Emergency Archives - Hanover Mortgages

May 8, 2021

Cash Management Account – What It Is, Pros & Cons of Saving This Way

A cash management account is a type of financial account that combines many of the features of checking, savings, and investment accounts into one product.

You get the safety and interest-earning capability of a savings account, the flexibility of a checking account, and the ability to buy and sell securities with an investment account.

Cash management accounts are typically offered by nonbank financial companies, such as brokerage companies. Although each cash management account will differ in its specific terms and features, they share a number of characteristics.

How Do Cash Management Accounts Work?

Cash management accounts combine many of the features of different financial accounts, so it can be hard to understand exactly how they operate.

Store & Protect Large Amounts of Cash

Cash management accounts are designed for people who have a lot of cash to deposit. Like a savings account, they help you keep your money in one place and keep it safe.

The way that cash management accounts do this is through Federal Deposit Insurance Corporation (FDIC) insurance. The FDIC offers up to $250,000 per depositor, per account type, at covered banks. That means if your bank fails and is unable to return your money, the FDIC will reimburse you for up to $250,000 in lost money.

Cash management accounts often have much higher insurance limits. For example, SoFi Money cash management account offers coverage for up to $1.50 million. That’s because SoFi automatically splits your deposits between six different banks, handling all of the management of these accounts on your behalf. You only ever have to work with SoFi when you want to access your money or make a deposit.

Use Your Money When You Need It

Cash management accounts also give you the flexibility of a checking account. Most offer checkbooks or debit cards you can use to make payments or withdrawals from your cash management account.

Depending on the account provider you choose, you may be able to completely replace a checking account with a cash management account. If you get a debit card, checkbook, and the option to make bill payments using your account funds, you’re covered for all of your checking account needs.

Earn Interest

Cash management accounts are able to pay interest like savings accounts do. Most offer interest rates on par with the best savings accounts in the market.

Cash management accounts pay these high rates because they are mostly offered by online financial companies. By avoiding the need to operate physical locations, online companies save a lot of money on overhead costs. That lets them pass more interest on to their customers.

Low Fees

Another benefit of cash management accounts being offered by online financial companies is they have lower fees than traditional bank accounts do. Many have no monthly maintenance fees at all, leaving you free to worry about using your money instead of fees.

Invest Your Funds

Many cash management accounts are offered by investment companies or brokerages. Although they’re usually separate from your brokerage account, it’s easy to link the two accounts. In some cases, there is no separation.

You can submit purchase orders for investments and have the funds deducted from your cash management account. Similarly, proceeds from any sales you make get deposited directly to the account.

This makes your cash management account the hub of your financial life and keeps managing your money easy. You’ll have just one account to monitor with all of your income and expenses flowing through it.

How Does a Cash Management Account Differ From a Checking or Savings Account?

Cash management accounts are neither checking nor savings accounts. They work like a mix of the two, offering the interest of a savings account with the flexibility of a checking account. For day-to-day use, you won’t notice much difference between a cash management account and a traditional bank account.

The big difference is behind the scenes. The company that offers your cash management account opens checking or savings accounts on your behalf at its partner banks. It then handles the management of these accounts for you, moving money in and out of those accounts as needed.

Essential Features of a Cash Management Account

If you’re thinking about opening a cash management account, these are the factors you should compare when looking at your options.

Ease of Access

Cash management accounts are meant to give you the flexibility of a checking account. That means it should be easy to access your money when you need it.

Look for accounts that make it easy to use your money. That includes providing a checkbook, debit card, and online bill payment.

For accounts that offer a debit card, don’t forget to look at the restrictions. Some cash management accounts limit the amount you can withdraw in a day.

You’ll also want to make sure the debit card works on the ATM network you prefer. Some cash management accounts reimburse ATM fees, leaving you free to use any ATM you come across.

Fees

With any financial account, you should keep an eye on the fees you’ll have to pay. There’s no reason to pay a fee when you don’t have to.

Before opening a cash management account, check to see if it has any monthly maintenance fees or minimum balances. Also take a moment to look for other fees might wind up paying, such out-of-network ATM fees.

Interest Rates

Cash management accounts are able to pay interest rates on par with the best savings accounts on the market, but that doesn’t mean they all pay the same rate. Compare the interest rates each account offers. Some will vary with your account balance, while others will be the same regardless of how much you deposit.

If it doesn’t cost you anything and you won’t lose any features that you need, opt for the account with the higher interest rate.

FDIC Insurance Limits

Cash management accounts let you protect your money by splitting your balance among multiple banks. This gives you more than the standard $250,000 insurance offered by the FDIC.

If you have a large balance to deposit to your cash management account, check to see how much of it will be insured by the accounts you’re considering. Some cash management accounts offer more protection than others.

If you’re worried about keeping large sums of cash, look for an account that offers enough insurance to protect your full balance.

Pros of Cash Management Accounts

There are a few reasons you should consider opening a cash management account.

They Make Money Management Simple. With a cash management account, you don’t need a checking or savings account. Many cash management accounts also link to your brokerage account. That makes it easy to keep all of your money in one place for easy management.
They Provide Protection. Cash management accounts keep your money safe with FDIC insurance, which is something investment accounts and money market funds cannot do.
They Have Higher Interest Rates Than Checking Accounts. You’ll earn more interest than you would from a checking account while maintaining the same level of flexibility with your funds.

Cons of Cash Management Accounts

Cash management accounts aren’t without their flaws, and you should be aware of them before opening one.

They Don’t Offer the Best Returns. Many investments, such as stocks, bonds, and mutual funds. offer great returns. There are also certificates of deposit (CDs) and some savings accounts that offer better rates than cash management accounts.
Face-to-Face Customer Service Might Not Be Available. Most cash management accounts are offered by online financial companies. If you need help, you have to call customer support or participate in an online chat. This can be difficult for people who prefer getting help in person or for complicated situations.
You Might Not Get All of the Features You Need. Cash management accounts are meant to combine the features of checking and savings accounts, but some cannot fully replace those dedicated accounts. For example, you might not have the option to make online bill payments from a cash management account, even though that’s a standard feature of checking accounts.

Who Needs a Cash Management Account?

Cash management accounts are a good choice for a few different groups of people.

The first group is people who have a large amount of cash they want to keep liquid but protected. If you have a few hundred thousand dollars you need to have easy access to, you don’t want to tie it up in investments. You also don’t want it sitting in a checking account, slowly losing value to inflation.

And if you exceed the $250,000 FDIC insurance limit, you’ll have to split it between multiple banks if you want all of your money to be insured.

Cash management accounts let you earn a reasonable rate of interest on your cash while maintaining its FDIC protection. You also don’t have to worry about splitting your money between multiple banks.

Cash management accounts are also great for people who want simplicity. All your money is in one place. You don’t have to maintain a separate checking and savings account. If you get your cash management account from the same company you use for your brokerage account, you can keep all of your finances in one place.

Anyone who likes online banking can make good use of a cash management account. If you’re already accustomed to doing your banking through a computer or phone rather than in-person, you’re ready to start using a cash management account.

Where Can I Get a Cash Management Account?

You can get a cash management account from a number of companies.

The first place you should look is your brokerage company. Why not keep all of your money in one place? Many financial firms offer cash management accounts, and your brokerage may even offer perks for customers who maintain a large balance, so using your brokerage for your cash management needs can help you reach balance thresholds.

If your brokerage doesn’t offer a cash management account, you have plenty of alternatives. Many robo-advisors and online investing platforms offer cash management accounts.

For example, Robinhood offers a cash management account you can link to your brokerage account. SoFi Money and Betterment offer both cash management and checking account options.

Alternatives to a Cash Management Account

If you don’t think a cash management account is right for you, you have other options.

If you’re considering a cash management account because you want to combine the features of a checking and savings account, a money market account can help you do that.

Most banks offer money market accounts, which provide the interest rates of a savings account with the check-writing capabilities of a checking account.

The downside is your ability to make withdrawals from the account is limited to six transactions per month. Money market accounts also have higher fees and minimums than cash management accounts.

If you want a cash management account for the safety and returns they offer, you can open a CD. CDs pay more interest than savings accounts and are fully insured by the FDIC up to the $250,000 limit.

