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The Earned Income Tax Credit (EITC) is a federal tax credit designed to benefit working people with low to moderate income. It is refundable — meaning if the credit is larger than the taxes you owe, you receive the difference as a refund. In 2026, the maximum EITC ranges from $649 (no qualifying children) to $7,830 (three or more qualifying children). Roughly 23 million taxpayers claim it each year, yet the IRS estimates that about 20% of eligible people don’t claim it, often because they don’t know they qualify.

Who Qualifies for the EITC

To claim the EITC, you must meet all of the following:

• Have earned income. You must have worked and earned wages, salaries, tips, or self-employment income during the year. Investment income alone does not qualify.
• Meet the income limits. Your adjusted gross income (AGI) and earned income must be below thresholds that vary by filing status and number of qualifying children (see table below).
• Have a valid Social Security number. You, your spouse (if filing jointly), and any qualifying children must each have a Social Security number that is valid for employment.
• Not file as “married filing separately.” This filing status disqualifies you.
• Be a U.S. citizen or resident alien all year.
• Not have investment income over $11,600. If your investment income (interest, dividends, capital gains) exceeds this limit in 2026, you do not qualify.
• Not be claimed as a dependent on someone else’s return.

2026 EITC Income Limits and Maximum Credits

Filing Status	No Children	1 Child	2 Children	3+ Children
Single / Head of Household	Up to $18,591	Up to $49,084	Up to $55,768	Up to $59,899
Married Filing Jointly	Up to $25,511	Up to $56,004	Up to $62,688	Up to $66,819
Maximum Credit	$649	$4,328	$7,152	$7,830

Income limits and credit amounts are indexed annually for inflation. Check IRS.gov for the most current figures at filing time.

What Counts as a Qualifying Child

A qualifying child for EITC purposes must meet four tests:

1. Relationship: Must be your son, daughter, stepchild, foster child, sibling, half-sibling, or a descendant of any of these.
2. Age: Must be under age 19 at the end of the year, under 24 if a full-time student, or any age if permanently and totally disabled.
3. Residency: Must have lived with you in the U.S. for more than half the year.
4. Joint return: Must not have filed a joint return with a spouse (unless only to claim a refund).

EITC Without Children

You can claim the EITC even with no qualifying children if you are between ages 25 and 64 at the end of the tax year, you are not a dependent, and you meet the income and other eligibility rules. The credit amount is smaller ($649 maximum in 2026) but still meaningful.

How to Claim the EITC

File your federal tax return (Form 1040) and complete Schedule EIC if you have qualifying children. The IRS will calculate the credit amount based on your income and filing status. If you use free tax software (IRS Free File, FreeTaxUSA, TurboTax Free Edition), the EITC is calculated automatically once you enter your income and family information.

If you are eligible for the EITC and did not claim it in a prior year, you can file an amended return (Form 1040-X) up to three years after the original due date to claim the credit for that year.

Common Reasons People Miss the EITC

• They don’t have children and don’t realize they can still qualify
• Their income varied significantly and they were below the limit only in some years
• They had self-employment income and weren’t aware it counts as earned income
• They received a notice of EITC disallowance in a prior year and assumed they could never claim it again (you can re-qualify each year)

EITC Refund Timing

By law, the IRS cannot issue refunds to EITC claimants before mid-February, even if you file on January 1. This is a fraud-prevention measure. Most EITC refunds arrive by late February or early March if you file electronically with direct deposit.

Bottom Line

The EITC is one of the most valuable tax credits available to working families with moderate income. If your income is below the threshold for your family size, file your tax return even if you think you don’t owe taxes — the refundable credit may generate a cash refund. Use the IRS EITC Assistant tool at irs.gov to check your eligibility before filing.

A backdoor Roth IRA is a two-step strategy that lets high earners contribute to a Roth IRA even when their income exceeds the direct contribution limit. There is nothing illegal or even unusual about it — the IRS has acknowledged it as a legitimate strategy. In 2026, the ability to contribute directly to a Roth IRA phases out between $150,000–$165,000 for single filers and $236,000–$246,000 for married filing jointly. If you earn above those thresholds, the backdoor is your path in.

The Two-Step Process

The backdoor Roth works because there is no income limit on converting a traditional IRA to a Roth IRA, even though there is an income limit on contributing directly to a Roth IRA.

1. Make a non-deductible contribution to a traditional IRA. In 2026, the limit is $7,000 ($8,000 if you are 50 or older). Anyone with earned income can do this regardless of income level. Because you already paid tax on this money and the contribution is non-deductible, it has a “basis” of $7,000 — meaning it is after-tax money.
2. Convert the traditional IRA to a Roth IRA. Shortly after making the contribution (typically within a few days to a week), request a Roth conversion for the full balance. The conversion moves the money from the traditional IRA to the Roth IRA. Because the original contribution was non-deductible, the conversion triggers little to no tax — you’ve already paid tax on the principal, and if there is no growth between contribution and conversion, the taxable amount is $0.

