You May Be Eligible to Save Over $10K in an HSA in 2024 After Largest-Ever Contribution Limit Increase
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People with health savings accounts (HSAs) got some good news this week when the IRS rolled out the largest contribution limit increases in history.
In 2024, an individual with self-only coverage can save up to $4,150 in an HSA, while a family can sock away up to $8,300. Catch-up contributions still allow people 55 and older to save an extra $1,000 per year, meaning some married couples will soon be allowed to save more than $10,000 in an HSA.
A financial advisor can help you plan for retirement, including your future healthcare costs. Find an advisor today.
HSAs are tax-advantaged savings vehicles that help people enrolled in high-deductible health plans (HDHPs) save for annual medical expenses. But unlike flexible spending accounts (FSAs), funds in an HSA can be carried over from year to year, making these accounts an important component of long-term financial plans.
Largest Increases on Record
Next year’s HSA contributions limit increases will be the largest on record since HSAs were first introduced in 2003. The IRS adjusts these limits each year to keep pace with inflation.
For individuals, the savings cap will rise 7.8% from $3,850 in 2023, while families will see their limit increase 7.1% from $7,750. A year ago the limits rose 5.5% and 6.2%, respectively. However, persistent inflation is pushing these caps even higher on Jan. 1, 2024.
HSA contribution limits for an individual with single, self-coverage:
2023: $3,850
2024: $4,150
HSA contribution limits for an individual with family coverage:
2023: $7,750
2024: $8,300
The changes will also affect what constitutes an HDHP. In 2024, health plans will qualify for HSAs if their deductibles are at least $1,600 for self-only coverage and $3,200 for family coverage.
Why HSA Contribution Limits Matter
Higher contribution limits not only mean that people can save more for qualified medical expenses, but they also provide an even larger potential tax break for HSA owners. Since contributions are tax-deductible, higher caps mean a person with an HSA will be able to reduce his taxable income by several hundred dollars more in 2024 than in 2023.
Of course, that’s not the only tax advantage of an HSA. Money that’s kept in this type of account also grows tax-free and can be withdrawn free of tax, provided it’s used to pay for qualified expenses.
And since HSA funds carry over each year, they’re a great way for pre-retirees to save up for the onerous healthcare expenses they may encounter in retirement.
A recent study from the Employee Benefit Research Institute found that despite the coverage offered by Medicare, retirees should prepare to pay significant out-of-pocket costs for their healthcare. These costs include a wide range of expenses, including insurance premiums, program deductibles and prescription drug treatments.
In fact, even with supplemental Medicare gap insurance, men will need an average of $166,000 in savings to pay for their healthcare needs in retirement. Since women have longer expected lifespans, that number is even higher: $197,000. Meanwhile, the average two-person household should anticipate needing $318,000, according to EBRI.
Bottom Line
With inflation remaining elevated, the IRS has increased the amount of money that individuals and families can save in their HSAs in 2024. The contribution limit increases are the largest on record. People with self-only coverage will be able to sock away $4,150 in 2024, while families will be permitted to save $8,300. The $1,000 catch-up contribution remains unchanged, meaning married couples can save $10,300 in an HSA in 2024.
Tips for Contributing to an HSA
Some HSAs allow you to invest your contributions in mutual funds and other financial products. Be sure to read our latest HSA investment guide to help you determine how you should invest your HSA funds. Our asset allocation calculator can also help you find an investment mix that suits your tolerance for risk.
A financial advisor can help you integrate your HSA savings into a comprehensive financial plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Patrick Villanova, CEPF®
Patrick Villanova is a writer for SmartAsset, covering a variety of personal finance topics, including retirement and investing. Before joining SmartAsset, Patrick worked as an editor at The Jersey Journal. His work has also appeared on NJ.com and in The Star-Ledger. Patrick is a graduate of the University of New Hampshire, where he studied English and developed his love of writing. In his free time, he enjoys hiking, trying out new recipes in the kitchen and watching his beloved New York sports teams. A New Jersey native, he currently lives in Jersey City.
Everybody likes to talk about how much they’re contributing to their 401(k) plans, or about how much they should be contributing to their 401(k) plans.
That’s important, no doubt.
But the bigger question should be the end game. That’s how much you should have in your 401(k).
That’s the real measure of success or failure of any retirement plan which involves the 401(k) as the main piece.
It’s a tough proposition. Everybody’s in a different situation, as far as age, income, immediate financial condition, and risk tolerance.
There’s no scientific way to determine how much you should have in your 401(k), but we’re going to take a stab at it, by approaching it from several different angles.
We’ll break it down this way…
Table of Contents – What We’ll Cover in this Post:
The State of American Retirement – It Needs Improvement!
Contributing Just Enough to Max-Out the Employer Match Will Fail
You Need to Contribute at Least 20% of Your Income for Retirement
Don’t Randomly Pick Investments for Your 401(k)
And Don’t Let Your Co-workers Tell You What Investments to Pick Either!
While You’re At It – Stay Away From Target Date Funds
If You Have a Roth 401(k) Take Advantage of It
Don’t Forget About the Roth IRA, Too
How Much Should YOU Have in Your 401(k)?
Let’s start with the bad news first…
The State of American Retirement – It Needs Improvement!
According to an article released by CNBC, which looked at data from Northwestern Mutual and Gallup’s 2018 surveys, 21% of Americans have no retirement savings, and the average amount that Americans have saved is $84,821.
A wide majority of those surveyed, 78%, expressed concern that they will not have a substantial amount of retirement money to live on, meaning they will continue to work past retirement age.
Many people do not realize what an advantageous opportunity a 401(k) plan offers. It is the most generous of all retirement plans, one that could alleviate much of the concern Americans are expressing over their financial future.
Contributing Just Enough to Max-out the Employer Match will Fail
I often recommend contributing at least enough to a 401(k) plan to get the maximum employer match.
If an employer matches 50% up to 3%, then you contribute 6%. That will give you a combined contribution of 9% per year.
But there’s a problem with this recommendation.
It’s not that it’s bad advice – it certainly makes sense for someone who is struggling with financial limits, and needs a minimum contribution level.
The problem is when the minimum contribution becomes the maximum contribution. There’s no question, 9% is way better than nothing. But if you intend to retire, it won’t get the job done!
The other problem is that the employer match typically comes with a vesting period. That could be up to five years.
If you stay on the job substantially less, you’ll lose some or all of the match. That will drop you down to only your 6% contribution.
An example of contributing just enough to max out the employer match
Let’s assume you’re 35 years old, and earn $50,000 per year.
You contribute 6% of your salary to your 401(k) plan, and your employer matches that at 50%, or 3%.
Over the next 30 years, you earn an average annual rate of return on your investments of 7%.
By the time you’re 65 years old, you’ll have $441,032.
That may seem like a lot of money from where you’re at right now. But when retirement rolls around, it will probably be inadequate.
Here’s why: it’s called the safe withdrawal rate.
It holds that if you limit your withdrawals from your retirement plan to about 4% per year, you will never outlive your money. You can see the wisdom of that, can’t you?
But a retirement portfolio of $441,032 with withdrawals at 4%, is just $17,641 per year, and that’s just $1,470 per month.
Since most employers no longer provide traditionally defined benefit pension plans, you’ll have to live on that, plus your Social Security benefit.
Let’s say that your Social Security benefit is $1,500 per month.
What kind of retirement will you have with an income of $2,970 per month?
You won’t do much better than just getting by on that kind of retirement income. My guess is that you won’t even be retired at all.
You Need to Contribute at Least 20% of Your Income for Retirement
Most people expect that retirement will be more than just getting by.
Retirement isn’t just a number – it’s the sum total of what you will take out of a lifetime of hard work. It should provide you with an income that will give you more than just basic survival.
For that reason, you need to contribute at least 20% of your income to your retirement plan. The only way for most people to do that is through a 401(k) plan at work.
Let’s look at another example. Let’s the same financial profile from the last example, but instead of making a 6% contribution, you instead contribute 20% of your salary. The employer match will remain a 3%, giving you a combined annual contribution of 23% of your income.
What will your retirement look like by age 65?
How about $1,127,066???
4% of $1,127,066 will be $45,083, or $3,756 per month. Adding in $1,500 for Social Security, and you’re up to $5,256, which is more than you earn on your job!
Are you getting excited? You should be.
Don’t Randomly Pick Investments for Your 401(k)
Next to low contribution rates, the biggest problem with most 401(k) plans is poor investment selection.
Sometimes that’s inevitable, because some 401(k) plans just have very limited investment selection. But in other cases, the owner of the plan just makes bad choices.
What makes investment choices bad?
Investing too conservatively, by favoring fixed-income investments for safety
Holding too much company stock, which is a classic case of “putting too many eggs in one basket”
Not having adequate diversification
Adding random investments to your plan, like “hot tip” stocks
Trading too frequently, which causes high transaction fees, and usually doesn’t work anyway
Designing your portfolio in a way that’s inconsistent with your long-term goals
Let’s face it, most people are not investment professionals. That means you can’t rely on your own resources in creating and managing what will eventually become your largest incoming-producing asset.
And that means you need to get help.
One source is Personal Capital. That’s an investment service that doesn’t manage your 401(k) plan directly, but it does provide guidance on how to invest the plan.
They do that through their Retirement Planner and 401(k) Fund Allocation tools.
Another service that’s growing rapidly is Blooom. It’s an investment service that will provide you with investment management for your 401(k) plan.
The service cost just $10 per month, which is a small price to pay to get professional investment advice for your largest asset.
And Don’t let Your Co-workers Tell You What Investments to Pick Either!
One of the complications with 401(k) plan management is the herd mentality.
It happens in most companies and departments. Someone says go to the right, and everyone turns to the right without giving it much thought. We’re virtually programmed to operate that way in an organizational environment.
But it’s financial suicide when it comes to investing for retirement.
We should never presume that a coworker, or even a boss, has some sort of superior knowledge when it comes to investments. That person might be bragging about what he is investing in, maybe to get moral support for his decision.
You, and you alone, will one day need to live on your retirement portfolio. You shouldn’t trust that outcome to what amounts to water cooler gossip.
While You’re at it – Stay Away from Target Date Funds
There’s one type of investment that’s gaining in popularity, and I don’t think it’s a healthy development.
It’s target date funds.
I don’t have a good feeling about them, and that’s why I don’t recommend them.
In fact, I hate target date funds. Does that sound too strong?
Target date funds are one of those innovations that work better in theory than they do in reality.
They start with your retirement date, which is why they’re called “target date funds”. If you plan to retire at age 65, they’ll have tiered plans (which are actually mutual funds).
They have one when you’re 40 years from retirement, another when you’re 30 years out, then 20 years, and 10 years. That may not be exactly how they all work, but that’s the basic idea.
The target dates mostly adjust your portfolio allocation. That is, the closer that you are to retirement, the higher the bond allocation is, and the less that’s invested in stocks.
The concept is to reduce portfolio risk as you move closer to retirement.
That all sounds reasonable on paper.
But it has two problems.
One is target date funds have unusually high fees. That reduces the return on your investment.
The other is they arbitrarily reduce growth in your portfolio as you move closer to retirement.
That generally makes sense, but not for people who either have a higher risk tolerance, or those who need healthier returns as they move closer to retirement.
Avoid these funds, no matter how hard the pitch is for them.
If You Have a Roth 401(k) Take Advantage of it
A growing twist on the basic 401(k) plan is the Roth 401(k).
It works just like a Roth IRA. Your contributions to the plan are not tax-deductible, but your withdrawals can be taken tax-free.
That’s as long as you are at least 59 ½, and have been in the plan for at least five years.
The Roth 401(k) has two major differences from a Roth IRA.
The first is that the Roth 401(k) is subject to required minimum distributions (RMDs) beginning at age 70 1/2. A Roth IRA is not. (You can get around this problem by rolling your Roth 401(k) plan into a Roth IRA.)
The second is the amount of your contribution.
While a Roth IRA is limited to $5,500 per year (or $6,500 if you are 50 or older), contributions to a Roth 401(k) are the same as they are for a traditional 401(k). That’s $18,000 per year, or $24,000 if you are 50 or older.
This doesn’t mean that you can put $18,000 in a traditional 401(k), and another $18,000 into a Roth 401(k). You must allocate between the two.
It makes a lot of sense to do this. You will lose tax deductibility on the amount of your contribution that goes to the Roth 401(k).
But by making the allocation, you ensure that at least some of your retirement income will be free from income tax.
If your 401(k) plan offers the Roth option, you should absolutely take advantage of it. It’s a form of income tax diversification for your retirement.
Don’t Forget About the Roth IRA, Too
If your employer doesn’t offer a Roth 401(k), then you should contribute at least some of your retirement money to a Roth IRA.
There are income limits beyond which you cannot contribute to a Roth IRA (those limits don’t apply to Roth 401(k) contributions).
For 2019, your income cannot exceed $122,000 per year if you are single, or $193,000 if you’re married filing jointly. Both of those amounts have increased since last year, meaning those whose earnings were on the fringe of the income limit can now contribute to this rewarding retirement account.
Having a Roth IRA, in addition to your 401(k), has several advantages:
It increases your total retirement contributions. If you are contributing $18,000 to your 401(k), plus $5,500 to a Roth IRA, that raises your annual contribution to $23,500.
Roth IRAs are self-directed accounts. That means that you can hold the account with a large investment brokerage firm that offers virtually unlimited investment options.
You will have complete control over how the plan is managed. The account could even invest the account with a robo advisor, which will provide you with low-cost professional investment management. (Two popular choices are Betterment and Wealthsimple.)
You’ll have an account ready and waiting, in case you want to do a Roth IRA conversion. It’s a popular way to convert taxable retirement income into tax-free retirement income.
Set up and contribute to a self-directed Roth IRA account, if you qualify. It’s become a retirement must-have.
How Much Should You Have in Your 401(k)?
With all the above information in mind, how much should you have in your 401(k)?
The answer is: as much as you think you’ll need to retire.
Does that sound too vague?
Let’s start with this…make sure that you have more in your 401(k) than the average person does. Based on the information presented in the chart at the beginning of this article, the average person won’t be able to retire.
You don’t want to be average. You want to be above average. And you need to be.
And don’t be one of those people who pokes along throughout their career, making the minimum 401(k) contribution to get the maximum employer match.
As I showed earlier, that won’t get you there either.
Let’s go through some steps that can help you determine how much money you’ll need when you retire:
Determine how much annual income you’ll need when you retire. The rule of thumb is that you use 80% of your pre-retirement income. That’s a good start, but you should make adjustments for variations. This can include higher healthcare and travel expenses, but lower housing and debt payments.
Subtract pension and Social Security income. You can get a pension estimate from your employee benefits department. For Social Security, you can use the Retirement Estimator tool that will give you an approximate benefit.
Divide the remaining amount by .04. That’s the 4% safe withdrawal rate. It will tell you how large of a retirement portfolio you’ll need to produce the necessary income.
Determine how much you will need to reach that portfolio size. Project how much you will need to contribute to your 401(k) plan and other retirement plans in order to reach the needed portfolio size. Just make sure that your return on investment calculations are reasonable.