The only drawback is you have to commit your deposit to the account for a set period of time. If you make an early withdrawal, you have to pay a fee.

If returns are your primary concern, you should open an investment account instead. You won’t have the safety of FDIC insurance, but you can earn far more money by investing your cash in stocks, bonds, or mutual funds.

Final Word

Cash management accounts offer safety, simplicity, and a solid return on your cash. They’re a great choice for anyone who wants to make managing their money easier, but they don’t have all of the features of dedicated checking and savings accounts.

If you’re looking to store and protect a large sum of cash, whether in anticipation of putting a down payment on a home or keeping it as an emergency fund, a cash management account could be a great option that provides you with the best features of checking, savings, and investment accounts all in one place.

Source: moneycrashers.com

May 8, 2021

Best CD Rates Of 2021: CD’s Interest Rates Updated Daily

Find today’s best CD rates and compare certificates of deposit from leading national banks. All rates are updated daily and accounts can be opened securely online.

Click the rates to learn more about how to apply.

What’s Ahead:

Finding the best CD rates for your savings goal

Most of the time, CD rates are significantly higher than regular savings account rates. The trade-off is you need to keep your money in the account for the specified term in order to earn the best CD rates.

Let’s take a look at the pros and cons of investing in CDs versus savings accounts.

What is a certificate of deposit?

CDs are like savings accounts. They are federally insured, meaning they can’t lose value, so they are a totally safe place to put cash.

Unlike savings accounts and money markets, however, when you “buy” a CD, you can’t access that money anytime you want. If you withdraw money from a CD before the end of the term, you will pay a penalty equal to some or all of the interest the account has earned.

When not to use CDs

Because you face a penalty if you access your money before the end of the CD term, CDs don’t work for emergency savings or other money that you might need on short notice. (If your car breaks down, you want to tap your savings now, not in three months when your CD matures.)

When to save with CDs

A CD make an attractive option for short-term savings goals. CDs can be a smart way to save for a major purchase like a new car, vacation, wedding or the down payment on a home. When saving for a short-term goal, you may be able to earn a better return on your money in stocks or bonds, but investing involves risk; with a CD, you know you’re principal will be there for you at the end of the term.

If, for example, you have been saving for home and know you will not be buying for another year, throw your savings into a 1-year CD to get a better rate than you could in an online savings account.

Finally, if you are an aggressive saver and have at least two months of emergency cash and are working on building more, you can do what is called CD bracketing or CD ladders.

Say you are putting $400 a month into emergency savings. Once you have, say, three months living expenses saved, you can begin to buy CDs with different maturity dates. The goal is to think about what would happen if you needed your emergency savings in the future, and to have different CDs mature each month after your initial cash reserves has run out.

The higher CD rates get, the more CD ladders make sense; it all depends on how much extra juggling you want to do to earn a few extra points in interest.

Learn more about:

Source: moneyunder30.com

May 7, 2021

Investing during a recession – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

When things get lean, it’s natural to want to tighten your belt and save money wherever possible. But should you stop investing completely? It’s an entirely personal decision. Get some facts and insights about investing during a recession below to help you determine what will work for you.

Is It a Good Idea to Invest During a Recession?

It depends on a few factors, including what you’re referring to when you say “investing.” If you’re talking about funding a 401(k), you probably want to continue doing so unless you would be unable to pay your necessary bills and living expenses.

But if investing means the stock market or other similar options, you should seriously consider your financial situation. If you already have emergency savings and have disposable income to risk, investing can be an option. This is especially true if you won’t be touching your portfolio for a while, so you have time to weather the ups and downs associated with a recession economy.

But you do want to be aware of the bear market trap so you don’t fall into it. Bear traps occur when a lot of investors have bought into certain stock. This increases the selling pressure, which just means that there are buyers for the stock but not a lot of stock to be had.

Institutions that want the stock to move higher may push prices lower via short sales or other strategies, making it appear as if the prices are falling. That can scare people into selling the stock. In the long run, however, the stock maintains its price or increases in value, so selling early can mean losing out on future gains. This is just one reason you might want to work with a professional advisor when investing.

7 Tips for Investing During a Recession

1. Be Patient and Think Long-Term

Buying and selling stocks rapidly to turn huge profits is mostly an event seen in movies and television. And while it’s not impossible for pros to luck into a big win, this is not typically how individuals should look at investing. It may take time for your investments to pay off, especially if the economy as a whole is struggling, so it’s important to avoid being guided by emotions and rely on logic and sound financial advice.

2. Commit to a Personal Investment Plan

A personal investment plan is a written document that includes your financial goals and what types of limitations you might have, such as what you can afford to spend on investing. Creating such a document ensures you have a logical, well-thought-out guide to turn to when things do get tricky. If you feel tempted by a seemingly perfect investment, for example, your plan can remind you what you can realistically put into this new investment.

3. Use the Dollar-Cost Averaging Strategy

Dollar-cost averaging is a strategy used by many investors, including some professionals. Its goal is to potentially reduce the volatile nature of a single purchase. The DCA strategy works like this:

You decide how much you’re going to invest in certain assets within a set period
You divide that budget over that time and make periodic purchases of the asset
You do this despite the price of the asset at any given time

The goal is to build up the investment for a long-term gain strategy. This is actually how most 401(k) investments are managed.

4. Focus on Quality Over Quantity

But don’t think that you have to buy tons of assets to be investing for the future. If you have limited funds to invest with, it can be tempting to buy up stock that is cheap just to get some quantity. But cheap stock isn’t always a great investment, and it might be better to buy a smaller number of shares in a well-trusted company with a history of strong stock performance.

5. Consider Funds Instead of Individual Stocks

Another option is to consider funds, which spread your investment over numerous stocks. You’ve probably heard that you have to diversify your portfolio. That just means investing in numerous types of assets so that if one doesn’t perform well, you have other gains to make up for the loss.

A mutual fund is an investment option that’s already diversified, for example. Plus, it’s a convenient way to add numerous assets to your equity portfolio without buying and managing numerous stocks yourself.

6. Rebalance When Necessary

While investing is a long-term strategy, active investing can’t be a set-and-forget strategy. You have to make efforts to rebalance your portfolio—or ensure someone is doing that for you—from time to time.

Rebalancing just means aligning your assets with your target goals. For example, you might have a goal of 60% in stocks and 40% in other assets. But if your stocks gain rapidly during a few years, outpacing the gains of your other assets, you could have a 70/30 split. If your goal is still 60/40, you would rebalance by selling stock, purchasing other assets or both.

7. Invest in Recession-Resistant Industries

Recession-resistant industries are those that don’t tend to succumb to downturns in the economy, often because they’re necessary. Examples of industries that have historically weathered recessions well include healthcare, technology, beauty, retail, construction and pet products.

Note that because a company is in a recession-resistant industry doesn’t mean that company itself is necessarily resistant. It’s always important to be discerning about which stocks you invest in. For example, if the company doesn’t have strong financial leadership or has known money problems, it may not matter what industry it’s in.

Review Your Finances and Decide What’s Best for You

Ultimately, only you can decide whether investing during a recession is right for you. Start by reviewing your own finances. Some things you might want to look at include:

What kind of savings you have. Having emergency savings is important, especially in a recession. Before you start investing, you may want to build yours.
Your income and expenses. You need disposable income before you can invest. That means that your income should be more than your expenses.
Your credit history. Buying stocks and investing typically doesn’t rely on you having good credit. But before you start building wealth, get a good look at your credit reports to ensure there’s nothing lurking that you might need to attend to. If you find any surprises, consider reaching out to Lexington Law for help disputing inaccurate items and working to make a positive impact on your credit.

And if you do decide to invest—during a recession or otherwise—consider working with a financial advisor to help you navigate the complexities of managing your portfolio.

Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

May 7, 2021

How to Use Your Health Savings Account (HSA) for Retirement Investing

Saving for retirement is difficult, but it’s an important part of everyone’s financial life. There are a number of ways to make saving for retirement easier, such as using tax-advantaged accounts like individual retirement accounts (IRAs) and 401(k) plans.

One special type of tax-advantaged account, the health savings account (HSA), isn’t specifically designed to help people save for their retirement. However, its unique benefits make it one of the most powerful tax-advantaged accounts out there.

