly estimates by increasing withholding at your regular job. The IRS Withholding Estimator can help you check.

Can I deduct my home office?

Yes, if you use a dedicated area regularly and exclusively for business. Use the simplified method ($5/sq ft up to 300 sq ft) or the actual expense method.

What is the 1099 threshold in 2026?

Clients who pay you $600 or more must send a 1099-NEC. But you owe taxes on all freelance income, even without a 1099.

What is the QBI deduction?

The QBI deduction lets eligible self-employed people deduct up to 20% of qualified business income. Most freelancers qualify, subject to income limits.

This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

Two Ways to Reduce Your Tax Bill

When you file your taxes, you get to subtract either the standard deduction or your itemized deductions from your income. The right choice depends on your situation. This guide explains both options so you can pick the one that saves you more money.

Rates and figures as of May 2026.

What Is the Standard Deduction?

The standard deduction is a flat dollar amount the IRS lets you subtract from your income. You do not need receipts or documentation. You just take the deduction and move on.

For 2026 (taxes filed in 2027), the standard deduction amounts are:

• Single filers: $15,000
• Married filing jointly: $30,000
• Head of household: $22,500

If you are 65 or older, or blind, you get an extra amount added on top of these figures.

What Is Itemizing?

Itemizing means listing out your actual deductible expenses and adding them up. If the total is higher than the standard deduction, it is worth itemizing.

Common itemized deductions include:

• Mortgage interest (on loans up to $750,000)
• State and local taxes (SALT) — capped at $10,000
• Charitable donations
• Medical expenses above 7.5% of your income

The SALT Cap Limits Many Deductions

One big factor is the SALT cap. You can only deduct up to $10,000 in state and local taxes. This includes property taxes plus either state income tax or sales tax.

For people in high-tax states like California, New York, or New Jersey, this cap limits how much they can deduct. It makes itemizing less attractive than it used to be.

When Does Itemizing Beat the Standard Deduction?

You should itemize if your total deductible expenses add up to more than the standard deduction for your filing status.

Itemizing usually makes sense if you:

• Own a home with a large mortgage and pay a lot in mortgage interest
• Pay high property taxes and live in a high-tax state
• Make large charitable donations
• Had big out-of-pocket medical expenses

Most people, especially renters, do better with the standard deduction.

A Quick Decision Checklist

Run through this:

1. Add up your mortgage interest paid in 2025.
2. Add state/local taxes paid, up to $10,000.
3. Add any charitable donations.
4. Add medical expenses above 7.5% of your income.
5. If that total beats your standard deduction amount, itemize. If not, take the standard deduction.

Tax software will usually run this calculation for you and recommend the better option.

If you get a refund after filing, put it to work. A high-yield savings account is a smart place to park it. If you have debt, the debt avalanche vs snowball calculator can help you build a payoff plan. And if you want to use your refund to start building wealth, read our guide on how to start investing with $100.

Frequently Asked Questions

Can I switch between the standard deduction and itemizing each year?

Yes. You choose which method to use each year when you file. There is no penalty for switching. Pick whichever saves you more money for that tax year.

What is the SALT deduction cap in 2026?

The SALT cap is $10,000 per household. This includes property taxes plus either state income taxes or sales taxes.

Do renters benefit from itemizing?

Usually not. Renters do not have mortgage interest or property tax deductions. Unless you make large charitable donations or have high medical expenses, the standard deduction is almost always better for renters.

What is the standard deduction for married couples in 2026?

For 2026, the standard deduction for married filing jointly is $30,000. This is the amount you subtract from your combined income before calculating how much tax you owe.

This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

The W-4 Controls How Much Tax Is Withheld From Your Paycheck

When you start a new job, your employer gives you a W-4 form. What you write on it tells your employer how much federal income tax to take out of each paycheck. Get it right and you will owe little to nothing at tax time. Get it wrong and you could owe a big bill or give the IRS an interest-free loan all year.

Rates and figures as of May 2026.

The Five Steps on the W-4

The current W-4 form has five steps. Only Steps 1 and 5 are required for everyone. The rest are optional and only apply to certain situations.