Working a Retirement Plan Example
You can get as complicated as you want with this exercise, but let’s keep it simple.
Let’s assume that you earn $100,000 per year. You estimate needed retirement income at 80% of that number, or $80,000 per year.
You expect to receive $30,000 in Social Security income, but are not eligible for a pension. That means that your retirement portfolio will need to provide the remaining $50,000 in income.
Dividing $50,000 by .04 (4%), shows that you will need a retirement portfolio of $1.25 million.
In order to reach $1.25 million by age 65 (you’re currently 40), will require that you contribute 20% of your annual income, or $20,000 per year to your 401(k) plan. This assumes a 3% employer match, and a 7% annual rate of return on your investment.
You can also take the easy route by using an online retirement calculator, like the Bankrate Retirement Calculator.
In order to make his retirement goal, the 40-year-old in our example would need to hit (roughly) the following 401(k) balances at various ages in order to reach $1.25 million by age 65:
At age 45, $110,000
Age 50, $260,000
Age 55, $490,000
By age 60, $800,000
However you calculate how much you should have in your 401(k), what I want you to take away from this article is that the amount that you actually need is way above what you probably have.
At least that’s the case if you’re the average person.
That’s why I recommend that you decide that you’re not going to be average when it comes to your 401(k) plan. If you want a better-than-average retirement, you’ll need to have a better than average plan.
Even if you still haven’t filed your 2022 tax return yet because you requested an extension, it’s a good time to review this year’s tax situation, especially if you expect significant changes to your income.
Whether you hire a tax professional to file your taxes or file them on your own, you can review not only income projections but your possible tax bill too.
Following are key moves you can make right now that could lower the taxes you will owe in 2024. If you are able to implement these steps now, as opposed to later in the year, you’ll have more time to reap the benefits.
Review your tax withholding
A big tax refund isn’t necessarily a good thing: It could simply mean that you had too much withheld from your paycheck for taxes throughout the year, which is akin to giving the federal government an interest-free loan.
So, if your last tax refund was too small or too big for your liking, or if you owed taxes this year, it might be time to update your withholding by filling a new Form W-4 with your employer. Or at the least, consider using the IRS’ Tax Withholding Estimator, a free online tool that can help you determine whether you should withhold more or less from your paycheck this year.
By adjusting how much tax is taken out now, you’ll have more paychecks to spread the extra amount over.
If you’re lucky enough to no longer need a full-time job and are enjoying retirement, you may need to file a Form W-4V or W-4P as you begin to receive Social Security and any pension income, instead of a Form W-4. The other forms enable you to request that more (or less, if appropriate) be withheld from your retirement income this year to avoid paying a hefty tax bill next year.
Figure out your income bracket
If you can estimate how much income you will earn this year, you can also project your 2023 income tax rate. Here’s how:
Figure out your expected income for this year. If you’re unsure or want to be safe, assume it will be higher than your 2022 income.
Find the corresponding income bracket, or income range, for the tax filing status that you expect to have for 2023 (such as single, head of household, married filing jointly or married filing separately).
Find the tax rate (percentage) that corresponds to your expected income bracket.
If you find that your expected income puts you near the next-highest income bracket, implementing some of the following moves could keep you from paying more tax. In other words, these steps can lower your taxable income, which helps ensure that you stay in your expected income bracket rather than getting bumped into the next-highest bracket and thus having to pay a higher tax rate.
Plan out your retirement contributions
You can lower next year’s tax bill by putting away some of this year’s income into a tax-deferred (non-Roth) retirement account. Contributions to such accounts generally are tax-deductible.
If you’re under the age of 50, you can put $22,500 in an employer-sponsored 401(k), for example. That amount increases to a total of $30,000 if you are 50 or older.
Gig workers, small-business owners and other self-employed taxpayers can also lower their taxable income by contributing to a retirement account for the self-employed, if eligible.
Able to put away more? Then consider contributing to a traditional individual retirement account (traditional IRA), if you do not exceed the income limitations. You can squirrel away $6,500 in an IRA if you’re under the age of 50 or a total of $7,500 if you are 50 or older.
You’ll have more time to max out this year’s contributions if you start now.
Contribute to an HSA
If you have a high-deductible health plan, consider lowering your taxable income by funding a health savings account (HSA). Contributions are tax-deductible.
For 2023, you can put away up to $7,750 in an HSA if your insurance provides coverage for your whole family. Single individuals can put away $3,850.
If the funds are used for eligible medical costs after you withdraw them, you won’t pay tax on the withdrawals, either. Another great feature of these accounts: You don’t have to use up all the money you contributed in the same year. You can let it grow, unlike with a health flexible spending account (health FSA).
Contribute to an FSA
If you don’t have access to a high-deductible health plan, you may have access to a health flexible spending account. Health FSAs allow you to put money away before it’s taxed to pay for medical costs, which means contributions are tax-deductible. However, these dollars must be used in the same tax year they were contributed.
Check with your employer to find out if you have access to a health FSA — or a dependent-care FSA, for that matter. The latter works like health FSA except the funds can be used to pay for child care expenses instead of medical expenses.
Plan out your RMD
Generally, taxpayers who turned 72 or older prior to 2023 must withdraw a required minimum distribution (RMD) from their tax-deferred retirement accounts for the 2023 tax year. The deadline for doing so is Dec. 31, 2023 — and missing that deadline can trigger a steep tax penalty.
So if you must take an RMD for 2023, estimate the amount of the RMD (the IRS offers worksheets and tables to help) and plan for it. For example, do you want to take it all at once or in multiple withdrawals over the course of the year? If you take it all at once, when is the best time for you to do so?
It’s also a good idea to see how this required withdrawal will increase your income and possibly your tax liability for next year.
Add up those business expenses
If you are among the millions of Americans who are self-employed, make sure you understand what expenses can be deducted. By tracking your deductible expenses throughout the year, you can lower your taxable income, which likely will lower your taxes next year. You’ll want to keep accurate records of all deductible expense, though.
If you’re not sure what you can deduct, check out “6 Things Every Self-Employed Worker Should Know About Taxes” or visit the IRS’ Gig Economy Tax Center or its Self-Employed Individuals Tax Center to learn more.
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Bankrate Award winner for best auto insurance company overall and best budget auto insurance company
Bankrate’s insurance editorial team has decades of combined industry experience, and we use our expertise to uncover the best insurance companies through our annual Bankrate Awards.
Our goal is to give consumers an easy way to find a company that fits their unique circumstances. Based on our extensive research, we’ve recognized Geico as a 2023 Bankrate Award winner for the best overall auto insurance company and the best budget auto insurance company.
Why Geico won
Geico offers below-average auto insurance rates as well as a solid mix of coverage options, discounts and digital tools. These factors, combined with customer satisfaction and financial strength scores, earned Geico Bankrate Awards for best overall auto insurance company and best budget auto insurance company.
To choose the best overall auto insurance company, we started by gathering information from over 150 insurance companies. We researched average quoted annual premiums obtained from Quadrant Information Services for all 50 states and Washington, D.C., because we know that price is a top concern for many shoppers. We also know that service and financial strength are important, so we also evaluated third-party scores and ratings from J.D. Power, the National Association of Insurance Commissioners (NAIC), AM Best, Standard & Poor’s (S&P) and Moody’s. To ensure that we chose companies that offer the coverage that drivers need, we next reviewed available coverage options and discounts. Finally, we considered each company’s local agency presence, digital tool functionality, corporate sustainability and national availability (which we define as being available in at least 48 states, since Alaska and Hawaii often present unique challenges to insurers). While our Bankrate Awards can serve as a helpful guide, keep in mind that each insurance company has its own underwriting and pricing regulations, which means eligibility and rates will vary. We chose to feature two companies, Amica and Geico, as the best overall to help a wider range of drivers.
Price was the most important factor as we looked for the best budget auto insurance company. We obtained average quoted premiums from Quadrant Information Services for all 50 states and Washington, D.C., then analyzed the rates by a number of driver profiles. We weighed the national average rate most heavily in our analysis, but also considered coverage options, discounts, third-party scores and digital tools. Geico consistently offers low average rates and has a long list of discounts that could lower premiums even more.
Geico car insurance is available in all 50 states and Washington, D.C. Its coverage options are generally standard, and it does not have as many optional add-ons as some other car insurance carriers. The only additional options listed on Geico’s website are emergency roadside service, rental reimbursement and mechanical breakdown insurance.
Pros and cons of Geico car insurance
If you’re comparing auto insurance rates, considering Geico’s pros and cons might help you in your decision.
PROS
Checkmark
Average rates are lower than the national average
Checkmark
Average rates for drivers with an at-fault accident or moving violation on their record may be more affordable than competitors
Checkmark
Robust digital tools for online policy management
CONS
Close X
May have limited local agencies for those who want in-person support
Close X
Fewer optional coverage add-ons than competitors
Close X
Mobile app is highly-rated in the app store, but the company scored below the segment average for service in the J.D. Power U.S. Insurance Digital Experience Study
Geico car insurance cost
Based on Bankrate’s study of rate data from Quadrant Information Services, Geico is one of the cheapest car insurance companies. Its 2023 average cost of car insurance is $1,353 per year for full coverage and $373 per year for minimum coverage. This is notably lower than the 2023 national average cost of car insurance at $2,014 per year for full coverage.
Geico car insurance rates by driving history
Car insurance companies may weigh driving records heavily when it comes to calculating car insurance rates. An at-fault accident or moving conviction, such as a speeding ticket or DUI, could make your car insurance more expensive compared to a driver with no accidents or tickets on their record. Below is a comparison of rates for drivers with different driving histories. A DUI conviction has been excluded as some insurance carriers may not accept drivers with a DUI.
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Geico average monthly full coverage premium
Geico average annual full coverage premium
National average annual full coverage premium
Clean driving history
$113
$1,353
$2,014
Speeding ticket conviction
$138
$1,658
$2,427
At-fault accident
$166
$1,988
$2,854
Geico average monthly minimum coverage premium
Geico average annual minimum coverage premium
National average annual minimum coverage premium
Clean driving history
$31
$373
$622
Speeding ticket conviction
$38
$455
$748
At-fault accident
$46
$551
$892
Geico car insurance quotes by age
The age of a driver and the years of driving experience they’ve accumulated may also play an important role in determining car insurance rates. Young drivers and those who are newly licensed typically pay more for car insurance than drivers with more years of experience behind the wheel. Average insurance rates by age show that auto insurance premiums do tend to decrease over time until your 60s, but you may be able to find the best car insurance rate at any age by compiling car insurance quotes.
Below are comparisons that show young drivers both on and off their parents’ policy, as well as how they compare to other age groups. All rates are for drivers with a clean driving record.
Average cost of car insurance for drivers on their parents’ policy
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Geico average monthly full coverage premium
Geico average annual full coverage premium
National average annual full coverage premium
Age 16
$248
$2,977
$4,392
Age 17
$229
$2,753
$4,102
Age 18
$210
$2,523
$3,837
Age 19
$184
$2,212
$3,345
Age 20
$171
$2,054
$3,149
Geico average monthly minimum coverage premium
Geico average annual minimum coverage premium
National average annual minimum coverage premium
Age 16
$74
$886
$1,470
Age 17
$68
$811
$1,362
Age 18
$61
$733
$1,261
Age 19
$53
$633
$1,070
Age 20
$48
$580
$995
Average cost of car insurance for drivers on their own policy
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Geico average monthly full coverage premium
Geico average annual full coverage premium
National average annual full coverage premium
Age 18
$337
$4,048
$6,110
Age 25
$132
$1,584
$2,473
Age 30
$116
$1,389
$2,125
Age 40
$113
$1,353
$2,014
Age 60
$105
$1,264
$1,824
Geico average monthly minimum coverage premium
Geico average annual minimum coverage premium
National average annual minimum coverage premium
Age 18
$98
$1,175
$1,967
Age 25
$36
$432
$747
Age 30
$32
$379
$647
Age 40
$31
$373
$622
Age 60
$29
$352
$578
You may be eligible for a discount if you are a member or employee of a participating affiliate company or organization.
Both active duty and retired military policyholders, as well as members of the National Guard or Reserves, may save up to 15 percent on Geico auto insurance.
Geico provides up to 25 percent off car insurance for service members who experience an emergency deployment.
This usage-based telematics program tracks participating members’ driving habits and may offer premium discounts to safe drivers.
Geico may extend a discount to policyholders who insure multiple vehicles on the same policy.
Full-time students who maintain a strong academic record may receive a discount of up to 15 percent.
Geico car tools and benefits
Geico has partnered with TrueCar to create its Geico Car Buying Service. With this program, Geico policyholders can research their desired car’s market value and receive assistance from TrueCar’s Certified Dealers. After purchasing their vehicle, Geico members can use Geico Mobile’s Vehicle Care app, created through a partnership with CARFAX, to track their service history, access recall information and set maintenance reminders.
Drivers 50-years-old and older in certain states may qualify for policy renewal for life through Geico’s Prime Time contract. However, there are eligibility requirements. For example, there can be no drivers listed on the policy under the age of 25, no drivers on the policy can have received a violation or been involved in an accident in the past three years, and you can’t use your vehicle for business purposes. Still, this unique contract could provide peace of mind for those who are eligible.
Geico home insurance
Geico does not write its own home insurance policies, but it works with non-affiliated insurance companies to provide homeowners insurance quotes to interested customers. The policies are secured through GEICO Insurance Agency, LLC, and may require additional research to see if they offer the best homeowners insurance for your needs. Although coverage options and discounts may vary based on the partner company, Geico does advertise a bundling discount for auto insurance customers who add a property insurance policy through the carrier.
Geico life insurance
Similar to its home insurance policies, Geico life insurance is offered through partner companies.
Geico’s partnered life insurance offerings are available in three policy types: term life, whole life and universal life insurance. Term life insurance provides coverage for a specific amount of time, such as 10 or 30 years, and is typically used to replace lost income and cover future expenses if the policyholder passes away during the policy term. Customers may be able to obtain a term life insurance policy through Geico’s partner companies with no medical exam, but they will likely still have to fill out a health and lifestyle questionnaire.
Whole life insurance and universal life insurance are both types of permanent life insurance. These policies do not have a policy end date as long as policy terms are fulfilled. In addition to helping with income, permanent life insurance policies could also be an integral part of estate planning.
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Geico customer satisfaction
Bankrate analyzes a variety of metrics to evaluate an insurance company’s customer satisfaction, including third-party scores issued by J.D. Power. Every year, J.D. Power studies customer satisfaction, claims satisfaction and digital experience for various insurance companies across the country and issues them scores in each subject, with 1,000 being the highest score possible.
Our editorial team also considers the National Association of Insurance Commissioners (NAIC) complaint index. The NAIC keeps track of how many complaints are lodged against an insurance company and translates this data into a complaint index score. To understand this data, know the baseline (or average) amount of customer complaints is 1.0. A complaint index score higher than 1.0 means the company receives more complaints on average for its size and vice versa.
Geico auto satisfaction
Geico’s scores in the J.D. Power 2022 U.S. Auto Insurance Study vary depending on the region. Although it often scored above the segment average, it fell short in Texas and the Mid-Atlantic and Southeast regions. Additionally, it landed just above the industry average for claims satisfaction in the J.D. Power 2022 U.S. Auto Claims Satisfaction Study.