If you have access to an HSA, it can be one of the best ways to set money aside for retirement.

What Is an HSA?

A health savings account (HSA) is a special type of account that is designed to help people save money to pay for medical bills. HSAs are only available to people who have certain types of health insurance plans called high-deductible health plans (HDHPs).

Like retirement accounts, HSAs offer tax advantages that make it easier to set aside money to pay for medical bills. If your employer offers eligible insurance plans, they may also make contributions to your HSA on your behalf, similar to 401(k) matching.

The unique tax benefits of HSAs are what make them potent vehicles for saving for both medical expenses and retirement.

Pro tip: If you’re thinking about opening an HSA, you can get started through Lively. There are no hidden fees and you’ll be able to set up recurring contributions.

How Do HSAs Work?

Understanding how HSAs work is essential to making the most of them when it comes to saving for both health care and your retirement. You risk paying penalties if you fail to follow the rules.

Insurance Requirements

First, not everyone can open an HSA. They’re only available to people who have a qualifying high-deductible health plan.

An insurance plan’s deductible is the amount that you pay before your insurance kicks and starts covering costs. For example, if you have a $2,000 deductible, you have to pay $2,000 toward your health care expenses before your insurance pays any of the cost.

For an insurance policy to qualify as an HDHP, it must meet the following requirements:

It charges a higher annual deductible than typical health plans (for 2020, the minimum is $1,400 for individuals and $2,800 for families).
It has a maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses (for 2020, the maximum is $6,750 for individuals and $13,500 for families).
It may, but is not required to, provide preventative care without a deductible or with a lower deductible.

Other Qualifications

The exact requirements for qualifying for an HSA are:

You are covered by an HDHP.
You have no other health insurance coverage, with the following exceptions:
- Liabilities incurred under workers’ compensation laws, tort liabilities, or liabilities related to ownership or use of property.
- A specific disease or illness.
- A fixed amount per day (or other period) of hospitalization.
- Coverage for accidents, disability, dental care, vision care, and long-term care.
You aren’t enrolled in Medicare.
You aren’t claimed as a dependent on anyone else’s tax return.

If you meet the requirements, you can open an HSA.

Contribution Limits

Like other tax-advantaged accounts, you cannot make unlimited contributions to an HSA. There is a limit on how much you can contribute each year.

For 2020, the limit is $3,550 for individual plans and $7,100 for family plans.

Some employers that offer HDHPs make contributions to their employees’ HSAs as an employee benefit. Employer contributions count toward these limits, so make sure you don’t exceed the contribution limit with your contributions and your employer’s contributions combined.

Tax Advantages

The primary reason that people use HSA for savings is the tax advantages. Like traditional IRAs and 401(k)s, the money you contribute to an HSA is contributed before tax. That means you can deduct the amount you add to the account from your income when filing your taxes.

If you have a taxable income of $50,000 and put $5,000 in your HSA, you can report your taxable income as just $45,000. That will save you about $1,100 on your tax bill, meaning your $5,000 contribution only costs you $3,900 out of pocket.

With a traditional IRA or 401(k), you pay income tax on the money that you withdraw from the account. HSAs are different. If you use the money in the account for qualified health expenses, you pay no taxes on the withdrawals either. This makes them doubly tax-advantaged.

If you have extra money in your HSA after you turn 65, you can begin making withdrawals from the account for nonmedical expenses too. If you do, you pay income tax on the amount you withdraw, but no penalties, just like a retirement account.

Penalties

Typically, you can only withdraw money from an HSA for qualified medical expenses. The IRS outlines all qualified expenses in its Publication 502, but it includes most things you’d expect, including:

Ambulance fees
Birth control
Body scans like MRIs or X-rays
Contact lenses
Dental treatment
Drug addiction care
Eye exams
Hearing aids
Hospital services
Physical exams
Prescriptions
Surgery

If you withdraw money from an HSA for a nonmedical expense and you are under age 65, you pay a 20% penalty on the amount withdrawn. You also have to pay income tax on your withdrawal, meaning you are doubly punished for using the money for nonmedical expenses when you’re under 65.

Once you reach age 65, however, you can use HSA funds for nonmedical expenses penalty-free, but will still have to pay income tax on the amount withdrawn.

Although you generally don’t have to prove that you’ve used your HSA money for qualified medical expenses when you file your taxes, you should always save your receipts so that you can show how much you spent compared to how much you withdraw. The receipts will come in handy if you wind up getting audited.

How to Use an HSA for Retirement Savings

HSAs are useful for saving for health care expenses, but they’re one of the most powerful retirement accounts available to Americans. If you want to use your HSA to save for retirement, these tips can help.

1. Contribute as Much as You Can

If you want to use your HSA for retirement savings, the first thing to do is contribute as much as you can to the account.

Typically, you want to contribute to your 401(k) until you max out the amount that your employer will match. Getting employer matching contributions is like getting a raise, so it’s worth getting as much in matching funds as possible.

After that, you can focus on putting money in your HSA until you max it out.

2. Invest Your Balance

The name “health savings account” might make you think that your HSA is a simple savings account. Savings accounts pay interest, but they’re not great for long-term wealth building because you usually wind up losing spending power to inflation.

Depending on your HSA provider, you likely have the option to invest your HSA in the stock market. That means that you can use the money in your HSA to build an investment portfolio like you do in your retirement and taxable brokerage accounts. Building a portfolio of low-cost index funds is a great way to help your HSA’s balance grow.

Just remember to keep some of the money in cash if you plan on using the HSA to cover health expenses as well.

3. Wait Until You’re 65

Once you’ve opened your HSA, made contributions, and invested your money, all you have to do is wait. Once you turn 65, you can withdraw money from the account as if it were a 401(k) or IRA. There’s no requirement that you use the money for health care expenses.

The only downside of this strategy is that IRAs and 401(k)s are slightly more flexible when it comes to withdrawals. You can start taking money from those accounts, penalty-free, when you turn 59 ½.

4. Save Your Receipts

Even if you don’t plan to use your HSA to cover health care expenses, you should make sure that you save every medical-related receipt that you get.

The reason to save every receipt is that there is no time limit for withdrawing money from your HSA after you incur a qualified medical expense.

Consider this example: you injure your leg while out for a run and have to go to the hospital for surgery. After you recover, you get the hospital bill and have to pay $5,000.

You can withdraw money from the HSA now to pay the bill, or you can pay the bill out of pocket, leaving your money in the HSA to grow, tax-free. You decide to pay the bill out of pocket.

Because there’s no time limit on withdrawals, you can take $5,000 out of your HSA, tax-free and penalty-free, any time you want. You can make the withdrawal tomorrow, next year, 10 years from now, or when you retire.

This is better than simply waiting until you turn 65 because withdrawals for nonmedical expenses still incur income taxes. If you pay for medical expenses out of pocket but save your receipts, you can withdraw from your HSA without paying any tax at all, up to the total amount of your qualified medical expenses that you’ve incurred over the years.

This makes HSAs more powerful than standard retirement accounts because you pay no tax on contributions or qualified distributions.

The full list of qualifying medical expenses is long, and some might surprise you. Over time, you’ll likely build up plenty of qualified expenses, which will make it easy for you to make tax-free withdrawals when you need to.

Advantages of Using an HSA for Retirement Savings

HSAs are one of the most powerful tax-advantaged accounts when used properly, so there are a lot of perks to using one for retirement savings.

1. Tax Benefits Add Up

One of the primary reasons to use an HSA for retirement savings is the tax benefits. If you use the account properly and save your medical receipts you can ultimately pay no tax on any of the money you contribute or withdraw from the account.

Even if you don’t have enough medical expenses to withdraw the entire amount tax-free, you have the backup plan of paying taxes on penalty-free withdrawals after you turn 65, effectively making the account into a second IRA or 401(k). Over the long term, the amount that you save in taxes can be huge.

If you’re in the 22% tax bracket — single earners making $39,476 to $84,200 and couples making $78,951 to $168,400 — and withdraw $10,000 per year from your HSA tax-free, you save $2,200 per year in taxes. That means needing to save about $55,000 less for retirement if you’re using the 4% rule to determine how much of your portfolio to withdraw each year.