Step 1: Personal Information

Write your name, address, Social Security number, and filing status. Filing status options are Single, Married Filing Jointly, and Head of Household. Choose the one that matches how you plan to file your taxes.

Step 2: Multiple Jobs or Spouse Works

Fill this out if you have more than one job or if you are married and your spouse also works. You have three options:

• Use the IRS Tax Withholding Estimator online for the most accurate result.
• Use the Multiple Jobs Worksheet on page 3 of the form.
• Check the box in Step 2(c) if you have exactly two jobs with similar pay. This is the simplest option but may not be perfectly accurate.

Skip Step 2 if you only have one job and your spouse does not work.

Step 3: Claim Dependents

If you have children or other dependents, this step reduces your withholding. For each qualifying child under 17, multiply by $2,000. For other dependents, multiply by $500. Write the total in the box.

Skip this if no one claims you as a dependent on their taxes.

Step 4: Other Adjustments (Optional)

This step has three parts:

• 4(a): Add other income not from jobs, like freelance work or investment income. Adding income here increases your withholding so you do not owe a big bill later.
• 4(b): Add deductions if you plan to itemize. This reduces your withholding.
• 4(c): Request extra withholding in whole dollars if you want more taken out each pay period.

Step 5: Sign and Date

Sign the form and give it to your employer. You are done.

Common Mistakes to Avoid

• Not updating your W-4 after a major life change (marriage, divorce, new baby, second job).
• Claiming too many deductions and owing a large bill in April.
• Forgetting to account for freelance or investment income in Step 4(a).
• Using an old W-4 form. The IRS redesigned it in 2020. Do not use anything before that year.

When Should You Update Your W-4?

You should update it anytime your tax situation changes. Common triggers include getting married or divorced, having a child, getting a second job, starting freelance work, or getting a significant raise or pay cut.

If you earn freelance income on top of your regular job, be sure to read our guide on paying off IRS tax debt in case you end up owing. It is also smart to keep a solid emergency fund to cover any unexpected tax bill. And once your withholding is dialed in, put extra savings into a high-yield savings account.

Frequently Asked Questions

Do I have to fill out a new W-4 every year?

No. Your W-4 stays in effect until you change it. Only update it when your tax situation changes.

What happens if I do not fill out a W-4?

Your employer withholds taxes as if you are single with no other adjustments. This often means more withholding than necessary.

Can I claim exempt on my W-4?

Only if you had zero federal tax liability last year and expect zero this year. Most workers do not qualify.

How do I fill out a W-4 if I have two jobs?

Complete Step 2 on your W-4. Use the IRS Withholding Estimator or the Multiple Jobs Worksheet on the form for the most accurate result.

Does a W-4 affect state taxes?

No. The federal W-4 only affects federal withholding. Most states have their own separate withholding form.

This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

What Is Capital Gains Tax?

When you sell an asset for more than you paid for it, the profit is called a capital gain. The IRS taxes that profit. How much you pay depends on how long you held the asset and how much money you make overall.

Rates and figures as of May 2026.

Short-Term vs Long-Term Capital Gains

This is the most important distinction in capital gains tax.

Short-term gains come from assets you held for one year or less. They are taxed at your regular income tax rate, which can be as high as 37%.

Long-term gains come from assets you held for more than one year. They are taxed at lower rates: 0%, 15%, or 20%.

Holding an investment for just one extra day can move it from short-term to long-term and save you a significant amount of tax.

2026 Long-Term Capital Gains Tax Rates

Your long-term rate depends on your taxable income:

• 0% rate: Single filers earning up to $47,025; married filing jointly up to $94,050
• 15% rate: Single filers earning $47,026 to $518,900; married filing jointly up to $583,750
• 20% rate: Income above those thresholds

Many middle-income households pay 0% on long-term gains. This is one of the biggest tax breaks available to regular investors.

Special Rules for Crypto and Real Estate

Cryptocurrency: The IRS treats crypto like property. Every time you sell, trade, or spend crypto, it is a taxable event. Short-term gains are taxed as income. Long-term gains get the 0/15/20% treatment.

Real estate: If you sell your primary home, you can exclude up to $250,000 in gains ($500,000 if married) from taxes. You must have owned and lived in the home for at least two of the last five years. Investment properties do not get this exclusion.