The Pro-Rata Rule: The Most Important Caveat

The backdoor Roth strategy works cleanly only if you have no other pre-tax traditional IRA funds. If you do, the IRS applies the pro-rata rule, which treats all your IRA money as a single pool when calculating how much of a conversion is taxable.

Example: You have $63,000 in a pre-tax IRA from a previous 401(k) rollover, plus the new $7,000 non-deductible contribution — a total of $70,000. When you convert $7,000, the IRS treats 10% of it ($700) as after-tax and 90% ($6,300) as pre-tax. You owe income taxes on that $6,300. The backdoor becomes much less attractive or outright unfavorable in this situation.

Solutions to the pro-rata problem:

• Roll your pre-tax IRA funds into your current employer’s 401(k) before doing the backdoor Roth. 401(k) balances are not included in the pro-rata calculation for IRA conversions.
• If your employer’s plan accepts rollovers, this clears the path for a clean backdoor conversion.

Reporting the Backdoor Roth on Your Tax Return

The backdoor Roth requires Form 8606 to be filed with your tax return every year you make a non-deductible IRA contribution. Form 8606 tracks your IRA basis (the after-tax money you’ve contributed) so the IRS knows which portion of any future conversions or withdrawals is taxable. If you skip this form, you risk being taxed twice on the same money when you withdraw.

Your IRA custodian will also send you Form 1099-R showing the conversion. The taxable amount should be $0 (or close to it) if you completed the conversion promptly with no earnings on the non-deductible contribution.

Mega Backdoor Roth: A More Powerful Variation

If your 401(k) plan allows after-tax contributions and in-service withdrawals or conversions, you can execute a mega backdoor Roth. This lets you contribute an additional $46,500 (the gap between the $70,000 total 401(k) contribution limit and the $23,500 employee limit in 2026) as after-tax 401(k) contributions, then convert them to a Roth IRA or Roth 401(k). Not all employers allow this — you need to check your plan documents.

Is the Backdoor Roth Worth It?

Yes, for most high earners with no pre-existing traditional IRA balances. Roth IRA money grows tax-free, withdrawals in retirement are tax-free, and Roth IRAs have no required minimum distributions during the owner’s lifetime. The $7,000 annual contribution is modest, but compounding over 20–30 years in a tax-free account is meaningful.

If you have a large pre-tax IRA balance and cannot roll it into a 401(k), the pro-rata rule may make the backdoor impractical. Talk to a tax professional about your specific situation before proceeding.

Bottom Line

The backdoor Roth IRA is a straightforward two-step process: make a non-deductible traditional IRA contribution, then convert it to Roth. The main complication is the pro-rata rule, which can create an unexpected tax bill if you have pre-tax IRA balances. File Form 8606 every year. Do it early in the year while the contribution has no time to generate earnings that would trigger tax on conversion.

Related Reading

• how to do a Roth IRA conversion

Getting approved for a credit card when you have no credit history is a genuine catch-22: lenders want to see credit history before they extend credit. But there are several card types specifically designed for people starting from zero, and a few strategies that accelerate your path to getting approved for standard cards.

Your Best Starting Options

1. Secured Credit Card

A secured card requires a cash deposit that becomes your credit limit — typically $200–$500. The deposit protects the lender if you don’t pay, which is why approval is nearly guaranteed regardless of credit history. Use the card for small purchases, pay the full balance each month, and the issuer reports your payment history to the credit bureaus. After 12–18 months of responsible use, most issuers will upgrade you to an unsecured card and return your deposit.

Best secured cards for credit building: Discover it Secured (earns cash back, reviews for upgrade), Capital One Platinum Secured (low deposit requirement), and Chime Credit Builder (no minimum deposit, no interest if you pay balance from connected account).

2. Student Credit Card

If you are currently enrolled in college or university, student credit cards are designed for people with limited or no credit history. They typically have low credit limits and few frills but are easier to get approved for than standard cards. Discover it Student Cash Back, Capital One SavorOne Student, and Bank of America Cash Rewards for Students are common options. Having income — even part-time — strengthens your application.

3. Become an Authorized User on Someone Else’s Account

If a parent, spouse, or trusted family member has a credit card in good standing, ask them to add you as an authorized user. The account’s full history — including account age, credit limit, and payment record — appears on your credit report. You may or may not need to use the card yourself. This can give you a significant credit history boost immediately and qualify you for approval on your own card faster.

4. Credit-Builder Loan

A credit-builder loan works backwards from a regular loan: you make monthly payments, and at the end of the term (usually 6–24 months), you receive the lump sum. Community banks, credit unions, and online lenders like Self and Credit Strong offer these. The loan payment history is reported to the bureaus, building credit without requiring any existing credit. Once you’ve made 6–12 months of payments, apply for a secured card to diversify your credit mix.