2. HSA Contributions Don’t Count Against Retirement Contribution Limits

Using an HSA for retirement savings also increases the amount of tax-advantaged saving “cap space” you have for other retirement vehicles. IRAs and 401(k)s limit your contributions (to $6,500 per year and $19,500 per year, respectively). HSA contributions don’t count against those caps.

If you’re maxing out your tax-advantaged retirement contributions and looking for other ways to reduce your tax bill, HSAs can be an attractive option.

Disadvantages of Using an HSA for Retirement Savings

Just because you can use an HSA to save for retirement doesn’t mean that doing so is a good idea. Here are the disadvantages to consider.

1. You Might Need the Money for Medical Expenses

One reason not to use your HSA for retirement savings is the possibility that you might wind up needing that money to pay for health care expenses. Odds are good that you’ll wind up with a big medical bill at some point in your life.

If you have a high-deductible health plan, the out-of-pocket expense could be significant, and unless you have a strong emergency fund in savings, you might need to tap your HSA account to pay the bill.

If your HSA is one of your primary methods of saving for retirement, you might have to dip into your nest egg to cover a medical emergency, which is never ideal.

2. HSAs Aren’t Designed for Retirement Investing

Another drawback is that HSAs aren’t designed for retirement saving. The tax rules surrounding HSAs make them a great way to save for retirement, but that isn’t their intended purpose. HSA accounts aren’t necessarily optimized for long-term investing.

Some HSA providers might not offer the option to invest your balance at all, or might offer options that charge hefty fees for the privilege. Some HSAs limit your investment options to expensive mutual funds whose fees can eat away at your balance over the long term, meaning your savings will grow much more slowly in an HSA than a specifically designed retirement account.

By contrast, many true retirement plans have specially designed investment options, such as target-date funds, that make saving for retirement easy.

3. The Rules for HSAs Could Change

Finally, just because HSAs are great for retirement savings now doesn’t mean that they will be 20, 30, or 40 years from now. The government could change the rules for how you can use the money in the account. For example, the IRS may add a time limit for withdrawing funds after you incur a medical expense.

Future changes may make it harder to use the money you have in the account or alter the tax implications, which could limit its usefulness as a retirement savings vehicle.

Final Word

HSAs can be a good way to save for retirement, but you need to have a high-deductible health plan to be eligible for one. Furthermore, you must be able to cover out-of-pocket medical expenses by other means in order to make the most of these accounts as retirement savings vehicles.

For most people, 401(k)s and IRAs will be the main methods of saving for retirement. Don’t forget that you can also benefit from opening a taxable brokerage account if you want to invest for long-term goals beyond retirement.

Source: moneycrashers.com

May 7, 2021

7 Things to Do After College Besides Work

Numerous college students have a trajectory in mind for navigating life after college. For some, getting a job is their top goal. But, are there other things to do after college besides work?

Beyond looking for a traditional entry-level job, there are alternative choices for new grads—including internships, volunteering, grad school, spending time abroad, or serving in Americorps.

Naturally, the options available will differ depending on each person’s situation, as not all alternatives to work come with a paycheck attached.

Here’s a look at these seven things to do after college besides work.

1. Pursuing Internships

One popular alternative to working right after college is finding an internship. Generally, internships are temporary work opportunities, which are sometimes, but not always, paid.

Internships may give recent grads a chance to build up hands-on experience in a field or industry they believe they’re interested in working in full time. For some people, it could help determine whether the reality of working in a given sector meets their expectations.

Whatever grads learn during an internship, having on-the-job experience (even for those who opt to pursue a different career path) could make a job seeker stand out afterwards. Internships can help beef up a resume, especially for recent grads who don’t have much formal job experience.

A potential perk of internships is the chance to further grow your professional network—building relationships with more experienced workers in a particular department or job. Some interns may even be able to turn their short-term internship roles into a full-time position at the same company.

Starting out in an internship can be a great way for graduates to enter the workforce, “road testing” a specific job role or company.

2. Serving with AmeriCorps

Some graduates want to spend their time after college contributing to the greater good of American society. One possible option here is the Americorps program—supported by the US Federal Government.

So, what exactly is Americorps? Americorps is a national service program dedicated to improving lives and fostering civic engagement. There are three main programs that graduates can join in AmeriCorps: AmeriCorps NCCC, AmeriCorps State and National, and AmeriCorps Vista.

There’s a wide variety of options in AmeriCorps, when it comes to how you can serve. Graduates can work in emergency management, help fight poverty, or work in a classroom.

However graduates decide to serve through AmeriCorps, it may provide them with a rewarding professional experience and insights into a potential career.

Practically, Americorps members may also qualify for benefits such as student loan deferment, a living allowance, education awards (upon finishing their service), and skills training.

It may sound a bit dramatic, but AmeriCorps’ slogan is “Be the greater good.” Giving back to society could be a powerful way to spend some time after graduating—supporting organizations in need, while also establishing new professional connections.

3. Attending Grad School

When entering the workforce, graduates may encounter job postings with detailed employment requirements.

Some jobs require just a Bachelor’s degree, while others require a Master’s–think, for instance, of being a lawyer or medical doctor. Depending on their field of study and career goals, some students may opt to go right to graduate school after receiving their undergraduate degrees.

The number of jobs that expect graduate degrees is increasing in the US. Graduates might want to research their desired career fields and see if it’s common for people in these roles to need a master’s or terminal degree.

Some students may wish to take a break in between undergrad and grad school, while others find it easier to go straight through. This choice will vary from student to student, depending on the energy they have to continue school as well as their financial ability to attend graduate school.

Graduate school will be a commitment of time, energy and money. So, it’s advisable that students feel confident that a graduate degree is necessary for the line of work they’d like to end up in before they apply or enroll.

4. Volunteering for a Cause

Volunteering could be a great way for graduates to gain some extra skills before applying for a full-time job. Doing volunteer work may help graduates polish some essential soft skills, like interpersonal communication, interacting with clients or service recipients, and time management.

Another potential benefit to volunteering is the ability to network and forge new connections outside of college. The people-to-people connections made while volunteering could lead to mentorship and job offers.

Volunteering is something graduates can do after college besides work, while still fleshing out their resume or skills.

New grads may want to volunteer at an institution or organization that syncs with their values or, perhaps, pursue opportunities in sectors of the economy where they’d like to work later on (i.e., at a hospital).

On top of all these potential plus sides, volunteering just feels good. It makes people feel happier. And, after all of the stress that accompanies finishing up college, volunteering afterward could be the perfect way to recharge.

5. Serving Abroad

Similar to the last option, volunteering abroad can be attractive to some graduates. It may help grads gain similar skills they’d learn volunteering here at home, while also giving them the opportunity to learn how to interact with people from different cultures, try to learn a new language, and see new perspectives on solving problems.

Though it can be beneficial to the volunteers, volunteering abroad isn’t always as ethical as it seems. And, not all volunteering opportunities always benefit the local community.

It could take research to find organizations that are doing ethically responsible work abroad. One key thing to look for is organizations that put the locals first and have them directly involved in the work.

6. Taking a Gap Year

According to the Gap Year Association , a gap year is “a semester or year of experiential learning, typically taken after high school and prior to career or post-secondary education, in order to deepen one’s practical, professional, and personal awareness.”

While a gap year is generally taken after high school or after college, one common purpose of the gap year is to take the time to learn more about oneself and the world at large—which can be beneficial after graduating from college and trying to figure out what to do next.

Not only might a gap year help grads build insights into what they’d like to do with their later careers, it may also help them home in on a greater purpose in life or build connections that could lead to future job opportunities.

Graduates might want to spend a gap year doing a variety of activities—including:

•   trying out seasonal jobs
•   volunteering
•   interning
•   teaching or tutoring
•   traveling

A gap year can be whatever the graduate thinks will be most beneficial for them.

7. Traveling Before Working

Going on a trip after graduation is a popular choice for graduates that can afford to travel after college. Traveling can be expensive, so graduates may want to budget in advance (if they want to have this experience post-graduation.

On top of just being really fun, travel can have beneficial impacts for an individual’s stress levels and mental health. Research from Cornell University published in 2014 suggests that the anticipation of planning a trip might have the potential to increase happiness.