How to Minimize Capital Gains Tax

Hold for More Than a Year

The simplest strategy. Waiting just over 12 months before selling converts short-term gains into long-term gains.

Tax-Loss Harvesting

If you have investments that are worth less than you paid for them, selling them generates a capital loss. You can use those losses to offset capital gains dollar for dollar. If losses exceed gains, you can deduct up to $3,000 against regular income. Extra losses carry forward to future years.

Use Tax-Advantaged Accounts

Inside a Roth IRA or traditional IRA, you do not pay capital gains taxes on growth. Investments inside a 401(k) also grow tax-deferred. Moving your highest-growth assets into these accounts can save a lot over time.

Donate Appreciated Assets

If you donate stock or other appreciated assets to charity instead of selling them, you avoid capital gains tax entirely and still get a charitable deduction for the full market value.

Capital gains planning works best alongside a broader investment strategy. Read our guide to opening a Roth IRA to see how tax-free growth can work in your favor. You can also compare index funds vs ETFs to decide where to put your money. For hands-on portfolio management, check out the best investment apps for beginners.

Frequently Asked Questions

What is the capital gains tax rate for most people in 2026?

Most middle-income households pay 15% on long-term capital gains. If your income is below $47,025 (single) or $94,050 (married), you may pay 0%.

Do I owe capital gains tax if I sell my house?

Probably not on all of it. If you owned and lived in the home for at least two of the last five years, you can exclude up to $250,000 in gains ($500,000 if married) from taxes.

How is crypto taxed for capital gains?

The IRS treats cryptocurrency as property. Every sale or trade is taxable. Gains on crypto held over a year get long-term rates (0%, 15%, 20%). Short-term gains are taxed as ordinary income.

What is tax-loss harvesting?

Selling investments worth less than you paid generates a capital loss. That loss offsets your gains, reducing your tax bill. Losses over $3,000 carry forward to future years.

Are capital gains taxed separately from regular income?

Long-term gains have their own tax rates (0/15/20%). Short-term gains are added to regular income and taxed at your ordinary rate, up to 37%.

This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

The Age You Claim Social Security Changes Everything

You can start Social Security as early as age 62 or as late as age 70. Waiting longer means a bigger monthly check. But that is not always the right call. This guide helps you find the best time to claim based on your situation.

Rates and figures as of May 2026.

The Three Main Ages to Know

Age 62: The Earliest Option

You can claim at 62, but your benefit is permanently reduced. The reduction is about 25-30% less than your full benefit, depending on your birth year. If you need the income now or have health concerns, early claiming might make sense.

Full Retirement Age (FRA)

Your full retirement age is the point where you get 100% of your earned benefit. For anyone born in 1960 or later, FRA is 67. Claiming before 67 means a reduced benefit. Claiming after 67 means an increased benefit.

Age 70: The Maximum Benefit

For every year you wait past your FRA, your benefit grows by 8% per year. Wait until 70 and you can get up to 32% more than your FRA amount. After 70, there is no additional increase, so there is no reason to wait longer.

The Break-Even Analysis

The break-even point is when the total lifetime payments from waiting equal the total from claiming early. For most people, the break-even age is around 80 to 83.

Here is the simple math: if you expect to live past 80-83, waiting to claim usually puts more money in your pocket over your lifetime. If you have serious health issues or a shorter life expectancy, claiming early or at FRA may make more sense.

Spousal Benefits

Married couples have more flexibility. A spouse can claim benefits based on their own work record or up to 50% of their partner’s benefit, whichever is higher.

A common strategy: one spouse claims early for income, while the higher earner waits until 70 to maximize the survivor benefit. When one spouse dies, the surviving spouse gets the higher of the two monthly amounts.

Working While Claiming

If you claim before your FRA and keep working, your benefit is temporarily reduced if you earn above the annual limit ($22,320 in 2026). For every $2 you earn above the limit, $1 is withheld from your Social Security check. Once you reach FRA, the withheld amounts are added back, and there is no earning limit after that point.