Geico’s full-service mobile app and online customer portals may be a big perk for tech-savvy shoppers. While it is true that the app is highly-rated on the App store and Google Play, the company fell under the segment average in the service category in the J.D. Power 2022 U.S. Insurance Digital Experience Study. Consumers may be more satisfied with Geico’s online sales flow as the company scored above average in the shopping category.
Regarding the NAIC complaint index, Geico has fewer complaints, on average, about its private passenger auto insurance for a company of its size, with a complaint index of 0.68. This index may indicate that Geico’s auto insurance policyholders are generally happy with the company’s service.
How to file a claim with Geico
Filing a claim with Geico can be done online through its website or the mobile app. Policyholders may also call the company’s claims line at 800-841-3000.
As Geico homeowners insurance is offered through partner companies, contact information for property claims may vary based on the company that writes your policy. A comprehensive list of property claims contact numbers can be found on Geico’s website.
Geico availability
Geico is available in all 50 states and Washington, D.C.
Other Geico perks worth considering
Auto insurance may be Geico’s most popular product, but customers can also access the following:
Travel insurance: Offered through Berkshire Hathaway Travel Protection, this insurance could help insure your travel costs including trip cancellations, lost or stolen travel documents or unplanned medical costs.
Jewelry insurance: Geico has partnered with Jewelers Mutual Insurance Group to help customers insure valuable and sentimental jewelry against theft, damage and loss.
Pet insurance: Caring for a pet can be a major expense, but pet insurance may help decrease some of the costs. Geico works with partner insurance carriers to provide coverage for most accidents, non-pre existing illnesses, dental care and more.
Geico corporate sustainability
Geico supports three main initiatives through the Geico Philanthropic Foundation: education, community engagement and equity, justice, diversity and inclusion. The Foundation has donated an average of $6-8 million annually to over 7,000 charities in the last twenty years. It encourages policyholders and the wider public to submit their 501(c)(3) non-profit organizations for donation consideration, provided that the non-profit meets Geico’s criteria. Nominations can be made from the start of the year to November 30.
Not sure if Geico is right for you?
If you’re still wondering if Geico could be a good fit for your insurance needs, you may want to consider requesting quotes from the companies below:
Geico vs. Esurance
As a fully digital insurance company, Esurance offers a robust digital app experience and may be another good option for those who want to manage their own policies. Its telematics DriveSense mobile app may allow Esurance customers and non-policyholders to earn rewards and discounts by tracking real-time driving habits and behaviors. However, Esurance does not advertise as many discounts as Geico and has higher average auto insurance premiums.
Learn more: Esurance Insurance review
Geico vs. Nationwide
Low-mileage drivers and those who want to build safe driving habits may appreciate Nationwide’s two telematics programs: SmartMiles and SmartRide. Nationwide could also be an option for those who want to bundle home and auto insurance with the same carrier, as the company writes its own homeowners insurance policies. Consumers should note that Nationwide did score below the industry average in J.D. Power’s auto claims satisfaction study.
Learn more: Nationwide Insurance review
Geico vs. Progressive
Progressive offers a long list of car insurance discounts as well as numerous home insurance discounts for those looking to save on both policy types. The company’s Name Your Price tool may also help customers take a price-first approach to their car insurance and find coverage that fits their budget. Progressive auto insurance is available in all 50 states, but homeowners insurance is not, so potential customers may want to verify availability when researching this carrier.
Learn more: Progressive Insurance review
Is Geico a good insurance company?
Bankrate’s insurance editorial staff includes three licensed agents, and we aim to share our intimate industry knowledge to help our readers choose the best insurance company that suits their needs. Insurance is complex, and we know that finding the right carrier isn’t always easy. That’s why we spend hundreds of hours each year conducting in-depth insurance company reviews.
Bankrate’s Geico insurance review also revealed that the company does not underwrite many insurance products other than car insurance. However, its partnerships with non-affiliated companies could allow customers to purchase most types of insurance including home, umbrella and life. Additional research may be required on these carriers to see if they’re the right fit.
Clock Wait
46
years of industry expertise
122
carriers reviewed
20.7K
ZIP codes examined
Dollar Coin
1.2M
quotes analyzed
Methodology
Auto
Bankrate utilizes Quadrant Information Services to analyze 2023 rates for ZIP codes and carriers in all 50 states and Washington, D.C. Rates are weighted based on the population density in each geographic region. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:
$100,000 bodily injury liability per person
$300,000 bodily injury liability per accident
$50,000 property damage liability per accident
$100,000 uninsured motorist bodily injury per person
$300,000 uninsured motorist bodily injury per accident
$500 collision deductible
$500 comprehensive deductible
To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2021 Toyota Camry, commute five days a week and drive 12,000 miles annually.
These are sample rates and should only be used for comparative purposes.
Age: Rates were calculated by evaluating our base profile with the ages 18-60 (base: 40 years) applied. Depending on age, drivers may be a renter or homeowner. Age is not a contributing rating factor in Hawaii and Massachusetts due to state regulations.
Incidents: Rates were calculated by evaluating our base profile with the following incidents applied: clean record (base), at-fault accident and single speeding ticket.
Bankrate Scores
Our 2023 Bankrate Score considers variables our insurance editorial team determined impacts policyholders’ experiences with an insurance company. These rating factors include a robust assessment of each company’s product availability, financial strength ratings, online capabilities and customer and claims support accessibility. Each factor was added to a category, and these categories were weighted in a tiered approach to analyze how companies perform in key customer-impacting categories.
Like our previous Bankrate Scores, each category was assigned a metric to determine performance, and the weighted sum adds up to a company’s total Bankrate Score — out of 5 points. This year, our 2023 scoring model provides a more comprehensive view, indicating when companies excel across several key areas and better highlighting where they fall short.
Tier 1 (Cost & ratings): To determine how well auto and home insurance companies satisfy these priorities, 2023 quoted premiums from Quadrant Information Services (if available), as well as any of the latest third-party agency ratings from J.D. Power, AM Best and the NAIC, were analyzed.
Tier 2 (Coverage & savings): We assessed companies’ coverage options and availability to help policyholders find a provider that balances cost with coverage. Additionally, we evaluated each company’s discount options listed on its website.
Tier 3 (Support): To encompass the many ways an auto insurance company can support policyholders, we analyzed avenues of customer accessibility along with community support. This analysis incorporated additional financial strength ratings from S&P and Moody’s and factored a company’s corporate sustainability efforts.
Tier scores are unweighted to show the company’s true score in each category out of a possible five points.
The average cost of homeowners insurance in Mississippi is $2,510 per year, or about $210 per month, according to a NerdWallet analysis. That’s considerably higher than the national average of $1,820 per year.
We’ve analyzed rates and companies across the state to find the best homeowners insurance in Mississippi. Our sample rates are for a homeowner with good credit and $300,000 dwelling coverage, $300,000 liability coverage, and a $1,000 deductible. But, of course, your rates will be different.
Note: Some insurance companies in this article may have changed their underwriting practices and no longer issue new policies in your state.
Why you should trust NerdWallet
Our writers and editors follow strict editorial guidelines to ensure fairness and accuracy in our writing and data analyses. You can trust the prices we show you because our data analysts take rigorous measures to eliminate inaccuracies in pricing data and may update rates for accuracy as new information becomes available.
We include rates from every locale in the country where coverage is offered and data is available. When comparing rates for different coverage amounts and backgrounds, we change only one variable at a time, so you can easily see how each factor affects pricing.
Our sample homeowner had good credit, $300,000 of dwelling coverage, $300,000 of liability coverage and a $1,000 deductible.
The best homeowners insurance in Mississippi
If you’re looking to buy homeowners insurance from a well-rated national brand, consider one of these insurers from NerdWallet’s list of the Best Homeowners Insurance Companies.
More about the best home insurance companies in Mississippi
See more details about each company to help you decide which is best.
State Farm
Well-established insurer with a lengthy list of coverage options.
Coverage options
More than average
Average set of discounts
NAIC complaints
Fewer than expected
State Farm
Well-established insurer with a lengthy list of coverage options.
Coverage options
More than average
Average set of discounts
NAIC complaints
Fewer than expected
State Farm is a great choice for homeowners who like to work directly with a company representative, as the company sells policies through a vast network of agents. And its attention to customer service has paid off; the company has fewer customer complaints to state regulators than expected for a company of its size.
State Farm offers a free Ting device as a perk for home insurance policyholders. Ting is a smart plug that monitors your home’s electrical network to help prevent fires.
Farmers
Those seeking benefits like diminishing deductibles and claims forgiveness may want to consider Farmers.
Coverage options
More than average
Average set of discounts
NAIC complaints
Fewer than expected
Farmers
Those seeking benefits like diminishing deductibles and claims forgiveness may want to consider Farmers.
Coverage options
More than average
Average set of discounts
NAIC complaints
Fewer than expected
Homeowners policies from Farmers may include two valuable types of insurance: extended dwelling and replacement cost coverage. Extended dwelling coverage gives you extra insurance for the structure of your house, while replacement cost coverage offers higher reimbursement for stolen or destroyed belongings.
Some Farmers policies also come with perks that can save you money. For example, with claim forgiveness, Farmers won’t raise your rate for a claim as long as you haven’t filed one within the past five years.
Nationwide
For shoppers seeking a broad range of coverage options, Nationwide may fit the bill.
Coverage options
More than average
Great set of discounts
NAIC complaints
Close to expected
Nationwide
For shoppers seeking a broad range of coverage options, Nationwide may fit the bill.
Coverage options
More than average
Great set of discounts
NAIC complaints
Close to expected
We like Nationwide for its wide variety of coverage options. For example, its standard homeowners insurance policy generally includes ordinance or law coverage, which can help pay to bring your home up to current building codes after a covered claim. In addition, you can add other coverage for things like identity theft and damage from backed-up sewers and drains.
Depending on how much personal assistance you need, you can get a quote for homeowners insurance on the Nationwide website or work with a local agent instead. You can also use the website to pay bills, file claims or check claim status.
USAA
Offers perks and affordable rates for the military community.
Coverage options
Below average
Average set of discounts
NAIC complaints
Far fewer than expected
USAA
Offers perks and affordable rates for the military community.
Coverage options
Below average
Average set of discounts
NAIC complaints
Far fewer than expected
USAA sells homeowners insurance to veterans, active military and their families. If you fall into one of those groups, you might want to look into USAA’s offerings. The company’s homeowners policies include some unique perks, such as deductible-free coverage for military uniforms and coverage for identity theft.
Homeowners in Mississippi can participate in the company’s Connected Home program, which gives you a discount on your policy if you buy and install approved smart home devices. These include water leak sensors, cameras and thermostats.
How much does homeowners insurance cost in Mississippi?
The average annual cost of home insurance in Mississippi is $2,510. That’s 38% more than the national average of $1,820.
In most U.S. states, including Mississippi, many insurers use your credit-based insurance score to help set rates. Your insurance score is similar but not identical to your traditional credit score.
In Mississippi, those with poor credit pay an average of $5,640 per year for homeowners insurance, according to NerdWallet’s rate analysis. That’s more than twice as much as those with good credit.
Average cost of homeowners insurance in Mississippi by city
How much you pay for homeowners insurance in Mississippi depends on where you live. For instance, the average cost of home insurance in Jackson is $2,815 per year, while homeowners in Gulfport pay $3,650 per year, on average.
Average annual cost
Average monthly cost
Greenville
Hattiesburg
Ocean Springs
Olive Branch
Starkville
The cheapest home insurance in Mississippi
Here are the insurers we found with average annual rates below the Mississippi average of $2,510.
What to know about Mississippi homeowners insurance
Mississippi sees a wide range of severe weather that homeowners should consider when shopping for the best homeowners insurance in the state.
Hurricanes
On the Gulf of Mexico, Mississippi is vulnerable to hurricanes. These fierce storms can cause damage from strong winds, storm surge and flooding. If you’re in a coastal area, ensure you have enough wind and flood damage coverage. Read more about hurricane insurance.
Wind damage is typically included in a standard homeowners insurance policy. However, residents of coastal areas may have windstorm exclusions or a separate wind deductible. These are often a flat rate, such as $1,000 or a percentage of your dwelling coverage. For example, your policy may have a $1,000 deductible for most claims and a 1% deductible for hail or wind claims. So if your house has $250,000 worth of dwelling coverage, you’d have to pay for the first $2,500 of hail damage yourself.
If wind damage is not covered in your policy, you may be able to purchase separate wind coverage from the “windpool,” or the Mississippi Windstorm Underwriting Association.
Flooding
Flooding is a common hazard in Mississippi, particularly in areas near rivers or other bodies of water or due to hurricanes and tropical storms. Flood damage is not typically covered by standard homeowners insurance; you’ll need to buy a separate flood insurance policy.
To find out if you’re at risk, check out the Federal Emergency Management Agency’s flood maps or visit RiskFactor.com, a website from the nonprofit First Street Foundation. Even if your property is deemed low risk, it may be worthwhile to purchase flood insurance for extra peace of mind.
Remember that while you can purchase flood coverage anytime, there’s typically a 30-day waiting period before the insurance takes effect. Here’s more information about flood insurance and waiting periods.
Tornadoes
Tornadoes are not uncommon in Mississippi, and they seem to be increasing in frequency. The past five years have averaged 86 tornadoes a year, up from an average of 33 a year. Much like hurricanes, the force of wind from these storms can cause significant damage to homes.
Thankfully, standard homeowners insurance will cover tornado damage, but you’ll still want to review your policy carefully. There may be a separate deductible for wind damage, as described in the hurricane section.
Thunderstorms
Severe thunderstorms that produce hail are common in Mississippi. In 2022, there were 108 reports of hail-producing thunderstorms. Hail can cause significant damage to roofs, windows, and siding. The good news for homeowners is that hail damage is often covered by standard policies.
However, as with wind damage, you may have a separate deductible for hail claims, so read your policy carefully to ensure you know what’s covered.
Mississippi insurance department
The Mississippi Insurance Department oversees the state’s insurance industry and provides consumer protection and resources. For example, its website includes guides to shopping for homeowners insurance in Mississippi, a hurricane insurance checklist and other disaster preparedness information.
You can file a complaint against your insurance company with the Mississippi Insurance Department; you can do so by mail, fax or online form. If you have questions about filing a complaint or need help, you can request assistance by email at [email protected] or toll-free at 800-562-2957.
Amanda Shapland contributed to this story.
Frequently asked questions
Is homeowners insurance required in Mississippi?
Homeowners insurance isn’t legally required in Mississippi, but your mortgage lender may require you to buy it.
Does Mississippi homeowners insurance cover flooding?
A standard homeowners policy typically doesn’t cover flooding. That means you may want to buy separate flood insurance if your home is in a high-risk area. Learn how to find the best flood insurance.
How can I save money on home insurance in Mississippi?
There are several ways to save money on homeowners insurance in Mississippi:
Shop around to make sure you’re getting the best rate.