Traveling after graduation is a convenient time to start ticking locations off that bucket list, because graduates won’t be held back by a limited vacation time. Going abroad before working can give students more time and flexibility to travel as much as they’d like (and can afford to!).

With proper research, graduates can find more affordable ways to travel—such as a multi-country rail pass, etc. It doesn’t have to be all luxury all the time. Budget travel is possible especially when making conscious decisions, like staying in hostels and using public transportation.

If graduates are determined to travel before working, they can accomplish this by saving money and budgeting well.

Navigating Post Graduation Decisions

Whether a recent grad opt to start their careers off right away or to pursue one of the above-mentioned things to do after college besides work, student loans are something that millions of university students have taken out.

After graduating (or if you’ve dropped below half-time enrollment or left school), the reality of paying back student loans sets in. The exact moment that grads will have to begin paying off their student loans will vary by the type of loan.

For federal loans, there are a couple of different times that repayment begins. Students who took out a Direct Subsidized, Direct Unsubsidized, or Federal Family Education Loan, will all have a six month grace period before they’re required to make payments. Students who took out a Perkins loan will have a nine month grace period.

When it comes to the PLUS loan, it depends on the type of student that’s taken one out. Undergraduates will be required to start repayment as soon as the loan is paid out. Graduate and professional students with PLUS loans will be on automatic deferment while they’re in school and up to six months after graduating.

Some graduates opt to refinance their student loans. What does that mean? Well, refinancing student loans is when a lender pays off the existing loan with another loan that has a new interest rate. Refinancing can potentially lower monthly loan repayments or reduce the amount spent on interest over the life of the loan.

Both US federal and private student loans can be refinanced, but when federal student loans are refinanced by a private lender, the borrower forfeits guaranteed federal benefits—including loan forgiveness, deferment and forbearance, and income-driven repayment options.

Refinancing student loans may reduce money paid to interest. For graduates who have secured well-paying jobs and have improved their credit score since taking out their student loan, refinancing could come with a competitive interest rate and different repayment terms.

Graduating from college means officially entering the realm of adulthood, but that transition can take many forms. There are various financial tips that recent graduates may opt to look into.

Thinking about refinancing your student loans? With SoFi, you could get prequalified in just two minutes.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Source: sofi.com

May 6, 2021

Investing during a recession

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Is It a Good Idea to Invest During a Recession?

7 Tips for Investing During a Recession

1. Be Patient and Think Long-Term

2. Commit to a Personal Investment Plan

3. Use the Dollar-Cost Averaging Strategy

Dollar-cost averaging is a strategy used by many investors, including some professionals. Its goal is to potentially reduce the volatile nature of a single purchase. The DCA strategy works like this:

You decide how much you’re going to invest in certain assets within a set period
You divide that budget over that time and make periodic purchases of the asset
You do this despite the price of the asset at any given time

The goal is to build up the investment for a long-term gain strategy. This is actually how most 401(k) investments are managed.

4. Focus on Quality Over Quantity

5. Consider Funds Instead of Individual Stocks

6. Rebalance When Necessary

7. Invest in Recession-Resistant Industries

Review Your Finances and Decide What’s Best for You

Ultimately, only you can decide whether investing during a recession is right for you. Start by reviewing your own finances. Some things you might want to look at include:

What kind of savings you have. Having emergency savings is important, especially in a recession. Before you start investing, you may want to build yours.
Your income and expenses. You need disposable income before you can invest. That means that your income should be more than your expenses.
Your credit history. Buying stocks and investing typically doesn’t rely on you having good credit. But before you start building wealth, get a good look at your credit reports to ensure there’s nothing lurking that you might need to attend to. If you find any surprises, consider reaching out to Lexington Law for help disputing inaccurate items and working to make a positive impact on your credit.

And if you do decide to invest—during a recession or otherwise—consider working with a financial advisor to help you navigate the complexities of managing your portfolio.

Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Source: lexingtonlaw.com

May 5, 2021

10 Credit Card Rules You Should Know

If you’re like the 40% of credit card holders the American Bankers Association refers to as “revolvers,” you probably carry at least some debt from month to month. And if you’re a typical American, according to Experian, you have an average balance of $5,897 , with an additional $2,044 on a couple of retail credit cards.

Unfortunately, many consumers are uninformed and unprepared for the responsibility of paying with plastic. Nobody makes you take a class before they hand you that first card—or the next one, or the next. But the consequences of getting in over your head can be troublesome.

What else should you know about credit cards? Here are some do’s and don’ts to keep in mind:

Just Because You Can Get Another Credit Card Doesn’t Mean You Should

Once you prove your credit-worthiness, you’ll likely receive other credit card offers in the mail. Retail stores you shop in often ask if you’d like to apply for their card, offering things like special discounts, partnerships, and card-holder shopping days to draw you in.

But unless the rewards are high and the annual percentage rate (APR) is low, you may choose to pass. Especially if you’re in a store and won’t have time to focus on the terms and fees in the agreement.

Remember: When you apply for a credit card, it can create a credit inquiry on your report because of the hard pull on your credit report. Unless your credit inquiry qualifies as rate shopping , too many inquiries in a short time period could cause a drop to your credit score.

A Credit Card Can Be Convenient—If You Keep Your Balance In Check

The clock starts ticking whenever you make a purchase using your credit card. Many credit card companies will give you a period of interest-free grace, but if you don’t pay off the balance within the grace period, you’ll start racking up interest.

Of course, using cash instead of credit for purchases is an option, especially for purchases made in person.

Thinking Twice Before Just Paying The Minimum

It’s easy to get into the mindset that you’re on track for the month because you paid the minimum payment due on your credit card statement. But that amount is typically based on a small percentage of your balance, typically between 1% and 3%, or a fixed dollar amount.

Unless you have a 0% credit card rate, letting your balance carry over can rack up additional interest.

Checking Your Statements Every Month

A thorough monthly review of credit card statements makes it possible to find billing mistakes and be sure your purchases and returns are accurately reflected.

It’s worth reviewing your statement for any subscription services you might be making automatic payments or renewals for. You could be paying for a service or app you don’t want anymore.

Reviewing your charges can also help you determine if you’ve been the victim of identity fraud . The faster you move to report any problems , the better off you typically are. The Fair Credit Billing Act (FCBA) instructs consumers to report unauthorized charges within 60 days after the statement was mailed, so making it a habit to check your statements as they come in—or reviewing them online at least once a month—can help you be aware of any issues and report them quickly.

If you’ve made late payments or missed a payment, your interest rate may have gone up—and you could be paying a much higher rate than you thought. Keeping track of this information will give you a more complete picture of the amount you owe.

Credit card statements also include information about how long it will take to pay off the bill if you send only the minimum payment each month, as well as how much you’ll pay in interest. Think of this information like nutrition facts on food packaging—it could be an encouragement to be financially healthier.

Reporting Misplaced, Lost, or Stolen Cards

Under the FCBA , a consumer’s liability for unauthorized use of their credit card is limited to $50. However, the FCBA also says if you report the loss before your credit card is used to make unauthorized purchases, you aren’t responsible for any charges you didn’t authorize.

If your credit card account number is stolen, but not the card, the FCBA also says you won’t be liable for unauthorized use. Credit card companies are generally quick to provide customers with new account numbers, passwords, and cards.

Using a Credit Card To Get Cash

Another piece of information available on a credit card statement is the APR charged for cash advances. Most likely, the interest rate charged for cash advances is several points higher than the rate charged for purchases.

If a credit card is used at an ATM, there may also be an additional fee charged by the machine’s owner.

So unless it’s an unavoidable emergency, it’s probably much better for your wallet to stick to your debit card or go old-school and cash a check.

Using a Credit Card For Purchases Just To Get the Rewards Points

Cash back and other perks make some cards more appealing than others. But that probably shouldn’t be an excuse to use a credit card if you’re not in a solid financial position. The trade-off probably isn’t worth it if you carry a balance.

Balance Transfer Cards Can Be Appealing, But…

Again, if you have solid credit, you may be getting offers for 0% balance transfer cards. And they may potentially save you hundreds, even thousands of dollars, if you can realistically pay off that balance in the designated period.

If not, the interest rate will increase after the introductory 0% interest period ends. And moving the remaining amount to yet another balance transfer card could ding your credit record, as every time you apply for a credit card a hard inquiry is pulled.