What to Think About Before You Decide

• Your health and expected lifespan
• Whether you are still working and what you earn
• Your spouse’s situation and benefit amount
• Whether you have other retirement income
• Your overall financial picture

Social Security is just one piece of retirement income. A Roth IRA vs Traditional IRA comparison can help you decide how to save in parallel. Also check how your savings stack up against the retirement benchmarks by age. If you have not started investing yet, the best investment apps for beginners are a good starting point.

Frequently Asked Questions

What is the best age to claim Social Security?

It depends on your health, finances, and life expectancy. If you expect to live past 80-83, waiting until 70 usually gives you more total lifetime income.

How much is my benefit reduced if I claim at 62?

For people with a full retirement age of 67, claiming at 62 reduces your benefit by about 30%. This reduction is permanent.

Can I work while receiving Social Security?

Yes, but if you claim before full retirement age and earn above $22,320 (2026 limit), $1 is withheld for every $2 you earn over the limit. After full retirement age, there is no earning limit.

What happens to Social Security if my spouse dies?

You can receive the higher of your own benefit or your deceased spouse’s benefit. This is why the higher earner in a couple often benefits from waiting until 70 to claim.

This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

You Do Not Have to Pay to File Your Taxes

Millions of Americans pay to file their taxes every year. But you do not have to. There are several free options that work for most people. This guide covers the best ways to file for free in 2026.

Rates and figures as of May 2026.

IRS Free File

IRS Free File is the most well-known free option. It is a partnership between the IRS and several tax software companies.

If your income is $84,000 or below, you can use guided tax software at no cost. The IRS website lists the companies that participate each year. You pick one and file through their site.

If your income is above $84,000, you can still use Free File Fillable Forms. These are electronic versions of the paper forms. There is no guidance, but there is no cost either.

Go to IRS.gov/freefile to start. Do not search Google for “IRS Free File.” Scam sites use that phrase to trick people.

FreeTaxUSA

FreeTaxUSA is one of the best free tax options. Federal filing is always free. State filing costs $14.99, which is still much less than TurboTax or H&R Block.

It handles W-2 income, self-employment income, investment gains, and retirement income. The interface is simple. Most people can finish in under an hour.

Cash App Taxes

Cash App Taxes (formerly Credit Karma Tax) is completely free. Federal and state filing cost nothing. There are no hidden fees or upgrade prompts.

The downside is that it does not cover every tax situation. If you have a complex return, FreeTaxUSA or IRS Free File may be a better fit.

VITA: Free Help for Lower-Income Filers

VITA stands for Volunteer Income Tax Assistance. It is an IRS program that provides free tax prep for people who earn $67,000 or less. Trained volunteers prepare your return at no charge.

VITA sites are usually at libraries, schools, and community centers. Use the IRS VITA locator tool to find one near you.

What to Watch Out For

• Do not confuse “free to start” with “free to file.” Many paid services advertise free filing but charge when you get to the state return or certain forms.
• TurboTax and H&R Block have free tiers, but they are limited. If you have any investment income, freelance income, or own a home, you will likely hit a paywall.
• Check that your chosen service supports all the forms you need before you start entering data.

Which Free Option Should You Use?

Here is a simple way to decide:

• Income under $84,000 with a straightforward return: Use IRS Free File guided software.
• Want a clean interface with free federal filing: Use FreeTaxUSA.
• Want completely free federal and state: Use Cash App Taxes.
• Need in-person help: Find a VITA site.

Once your taxes are done, think about where to put any refund you get. A high-yield savings account can earn you much more than a regular bank account. You should also make sure you have an emergency fund in place before investing or paying down debt. If you owe the IRS money, check out our guide on how to pay off IRS tax debt.

Frequently Asked Questions

Can I file my taxes for free if I have a side income?

Yes. FreeTaxUSA handles self-employment income for free at the federal level. You will need to report it on Schedule C. State filing costs $14.99 on FreeTaxUSA.

Is IRS Free File really free?

Yes, if you qualify. Households earning $84,000 or less can use guided software at no cost. Above that income, the Free File Fillable Forms are still free but have no guidance.

What is the deadline to file taxes in 2026?

The standard federal tax deadline is April 15. If that falls on a weekend or holiday, it shifts to the next business day. You can file for a free extension to October 15, but any taxes owed are still due by April 15.