Choose a higher deductible. In case of any claims, you’ll pay more out of pocket, but your premiums will be lower.
No financial institution can be all things to all people, but some come pretty close.
BMO Harris Bank is one of those banks. It’s a full-service bank with hundreds of branches in the United States (mainly in the Midwest and Southwest) and thousands of fee-free ATMs. With a comprehensive array of checking and savings accounts, plus credit cards, auto loans, and more, BMO Harris Bank is about as close as a bank can come to being a one-stop shop.
Does that mean BMO Harris Bank is right for you? Not necessarily. Plenty of other high-quality banks vie for your deposits every day. See whether BMO is the best fit — or whether you should see what else is out there instead.
What Is BMO Harris Bank?
BMO Harris Bank N.A. is an American bank that provides consumer and business banking services online and through a network of physical branches. Eligible deposits with the bank are FDIC-insured up to statutory limits set by Congress.
Its deposit accounts include checking, savings, money market, and certificates of deposit (CDs), and it also offers credit products like credit cards, mortgages, auto loans, personal loans, and private student loans. BMO Harris Bank has a wealth management division that focuses on relatively high net worth individuals and families, but no self-directed brokerage platform.
Is BMO Harris Bank a good place to park your cash, borrow money, and invest for the future? I’ve reviewed dozens of online banks and brick-and-mortar financial institutions over the years, and I believe BMO Harris Bank is in the upper echelon of the brick-and-mortar group. In other words, it’s one of the best traditional banks to work with — in part because it has embraced technology and innovation in a way that many of its competitors haven’t.
How BMO Harris Bank Stacks Up
BMO Harris Bank is a full-service financial institution that consistently ranks among the top traditional banks for U.S.-based consumers.
It competes not only with other big banks like Chase Bank and Citibank but with major online banks as well. If you’re torn between an “innovative incumbent” like BMO Harris Bank and an “established upstart” like Ally Bank, see for yourself how the two compare.
BMO Harris Bank
Ally Bank
Monthly Maintenance Fees for Checking
None on the BMO Harris Smart Advantage™ Account
None
Savings Account Yields
Relatively low
3.60% APY
CD Yields
Up to 4.50% APY
Up to 4.25% APY
Credit Products
Credit cards, mortgages, credit-builder loans, home equity products, personal loans, auto loans, private student loans
Credit cards, mortgages, home equity products, auto loans
Self-Directed Brokerage
No, managed investments only
Yes
Physical Branches
Yes, in Illinois, Arizona, Wisconsin, Indiana, Florida, Missouri, Kansas, and some other states
No
What Sets BMO Harris Bank Apart?
Where does BMO Harris Bank get its edge? Out of all the bank’s advantages and selling points, three things really stand out:
A Checking Account With No Monthly Maintenance Fee, Period. The BMO Harris Smart Advantage™ Account is a truly free checking account. It doesn’t charge a monthly maintenance fee, period, regardless of balance or relationship status with BMO, yet it’s packed with features. It’s rare to find an account like this at a big bank.
One-Stop Shop for Credit. Even Ally Bank, probably the best online bank for borrowers, doesn’t bother with certain credit products. BMO Harris Bank has a comprehensive lineup of loans and lines of credit, from home and auto loans to personal and student loans.
Excellent CD Rates (For a Traditional Bank). BMO Harris Bank’s CD rates are competitive with the top online banks for CD customers. And they blow most traditional banks’ CD rates out of the water.
Key Features of BMO Harris Bank
BMO Harris Bank has a comprehensive lineup of deposit accounts and loans, plus some nice value-adds like account opening bonuses and a handy digital app. See what to expect from its products and how to determine which, if any, are right for you.
Account Opening Bonus Opportunities
BMO Harris Bank has some fantastic new account opening bonus opportunities for new checking customers.
BMO Harris PremierTM Account — $350 Cash Bonus
This one is best for higher-income folks who have no problem meeting the direct deposit requirement. Here’s how it works:
Open a new BMO Harris PremierTM Account by July 14, 2023, and receive a total of at least $7,500 in qualifying direct deposits during the first 90 days of account opening. If you do, you’ll get a $350 cash bonus in your account.
This new checking account offer is not available for current BMO Harris personal checking customers, nor to customers who closed a personal checking account within the past 12 months. Open on-line or in branch; accounts subject to approval.
If you can’t notch $7,500 in qualifying direct deposits during the first 90 days, this bonus could be right for you. It’s nearly as generous:
Open a new BMO Harris Smart AdvantageTM or Smart MoneyTM Account by July 14, 2023,and receive a total of $4,000 in qualifying direct deposits within 90 days of account opening. Do this and you’ll get a $200 cash bonus in your account.
The same restrictions apply to this offer — you must be a new BMO Harris personal checking customer and can’t have had a BMO Harris personal checking account within the past 12 months.
Checking Accounts
BMO Harris Bank offers three consumer checking accounts, each with its own clear use case. All offer access to in-branch and online banking, plus low- or no-fee transactions at more than 40,000 in-network ATMs:
BMO Harris Smart Advantage™ Account: With no monthly maintenance fee, this account is ideal for folks with modest incomes and low-ish balances — folks who wouldn’t be able to avoid monthly maintenance fees at most big competitor banks.
BMO Harris Smart MoneyTM Account: Is a $5 monthly maintenance fee worth it for no overdraft fees, ever? If you occasionally dip into the red, probably yes. And there’s no maintenance fee if you’re under age 25, making this a solid student checking account.
BMO Harris Premier™ Account: BMO’s fanciest checking account entitles you to relationship benefits like up to $25 in monthly out-of-network ATM fee reimbursement and 0.50% off your home equity line’s interest rate. Benefits increase with your total BMO deposit balance.
Like all banks, BMO charges some account fees beyond the headline monthly maintenance fees (where present). Here’s how the Smart Advantage Account’s fee schedule looks:
Fee Type
Fee Amount
Monthly Maintenance Fee
$0
Allpoint and BMO Harris ATM transactions
$0
Non-BMO ATM transactions
$0
Paper statements
$2, but $0 when you opt into paperless
Check images
$3, but $0 when you opt into paperless
Overdraft fee
$15, but $0 when you opt into overdraft services
Minimum opening deposit
$25
Savings Builder Account
The Savings Builder Account is BMO Harris Bank’s standard savings account. There’s a $25 minimum opening deposit and no monthly maintenance fee.
Savings Builder’s defining feature is a $5 reward for each month you save at least $200 during the first year. Save $200 per month for all 12 months of the first year from account opening and you’ll clear a cool $60 in extra cash.
Moving forward, the Savings Builder Account has a negligible yield — just 0.01% APY. First-year deposit bonus aside, it’s not suitable if you’re looking for a high-yield savings account. On the bright side, it doesn’t have the usual savings account transaction limit. You’re free to make as many withdrawals as you like without incurring a penalty.
Money Market Account
BMO Harris Bank’s money market account has a higher yield than the Savings Builder Account. However, the yield requires a paired Premier checking account, and your actual return depends on how much you have on deposit across all BMO accounts.
To get the best rates — 2.00% higher than the baseline — you need at least $250,000 in deposits with BMO. And you need at least $10,000 in the money market account to avoid the $10 monthly maintenance fee.
Needless to say, this one’s better if you have a lot of cash on hand.
Certificates of Deposit
BMO Harris Bank offers standard CDs with terms ranging from three months to 60 months (five years). All require a minimum opening deposit of $1,000 and charge interest penalties if you withdraw principal before maturity.
BMO’s standard CD rates are not competitive. The longer-term products earn less than 0.50%, compared with 4.00% APY or higher at the best online banks for CDs.
BMO does offer CDs with competitive rates though. These special CDs, as they’re known, earn upwards of 4.00% APY on terms ranging from 13 to 59 months. They require a minimum deposit of $5,000, but if you can swing that, they’re well worth it.
You can structure select CDs as individual retirement accounts (IRAs) and enjoy tax-deferred or tax-free growth.
Individual Health Savings Account
BMO Harris Bank is one of relatively few banks that offer direct-to-consumer health savings accounts (HSAs). If you’re enrolled in an individual or family high-deductible health plan (HDHP) not through your employer, a BMO Harris Bank HSA can help you save for planned and unplanned medical expenses — or save for retirement if you stay healthy.
BMO’s HSA is delivered by Lively, a leading provider of individual HSAs. There are no ongoing or hidden service fees or monthly fees — you pay nothing out of pocket for the account — and you can withdraw money at any time to cover eligible health care expenses without paying taxes. Your contributions may be tax-deductible as well.
Credit Cards
BMO Harris Bank has four consumer credit cards, although its lineup has changed in the past and could in the future:
BMO Harris Bank Platinum Rewards Mastercard®. Earn 2 points per $1 spent on eligible gas and groceries, up to $2,500 in combined purchases each calendar quarter. Plus, get 10% bonus points on your cardmember anniversary each year (based on prior-year spending) and 0% introductory APR on balance transfers for 12 months from date of first transfer (must be completed within 90 days from date of account opening).
BMO Harris Bank Premium Rewards Mastercard®. Earn 3 points per $1 spent on eligible dining, hotels, and airfare, up to $2,500 in combined spend each calendar quarter, plus 15% bonus points on your anniversary. The same first-year balance transfer promotion applies, but there’s a $79 annual fee after the first year.
BMO Harris Bank Cash Back Mastercard®. Get 5% cash back on eligible streaming and cable/satellite TV purchases and 3% cash back on eligible gas and grocery purchases, up to $2,500 in combined spend per calendar quarter. Plus, get up to $400 in cellphone protection (restrictions apply) and the same first-year balance transfer deal.
BMO Harris Bank Platinum Mastercard®. If you need to finance a major purchase, this is your card. Enjoy 0% APR for 15 months from account opening on purchases and balance transfers.
Loans and Lines of Credit
BMO Harris Bank offers a full lineup of loans and lines of credit:
Mortgage loans, including fixed-rate and variable-rate conventional loans, jumbo loans, and specialty loans like VA and FHA mortgages
Home equity products, including home equity loans and lines of credit
Specialty property loans for bank-owned properties — BMO is one of the few banks that connects consumers with distressed property opportunities
Unsecured personal loans and lines of credit
Savings secured loans — borrow against your savings balance
Credit-builder loans — ideal for people just beginning their credit journeys
Auto loans
Private student loans and student loan refinancing
Premier customers may qualify for rate discounts and other benefits on select loan products.
Wealth Management Services
BMO Harris Bank has a team of in-house wealth advisors who offer financial planning and investment management services customized to your needs. One thing to note here: BMO doesn’t have a self-directed brokerage, so if you prefer to manage your own funds, you’ll need to look elsewhere.
Mobile Banking App
The BMO Harris mobile banking app is compatible with Android and iOS devices. It’s capable of handling most everyday banking functions, including online bill pay, money transfers, and statement review.
Advantages of BMO Harris Bank
BMO Harris Bank has a lot going for it. These are its most notable advantages.
Actually Has a Free Checking Account With No Minimum Balance. BMO Harris Bank is one of the few big banks that has a truly free checking account: the Smart Advantage Account. Most competitors require you to jump through some sort of hoops to avoid a monthly fee or impose age-based restrictions you can’t avoid.
Offers a Health Savings Account for Individuals. BMO Harris Bank’s individual HSA is another rarity among big banks. And it’s backed by Lively, a leader in the HSA space.
Built-in Free Overdraft Protection With Smart Money. BMO’s Smart Money Account doesn’t charge for overdrafts, period. Call it complimentary overdraft protection — it’s a big deal if you sometimes cut it close.
Impressive Range of Deposit Accounts and Loans. BMO Harris has three checking accounts, several savings products, and just about every major type of consumer loan you can imagine. It’s a one-stop shop for consumer financial products and services.
Competitive Rates on Special CDs. If you can meet the $5,000 minimum balance requirement, BMO’s special CDs are a great deal. Yields range from 2.00% to 3.00% annual percentage yield and appear responsive to changes in benchmark interest rates.
Disadvantages of BMO Harris Bank
Consider these potential drawbacks before opening an account with BMO Harris Bank.
Poor Savings Account Yields. BMO’s Savings Builder Account has a very poor yield. It’s not even worth talking about, frankly — if you’re in the market for a high-yield savings account, look elsewhere.
Standard CD Rates Aren’t Competitive. BMO’s standard CD rates aren’t competitive either. Fortunately, as long as the special CDs are available, you don’t have to bother with them.
Special CDs Have High Minimum Balance Requirements. BMO’s special CDs have high minimum balance requirements ($5,000). If that’s tough for you to swing, you may need to look elsewhere for competitive CDs.
Premier Benefits Have High Balance Requirements. BMO’s Premier relationship tiers offer lots of potentially valuable perks and benefits, but you have to hold up your end of the bargain by bringing tens of thousands of dollars to the table. The juiciest perks are reserved for people with at least $250,000 in eligible BMO accounts.
Is BMO Harris Bank Legit?
Yes, BMO Harris Bank is legit. It’s the eighth largest bank in North America by assets and serves more than 12 million customers on both sides of the U.S.-Canada border. It has been in business for nearly 200 years and has paid dividends to shareholders for virtually all of that time — dividends that have steadily increased over the decades.
For U.S.-based customers, BMO Harris Bank is a Member FDIC institution, which means eligible deposits are insured up to statutory limits by the Federal Deposit Insurance Corporation. When you open a checking, savings, money market, or CD account with BMO Harris, you can rest assured that your money is backed by the full faith and credit of the U.S. government — up to $250,000 per account type.
Final Word
BMO Harris Bank is a full-service financial institution that has been in business for hundreds of years and serves millions of customers in the U.S. and Canada. It’s accessible through a network of physical branches (mostly in the Midwest and Southwest), through thousands of in-network ATMs, and online and through the BMO Harris Bank mobile app from anywhere.
BMO Harris Bank stands out for several reasons. It has one of the best no-maintenance-fee checking accounts of any big bank. It offers a comprehensive lineup of savings products, although its actual savings accounts don’t have competitive yields. And it’s basically a one-stop shop for consumer credit, from credit cards and auto loans to mortgages and education financing.
If you’re in the market for a new bank, I’d encourage you to give BMO Harris Bank serious consideration. It’s not perfect, to be sure, but it’s better than most.
Editorial Note:
The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
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Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.
In Best Low-Risk Investments for 2023, I provided a comprehensive list of low-risk investments with predictable returns. But it’s precisely because those returns are low-risk that they also provide relatively low returns.
In this article, we’re going to look at high-yield investments, many of which involve a higher degree of risk but are also likely to provide higher returns.
True enough, low-risk investments are the right investment solution for anyone who’s looking to preserve capital and still earn some income.
But if you’re more interested in the income side of an investment, accepting a bit of risk can produce significantly higher returns. And at the same time, these investments will generally be less risky than growth stocks and other high-risk/high-reward investments.
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Determine How Much Risk You’re Willing to Take On
The risk we’re talking about with these high-yield investments is the potential for you to lose money. As is true when investing in any asset, you need to begin by determining how much you’re willing to risk in the pursuit of higher returns.
Chasing “high-yield returns” will make you broke if you don’t have clear financial goals you’re working towards.