What Lenders Look for When You Have No History

Without a credit history, issuers look at other factors:

• Income: Higher income improves approval odds. You must be able to demonstrate income — a job, financial aid, or allowance from a parent (if under 21).
• Banking relationship: Some banks pre-approve customers who have an existing checking or savings account with them. Capital One, Discover, and Bank of America sometimes extend first card offers to their banking customers.
• No negative marks: Even without a credit score, a ChexSystems report showing unpaid banking fees or overdrafts can hurt your application.

Common Mistakes When Building Credit From Zero

• Applying for multiple cards at once. Each application generates a hard inquiry. Multiple applications in a short period can hurt your score before it gets started. Apply for one card at a time.
• Carrying a balance. “Building credit” does not mean carrying debt. Pay your full balance every month to avoid interest charges. Payment history (whether you pay on time) and credit utilization (how much of your limit you use) drive most of your score.
• Closing the account too soon. Keep your first card open as long as possible. Account age is a factor in your score, and a longer history helps.
• Missing payments. A single missed payment stays on your credit report for seven years. Set up autopay for at least the minimum payment as a backup.

How Long Until You Have a Real Credit Score?

FICO requires at least one account that has been open for 6 months and reported to the bureaus in the last 6 months to generate a score. VantageScore can generate a score with as little as one month of history. Most people see their first credit score within 3–6 months of opening their first account.

With consistent on-time payments and low utilization, you can have a score in the 680–720 range within 12–18 months — sufficient to qualify for standard unsecured credit cards with better rewards.

Bottom Line

The fastest path from no credit to a real credit score is opening a secured card or becoming an authorized user, making on-time payments every month, and keeping your balance low relative to your limit. Avoid applying for multiple products at once, and give it 12–18 months before applying for premium rewards cards.

Switching banks is worth doing if your current bank charges fees you don’t need to pay, pays near-zero interest on savings, or has poor customer service. The main reason people stay with a bad bank is fear of disrupting automatic payments and direct deposits. Done in the right order, switching takes about two weeks and carries virtually no risk of missed payments.

Step 1: Choose Your New Bank and Open the Account

Before closing anything, open your new account and let it sit funded for two to four weeks. Compare banks on:

• Monthly fees: Many online banks charge $0. Traditional banks often charge $10–$15/month unless you maintain a minimum balance.
• Interest rate on checking/savings: Online banks like Ally, Marcus, SoFi, and Discover typically pay 4–5% APY on high-yield savings. Traditional brick-and-mortar banks often pay 0.01–0.10%.
• ATM network: Make sure your new bank reimburses out-of-network ATM fees or has a large free network.
• Mobile app quality: Check app store reviews. If you primarily bank on your phone, this matters more than branch access.
• FDIC insurance: Confirm the new bank is FDIC-insured (or NCUA-insured if a credit union). Coverage is up to $250,000 per depositor, per institution.

Step 2: List Every Automatic Payment and Direct Deposit Linked to Your Old Account

This is the most important step. Go through your last 2–3 months of bank statements and identify every recurring transaction:

• Direct deposit (payroll, government benefits, freelance payments)
• Automatic bill payments (utilities, rent, mortgage, insurance, subscriptions)
• Auto-transfer to savings or investment accounts
• Loan payments (auto, student, personal)
• Tax payments

Make a spreadsheet with the company name, amount, and the date it typically hits. This becomes your switching checklist.

Step 3: Update Direct Deposit First

Contact your employer’s payroll department and provide your new bank account and routing numbers. Many employers process payroll changes on a 1–2 pay cycle lag, so initiate this early. Federal government benefit direct deposits (Social Security, VA benefits) can be updated at ssa.gov or by calling the relevant agency.

Keep your old account open and funded during the transition — if a deposit hits the old account, you can transfer it manually.

Step 4: Update Automatic Payments One at a Time

Work through your list systematically. For each biller, log into your account and update the payment method to your new bank. Do this at least 5–7 days before the payment is due to ensure processing time. Some companies require a voided check or take several days to verify new banking information.

Priority order: mortgage or rent first (missing these has the most severe consequences), then utilities, then subscriptions.

Step 5: Let Your Old Account Run in Parallel for 60–90 Days, Then Close It

After updating all payments and direct deposits, keep your old account open with a small balance ($100–$200) for 60–90 days. This catches any payment that you missed in your list — an annual subscription renewal, a quarterly insurance premium, or a dormant automatic payment you forgot about.

After 60–90 days with no unexpected activity, transfer the remaining balance to your new account and close the old one.

How to Close Your Old Account

Visit a branch, call customer service, or request closure online depending on your bank’s process. Get confirmation in writing (email or letter) that the account is closed and a $0 balance is confirmed. Ask to have any pending interest credited before closure. Do not simply withdraw all funds and stop using the account — inactive accounts with zero balances can generate inactivity fees that go to collections.