What happens if I file late?

If you owe taxes and file late, the IRS charges a failure-to-file penalty of 5% of unpaid taxes per month, up to 25%. If you are owed a refund, there is no penalty for filing late, but you have three years to claim your refund before it is forfeited.

Can I file for free if I own a home?

It depends on the service. FreeTaxUSA supports Schedule A for free. TurboTax and H&R Block often charge for this. IRS Free File guided software also covers homeowner deductions.

Disclosure: This article contains affiliate links. We may earn a commission if you apply through our links, at no extra cost to you.

The 50/30/20 rule is one of the most popular budgeting methods. It’s simple, flexible, and works for most people.

But does it still work in 2026? Here’s how to use it — and when to adjust it.

What Is the 50/30/20 Budget Rule?

Split your after-tax income into three buckets:

• 50% — Needs: Rent, groceries, utilities, insurance, minimum debt payments
• 30% — Wants: Dining out, subscriptions, entertainment, vacations
• 20% — Savings and debt payoff: Emergency fund, retirement, extra debt payments

Example Calculation

After-tax income: $5,000/month

• Needs (50%): $2,500
• Wants (30%): $1,500
• Savings/debt (20%): $1,000

Simple. But real life is rarely that clean.

The Problem with 50% for Needs in High Cost-of-Living Areas

In cities like San Francisco, New York, or Boston, rent alone can eat 40% to 50% of after-tax income. If you live somewhere expensive, the standard 50% bucket won’t hold all your needs.

Adjustments for high cost-of-living areas:

• Try a 60/20/20 split (more to needs, cut wants, keep savings the same)
• Or 60/10/30 (increase savings rate to compensate for longer time to reach goals)
• Focus on lowering fixed costs over time — smaller unit, roommates, moving to a cheaper area

50/30/20 vs Zero-Based Budgeting

Method	How It Works	Best For
50/30/20	Percentage-based categories	Simple budgets, beginners
Zero-based (YNAB)	Every dollar gets a job	Detail-oriented, debt payoff, irregular income
Envelope method	Cash in physical or digital envelopes	Overspenders, cash users
Pay yourself first	Auto-save first, spend the rest	People who struggle to save consistently

How to Use the 50/30/20 Rule Step by Step

1. Calculate after-tax income. Use your take-home pay, not your gross salary.
2. List all needs. Rent, utilities, groceries, insurance, minimum payments on debt.
3. Check if needs exceed 50%. If so, you need to cut needs or adjust the split.
4. Assign 30% to wants. Be honest — subscriptions and gym memberships are wants, not needs.
5. Route the remaining 20% to savings and debt. Start with your emergency fund, then retirement, then extra debt payments. See our guide: how much should you save in an emergency fund.

Where to Put Your 20%

Prioritize in this order:

1. Emergency fund — 3 to 6 months of expenses in a high-yield savings account
2. 401(k) match — get the full employer match first (free money)
3. Roth IRA or traditional IRA
4. Extra debt payments using the avalanche or snowball method

Does the 50/30/20 Rule Still Work in 2026?

Yes — as a starting framework. Inflation has pushed up costs for food, housing, and insurance. This means many people need to adjust the 50% needs bucket upward.

The rule is a guideline, not a rigid law. What matters most is that 20% gets saved or used to pay down debt. The split between needs and wants can flex.

Frequently Asked Questions

Should I use gross or net income for the 50/30/20 rule?

Use net income — your after-tax take-home pay. Using gross income overstates what you actually have to work with.

What counts as a “need” vs a “want”?

Needs are things you cannot live without: housing, food, utilities, transportation to work, insurance, minimum debt payments. Wants are everything else, including eating out, streaming services, and hobbies.

What if I can’t save 20%?

Start with whatever you can — even 5% or 10%. Increase by 1% every few months. The goal is to build the habit and grow over time.

Is 50/30/20 good for paying off debt?

The 20% bucket covers minimum payments (counted in needs) plus extra debt payments. If you want to pay off debt faster, shrink the wants bucket and put more into debt.

Can I use the 50/30/20 rule with a variable income?

Yes. Use your lowest expected monthly income as the base. In higher-income months, put extra toward savings and debt.