I’m going to present a large number of high-yield investments, each with its own degree of risk. The purpose is to help you evaluate the risk/reward potential of these investments when selecting the ones that will be right for you.
If you’re looking for investments that are completely safe, you should favor one or more of the highly liquid, low-yield vehicles covered in Best Low-Risk Investments for 2023. In this article, we’re going to be going for something a little bit different. As such, please note that this is not in any way a blanket recommendation of any particular investment.
Best High-Yield Investments for 2023
Table of Contents
Below is my list of the 18 best high-yield investments for 2023. They’re not ranked or listed in order of importance. That’s because each is a unique investment class that you will need to carefully evaluate for suitability within your own portfolio.
Be sure that any investment you do choose will be likely to provide the return you expect at an acceptable risk level for your own personal risk tolerance.
1. Treasury Inflation-Protected Securities (TIPS)
Let’s start with this one, if only because it’s on just about every list of high-yield investments, especially in the current environment of rising inflation. It may not actually be the best high-yield investment, but it does have its virtues and shouldn’t be overlooked.
Basically, TIPS are securities issued by the U.S. Treasury that are designed to accommodate inflation. They do pay regular interest, though it’s typically lower than the rate paid on ordinary Treasury securities of similar terms. The bonds are available with a minimum investment of $100, in terms of five, 10, and 30 years. And since they’re fully backed by the U.S. government, you are assured of receiving the full principal value if you hold a security until maturity.
But the real benefit—and the primary advantage—of these securities is the inflation principal additions. Each year, the Treasury will add an amount to the bond principal that’s commensurate with changes in the Consumer Price Index (CPI).
Fortunately, while the principal will be added when the CPI rises (as it nearly always does), none will be deducted if the index goes negative.
You can purchase TIPS through the U.S. Treasury’s investment portal, Treasury Direct. You can also hold the securities as well as redeem them on the same platform. There are no commissions or fees when buying securities.
On the downside, TIPS are purely a play on inflation since the base rates are fairly low. And while the principal additions will keep you even with inflation, you should know that they are taxable in the year received.
Still, TIPS are an excellent low-risk, high-yield investment during times of rising inflation—like now.
2. I Bonds
If you’re looking for a true low-risk, high-yield investment, look no further than Series I bonds. With the current surge in inflation, these bonds have become incredibly popular, though they are limited.
I bonds are currently paying 6.89%. They can be purchased electronically in denominations as little as $25. However, you are limited to purchasing no more than $10,000 in I bonds per calendar year. Since they are issued by the U.S. Treasury, they’re fully protected by the U.S. government. You can purchase them through the Treasury Department’s investment portal, TreasuryDirect.gov.
“The cash in my savings account is on fire,” groans Scott Lieberman, Founder of Touchdown Money. “Inflation has my money in flames, each month incinerating more and more. To defend against this, I purchased an I bond. When I decide to get my money back, the I bond will have been protected against inflation by being worth more than what I bought it for. I highly recommend getting yourself a super safe Series I bond with money you can stash away for at least one year.”
You may not be able to put your entire bond portfolio into Series I bonds. But just a small investment, at nearly 10%, can increase the overall return on your bond allocation.
3. Corporate Bonds
The average rate of return on a bank savings account is 0.33%. The average rate on a money market account is 0.09%, and 0.25% on a 12-month CD.
Now, there are some banks paying higher rates, but generally only in the 1%-plus range.
If you want higher returns on your fixed income portfolio, and you’re willing to accept a moderate level of risk, you can invest in corporate bonds. Not only do they pay higher rates than banks, but you can lock in those higher rates for many years.
For example, the average current yield on a AAA-rated corporate bond is 4.55%. Now that’s the rate for AAA bonds, which are the highest-rated securities. You can get even higher rates on bonds with lower ratings, which we will cover in the next section.
Corporate bonds sell in face amounts of $1,000, though the price may be higher or lower depending on where interest rates are. If you choose to buy individual corporate bonds, expect to buy them in lots of ten. That means you’ll likely need to invest $10,000 in a single issue. Brokers will typically charge a small per-bond fee on purchase and sale.
An alternative may be to take advantage of corporate bond funds. That will give you an opportunity to invest in a portfolio of bonds for as little as the price of one share of an ETF. And because they are ETFs, they can usually be bought and sold commission free.
You can typically purchase corporate bonds and bond funds through popular stock brokers, like Zacks Trade, TD Ameritrade.
Corporate Bond Risk
Be aware that the value of corporate bonds, particularly those with maturities greater than 10 years, can fall if interest rates rise. Conversely, the value of the bonds can rise if interest rates fall.
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4. High-Yield Bonds
In the previous section we talked about how interest rates on corporate bonds vary based on each bond issue’s rating. A AAA bond, being the safest, has the lowest yield. But a riskier bond, such as one rated BBB, will provide a higher rate of return.
If you’re looking to earn higher interest than you can with investment-grade corporate bonds, you can get those returns with so-called high-yield bonds. Because they have a lower rating, they pay higher interest, sometimes much higher.
The average yield on high-yield bonds is 8.29%. But that’s just an average. The yield on a bond rated B will be higher than one rated BB.
You should also be aware that, in addition to potential market value declines due to rising interest rates, high-yield bonds are more likely to default than investment-grade bonds. That’s why they pay higher interest rates. (They used to call these bonds “junk bonds,” but that kind of description is a marketing disaster.) Because of those twin risks, junk bonds should occupy only a small corner of your fixed-income portfolio.
High Yield Bond Risk
In a rapidly rising interest rate environment, high-yield bonds are more likely to default.
High-yield bonds can be purchased under similar terms and in the same places where you can trade corporate bonds. There are also ETFs that specialize in high-yield bonds and will be a better choice for most investors, since they will include diversification across many different bond issues.
5. Municipal Bonds
Just as corporations and the U.S. Treasury issue bonds, so do state and local governments. These are referred to as municipal bonds. They work much like other bond types, particularly corporates. They can be purchased in similar denominations through online brokers.
The main advantage enjoyed by municipal bonds is their tax-exempt status for federal income tax purposes. And if you purchase a municipal bond issued by your home state, or a municipality within that state, the interest will also be tax-exempt for state income tax purposes.
That makes municipal bonds an excellent source of tax-exempt income in a nonretirement account. (Because retirement accounts are tax-sheltered, it makes little sense to include municipal bonds in those accounts.)
Municipal bond rates are currently hovering just above 3% for AAA-rated bonds. And while that’s an impressive return by itself, it masks an even higher yield.
Because of their tax-exempt status, the effective yield on municipal bonds will be higher than the note rate. For example, if your combined federal and state marginal income tax rates are 25%, the effective yield on a municipal bond paying 3% will be 4%. That gives an effective rate comparable with AAA-rated corporate bonds.
Municipal bonds, like other bonds, are subject to market value fluctuations due to interest rate changes. And while it’s rare, there have been occasional defaults on these bonds.
Like corporate bonds, municipal bonds carry ratings that affect the interest rates they pay. You can investigate bond ratings through sources like Standard & Poor’s, Moody’s, and Fitch.
Fund
Symbol
Type
Current Yield
5 Average Annual Return
Vanguard Inflation-Protected Securities Fund
VIPSX
TIPS
0.06%
3.02%
SPDR® Portfolio Interm Term Corp Bond ETF
SPIB
Corporate
4.38%
1.44%
iShares Interest Rate Hedged High Yield Bond ETF
HYGH
High-Yield
5.19%
2.02%
Invesco VRDO Tax-Free ETF (PVI)
PVI
Municipal
0.53%
0.56%
6. Longer Term Certificates of Deposit (CDs)
This is another investment that falls under the low risk/relatively high return classification. As interest rates have risen in recent months, rates have crept up on certificates of deposit. Unlike just one year ago, CDs now merit consideration.
But the key is to invest in certificates with longer terms.
“Another lower-risk option is to consider a Certificate of Deposit (CD),” advises Lance C. Steiner, CFP at Buckingham Advisors. “Banks, credit unions, and many other financial institutions offer CDs with maturities ranging from 6 months to 60 months. Currently, a 6-month CD may pay between 0.75% and 1.25% where a 24-month CD may pay between 2.20% and 3.00%. We suggest considering a short-term ladder since interest rates are expected to continue rising.” (Stated interest rates for the high-yield savings and CDs were obtained at bankrate.com.)
Most banks offer certificates of deposit with terms as long as five years. Those typically have the highest yields.
But the longer term does involve at least a moderate level of risk. If you invest in a CD for five years that’s currently paying 3%, the risk is that interest rates will continue rising. If they do, you’ll miss out on the higher returns available on newer certificates. But the risk is still low overall since the bank guarantees to repay 100% of your principle upon certificate maturity.
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7. Peer-to-Peer (P2P) Lending
Do you know how banks borrow from you—at 1% interest—then loan the same money to your neighbor at rates sometimes as high as 20%? It’s quite a racket, and a profitable one at that.
But do you also know that you have the same opportunity as a bank? It’s an investing process known as peer-to-peer lending, or P2P for short.
P2P lending essentially eliminates the bank. As an investor, you’ll provide the funds for borrowers on a P2P platform. Most of these loans will be in the form of personal loans for a variety of purposes. But some can also be business loans, medical loans, and for other more specific purposes.
As an investor/lender, you get to keep more of the interest rate return on those loans. You can invest easily through online P2P platforms.
One popular example is Prosper. They offer primarily personal loans in amounts ranging between $2,000 and $40,000. You can invest in small slivers of these loans, referred to as “notes.” Notes can be purchased for as little as $25.
That small denomination will make it possible to diversify your investment across many different loans. You can even choose the loans you will invest in based on borrower credit scores, income, loan terms, and purposes.
Prosper, which has managed $20 billion in P2P loans since 2005, claims a historical average return of 5.7%. That’s a high rate of return on what is essentially a fixed-income investment. But that’s because there exists the possibility of loss due to borrower default.
However, you can minimize the likelihood of default by carefully choosing borrower loan quality. That means focusing on borrowers with higher credit scores, incomes, and more conservative loan purposes (like debt consolidation).
8. Real Estate Investment Trusts (REITs)
REITs are an excellent way to participate in real estate investment, and the return it provides, without large amounts of capital or the need to manage properties. They’re publicly traded, closed-end investment funds that can be bought and sold on major stock exchanges. They invest primarily in commercial real estate, like office buildings, retail space, and large apartment complexes.
If you’re planning to invest in a REIT, you should be aware that there are three different types.
“Equity REITs purchase commercial, industrial, or residential real estate properties,” reports Robert R. Johnson, PhD, CFA, CAIA, Professor of Finance, Heider College of Business, Creighton University and co-author of several books, including The Tools and Techniques Of Investment Planning, Strategic Value Investing and Investment Banking for Dummies. “Income is derived primarily from the rental on the properties, as well as from the sale of properties that have increased in value. Mortgage REITs invest in property mortgages. The income is primarily from the interest they earn on the mortgage loans. Hybrid REITs invest both directly in property and in mortgages on properties.”
Johnson also cautions:
“Investors should understand that equity REITs are more like stocks and mortgage REITs are more like bonds. Hybrid REITs are like a mix of stocks and bonds.”
Mortgage REITs, in particular, are an excellent way to earn steady dividend income without being closely tied to the stock market.
Examples of specific REITs are listed in the table below (source: Kiplinger):
REIT
Equity or Mortgage
Property Type
Dividend Yield
12 Month Return
Rexford Industrial Realty
REXR
Industrial warehouse space
2.02%
2.21%
Sun Communities
SUI
Manufactured housing, RVs, resorts, marinas
2.19%
-14.71%
American Tower
AMT
Multi-tenant cell towers
2.13%
-9.00%
Prologis
PLD
Industrial real estate
2.49%
-0.77%
Camden Property Trust
CPT
Apartment complexes
2.77%
-7.74%
Alexandria Real Estate Equities
ARE
Research Properties
3.14%
-23.72%
Digital Realty Trust
DLR
Data centers
3.83%
-17.72%
9. Real Estate Crowdfunding
If you prefer direct investment in a property of your choice, rather than a portfolio, you can invest in real estate crowdfunding. You invest your money, but management of the property will be handled by professionals. With real estate crowdfunding, you can pick out individual properties, or invest in nonpublic REITs that invest in very specific portfolios.
One of the best examples of real estate crowdfunding is Fundrise. That’s because you can invest with as little as $500 or create a customized portfolio with no more than $1,000. Not only does Fundrise charge low fees, but they also have multiple investment options. You can start small in managed investments, and eventually trade up to investing in individual deals.
One thing to be aware of with real estate crowdfunding is that many require accredited investor status. That means being high income, high net worth, or both. If you are an accredited investor, you’ll have many more choices in the real estate crowdfunding space.
If you are not an accredited investor, that doesn’t mean you’ll be prevented from investing in this asset class. Part of the reason why Fundrise is so popular is that they don’t require accredited investor status. There are other real estate crowdfunding platforms that do the same.
Just be careful if you want to invest in real estate through real estate crowdfunding platforms. You will be expected to tie your money up for several years, and early redemption is often not possible. And like most investments, there is the possibility of losing some or all your investment principal.
Low minimum investment – $10
Diversified real estate portfolio
Portfolio Transparency
10. Physical Real Estate
We’ve talked about investing in real estate through REITs and real estate crowdfunding. But you can also invest directly in physical property, including residential property or even commercial.
Owning real estate outright means you have complete control over the investment. And since real estate is a large-dollar investment, the potential returns are also large.
For starters, average annual returns on real estate are impressive. They’re even comparable to stocks. Residential real estate has generated average returns of 10.6%, while commercial property has returned an average of 9.5%.
Next, real estate has the potential to generate income from two directions, from rental income and capital gains. But because of high property values in many markets around the country, it will be difficult to purchase real estate that will produce a positive cash flow, at least in the first few years.
Generally speaking, capital gains are where the richest returns come from. Property purchased today could double or even triple in 20 years, creating a huge windfall. And this will be a long-term capital gain, to get the benefit of a lower tax bite.
Finally, there’s the leverage factor. You can typically purchase an investment property with a 20% down payment. That means you can purchase a $500,000 property with $100,000 out-of-pocket.
By calculating your capital gains on your upfront investment, the returns are truly staggering. If the $500,000 property doubles to $1 million in 20 years, the $500,000 profit generated will produce a 500% gain on your $100,000 investment.
On the negative side, real estate is certainly a very long-term investment. It also comes with high transaction fees, often as high as 10% of the sale price. And not only will it require a large down payment up front, but also substantial investment of time managing the property.
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11. High Dividend Stocks
“The best high-yield investment is dividend stocks,” declares Harry Turner, Founder at The Sovereign Investor. “While there is no guaranteed return with stocks, over the long term stocks have outperformed other investments such as bonds and real estate. Among stocks, dividend-paying stocks have outperformed non-dividend paying stocks by more than 2 percentage points per year on average over the last century. In addition, dividend stocks tend to be less volatile than non-dividend paying stocks, meaning they are less likely to lose value in downturns.”
You can certainly invest in individual stocks that pay high dividends. But a less risky way to do it, and one that will avoid individual stock selection, is to invest through a fund.