Switching Mortgage Autopay

If your mortgage payment is automatically deducted from your checking account, contact your mortgage servicer well in advance — 2–3 weeks before the next payment is due. They often require a paper or electronic authorization form and a voided check. Confirm the change was received and active before relying on it.

Bottom Line

The two-week overlap period — running old and new accounts simultaneously while updating payments systematically — is what makes switching nearly risk-free. Don’t rush it. The cost of a missed mortgage payment or a bounced automatic bill payment is far higher than a few weeks of maintaining two accounts.

A defined benefit pension is a retirement plan that guarantees a specific monthly payment in retirement, based on a formula using your salary history and years of service — not on how financial markets perform. The employer takes on all investment risk. As long as the plan is properly funded, you receive your promised benefit for life, regardless of what the stock market does.

How the Benefit Formula Works

Most defined benefit plans use a formula like this:

Annual benefit = Years of service × Final average salary × Benefit multiplier

For example: 30 years of service × $80,000 final average salary × 2% multiplier = $48,000 per year ($4,000/month).

The “final average salary” is typically your average salary over the last 3–5 years of employment, which protects against manipulation. The benefit multiplier ranges from 1% to 2.5% depending on the plan.

Some plans use a career average formula instead: averaging salary over all years of service rather than just the final years. Career average formulas generally produce lower benefits for workers whose salaries grow significantly over their careers.

Who Still Has Defined Benefit Pensions

Traditional pensions have largely been replaced by 401(k)s in the private sector. Today, pensions are most common in:

• Government employment — federal, state, and local government workers (teachers, police, firefighters, military) still predominantly receive defined benefit pensions
• Union employment — trades and labor unions often negotiate pension benefits as part of collective bargaining agreements
• Large legacy corporations — some large private employers still maintain pensions for long-tenured workers, though most have frozen plans for current employees

Approximately 15% of private-sector workers have access to a defined benefit plan, compared to about 80% in 1980.

Vesting

To receive a pension, you must be “vested” — meaning you’ve worked for the employer long enough to have a non-forfeitable right to the benefit. Federal law requires private-sector pensions to vest by 5 years (cliff vesting) or gradually between 3 and 7 years (graded vesting). Government plans vary; many require 5–10 years to vest.

If you leave before vesting, you receive no pension benefit, only a return of any employee contributions you made.

Defined Benefit Pension vs. 401(k): Key Differences

Feature	Defined Benefit Pension	401(k)
Benefit type	Guaranteed monthly income	Account balance (market-dependent)
Investment risk	Employer bears the risk	Employee bears the risk
Portability	Low (tied to employer)	High (can roll over when leaving)
Longevity protection	Yes — pays for life	No — account can run out
Inflation protection	Varies (COLAs sometimes included)	Depends on investment growth
Employee control	Minimal	High

Payment Options at Retirement

When you retire with a pension, you typically choose from several payment options:

• Single life annuity: Highest monthly payment, but stops at your death. No benefit to a surviving spouse.
• Joint and survivor annuity: Lower monthly payment, but continues (typically at 50–100% of the original amount) to your spouse after your death. Often the default option for married workers.
• Lump sum (if offered): A one-time payment of the present value of all future benefits. Gives control and portability but eliminates longevity protection. Consider carefully — the guaranteed monthly income is often worth more than the lump sum when you account for your life expectancy.

What Protects Your Pension If the Company Fails

The Pension Benefit Guaranty Corporation (PBGC) insures most private-sector defined benefit pension plans. If your employer’s plan fails, the PBGC guarantees benefits up to a maximum amount (about $7,400/month for a 65-year-old in 2026). Government pensions are backed by the state or federal government and generally not PBGC-insured, but they have different legal protections.

Bottom Line

A defined benefit pension provides something a 401(k) cannot: guaranteed income you cannot outlive, with no investment risk on your end. If you work in government, education, or a union trade, understand your plan’s vesting schedule and benefit formula — and factor your pension into your overall retirement income plan before making decisions about 401(k) contributions or early retirement.

See Also

• How to Negotiate Your Salary: A Step-by-Step Guide

Reducing your taxable income means paying less in federal (and often state) income taxes — legally. The strategies below work by either increasing deductions, shifting income to tax-advantaged accounts, or timing income and expenses strategically. Many are available to anyone with a W-2 job, not just the wealthy or self-employed.

1. Maximize Your 401(k) or 403(b) Contribution

The most straightforward reduction for most employees. Contributions to a traditional 401(k) or 403(b) reduce your taxable income dollar for dollar. The 2026 limit is $23,500 ($31,000 if you are 50 or older, with the $7,500 catch-up contribution). If you can’t max out, contribute at least enough to capture your employer match — that is a 50–100% immediate return.