Negotiating Rates and Fees

Even the most attentive person might sometimes miss a credit card due date. This oversight, however, means a late fee and interest may be added to the account balance. If this happens more than once, you might incur a higher late fee than the first one and the account’s interest rate might increase.

It may be possible, however, to negotiate credit card interest rates and fees. If you’ve only had one late payment, it’s worth a call to customer service asking for the late fee to be waived. If there have been multiple late payments and you’re faced with an increased interest rate, it might take up to six months on-time payments before a credit card issuer is willing to consider lowering the interest rate.

A 2018 poll for CreditCards.com, the latest data on the topic , found that 56% of those who asked got a lower interest rate/APR, and 70% had an annual fee waived or lowered. So it may not hurt to call customer service and ask.

Knowing How Much Credit Is Being Utilized

The amount of debt owed is the second largest factor that makes up a person’s credit score. It accounts for 30% of the total score, and revolving credit accounts like credit cards are important in the calculation of a credit score. Someone who is using a high percentage of their credit card limit might be seen as potentially risky by lenders. But someone who uses a lower percentage of their credit card limit may be considered to be in a favorable financial position.

Credit card companies sometimes raise the credit limit of financially responsible customers. By keeping your account balance low, it can improve the credit utilization rate used to calculate your credit score.

The Takeaway

Credit card debt can feel overwhelming quickly, but a personal loan may help you get things under control.

You can’t just sweep away the debt and forget it, of course. But if your financial history is solid, getting approved for a personal loan interest rate that’s lower than your credit card rates could make your outstanding debt easier to deal with. Using a debt consolidation loan to consolidate multiple credit cards would also mean just one bill to pay each month instead of keeping track of multiple payments and due dates.

A consolidation loan with a respected lender can be part of a smart overall money management plan. SoFi loans offer competitive rates, as well as membership benefits other lenders don’t necessarily offer.

If you’re serious about getting and staying on track, a SoFi personal loan might be helpful. Check out a SoFi personal loan if you need help with consolidating credit card debt.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Source: sofi.com

May 4, 2021

Choosing the Best Savings Accounts for May 2021

Storing your cash in a duffel bag under the bed has its perks — immediate access when you need it and the feeling of completely controlling your own finances.

But hoarding hard-earned money in your own home puts it at risk of theft or loss to natural disasters, and it’s doing you no favors in terms of interest.

Savings accounts at an FDIC-insured bank, on the other hand, keep your money secure and can earn you more money in the process.

Nowadays, the best savings accounts are typically with online banks due to higher interest rates, but brick-and-mortar banks still have some (though not many) benefits.

So which savings account should you choose? We’ve ranked the very best savings accounts available today to get you started.

What is a Savings Account?

A savings account is a bank account where you store your money until you need it. To see a detailed explanation to how it differs from a traditional checking account, visit our checking vs savings account comparison.

The best savings accounts are secured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. That means that if you store your money with a bank and it goes under, you won’t lose your money.

Savings accounts are perfect for achieving your savings goals — for a car, a house, a wedding, vacations, you name it. More importantly, they are the best tool to build your emergency fund.

Most experts agree your emergency savings should total six months’ worth of necessary expenses in the case of job loss or another unpredictable emergency. Necessary expenses might include rent/mortgage, car payments, insurance, medical bills, utilities and groceries.

Don’t sweat it if you don’t have six months’ worth saved up. It takes time to build up your savings. Even if you can deposit $50 a month, you will eventually reach your goal.

One thing a savings account is not is an investment account. Savings accounts have historically low interest rates (or APY — annual percentage yield), but they are inherently low risk.

Pro Tip

After you have padded your savings account with enough cash to cover emergency expenses and your other savings goals, your money is better spent on investments like IRAs, 401(k)s and stocks.

Common alternatives to savings accounts include certificates of deposit (CDs), where you store your money for a fixed term for a slightly higher interest rate, and money market accounts, which typically offer a higher APY but have significantly higher minimum balance requirements.

So just how much interest will you earn in a savings account? That depends on the amount you’ve saved and your APY.

Online Banks vs. Brick-and-Mortar Banks

Before the advent of the internet, brick-and-mortar banks (and credit unions) were the only place to store your money, if not in your duffel bag.

But over the last couple decades, online banks have transformed the way we think of safely storing our money, and because of their low overhead (fewer staff and few or no physical locations), they can offer much better interest rates on savings accounts.

Pros of Online Savings Accounts

Two women smile as they withdraw money from the ATM. — Getty Images

When online savings accounts first surfaced, bank customers were hesitant to store their money with companies they had never heard of and were fearful of internet security issues.

Today, many of these same customers now see far more pros to online savings accounts than their traditional physical banks.

Higher Interest Rates

This is easily the most important distinction between brick-and-mortar banks and online banks. The national average APY for a savings account is 0.70%, but many brick-and-mortar banks offer just 0.01% interest rates on their savings accounts.

Online banks, on the other hand, tend to offer savings rates that are better — sometimes a lot better

Availability

Online banks are always open. The most competitive online banks offer around-the-clock service over the phone or online, and typically have more user-friendly apps and websites.

Some national banks and credit unions may offer 24/7 service, but their physical locations are typically limited to the 9-to-5 business hours.

Pros of Brick-and-Mortar Savings Accounts

There are advantages to brick-and-mortar banks. However, if these benefits do not hold massive weight for you, we highly recommend an online savings account.

Easy Access to Account Funds

Emergencies wait for no one. If you have an unexpected need for $10,000, it would be nice to be able to immediately access that.

Many online savings accounts take several days to get you your funds via ACH deposit or a written check, though wait times for ACH deposits have dramatically decreased in recent years.

(You can also speed up the process by opening a checking account with your online bank or choosing an online savings account with ATM benefits. Prioritize online banks that offer free checking accounts or ATM convenience cards.)

Brick-and-mortar banks, however, can allow major withdrawals at any of their locations. No waiting necessary.

In-Person Support

Some people prefer to resolve their issues over the phone or online, but many others find comfort in face-to-face communication. By opening a savings account with a bank that offers physical locations, you’ll be able to get in-person help from financial experts during regular business hours.

… And a Toss-Up

When it comes to access to ATMs, there is no clear winner. Obviously, brick-and-mortar banks and credit unions offer ATMs at all their locations, where you can easily withdraw your money.

Many online banks, however, offer fee-free withdrawals at select ATMs, and the best online banks will reimburse you for fees incurred out of network.

Best Savings Accounts of May 2021, Ranked

So what are the best savings accounts of May 2021? That depends on what you value most.

In determining our top nine, we reviewed more than 20 popular savings accounts and considered what elements seem to be most universally important:

Best savings rates
Stellar mobile app and/or web experience
Convenience of transfers (easy access to funds)

We considered only savings accounts that were FDIC-insured or NCUA-insured and had no monthly fees.

Because physical branch access is becoming increasingly less important, all accounts on our list are online or hybrid (online with some brick-and-mortar bank locations).

So what didn’t we consider when making our list that you might also want to look for?

Bonuses: Because banks regularly add, remove or replace their bonuses, we did not include them in our criteria. If you’re stuck between two or three comparable savings accounts, see which one offers the best sign-on bonus. We highly recommend checking out our current bank promotions list to help earn bonus cash or incentives when signing up for a new savings account.

Customer service: Quality of customer service is subjective. Read reviews and ask friends and family about their experiences when considering banks.

To truly determine how you feel about the level and quality of customer service, give the bank a call and ask some questions about the account. From that interaction, you should be able to feel out how much each bank values customers and prospects.

1. Synchrony Bank High-Yield Savings Account

We ranked Synchrony’s account as the very best savings account of May 2021 because it has the perfect combination of the most important elements of a bank.

APY: 0.40%.

Monthly fees: None.

Minimum balance requirement: None.

Additional fee for withdrawals: None.

ATM card: No fee for in-network ATMs, $5 monthly reimbursement for out-of-network ATM fees

Access to funds: ATM, electronic transfer to an external account, wire transfer or a paper check in the mail.

Mobile app: Yes. At the time of this writing, the app has a 4.5 rating on the App Store and 3.7 on Google Play.

Details: Synchrony Bank High-Yield Savings account.