One of the most popular is the ProShares S&P 500 Dividend Aristocrat ETF (NOBL). It has provided a return of 1.67% in the 12 months ending May 31, and an average of 12.33% per year since the fund began in October 2013. The fund currently has a 1.92% dividend yield.
The so-called Dividend Aristocrats are popular because they represent 60+ S&P 500 companies, with a history of increasing their dividends for at least the past 25 years.
“Dividend Stocks are an excellent way to earn some quality yield on your investments while simultaneously keeping inflation at bay,” advises Lyle Solomon, Principal Attorney at Oak View Law Group, one of the largest law firms in America. “Dividends are usually paid out by well-established and successful companies that no longer need to reinvest all of the profits back into the business.”
It gets better. “These companies and their stocks are safer to invest in owing to their stature, large customer base, and hold over the markets,” adds Solomon. “The best part about dividend stocks is that many of these companies increase dividends year on year.”
The table below shows some popular dividend-paying stocks. Each is a so-called “Dividend Aristocrat”, which means it’s part of the S&P 500 and has increased its dividend in each of at least the past 25 years.
Company
Symbol
Dividend
Dividend Yield
AbbVie
ABBV
$5.64
3.80%
Armcor PLC
AMCR
$0.48
3.81%
Chevron
CVX
$5.68
3.94%
ExxonMobil
XOM
$3.52
4.04%
IBM
IBM
$6.60
5.15%
Realty Income Corp
O
$2.97
4.16%
Walgreen Boots Alliance
WBA
$1.92
4.97%
12. Preferred Stocks
Preferred stocks are a very specific type of dividend stock. Just like common stock, preferred stock represents an interest in a publicly traded company. They’re often thought of as something of a hybrid between stocks and bonds because they contain elements of both.
Though common stocks can pay dividends, they don’t always. Preferred stocks on the other hand, always pay dividends. Those dividends can be either a fixed amount or based on a variable dividend formula. For example, a company can base the dividend payout on a recognized index, like the LIBOR (London Inter-Bank Offered Rate). The percentage of dividend payout will then change as the index rate does.
Preferred stocks have two major advantages over common stock. First, as “preferred” securities, they have a priority on dividend payments. A company is required to pay their preferred shareholders dividends ahead of common stockholders. Second, preferred stocks have higher dividend yields than common stocks in the same company.
You can purchase preferred stock through online brokers, some of which are listed under “Growth Stocks” below.
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Preferred Stock Caveats
The disadvantage of preferred stocks is that they don’t entitle the holder to vote in corporate elections. But some preferred stocks offer a conversion option. You can exchange your preferred shares for a specific number of common stock shares in the company. Since the conversion will likely be exercised when the price of the common shares takes a big jump, there’s the potential for large capital gains—in addition to the higher dividend.
Be aware that preferred stocks can also be callable. That means the company can authorize the repurchase of the stock at its discretion. Most will likely do that at a time when interest rates are falling, and they no longer want to pay a higher dividend on the preferred stock.
Preferred stock may also have a maturity date, which is typically 30–40 years after its original issuance. The company will typically redeem the shares at the original issue price, eliminating the possibility of capital gains.
Not all companies issue preferred stock. If you choose this investment, be sure it’s with a company that’s well-established and has strong financials. You should also pay close attention to the details of the issuance, including and especially any callability provisions, dividend formulas, and maturity dates.
13. Growth Stocks
This sector is likely the highest risk investment on this list. But it also may be the one with the highest yield, at least over the long term. That’s why we’re including it on this list.
Based on the S&P 500 index, stocks have returned an average of 10% per year for the past 50 years. But it is important to realize that’s only an average. The market may rise 40% one year, then fall 20% the next. To be successful with this investment, you must be committed for the long haul, up to and including several decades.
And because of the potential wide swings, growth stocks are not recommended for funds that will be needed within the next few years. In general, growth stocks work best for retirement plans. That’s where they’ll have the necessary decades to build and compound.
Since most of the return on growth stocks is from capital gains, you’ll get the benefit of lower long-term capital gains tax rates, at least with securities held in a taxable account. (The better news is capital gains on investments held in retirement accounts are tax-deferred until retirement.)
You can choose to invest in individual stocks, but that’s a fairly high-maintenance undertaking. A better way may be to simply invest in ETFs tied to popular indexes. For example, ETFs based on the S&P 500 are very popular among investors.
You can purchase growth stocks and growth stock ETFs commission free with brokers like M1 Finance, Zacks Trade, Wealthsimple.
14. Annuities
Annuities are something like creating your own private pension. It’s an investment contract you take with an insurance company, in which you invest a certain amount of money in exchange for a specific income stream. They can be an excellent source of high yields because the return is locked in by the contract.
Annuities come in many different varieties. Two major classifications are immediate and deferred annuities. As the name implies, immediate annuities begin paying an income stream shortly after the contract begins.
Deferred annuities work something like retirement plans. You may deposit a fixed amount of money with the insurance company upfront or make regular installments. In either case, income payments will begin at a specified point in the future.
With deferred annuities, the income earned within the plan is tax-deferred and paid upon withdrawal. But unlike retirement accounts, annuity contributions are not tax-deductible. Investment returns can either be fixed-rate or variable-rate, depending on the specific annuity setup.
While annuities are an excellent idea and concept, the wide variety of plans as well as the many insurance companies and agents offering them, make them a potential minefield. For example, many annuities are riddled with high fees and are subject to limited withdrawal options.
Because they contain so many moving parts, any annuity contracts you plan to enter into should be carefully reviewed. Pay close attention to all the details, including the small ones. It is, after all, a contract, and therefore legally binding. For that reason, you may want to have a potential annuity reviewed by an attorney before finalizing the deal.
15. Alternative Investments
Alternative investments cover a lot of territory. Examples include precious metals, commodities, private equity, art and collectibles, and digital assets. These fall more in the category of high risk/potential high reward, and you should proceed very carefully and with only the smallest slice of your portfolio.
To simplify the process of selecting alternative assets, you can invest through platforms such as Yieldstreet. With a single cash investment, you can invest in multiple alternatives.
“Investors can purchase real estate directly on Yieldstreet, through fractionalized investments in single deals,” offers Milind Mehere, Founder & Chief Executive Officer at Yieldstreet. “Investors can access private equity and private credit at high minimums by investing in a private market fund (think Blackstone or KKR, for instance). On Yieldstreet, they can have access to third-party funds at a fraction of the previously required minimums. Yieldstreet also offers venture capital (fractionalized) exposure directly. Buying a piece of blue-chip art can be expensive, and prohibitive for most investors, which is why Yieldstreet offers fractionalized assets to diversified art portfolios.”
Yieldstreet also provides access to digital asset investments, with the benefit of allocating to established professional funds, such as Pantera or Osprey Fund. The platform does not currently offer commodities but plans to do so in the future.
Access to wide array of alternative asset classes
Access to ultra-wealthy investments
Can invest for income or growth
Learn More Now
Alternative investments largely require thinking out-of-the-box. Some of the best investment opportunities are also the most unusual.
“The price of meat continues to rise, while agriculture remains a recession-proof investment as consumer demand for food is largely inelastic,” reports Chris Rawley, CEO of Harvest Returns, a platform for investing in private agriculture companies. “Consequently, investors are seeing solid returns from high-yield, grass-fed cattle notes.”
16. Interest Bearing Crypto Accounts
Though the primary appeal of investing in cryptocurrency has been the meteoric rises in price, now that the trend seems to be in reverse, the better play may be in interest-bearing crypto accounts. A select group of crypto exchanges pays high interest on your crypto balance.
One example is Gemini. Not only do they provide an opportunity to buy, sell, and store more than 100 cryptocurrencies—plus non-fungible tokens (NFTs)—but they are currently paying 8.05% APY on your crypto balance through Gemini Earn.
In another variation of being able to earn money on crypto, Crypto.com pays rewards of up to 14.5% on crypto held on the platform. That’s the maximum rate, as rewards vary by crypto. For example, rewards on Bitcoin and Ethereum are paid at 6%, while stablecoins can earn 8.5%.
It’s important to be aware that when investing in cryptocurrency, you will not enjoy the benefit of FDIC insurance. That means you can lose money on your investment. But that’s why crypto exchanges pay such high rates of return, whether it’s in the form of interest or rewards.
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17. Crypto Staking
Another way to play cryptocurrency is a process known as crypto staking. This is where the crypto exchange pays you a certain percentage as compensation or rewards for monitoring a specific cryptocurrency. This is not like crypto mining, which brings crypto into existence. Instead, you’ll participate in writing that particular blockchain and monitoring its security.
“Crypto staking is a concept wherein you can buy and lock a cryptocurrency in a protocol, and you will earn rewards for the amount and time you have locked the cryptocurrency,” reports Oak View Law Group’s Lyle Solomon.
“The big downside to staking crypto is the value of cryptocurrencies, in general, is extremely volatile, and the value of your staked crypto may reduce drastically,” Solomon continues, “However, you can stake stable currencies like USDC, which have their value pegged to the U.S. dollar, and would imply you earn staked rewards without a massive decrease in the value of your investment.”
Much like earning interest and rewards on crypto, staking takes place on crypto exchanges. Two exchanges that feature staking include Coinbase and Kraken. These are two of the largest crypto exchanges in the industry, and they provide a wide range of crypto opportunities, in addition to staking.
Invest in Startup Businesses and Companies
Have you ever heard the term “angel investor”? That’s a private investor, usually, a high net worth individual, who provides capital to small businesses, often startups. That capital is in the form of equity. The angel investor invests money in a small business, becomes a part owner of the company, and is entitled to a share of the company’s earnings.
In most cases, the angel investor acts as a silent partner. That means he or she receives dividend distributions on the equity invested but doesn’t actually get involved in the management of the company.
It’s a potentially lucrative investment opportunity because small businesses have a way of becoming big businesses. As they grow, both your equity and your income from the business also grow. And if the business ever goes public, you could be looking at a life-changing windfall!
Easy Ways to Invest in Startup Businesses
Mainvest is a simple, easy way to invest in small businesses. It’s an online investment platform where you can get access to returns as high as 25%, with an investment of just $100. Mainvest offers vetted businesses (the acceptance rate is just 5% of business that apply) for you to invest in.
It collects revenue, which will be paid to you quarterly. And because the minimum required investment is so small, you can invest in several small businesses at the same time. One of the big advantages with Mainvest is that you are not required to be an accredited investor.
Still another opportunity is through Fundrise Innovation Fund. I’ve already covered how Fundrise is an excellent real estate crowdfunding platform. But through their recently launched Innovaton Fund, you’ll have opportunity to invest in high-growth private technology companies. As a fund, you’ll invest in a portfolio of late-stage tech companies, as well as some public equities.
The purpose of the fund is to provide high growth, and the fund is currently offering shares with a net asset value of $10. These are long-term investments, so you should expect to remain invested for at least five years. But you may receive dividends in the meantime.
Like Mainvest, the Fundrise Innovation Fund does not require you to be an accredited investor.
Low minimum investment – $10
Diversified real estate portfolio
Portfolio Transparency
Final Thoughts on High Yield Investing
Notice that I’ve included a mix of investments based on a combination of risk and return. The greater the risk associated with the investment, the higher the stated or expected return will be.
It’s important when choosing any of these investments that you thoroughly assess the risk involved with each, and not focus primarily on return. These are not 100% safe investments, like short-term CDs, short-term Treasury securities, savings accounts, or bank money market accounts.
Because there is risk associated with each, most are not suitable as short-term investments. They make most sense for long-term investment accounts, particularly retirement accounts.
For example, growth stocks—and most stocks, for that matter—should generally be in a retirement account. While there will be years when you will suffer losses in your position, you’ll have enough years to offset those losses between now and retirement.
Also, if you don’t understand any of the above investments, it will be best to avoid making them. And for more complicated investments, like annuities, you should consult with a professional to evaluate the suitability and all the provisions it contains.
FAQ’s on High Yield Investment Options
What investment has the highest yield?
The investment with the highest yield will vary depending on a number of factors, including current market conditions and the amount of risk an investor is willing to take on. Generally speaking, investments with the potential for high yields also come with a higher level of risk, so it’s important for investors to carefully consider their options and choose investments that align with their financial goals and risk tolerance.
Some examples of high-yield investments include:
1. Stocks: Some stocks may offer high dividend yields, which is the annual dividend payment a company makes to its shareholders, expressed as a percentage of the stock’s current market price.
2. Real estate: Investing in real estate, either directly by purchasing property or indirectly through a real estate investment trust (REIT), can potentially generate high returns in the form of rental income and appreciation of the property value.
3. High-yield bonds: High-yield bonds, also known as junk bonds, are bonds that are issued by companies with lower credit ratings and thus offer higher yields to compensate for the added risk.
4. Private lending: Investing in private loans, such as through peer-to-peer lending platforms, can potentially offer high yields, but it also carries a higher level of risk.
5. Commodities: Investing in commodities, such as precious metals or oil, can potentially generate high returns if the prices of those commodities rise. However, the prices of commodities can also be volatile and subject to market fluctuations.
It’s important to note that these are just examples and not recommendations. As with any investment, it’s crucial to carefully research and consider all the potential risks and rewards before making a decision.
Where can I invest my money to get high returns?
There are a number of places you can invest your money to get high returns. One option is to invest in stocks, which typically offer higher returns than other investment options. Another option is to invest in bonds, which are considered a relatively safe investment option.
You could also invest in real estate, which has the potential to provide high returns if done correctly. Finally, you could also invest in commodities, such as gold or silver, which can be a risky investment but can also offer high returns.
What investments can I make a 10% return?
It’s difficult to predict exactly what investments will generate a 10% return, as investment returns can vary depending on a number of factors, including market conditions and the performance of the specific investment. Some investments, such as stocks and real estate, have the potential to generate returns in excess of 10%, but they also come with a higher level of risk. It’s important to remember that past performance is not necessarily indicative of future results, and that all investments carry some degree of risk
Best for cash back: Maximum Rewards® World Mastercard® by Amalgamated Bank
Pros
No annual fee
Unlimited 1.5% cash back on all purchases
$30 bonus (30,000 points) when you spend $600 within the first three billing cycles
0% intro APR on purchases and balance transfers for the first 12 billing cycles
Cons
Higher variable APR on purchases and balance transfers after the introductory period
3% foreign transaction fee
Features
Travel insurance including
Amalgamated Bank supports a number of different causes from environmental sustainability to workers’ rights, and it’s union-owned to boot. Founded in 1923, it’s been rallying behind rallying people for over a century. It’s net-zero and run on renewable energy, pro-union, an ally to immigrants, and politically progressive.
But we’re here to talk about the credit card too. The Maximum Rewards® World Mastercard® is a rewards credit card that earns 1.5% rewards on all purchases. It’s got a great 12-month intro APR, a signup bonus, and good redemption flexibility — all without an annual fee.
Choose this option if you want to have your cake and eat it too (i.e. side with a bank that’s doing some good and still get a great flat-rate cash back card).
Learn more.