2. Contribute to a Traditional IRA

If you qualify for a deduction, a traditional IRA contribution (up to $7,000, or $8,000 if 50+) reduces taxable income. Deductibility phases out at higher incomes if you are covered by a workplace retirement plan: $79,000–$89,000 for single filers, $126,000–$146,000 for married filing jointly in 2026. Even if you’re over the limit for a deduction, non-deductible traditional IRA contributions can still be useful as part of a backdoor Roth strategy.

3. Open and Contribute to an HSA

A Health Savings Account (HSA) is the only triple-tax-advantaged account: contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. To contribute, you must be enrolled in a High Deductible Health Plan (HDHP). 2026 limits: $4,300 for individual coverage, $8,550 for family coverage. HSA funds roll over indefinitely — they never expire — and after age 65 you can withdraw for any reason (taxed like traditional IRA withdrawals).

4. Use a Flexible Spending Account (FSA)

If your employer offers an FSA, contributions reduce your taxable income by up to $3,300 in 2026. FSAs are use-it-or-lose-it (up to $660 rolls over), so plan carefully. Eligible expenses include most medical and dental costs.

5. Itemize Deductions If Greater Than the Standard Deduction

The 2026 standard deduction is $15,000 for single filers and $30,000 for married filing jointly. If your itemized deductions exceed this, itemizing saves you more. Deductions you can itemize include:

• Mortgage interest (up to $750,000 of debt)
• State and local taxes (capped at $10,000)
• Charitable contributions
• Casualty and theft losses in federally declared disaster areas

6. Increase Charitable Contributions

Donations to qualified nonprofits are deductible if you itemize. Donating appreciated stock directly to charity avoids capital gains tax entirely and gives you a deduction for the full fair market value — more tax-efficient than donating cash. A donor-advised fund lets you front-load contributions in a high-income year for the deduction while distributing to charities over time.

7. Tax-Loss Harvesting

In a taxable investment account, selling investments that have lost value creates a capital loss you can use to offset capital gains. Net capital losses up to $3,000 per year can also offset ordinary income. Losses beyond $3,000 carry forward to future years. This strategy has no effect inside a 401(k) or IRA.

8. Defer Income If Possible

If you have flexibility over when you receive income — self-employment invoices, bonuses, year-end freelance payments — consider deferring to January of the following year if you expect to be in a lower tax bracket then. This only works if the timing is genuinely within your control.

9. Contribute to a Dependent Care FSA

If you have children under 13 or a dependent adult who requires care, a Dependent Care FSA lets you set aside up to $5,000 pre-tax ($2,500 if married filing separately) to pay for daycare, after-school programs, or similar care.

10. Self-Employed: Use a SEP-IRA or Solo 401(k)

Self-employed individuals have access to powerful retirement accounts. A SEP-IRA allows contributions of up to 25% of net self-employment income, up to $70,000 in 2026. A Solo 401(k) allows employee contributions of up to $23,500 plus employer contributions of up to 25% of compensation — potentially more total than a SEP-IRA at higher income levels. Both reduce self-employment taxable income directly.

11. Deduct Student Loan Interest

You can deduct up to $2,500 of student loan interest per year as an above-the-line deduction — meaning you get it even if you take the standard deduction. It phases out at $85,000 (single) and $175,000 (married filing jointly) of modified adjusted gross income in 2026.

12. Consider Bunching Deductions

If your deductions are close to the standard deduction threshold, “bunching” means doubling up on deductible expenses every other year — for example, making two years’ worth of charitable contributions in one year and zero the next. In the bunching year, itemizing saves more than the standard deduction. In the off year, you take the standard deduction. Over two years, you get more total deductions than the standard deduction would have provided each year.

Bottom Line

The highest-impact strategies for most people are maximizing 401(k) contributions, using an HSA if eligible, and timing charitable contributions to bunch deductions above the standard deduction threshold. Self-employed individuals have the most flexibility — a well-structured retirement account can reduce taxable income by tens of thousands of dollars annually.

Related Reading

• Health Savings Account (HSA)
• 529 plan
• tax-loss harvesting

For more on this topic, see our guide on how a donor-advised fund can maximize your charitable deduction in a high-income year.

Social Security Disability Insurance (SSDI) is a federal program that pays monthly cash benefits to workers who have a disabling medical condition and cannot work. Unlike Supplemental Security Income (SSI), SSDI is based on your work history — you must have worked and paid Social Security taxes for a sufficient period to qualify. In 2026, the average SSDI benefit is approximately $1,620 per month, with a maximum of roughly $4,000 depending on your earnings history.