2. CIT Savings Builder Account

CIT Savings Builder is another solid account option, but you have to meet certain conditions to earn it:

APY: To earn up to 0.40% APY, either your account needs $25,000 in it, or you must make a monthly minimum deposit of $100 to the account. The latter option should be more feasible and is a good incentive to save each month.

Minimum balance requirement: $100.

Additional fee for withdrawals: None.

ATM card: None.

Access to funds: Electronic transfer, wire transfer (free if you have $25,000 or more in the account) or paper check.

Mobile app: Yes. At the time of writing, the app has a 4.6 rating on the App Store and 4.2 on Google Play.

Details: CIT Savings Builder.

A woman smiles as she checks her phone at night in her bed. — Getty Images

3. Ally Online Savings Account

Though savings accounts are different from checking accounts — and thus should not be thought of as a place to quickly and easily get money — Ally does make it easier than most to access your funds when you need them. Just open a free checking account (ranked 5th in the best online checking accounts of 2020), and you can easily transfer your money over.

APY: 0.50%.

Minimum balance requirement: None.

Additional fee for withdrawals: After the six permitted withdrawals a month, you’ll pay $10 per transfer with Ally.

ATM card: None.

Access to funds: You can transfer money via direct deposit, electronic transfer, wire transfer or paper check.

Mobile app: Ally’s mobile app is highly rated at 4.7 stars on the App Store and 3.7 on Google Play.

Details: Ally Online Savings account.

4. Alliant High-Rate Savings Account

The Alliant High-Rate Savings account is offered via the Alliant Credit Union, so instead of FDIC insurance, it carries insurance through the National Credit Union Administration, but the benefits are the same.

Because it is a credit union, joining Alliant can be a little more challenging. You need to fulfill one of these four requirements:

Be a current or retired employee of a business that is partnered with Alliant.
Have an immediate family member or domestic partner who banks with Alliant.
Be a member of an Alliant-related organization/association.
Become a member of Foster Care to Success, Alliant’s partner charity.
Live in one of the communities near the Alliant headquarters in Chicago, Illinois.

APY: 0.55%. You need an average daily balance of $100 for the APY to kick in.

Minimum balance requirement: $5.

Additional fee for withdrawals: Hard limit on six federally regulated withdrawals.

ATM card: Money access is super convenient with a free ATM convenience card that qualifies at more than 80,000 ATMs nationwide.

Access to funds: If you live in the Chicago area, you’ll even have access to brick-and-mortar locations.

Mobile app: It’s got a solid app (4.7 on the App Store and 4.6 on Google Play)

Details: Alliant High-Rate Savings account

5. Discover Savings Account

The Discover Savings account offers a substantial APY and easy access to funds via a rewards checking account.

APY: 0.40%.

Minimum balance requirement: None.

Additional fee for withdrawals: The bank may refuse to pay transactions that exceed the six monthly permitted withdrawals.

ATM card: While Discover doesn’t offer an ATM card for its FDIC-insured savings account, you can sign up for the Discover Cashback Debit (it’s free!), which earns up to 1% cash back on up to $3,000 a month.

Access to funds: The linked debit account provides an easy way to transfer funds; otherwise, you can rely on electronic transfers, wire transfers and paper checks.

Mobile app: Discover’s app has a 4.8 rating on the App Store and a 4.5 rating on Google Play.

Details: Discover Savings account

Learn more: Discover Bank review

6. Capital One 360 Savings Account

While it’s certainly not the savings account with the best interest rate, it makes up for it with no monthly fees, easy integration with other Capital One 360 accounts (including a checking account for easy funds transfer) and a killer app.

APY: 0.40%.

Minimum balance requirement: None.

Additional fee for withdrawals: Hard limit on six federally regulated withdrawals.

ATM card: None.

Access to funds: If you don’t open a linked checking account for the easy ATM access, you can still access your funds via the traditional (but slower) means.

Mobile app: In 2018, the Capital One 360 mobile app was ranked No. 1 in customer satisfaction in the banking category for the second year in a row in J.D. Power’s U.S. Banking App Satisfaction Study.

The app has a 4.8 rating on the App Store and a 4.7 rating on Google Play.

Details: Capital One 360 Savings account

7. Barclays Online Savings Account

Barclays has its cons, like challenging access to funds, but its high APY and strong mobile app earned it a spot on this list.

APY: Barclays is one of three banks on this list to offer the competitive 0.40% APY.

Minimum balance requirement: None.

Additional fee for withdrawals: Withdrawals that exceed the monthly limit will result in a fee.

ATM card: None.

Access to funds: You can deposit and withdraw funds in a number of ways, through direct deposit, an electronic transfer, paper check and more.

Mobile app: Yes, but the Barclays US Online Savings mobile app is not the most user-friendly based on its ratings: a 3.7 on the App Store and a 2.4 on Google Play.

Details: Barclays Online Savings account

Learn more: Barclay’s Bank review

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8. American Express Personal Savings Account

You might rely on American Express for your credit card, but the bank offers an online savings account worth your consideration as well.

APY: 0.40%.

Minimum balance requirement: $1.

Additional fee for withdrawals: Hard limit on nine withdrawals, though this is more than most of its competitors.

ATM card: A major drawback of the American Express account is the lack of ATM card.

Access to funds: Electronic transfer, wire transfer and paper check are the only ways to access your money.

Mobile app: It currently has a 4.9 rating on the App Store and a 4.2 rating on Google Play.

Details: American Express Personal savings account

9. Marcus Online Savings Account by Goldman Sachs Account

Our final online savings account is by Goldman Sachs. It offers a competitive APY and fairly new mobile app.

APY: 0.50%.

Minimum balance requirement: None.

Additional fee for withdrawals: Due to a change in federal law, Goldman Sachs currently doesn’t impose a limit on withdrawals.

ATM card: None.

Access to funds: Withdrawals are limited to electronic transfer and wire transfer (you also cannot deposit checks via the app).

Mobile app: Yes. It has a 4.9 rating on the App Store and a 3.9 rating on Google Play.

Details: Marcus Online Savings Account

6 Tips for Choosing a Savings Account

You should be aware that banks can change interest rates, develop better apps and update their bonuses, so it is important to understand how to determine the best savings account for yourself.

Here are a few tips:

1. Consider Your Needs

We prioritized high savings rates, ease of funds transfer and mobile apps in our rankings, but maybe for you, two-factor authentication and customer service are top considerations.

Build your own ranking system based on your top two or three criteria. You won’t find a perfect bank that offers everything, but at the very least, you’ll find banks that can meet all of your top needs.

2. Stick With Online

Put your money in an online savings account, unless you have a good reason not to, such as a high interest savings account at a brick-and-mortar credit union or a regular need to get in-person help.

3. Save Only With Insured Banks

Do not put your money into any bank that is not insured by the FDIC. Or, if you go the credit union route, make sure it is insured by the NCUA. We did not include any banks on our list that were not insured.

4. Don’t Be Tempted by Sign-on Bonuses Alone

Earning cash for starting an account with a bank feels awesome, but don’t let the appeal of $100 now prevent you from putting your savings into an account that will earn you $500 over a couple years.

5. Find a No-fee Account

Be wary of accounts with monthly maintenance fees, statement fees or any other miscellaneous charges. You’re more likely to find these fees with a brick-and-mortar bank.

Ideally, find a bank that has an associated free checking account for easy and fast funds transfers.

6. Read the Fine Print

Know what you are signing before you sign it.

If an APY sounds too good to be true, it’s possible there are strings attached — or that the rate is only temporary.

Ask questions and do research when you are confused by any of the terms and conditions, and don’t deposit your savings until you are satisfied with the agreement.

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Source: thepennyhoarder.com

May 4, 2021

Discover Bank Savings Review | The Simple Dollar

Discover Bank savings is best for people who want simple online banking with no fees.

Min. Deposit

N/A

J.D. Power Rating

5/5

SimpleScore

4.4 / 5.0

SimpleScore Discover, Member FDIC 4.4

Savings APY 3

Savings Tools 4

Customer Satisfaction 5

Product Variety 5

Discover online savings is an excellent account offering 0.40% APY and no fees. It’s the perfect account to keep your emergency fund safe and accessible in case you ever need it.