Best socially responsible card: Rewards Platinum Visa® from Green America
Pros
No annual fee
Unlimited one point per dollar on all purchases
0% intro APR on purchases and balance transfers for the first 12 billing cycles
$150,000 in Travel Accident Insurance
Cons
1% foreign transaction fee
Features
Donates a portion of profits to charities
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Maybe you’ve heard of Green America, the nonprofit working to combat climate change, promote ethical practices and corporate governance, fight for social justice, and more. Green America’s work covers a broad range of issues, and its credit card, the Rewards Platinum Visa®, supports these efforts with every transaction. And it earns unlimited points on everything.
This affinity card has a fairly competitive APR, doesn’t charge an annual fee, and has a few nice benefits like travel insurance and a lower foreign transaction fee. But it’s not perfect, and we wish it were more clear about how donations worked and where exactly they were going.
This is a good choice if you’re interested in socially responsible causes and giving back.
Learn more.
Best card for charitable donations: Charity Charge Card
Pros
No annual fee
Lower interest rate on purchases
Cons
Does not earn rewards
2% foreign transaction fee
Features
Donates 1% of all purchases to the charity of your choice
The Charity Charge Card automatically gives to charity every time you use it. Can your current card do that?
When you apply for this credit card, you get to choose the nonprofit you want your spending to automatically benefit. If a nonprofit is set up to receive credit card donations, it is likely available as an option. Bonus: your donations may qualify for charitable tax deductions, which can help the fact that you otherwise won’t earn rewards or cash back sting a little less.
Since donations are calculated as a percentage of spending, you’ll have a greater impact the more regularly you use this card. If you don’t want to miss out on rewards entirely, you could use this card for some of your spending that wouldn’t qualify for the best rates otherwise.
Learn more.
Read more: Want To Help But Can’t Give Cash? 10 Alternatives To Donating Money
Best secured credit card: Secured Mastercard® by Amalgamated Bank
Pros
Potential for a credit limit increase in as little as seven months after opening
Set your own credit line between $300 and $5,000
Potential to receive security deposit back in as little as 11 months with on-time payments
Cons
Does not earn rewards or cash back
$35 annual fee
3% foreign transaction fee
Features
Set your own limit and qualify for a credit limit increase
The Secured Mastercard® by Amalgamated Bank is a decent low-fee secured card for eco-conscious borrowers. It has a minimum limit of $300 and a maximum of $5,000, and your line is determined by your security deposit. This carries a modest annual fee (for a secured card) of $35 and fairly average interest rates, and it’s a little more flexible than the average competitor.
You may be eligible for a credit limit increase in as little as seven months after opening an account with responsible use and can get your deposit back in less than a year.
This is a good option for borrowers with little or poor credit, but you should only choose this if you couldn’t qualify for one of the others, as it doesn’t earn rewards and has higher fees.
Learn more.
Best for travel: Visa Signature Card (Climate Card) by Beneficial State Bank
Pros
No annual fee
Unlimited one point per dollar on all purchases
Cons
1% foreign transaction fee
Features
Travel insurance and protection including: Travel & emergency assistance services, travel accident insurance, auto rental collision damage waiver, and roadside dispatch
Beneficial State Bank is a purpose-driven financial institution with an eco-friendly card for people who may want their spending to help out green charities and nonprofits.
The Climate Card is similar to the Rewards Platinum Visa by Green America in that it earns flat-rate rewards that can be donated to charity. But unlike the Green America card, the Climate Card has you choose what happens to your points. So if you want to donate them, you can. But if you want to instead redeem for cash or travel, that’s your prerogative too.
This is a good travel card because it has a 1% foreign transaction fee (compared to 1% or 2%) and comes with benefits like insurance and roadside dispatch. And because it lets you choose between keeping your points and donating them, it’s also one of the most flexible choices.
Learn more.
Best fee-free credit card (for people in Washington): Verity Signature Rewards Visa
Pros
No annual fee
No foreign transaction fee
1.5 points per dollar on all purchases
0% intro APR on purchases and balance transfers for the first 12 billing cycles
Cons
Only people in Washington state are eligible to join Verity Credit Union
Features
Signature Rewards Visa protection benefits including: extended warranty protection, emergency assistance travel services, accident insurance, and more
Credit cards without foreign transaction fees can be hard to come by, but this card makes it happen. The Signature Rewards Visa by Verity Credit Union charges no annual fee and no foreign transaction fee, giving it a huge advantage over all the others on this list. But it has the huge disadvantage of being only available to people in the state of Washington.
Points can be redeemed for cash, travel, gift cards, or purchases and there are no restrictions for earning. There’s also an intro APR offer of 12 months on purchases and balance transfers, making this comparable to many rewards cards on the market. If you do qualify to join Verity, consider it for this — especially if you’re on the fence about eco-friendly cards.
This is a good card from an admirable credit union, but it won’t be a fit for everyone (or most).
Learn more.
Best debit card for earning: Aspiration Spend and Save
Pros
Up to 10% cash back on eligible Conscience Coalition purchases
Earns up to 3.00% interest with qualifying debit activity
Cons
Monthly fees for the Plus Plan ($7.99 a month paid monthly or $5.99 a month paid annually)
Does not earn cash back on all purchases
Does not build credit
Features
$10 minimum deposit
Additional green benefits like carbon offsetting and planting trees with purchases
The Aspiration Spend & Save account offers a debit card that earns rewards like a credit card and comes with a whole host of eco-friendly benefits. There are two plans to choose from.
The base Aspiration plan uses a “pay what is fair” fee structure and the Aspiration Plus plan costs $5.99 or $7.99 a month depending on if you pay monthly or annually. The Aspiration plan pays up to 1.00% interest and up to 3% – 5% cash back while the Aspiration Plus plan pays up to 3.00% interest and 10% cash back on Conscience Coalition spending.
Both have features like early direct deposit and the ability to plant trees when you spend, but only the Aspiration Plus account includes additional automatic offsets and Purchase Assurance. If you decide this account is right for you, pick the Plus Plan to maximize benefits.
Read our full Aspiration review.
Aspiration Zero Credit Card
Aspiration used to offer a credit card called the Aspiration Zero Credit Card, but they are no longer accepting new applications. Now, this bank’s only individual solution is the Spend & Save account, a rewards-earning checking account with a debit card.
Best debit card for eco-friendly spending: FutureCard Visa Debit Card
Pros
No monthly fees or annual fee
6% cash back on eligible purchases at FuturePartners
5% cash back on “climate-smart spending” purchases such as EV charging, bikes and scooters, public transit, etc.
Cons
Does not earn cash back on all purchases
Does not build credit
Features
See your climate impact using your FutureScore
Complete missions to earn FutureCoins
The FutureCard Visa Debit Card earns rewards based on your spending habits. The more eco-friendly your purchases, the more you’ll earn.
With this card, you’ll get points for “climate-smart spending.” This is defined as purchases with a lower carbon footprint, and examples include electric vehicle charging and secondhand items. There’s no cap on earnings but you won’t earn cash back on all purchases.
This card is also unique because it provides you with a summary of your impact in the form of a FutureScore. The app then gives you suggestions for living more sustainably and pays FutureCoins, which can be redeemed for cash, when you complete Missions. Look out for promotions and bonus days to earn even more cash back on your purchases.
Learn more.
Best business credit card for nonprofits: Charity Charge Nonprofit Business Card
Pros
No annual fee
Discounts and rebates on business spending
Cons
Does not earn rewards
Features
Mastercard Zero Liability protection
If you own or work for a nonprofit and are looking for a business credit card, look no further than the Charity Charge Nonprofit Business Card. This business card is exclusively for nonprofits and works with over 2,000 nonprofits to meet their spending and financing needs.
This card doesn’t charge an annual fee and offers service benefits specifically geared toward not-for-profit rather than for-profit institutions. These include expert guidance from the support team and dedicated representatives.
The Charity Charge Nonprofit Business Card is ideal for nonprofits with less credit to work with, especially newer and growing organizations.
Learn more.
🌳 What is an eco-friendly credit card?
An eco-friendly credit card or green credit card has a positive environmental impact.
There isn’t one single type of eco-friendly credit card, as the term “green” looks a little different to everyone, but the point is that they’re better for the planet. There are also green and eco-friendly debit cards.
A card might be green if it:
Has a smaller carbon footprint than the average card
Rewards you for eco-friendly spending
Donates to environmental nonprofits
Plants trees with each transaction
These are just a few examples.
There are also cards that have a more general positive impact. For example, they might support socially responsible missions such as fair labor and equal housing. These can benefit the planet but might also benefit other causes as well. The Rewards Platinum Visa® from Green America is a good example of this.
Pros and cons of greener cards
Green credit and debit cards aren’t for everyone, but for some might be just what they’ve been looking for. Here are a few of the main pros and cons to consider with this type of product.
👍 Pros
Eco-friendly cards offer many benefits for people with environmental — or financial — goals.
Some allow you to donate to charities without using money out of your own pocket, and these donations could be tax deductible. The best ones even let you choose the charity.
Others incentivize you to be more eco-friendly in your spending habits by handing you the most rewards points for green purchases. This could help you live more sustainably.
And a few have their own unique benefits, like Aspiration’s tree-planting with transactions.
Many of these cards earn some sort of rewards for spending, with several offering flat rates on everything. And a handful also have everyday perks like purchase protection and discounts too.
👎 Cons
While greener cards offer benefits like lowering your impact and motivating yourself to make more sustainable choices, they do require you to compromise in some areas.
When it comes to rewards you actually earn, most of these cards just aren’t as competitive as others. The highest rate we’ve seen for green credit cards is 1.5% cash back, and this is the lowest base rate for many of the best rewards cards out there. And you might not have a lot of flexibility in how you redeem these rewards with an eco-friendly card.
These cards also don’t have as much going for them in the perks department. They have leaner travel benefits, if any at all, and very few free features.
Sure, the satisfaction of knowing you’re helping the planet is rewarding, but it might not help you save money and isn’t as flashy as what other cards offer.
Who are eco-friendly credit cards and debit cards best for?
If your spending habits make sense for one of these cards and you’re willing to compromise on rewards some in order to do good with your dollars, an eco-friendly card could be right for you.
You might decide to go green with your card because you don’t want to support big banks with harmful practices that hurt the planet, people, or both. For example, many major card issuers are responsible for enormous carbon footprints and lend money to fossil fuel companies.
Some are also involved in scandals, wrapped up in politics, and sneaky about where they spend money. It’s not a good look.
If you want to be part of something different, these cards are just one way to do that.
Read more: What is public banking?
Who are eco-friendly credit cards and debit cards not ideal for?
Don’t go for a green credit card or socially responsible card if your number one priority is earning the most rewards. These cards have lower payouts than others, fewer options for redemption, and often less earning flexibility.
Eco-friendly credit and debit cards are not yet on par with the rest of the options in the personal finance world. And until they have higher rewards rates and more benefits overall, they’re not likely to become mainstream any time soon.
Fortunately for those who want to help the planet but don’t want to sign up for one of these cards, there are other ways to spend more sustainably. This next section is for you.
What if you don’t want a green credit card?
If you don’t want to have to compromise on rewards — or you just don’t need a new card — but still want to make a positive impact, you can skip the card and do these things:
Click the link below for more ways to make your money green.
Read more: 12 easy ways to make your money green and protect our planet
Summary
There are many green credit and debit cards to choose from, each with its own benefits for your wallet and the environment. We’ve highlighted the best here, but even some of these leave a little to be desired when it comes to rewards earning, perks, and redemption.
But if this category catches on as consumers grow more conscious of their impact on the planet, more eco-friendly cards will be available and this space will become more competitive.
According to a retirement study released by Stanford University, only about 50% of American workers have access to a 401(k) or equivalent employer-sponsored retirement plan. And many who have a retirement account, aren’t making sufficient contributions to meet their targeted retirement goals.
Retirement savings is a life venture where the stronger you start — and the earlier it happens — the better you’ll finish. If you work for an employer and have access to a 401(k) plan, do all you can to maximize your contributions, especially while you’re young.
401(k) plans are one of the most generous retirement plans available. You can contribute up to $19,500 per year, or up to $26,000 if you’re 50 or older. You’ll also get a tax deduction for your contribution and full tax deferral on your investment income between now and retirement. Early in life, fund your plan with reckless abandon, especially if your employer offers a matching contribution.
How Much You Should Have in Your 401(k)
There’s no heavy science here, since much of the progress you’ll make with your 401(k) plan is dependent on your personal circumstances. However, there are general retirement savings guides to know, based on your age.
One way to gauge this is through the Fidelity Retirement Widget. When using this free tool, enter your age, your expected retirement age, and what you think your lifestyle will be at reach retirement. The results will show you how much savings you should have in your 401(k) plan at various ages.
For the example below, we input age 25, a retirement age of 67, and an average expected lifestyle.
Age
Annual Income
Approximate 401(k) Income Multiple
Recommended 401(k) Balance
30
$50,000
1X
$50,000
35
$65,000
2X
$130,000
40
$80,000
3X
$240,000
45
$100,000
4X
$400,000
50
$140,000
6X
$840,000
55
$150,000
7X
$1.05 million
60
$150,000
8X
$1.2 million
67
$150,000
10X
$1.5 million
The recommended 401(k) balances are just approximations and can be adjusted higher or lower. For example, if you expect your lifestyle in retirement to be below average, the widget will recommend having 8X your annual income in your 401(k) plan at 67. If you expect your lifestyle to be above average, it will recommend 12X your annual income in retirement.
How to Manage My 401(k) Plan Investments
If you don’t know how to manage your retirement plan investments, that’s not a problem. There are services available to help you get the job done.
One example is Personal Capital. The free version comes with a 401(k) analyzer that discloses fund fees in your plan so you can switch to funds with lower fees. If you use the premium version, you’ll also get the 401(k) Fund Allocation, to help you learn where your money should be invested.
A more direct approach is available through blooom. For $10 per month, it provides direct management of your employer-sponsored retirement plan, whether it’s a 401(k), 403(b), 457 or Thrift Savings Plan (TSP). After a brief questionnaire, blooom sends you a recommended investment strategy for your plan. And since the service doesn’t actually take custody of your retirement account, you don’t need your employer’s approval to get started with blooom.
With the investment management services that are now available for 401(k) plans, lack of investment knowledge is no longer a reason to avoid investing through your retirement plan.
401(k) and Retirement Tips
Although the focus on retirement planning is almost entirely on the numbers, discipline and knowledge are equally important. When building your retirement plan, implement a few strategies.
1. Set Goals
You can certainly use the savings suggestions from the Fidelity Retirement Widget, but you need to work within the scope of your own financial circumstances. The important point is, whatever method you use, have goals in place. Those goals determine not only how much you’ll contribute to your plan, but also how aggressively you’ll invest the money.
For example, if you can’t make the full $19,500 per year contribution allowed, you might need to invest your plan portfolio more aggressively. One option is placing a higher allocation in stocks.
This strategy is recommended in the early years of your plan participation since you have more time to bounce back from aggressive investing. A popular rule for your stock portfolio allocation is calculating 120 minus your age.Here’s an example:
120 – 25 (years old) = 95 (% of stock allocation)
That means 95% of your retirement portfolio should be invested in stocks, and the remaining 5% in fixed-income investments. As you get older, the formula reduces your stock allocation as your investment time horizon shortens. The advantage of a heavier investment in stocks is that they’ve averaged 10% returns since the 1920s.