Who Qualifies for SSDI

To receive SSDI, you must meet three requirements:

1. Work credits. You must have earned enough work credits by paying Social Security taxes. Credits are earned based on income — in 2026, one credit is earned for every $1,810 in wages. You can earn up to 4 credits per year. Most people need 40 credits (10 years of work), with 20 earned in the last 10 years. Younger workers need fewer credits.
2. Medical condition. Your condition must meet the SSA’s definition of disability: a medically determinable physical or mental impairment that has lasted or is expected to last at least 12 continuous months or result in death, AND prevents you from performing any substantial gainful activity (SGA).
3. Unable to perform substantial gainful activity (SGA). In 2026, if you are earning more than $1,620 per month from work (non-blind), you generally do not qualify. SSDI is for people whose condition prevents them from maintaining employment at a meaningful level.

The Five-Step SSA Evaluation Process

The SSA uses a sequential five-step process to evaluate SSDI claims:

1. Are you currently working at SGA level? If yes, you are not disabled.
2. Is your condition severe enough to significantly limit your ability to do basic work activities?
3. Does your condition appear on the SSA’s Listing of Impairments (the “Blue Book”)? If yes, you are automatically disabled.
4. Can you perform your past work despite your condition?
5. Can you perform any other work that exists in the national economy, considering your age, education, and skills? If no, you are disabled.

How Much Does SSDI Pay?

Your SSDI benefit is calculated from your Average Indexed Monthly Earnings (AIME) — essentially your average lifetime earnings, indexed for inflation. The SSA applies a progressive formula to your AIME to calculate your Primary Insurance Amount (PIA). People who earned more over their careers receive higher SSDI payments, but lower earners receive a higher percentage of their pre-disability income replaced.

You can see your projected SSDI benefit in your Social Security statement at ssa.gov/myaccount.

How to Apply for SSDI

You can apply online at ssa.gov/applyfordisability, by phone (1-800-772-1213), or in person at your local Social Security office. The application requires:

• Birth certificate or proof of citizenship
• Social Security number
• Work history for the past 15 years
• Medical records, doctors’ contact information, and a list of medications
• Tax returns or W-2s

Apply as soon as your condition prevents you from working — there is a 5-month waiting period after your established disability onset date before benefits begin.

How Long Does Approval Take?

Initial applications take 3–6 months. Roughly 65% of first applications are denied. If denied, you have 60 days to file a reconsideration. Most approvals happen at the administrative law judge (ALJ) hearing stage, which can take 12–24 months from initial denial. Total time from application to approval through hearings averages 18–24 months. Hire a disability attorney if denied — they work on contingency and only charge if you win.

Medicare After SSDI Approval

SSDI recipients receive Medicare coverage automatically after a 24-month waiting period from the date benefits begin. This is a significant benefit — Medicare provides health insurance access to people who can no longer work and often lose employer coverage due to their disability.

Can You Work While Receiving SSDI?

Yes, within limits. The SSA has a Ticket to Work program and Trial Work Period that allow SSDI recipients to test employment without immediately losing benefits. During the 9-month trial work period (months need not be consecutive), you can earn any amount and still receive full SSDI. After the trial, the SGA earnings limit ($1,620/month in 2026) applies.

Bottom Line

SSDI is a meaningful safety net for workers who become seriously ill or injured and cannot maintain employment. Apply as soon as you become unable to work, gather thorough medical documentation, and do not be discouraged by an initial denial — most approved claimants are denied at least once. An SSDI attorney can significantly improve your odds at the hearing stage, at no upfront cost.

A target date fund is a mutual fund or ETF that automatically adjusts its mix of stocks, bonds, and other assets over time based on a planned retirement year. You pick the fund closest to your expected retirement year — say, a “2050 Fund” if you plan to retire around 2050 — and the fund does the rebalancing for you. It starts aggressive (mostly stocks) when retirement is far away, and gradually shifts conservative (more bonds and cash) as you approach the target date. This is called the “glide path.”

How the Glide Path Works

A target date fund’s asset allocation changes automatically as time passes. A typical example:

• 30 years out: 90% stocks, 10% bonds — growth-focused, accepting higher volatility for higher long-term returns
• 15 years out: 70% stocks, 30% bonds — still growth-oriented but beginning to reduce risk
• At retirement: 50% stocks, 50% bonds — more balanced, protecting accumulated wealth
• 10 years after retirement: 30–40% stocks, 60–70% bonds/stable — focused on capital preservation and income

The specific glide path varies by fund family. Vanguard, Fidelity, and T. Rowe Price all run target date funds with different philosophies about how aggressive to be near retirement. Some “to” funds reach their most conservative allocation at the target date; “through” funds continue shifting for 10–15 years past retirement on the assumption that retirees will live another 20–30 years and still need growth.

What Is Inside a Target Date Fund

Target date funds are “funds of funds” — they hold a collection of underlying mutual funds or index funds. A Vanguard target date fund, for example, holds Vanguard’s Total Stock Market Index Fund, Total International Stock Index Fund, Total Bond Market Fund, and Total International Bond Fund. As the target date approaches, the allocation shifts by automatically buying and selling the underlying funds. You never have to do anything.