The larger stock allocation will result in a faster accumulation of investment earnings.
2. Start as Early as Possible
This is best demonstrated by two examples.
Investor A begins investing $10,000 per year into a 401(k) plan at age 25, with an average annual rate of return of 7%. By age 40, their plan accumulated $260,722 — but they stop further contributions.
Nonetheless, since Investor A continues earning 7% per year on their investment balance between the ages of 40 and 67, they reach retirement age with $1.62 million in their 401(k) plan.
Investor B begins investing $10,000 per year into his 401(k) plan at age 35, also with an average annual rate of return of 7%. Because Investor B started later than Investor A, Investor B plans to make annual contributions straight through to age 67.
But by retirement age, their 401(k) plan has grown to just $1,143,545.
Even though Investor B made $10,000 contributions for a full 32 years — while Investor A contributed for just 15 years, then stopped — Investor A still ended up with a larger 401(k) plan at retirement, and by nearly $500,000.
This example illustrates why it’s so important to start saving for retirement as early in life as possible.
3. Understand Your 401(k)
Not knowing much about 401(k) plans is perfectly understandable — after all, retirement savings isn’t a part of regular high school or college curriculums. Given that your 401(k) plan is your single biggest asset in life, and the very foundation of your retirement, it’s worth learning about this account.
First, information about your plan should be available from your plan administrator. You likely received a copy of it when you were first hired. Study the plan from cover to cover, and make sure you understand all the major provisions.
4. Never Touch Your Retirement Savings
For some workers, employer-sponsored retirement plans aren’t just their primary retirement savings, but their only savings. Borrowing against your retirement fund through a 401(k) loan, for example, might be tempting but you’ll hurt your long-term retirement plan.
The loans typically come with a five-year repayment period if you meet certain requirements, and have very low interest rates. But 401(k) loans have three very important “gotcha provisions”:
You lose investment growth on borrowed funds. Once loan proceeds are removed from the account, they’re no longer being invested. You’ll pay interest of maybe 3% or 4%, which goes into your account, but that’s a lot less than the 7% or 8% you can earn in a balanced portfolio.
You’ll have another debt to repay. You’ll ultimately have to repay the loan. Additional loan repayments on your monthly budget might reduce the amount of new funds you’re putting into your retirement plan.
If you’re terminated, the loan is due sooner. You’re required to repay the full amount of the outstanding loan balance within 60 days, if you’re terminated from your employer. If you don’t, the remaining balance is automatically considered a taxable early distribution, subject to both ordinary income tax and a 10% early withdrawal penalty if you are under 59 1/2.
No matter how attractive the terms of a 401(k) loan may be, your best strategy is to pretend it doesn’t exist.
5. Don’t Rely on Social Security
One of the major reasons people don’t contribute enough to their 401(k) plans is an overly optimistic estimate of their anticipated Social Security benefits. Unfortunately, Social Security is not a retirement plan. It’s better described as a retirement supplement.
At most, Social Security supplies about 40% of your pre-retirement income, and that’s primarily for lower-income earners. If you’re at the higher end of the income scale (e.g. $100,000 per year) the percentage is much lower.
Use the Social Security Quick Calculator to get a rough estimate of what your Social Security benefit might be once you reach retirement. With this information on hand, you can better estimate how much money you’ll need to save in your retirement fund.
Frequently Asked Questions
Since the main purpose of a 401(k) plan is to replace your earned income in retirement, you’ll also need to increase your contributions. Of course, you won’t be able to contribute more than the maximum amount allowed by the IRS, plus any matching contribution from your employer.
If that’s insufficient, look into adding a traditional IRA or Roth IRA to your investment mix. Under either plan, you can contribute up to $6,000 per year, or $7,000 if you are 50 or older. Roth IRA contributions aren’t tax-deductible, but you can take income out of the plan tax-free at retirement.
One other major advantage with IRA accounts, whether traditional or Roth, is that you can open them through self-directed investment accounts. There, you’ll have unlimited investment options and you can invest as aggressively as you choose. You may find yourself getting a higher annual return on your IRA investments than you do in your 401(k) plan.
One other factor to be aware of as your income increases is that your 401(k) contribution may be limited if you’re defined as a highly compensated employee (HCE). Special rules will apply, and you’ll need to be aware of them as well as to create workarounds.
If your income declines, you’ll be forced to lower your standard of living. That means you’ll need less income in retirement and won’t need quite as much in your 401(k) plan either.
But this is another compelling reason to begin contributing to your 401(k) plan as early as possible. If you begin contributing to a retirement plan right out of college, you might have enough money in your plan by the time you reach your 40s to withstand an income decline and the lower 401(k) contributions.
There’s no simple or blanket answer. View your company’s stock the same way you would any other security you’re thinking about investing in. Ask yourself this question:
Would I invest in my company’s stock if I didn’t work for them?
If the answer is no, you should avoid it. And even if the answer is yes, be careful.
Holding a large amount of stock in the same company you work for may sound noble, but it also holds the potential for financial trouble. After all, the same pressures that might cause your employer to terminate your employment could also put downward pressure on company stock.
You’d be facing a double-jeopardy situation in which both your employment and your retirement plan would be at risk of loss.
Most financial advisors recommend you put no more than 10% of your plan into your employer’s stock. Again — If you wouldn’t invest in the company if you weren’t an employee, you might not want to go that high either.
Maximizing Your 401(k) Savings
How you approach your 401(k) savings strategy is unique to your personal financial situation. However, the key points to a sound retirement plan are:
Participating in your employer’s 401(k) plan, if one is offered
Contributing to the plan as early as possible
Getting curious about your plan, and about how 401(k)s work
Using a 401(k) management service, if you need extra guidance
Setting goals and making adjustments along the way to stay on track
Avoid borrowing against your 401(k)
If you follow these tips, you’ll be in a more secure place upon reaching retirement.
With so many business credit cards on the market, it can be difficult to determine which is best for your company’s needs.
Cutting through it all, the Ink Business Preferred® Credit Card is one of our favorites. In the same family, the Ink Business Premier℠ Credit Card is a cash-back option launched in December 2021.
Both are solid options, but there is a clear winner for most business owners, so let’s break it down.
Comparing the Ink Business Preferred and Ink Business Premier
Let’s start with a quick overview of each card’s highlights. For more details, check out our full review of the Ink Business Preferred and the Ink Business Premier.
Ink Business Preferred
Ink Business Premier
Annual fee
$95.
$195.
Welcome offer
100,000 bonus points after you spend $15,000 on purchases in the first three months of account opening.
$1,000 cash back (worth 100,000 bonus points) after you spend $10,000 on purchases in the first three months of account opening.
Bonus categories
Earn 3 points per dollar spent (on the first $150,000 in combined purchases each account anniversary year) on:
Travel.
Shipping purchases.
Internet, cable and phone services.
Advertising purchases made with social media sites and search engines.
Earn 1 point per dollar on all other purchases.
Earn 5% total cash back on travel purchased through Chase Ultimate Rewards.
Earn 2.5% total cash back on every purchase of $5,000 or more.
Earn 2% cash back on all other purchases.
Redemption options
Points are worth 1.25 cents each when redeemed through the Chase travel portal, or points transfer at a 1:1 ratio to 14 travel partners.
Points are worth 1 cent each when redeemed toward cash back and various Chase Ultimate Rewards portal redemptions, such as travel or gift cards.
Card benefits
Cellphone protection ($1,000 cap per incident).
Purchase protection.
Trip cancellation/interruption insurance.
Trip delay reimbursement.
Primary car rental coverage.
Extended warranty protection.
No foreign transaction fees.
Cellphone protection ($1,000 cap per incident).
Purchase protection.
Trip cancellation/interruption insurance.
Trip delay reimbursement.
Primary car rental coverage.
Extended warranty protection.
No foreign transaction fees.
Related: Ink Business Preferred review
Welcome offer
While the welcome offers for the Ink Business Preferred and Ink Business Premier might look similar on the surface, they are actually quite different due to the difference in how you can redeem the rewards earned between the two cards.
With the Ink Business Preferred, you’ll earn 100,000 Ultimate Reward bonus points after spending $15,000 in the first three months. Points earned from the card are worth 1.25 cents apiece when redeemed through the Chase Ultimate Rewards travel portal, or they can be transferred to any of Chase’s travel partners at a 1:1 ratio. This means the 100,000 points earned are worth a minimum of $1,250 toward travel. However, you can potentially get much more value from them by transferring to the Ultimate Rewards program’s 11 airline and three hotel partners, including United, Southwest and World of Hyatt.
The Ink Business Premier is also offering 100,000 Ultimate Reward bonus points ($1,000 cash back) after you spend $10,000 in purchases within the same three-month timeframe. The cash back is earned in the form of Ultimate Rewards points. But unlike those from the Ink Business Preferred, you cannot transfer these to the program’s airline and hotel partners. Nor can you transfer them to your Ultimate Rewards account linked to another card like the Chase Sapphire Preferred Card so that they become transferable (though you can transfer Ultimate Rewards points from your other card accounts into the one linked to your Ink Business Premier). Instead, these points are always worth just 1 cent apiece, whether you redeem them for cash back or things like statement credits, gift cards and travel through the Chase portal. So this welcome offer is worth $1,000 no matter how you use it.
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Related: The power of the Chase Trifecta
Winner: When comparing the two cards, the Ink Business Preferred card has the upper hand since its points are worth more when redeemed for travel. However, if you’re looking for a pure cash-back welcome offer, the Ink Business Premier is a better option since the minimum spending requirement to earn the bonus is much less.
Bonus earning categories
The Ink Business Preferred offers more bonus categories than the Ink Business Premier, so that you’ll earn 3 points per dollar spent on the first $150,000 in combined purchases per account year in the following categories:
Travel.
Shipping purchases.
Internet, cable and phone services.
Advertising purchases made with social media sites and search engines.
On all other purchases, or after you spend $150,000 combined in the above bonus categories, you’ll earn 1 point per dollar spent. Since Chase Ultimate Rewards are worth 2 cents per point, based on TPG’s valuation, you’re earning a 6% return on your category bonus purchases and a 2% return on all other purchases.
The Ink Business Premier offers both interesting bonus categories and strong everyday earning. With this card, you’ll accrue:
5% total cash back on travel purchased through Chase Ultimate Rewards.
2.5% total cash back on every purchase of $5,000 or more.
2% cash back on every purchase.
Earning at least 2% cash back on every purchase is strong but not unique. Many other cash-back cards offer the same return, such as the Citi® Double Cash Card (see rates and fees) and Capital One Spark Cash Plus. But if you often make large purchases — those over $5,000 — then earning that extra half a per cent in cash back can save you a lot of money in the end.
Winner: If you are looking to simplify your business expenses and to just have one card for everything, the Ink Business Premier is the winner. But that’s only if you are looking to earn cash back. The Ink Business Preferred will give you more options if you prefer to earn travel rewards with your credit card purchases.
Redemption options
Even though both cards are “Chase Ink” credit cards, the redemption options are very different.
With the Ink Business Preferred, in addition to redeeming your points for cash — where 1 point is worth 1 cent — you can also use them toward travel in two different forms. You can either redeem points toward travel reservations through the Chase Ultimate Rewards travel portal, where points are worth 1.25 cents each. Or you can transfer them to 14 travel partners (11 airlines and 3 hotels), including:
TPG estimates Chase Ultimate Rewards points to be worth 2 cents apiece when you leverage these transfer partners, thanks to the number of options they open up.
With the Ink Business Premier card, however, the points you earn are worth 1 cent each, plain and simple, and there’s no option to redeem your rewards toward travel at a higher rate. Whether you redeem them for cash back or for other options through Chase Ultimate Rewards, like gift cards or travel, you still get 1 cent per point.
Winner: The Ink Business Preferred has many more options and your points earned are worth significantly more.
Related: Maximizing Chase Ultimate Rewards
Card benefits
Both cards offer the exact same benefits when it comes to purchase and travel protection. With both cards, you’ll receive:
Purchase protection: If an eligible item is damaged or stolen within the first 120 days after purchase, you’re covered up to $10,000 per claim ($50,000 per account).
Trip cancellation/interruption insurance: If you must cancel or cut a trip short because of a covered issue (such as illness or severe weather), you’re eligible for up to $5,000 of coverage per person for prepaid, nonrefundable travel expenses, which provides great peace of mind when unexpected problems arise. Coverage is limited to $10,000 per trip.
Trip delay reimbursement: If a covered trip is delayed by a covered hazard for 12 or more hours — or long enough to require an overnight stay — you’ll be eligible for reimbursement, up to $500 per ticket in reasonable expenses. You only need to charge part of your common-carrier fare to the card to use this benefit, so you’ll be covered on award tickets if you put the taxes and fees on the card.
Primary car rental coverage: If you use either card for the entire rental cost and are traveling for business purposes, you’re covered for theft and damage in the U.S. and most countries worldwide. Remember that this doesn’t offer any liability coverage, but you are covered up to the actual cash value of the vehicle you’re renting.
Extended warranty protection: Purchases with a U.S. manufacturer’s warranty of three years or less will get coverage for an extra year. This can be extremely helpful when an item stops working shortly after its scheduled warranty ends.
Cellphone protection: If you pay your monthly cellphone bill with your card and your cellphone is stolen or damaged, you can receive up to $1,000 per claim, with a $100 deductible — for up to three claims per year.
Winner: Tie, as both cards offer the exact same benefits.
Which card should you get?
Like many other questions asked — it depends. If you don’t have a premium Chase Ultimate Rewards card that allows you to redeem points toward travel, then the Ink Business Preferred card is a great choice. Your points are potentially worth significantly more and open up many travel redemption options.
Also, if you have high monthly expenses in the card’s bonus earning categories, then the Ink Business Preferred can also help maximize your points earned.
But, if your spending categories are much more varied (or don’t include those increased bonus categories) and you prefer to earn cash back, you’ll be better off with the Ink Business Premier card. Earning a minimum of 2% cash back on every purchase is solid. And if you often make purchases of over $5,000, earning an uncapped 2.5% back is a great deal.
Yes, the Ink Business Premier card costs an extra $100 a year, but if you have heavy business spending, that difference can be nominal compared to the extra rewards earned.
Aside from how you earn and redeem points, the cards are extremely comparable, with both offering excellent travel and protection benefits.
Ultimately, the real question is: Do you want to earn travel rewards or cash back? If you are able to simply answer that question, then the card of choice is quite obvious.
Bottom line
For a mid-tier credit card, both are strong choices for business credit cards, in their own way. The two cards offer great ways to earn points or cash back, while also offering benefits that will help protect you in a time of need. And for a relatively low annual fee, you’ll never have to worry about statement credits or extra perks to help “offset” the fee.
Also, if you already have the Ink Business Preferred card, that doesn’t prevent you from applying for the Ink Business Premier. Combining the benefits of both can truly allow your business to earn a plethora of points and cash back, giving you more money and points in your pocket so you can take a step away from work at some point and truly enjoy a vacation.