Costs: Expense Ratios Matter

Target date fund fees vary significantly by provider:

• Vanguard Target Retirement Funds: 0.08–0.15% expense ratio
• Fidelity Freedom Index Funds: 0.12% expense ratio
• Schwab Target Date Index Funds: 0.08% expense ratio
• T. Rowe Price Target Date Funds (actively managed): 0.52–0.76% expense ratio
• American Funds Target Date Series: 0.32–0.57% expense ratio

Index-based target date funds from Vanguard, Fidelity, and Schwab are consistently the most cost-effective. Over 30 years, a 0.5% difference in expense ratio on a $100,000 investment amounts to roughly $70,000 in lost returns.

Who Target Date Funds Are Designed For

Target date funds are the default investment in many 401(k) plans because they work well for people who want a simple, set-it-and-forget-it approach. They are appropriate for:

• People who don’t want to manage asset allocation or rebalancing
• Investors in 401(k)s with limited fund options
• Younger investors who want diversification without complexity
• Anyone who would otherwise leave money in a money market or stable value fund indefinitely

Limitations to Know

• One-size-fits-all: The fund doesn’t know your risk tolerance, other assets, or Social Security income. It assumes a generic investor profile.
• You may be too conservative near retirement. If you have a pension, rental income, or Social Security covering most expenses, you may want a more aggressive allocation than the fund’s default near your target date.
• Double diversification cost: If you hold a target date fund alongside individual stock or bond funds in the same account, you may be over-concentrating or duplicating exposure without realizing it.
• Tax inefficiency if used outside retirement accounts: Frequent internal rebalancing generates taxable events. Target date funds work best inside 401(k)s and IRAs, not taxable brokerage accounts.

Bottom Line

A target date fund is an excellent choice for the majority of retirement investors who want broad diversification and automatic rebalancing without ongoing management. Focus on picking a fund with a low expense ratio from Vanguard, Fidelity, or Schwab. The main caveat: if your financial situation is complex — multiple income sources in retirement, a large taxable account, or a much higher or lower risk tolerance than average — a customized allocation may serve you better.

Overdraft protection is a bank service that covers transactions when you don’t have enough money in your checking account to pay for them. Instead of declining the transaction or bouncing a check, the bank either covers the shortfall from a linked account or extends a small line of credit. The bank usually charges a fee for this service — traditionally $25–$35 per transaction, though new regulations and competitive pressure have pushed many banks to reduce or eliminate these fees.

How Overdraft Protection Works

There are three main types of overdraft coverage:

• Linked account transfer — The bank automatically transfers funds from a savings account, money market account, or another checking account you own when your checking balance runs out. Most banks charge a flat transfer fee ($0–$12 per transfer), which is usually the cheapest option if you need it. Set this up if your bank offers it.
• Overdraft line of credit — The bank extends a revolving line of credit, typically $500–$1,000. Interest accrues from the date of the overdraft, often at 18–21% APR. You repay it when funds are deposited. Better than a fee-per-transaction but still costly if balances linger.
• Standard overdraft service (ad hoc coverage) — The bank pays for transactions on a case-by-case basis and charges a flat fee per transaction. This is the version that generates the most complaints. Under Federal Reserve Regulation E, you must opt in for this coverage to apply to debit card purchases and ATM withdrawals; it applies automatically to checks and ACH transfers unless you opt out.

The Cost of Overdraft Fees

Historically, overdraft fees were $35 per transaction. In 2024, the CFPB issued rules capping overdraft fees at $5 for large banks (those with over $10 billion in assets), though those rules faced legal challenges. Many banks have proactively reduced fees:

• Capital One: eliminated overdraft fees entirely (2022)
• Citibank: eliminated overdraft fees entirely (2022)
• Chase: reduced to $34 per transaction with a 24-hour grace period and a $50 no-fee threshold
• Bank of America: reduced to $10 per transaction (2022)
• Wells Fargo: eliminated NSF fees; overdraft fee $35, capped at 3 per day

Online banks and credit unions often charge $0 or small amounts. If your bank still charges $25–$35 per overdraft, it may be worth switching.

Opt-In vs. Opt-Out Rules

Under Regulation E, banks cannot charge overdraft fees on debit card point-of-sale transactions and ATM withdrawals unless you affirmatively opt in to their overdraft service. If you have not opted in, those transactions are simply declined at no charge. Checks and ACH (automatic) payments are not covered by this rule — banks can charge fees on those without opt-in unless you specifically opt out.

If you are enrolled in overdraft service and want to change that, call your bank or adjust the setting online. Opting out means debit transactions will be declined rather than covered — which is often preferable to a $35 fee.

How to Avoid Overdraft Fees

1. Set up low-balance alerts. Most banks let you receive a text or email when your balance drops below a threshold you choose, like $100. This gives you time to transfer funds before hitting zero.
2. Link a savings account as a backup. A linked-account transfer fee ($0–$12) beats a per-transaction overdraft fee every time.
3. Opt out of standard overdraft coverage for debit purchases. If the transaction is declined, you simply cannot complete it — no fee charged.
4. Keep a buffer. Treat $200–$300 as your effective zero. Do not spend your balance down to the last dollar.
5. Use a bank with no overdraft fees. Many online banks — Chime, Ally, SoFi, Capital One 360 — charge no overdraft fees or offer a small grace amount.
6. Ask for a fee waiver. If it is your first overdraft or you rarely overdraft, call your bank and ask them to waive the fee. Banks often do this once a year for good customers.

Overdraft Protection vs. Courtesy Pay

“Courtesy pay” or “courtesy overdraft” is a common name banks use for the standard ad hoc coverage described above. It sounds benign but it is the most expensive version — a per-transaction fee with no credit agreement. Read your account agreement carefully if your bank uses this term.

Bottom Line

The best strategy is to avoid needing overdraft protection at all — through alerts, buffers, and linked savings accounts. If you are regularly overdrafting, that is a cash flow signal that needs to be addressed by reviewing your budget. And if your bank still charges $30+ per overdraft, it may be time to compare online checking accounts where overdraft fees are minimal or nonexistent.

See Also

• What Is a Balance Transfer? How It Works and When to Use One

Americans leave jobs frequently, and it’s easy to lose track of retirement accounts along the way. The Department of Labor estimates there are roughly 29 million forgotten 401(k) accounts worth an estimated $1.65 trillion in unclaimed retirement assets. If you’ve changed jobs and aren’t sure what happened to a retirement account, you can find it — and you should. That money is yours.

Why 401ks Get Lost

When you leave a job, your 401(k) doesn’t disappear — but it can become difficult to track if:

• Your former employer was acquired, merged with another company, or went bankrupt
• The plan administrator changed and your contact information is outdated
• You moved and paper statements went to an old address
• Small account balances (typically under $7,000) were automatically rolled over to an IRA by the former plan without your action

Step 1: Contact Your Former Employer’s HR Department

Start with the most direct path. Contact the HR or benefits department of the company where you last participated in the 401(k). Provide your name, Social Security number, and the approximate dates of employment. They can tell you which financial institution held the plan and how to contact them.

If the company no longer exists, search for successor companies. An acquisition or merger often means the new company’s HR department inherited pension and benefits records.

Step 2: Use the DOL’s Abandoned Plan Database

The Department of Labor maintains a database of terminated retirement plans at abandoned plan search on dol.gov. If your former employer’s plan was formally terminated, the plan trustee should be listed here, along with instructions for claiming your benefit.

Step 3: Search the National Registry of Unclaimed Retirement Benefits

The National Registry of Unclaimed Retirement Benefits (unclaimedretirementbenefits.com) is a free national database where employers can register information about former employees who have unclaimed retirement benefits. Search by your Social Security number. If your account is registered, you’ll get contact information to claim it.

Step 4: Check Your State’s Unclaimed Property Database

If a plan administrator cannot locate you, they are required to eventually turn the account over to the state as unclaimed property. Every state has an unclaimed property database — search “unclaimed property” plus your state name, or use the National Association of Unclaimed Property Administrators’ portal at missingmoney.com. Search by your name.

Step 5: Search the PBGC for Pension Benefits

If you worked at a company that had a defined benefit pension (not a 401k), the Pension Benefit Guaranty Corporation (PBGC) insures those plans. If your former employer’s pension plan was terminated and taken over by the PBGC, search their database at pbgc.gov/search-for-unclaimed-pension-benefits to find out if you have a pension benefit waiting.

What Happens to Small Balances Automatically

Under SECURE 2.0 (effective 2024), when your account balance is between $1,000 and $7,000 and you’ve left an employer, the plan is allowed to automatically roll your account into an IRA. When this happens, the plan administrator typically selects a default IRA provider. If this occurred, you may have an IRA account you didn’t know you opened — check with your former plan administrator for where the rollover went.

Balances under $1,000 can be cashed out and sent to you (minus taxes and a 10% early withdrawal penalty if you are under 59½), though the plan must notify you first.

What to Do Once You Find Your Account

Once you locate the account, your best option is usually to roll it into your current employer’s 401(k) plan or into an IRA you control. A direct rollover (the money moves directly from account to account) avoids taxes and penalties entirely. Contact your current plan administrator or IRA provider and ask for rollover instructions — they will typically handle the transfer directly with the old plan.

Bottom Line

Finding a lost 401(k) is worth the effort even for seemingly small balances. A $5,000 account left alone for 20 years at 7% annual growth becomes roughly $19,000. Start with your former employer’s HR, then use the DOL and state unclaimed property databases. Once found, roll it into your current retirement account rather than cashing it out.