Online-only banks have lower overhead costs than their brick-and-mortar counterparts. The money they save on overhead ends up in your pocket as a higher interest rate for your savings. The Discover high yield savings account earns 0.40% APY.

When you stack that Discover bank savings rate with absolutely no fees (not even for insufficient funds) and no minimum balance or deposit, you build a hassle-free savings account to house your emergency fund, future house down payment or cash for a dream vacation.

Discover Bank at a glance

Bank	Min Deposit	ATM Network	J.D. Power Survey Score	Key Benefit
Discover Bank	$0	60,000 surcharge-free ATMs through Allpoint and MoneyPass networks	5/5	High interest with no fees

Rates accurate as of February, 2021

Things to consider

You won’t find much to worry about with Discover online savings if you’re fine with banking completely online. But, if you prefer the in-person experience of a brick-and-mortar bank, Discover Bank might not be the best fit for you.

Discover only has one physical location in Delaware, so cash deposits won’t be an option for most people. If you have a lot of cash you need to put into your high-yield savings account, you can deposit it to your traditional checking account then transfer it to Discover savings.

What you need to know

With a Discover online savings account, you’ll earn 0.40% interest on all of your deposits, unlike some banks that require you to keep a minimum balance in your account to earn a higher interest rate.

Whether you deposit $10 or $10,000 in your Discover account, you’ll begin earning interest immediately. Interest accrues daily and deposits to your account once a month.

You are limited by federal law to only six electronic or telephone withdraws each calendar month. While you won’t be charged a fee if you go over six occasionally, you do run the risk of having your account closed if you make a habit of exceeding the withdrawal limit. The rule does not apply to ATM withdrawals or official bank checks, though.

To open a new savings account at Discover, follow these steps:

Click “Open an Account” or “Get Started” from the Discover online savings webpage.
If you’re new to Discover, choose that option. If you already have an account, you can log in now.
For new Discover members, you’ll provide basic information about yourself like your name, birth date and Social Security number.
Once you submit your application, you can set up your account settings and make your first deposit. You can skip this step if you would rather make a deposit later.
Check your email for an account confirmation message. Once you receive it, your account is set up and you’re ready to start saving.

Discover Bank mobile app

If you open a Discover high-yield savings account, everything you do will be either through the web portal at Discover.com or Discover’s banking app. The app is available on both Google Play and the Apple App Store, making it accessible for smartphone users.

The Discover mobile app has all of the features you need to manage your savings account from your smartphone. The user interface is simple and intuitive, making it easy to find your way around. It offers mobile check deposit and easy transfers between all your different accounts — even the ones you have at other banks. To keep things simple and secure, you can log in with either touch ID or Face ID (if you’re an Apple user).

Fees and penalties

Discover’s all about saying “no” in all the right ways. A Discover savings account has no minimum deposit, so you can open your account now and make your first deposit once your next paycheck comes in. It also features for:

Monthly maintenance.
Official bank checks.
Expedited delivery of official bank checks.
Returned deposits.
Excessive withdraws.
Stop payment orders.
Insufficient funds.
Closed accounts.

The only fee Discover charges its online savings customers is for outgoing wire transfers, which come with a $30 charge.

You can also enroll in overdraft protection, allowing you to designate a separate account to withdraw funds from if you accidentally overdraft your online savings account.

Discover savings vs. Chase savings

Discover savings interest rates and fees are hard to overlook when comparing them to the signature savings accounts from America’s largest bank. Chase savings offers only 0.01% to its customers and comes with a $5 monthly service fee if you don’t meet at least one of its requirements, like maintaining a $300 minimum daily balance or having a $25 recurring monthly transfer into your account.

Chase’s mobile banking app is comparable to Discover’s, but you will have the benefit of in-person banking if you like with Chase — though its online banking experience is exceptional as well. Unfortunately, those factors can’t overcome Discover’s high-yield savings rate and no-fee policy.

Please Note: Information about Chase Savings℠ has been collected independently by TheSimpleDollar.com. The issuer did not provide the details, nor is it responsible for their accuracy.

Compare top bank accounts

Too long, didn’t read?

Everyone should have a high yield savings account to protect their savings. Whether you’re saving for a home down payment, a dream vacation or a rainy day, a Discover savings accounts will allow you to earn more with a 0.40% interest rate and no fees. The Discover mobile banking app makes managing your account a breeze, and you’ll have access to 60,000 surcharge-free ATMs around the world if you ever need cash.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

May 4, 2021

Have a Plan for Student Loan Debt Payoff

Student loan debt payoff is a political hot button. But no matter your position, we can likely all agree that college loan debt itself is a financial burden to millions of Americans at nearly all adult age levels.

You may have put off buying a home or starting a family if you are among the 45 million Americans paying off college loan debt. If you’re heading toward 60 and still paying on a second degree or loans you took out for your children’s education, you may have not saved much for retirement.

And among recent grads, 92 percent of college graduates from the class of 2016 who took out student loans still owe an average of just over $30,000, according to the National Center For Education Statistics. The Federal Reserve estimates that at the end of 2020, the student loan debt was $1.7 trillion.

No matter how much you owe, you’re likely hoping that there will be some permanent federal relief after Sept. 30, 2021, when the suspension of loan payments expires. But hoping isn’t a plan, is it? And the fact that President Joe Biden didn’t mention college loan forgiveness in his state of the union address on April 28 makes us wonder about any forgiveness proposal becoming a reality.

Reduce Student Loan Debt, All or $50,000?

Reducing individual student loans by $50,000 would obviously make a good-sized dent in what’s owed and that plan is still on the table. Eliminating all such debt would release those millions of citizens from that financial burden and, purportedly, open them to new opportunities of financial growth and stability.

And while loan payments have been suspended through September, it’s important to remember that they still exist. And when the economy returns fully as the population receives vaccinations, the loan payments will restart.

What Can You Do Now?

If you owe money on a student loan, you should be thinking about what you will do if loan forgiveness becomes a reality or if come Oct. 1, you will be back to paying the same monthly payment. Some suggestions:

It’s been nice to have that extra money in your bank account each month because you haven’t had to make a loan payment. If you haven’t been putting that money aside in anticipation of payments starting up again in the fall, starting doing it now. In fact, if you can double that set-aside money do so. You will have a good piece of change to pay down the loan if the loans return to pre-COVID terms. Obviously, this would be difficult if you have lost a job because of the pandemic.
If the $50,000 payoff scenario passes, you might have your loans wiped out. The money that you put away intended for reinstated payments could be invested in a retirement plan, used toward the down payment on a house or to pay down a credit card. If you owe much more than $50,000 you still will have had a big chunk paid off and can add to that with the money you’ve been setting aside.
In the unlikely event the feds wiped out all student loan debt, you’ll be in the position to use all of the money you’ve set aside for student loan payments as a kind of windfall. To avoid letting those savings disappear, keep budgeting the same amount you were paying for student loans and make larger payments toward other debts, build your emergency fund, save for down payment on a house or contribute it to your retirement account.

What’s The Problem?

There are numerous arguments against any proposal regarding student loan forgiveness, and the arguments come from both sides of the issue.

There are those who point out that a forgiveness of $50,000 would not be enough for the many Americans who have outstanding student loans in the six-digit range.

At the same time, there are those who say it is inappropriate to discuss any student loan forgiveness because it penalizes all of those people who managed to pay off their loans without the benefit of a federal bailout.

The cost of the $50,000 debt forgiveness for all applicable cases is estimated at $1 trillion. If Biden attempted to issue an executive order on such a scale, it would be the most expensive executive order ever issued, and it would likely face legal challenges, and not only from the for-profit companies which issued the loans in the first place.

How the Plans Evolved

During his presidential campaign, Biden suggested he would push for $10,000 in student loan forgiveness for all borrowers and some members of Congress still support this. But Sen. Elizabeth Warren (D-Mass.) has spearheaded a campaign to issue a $50,000 forgiveness for all student loan holders, while Sen. Bernie Sanders (D-Vermont) has firmly supported forgiving all student loan debt.

With the Democratic Party holding the majority in the U.S. House of Representatives and a tiny majority in the U.S. Senate, the atmosphere for accomplishing one of those three goals is at its best. However, not all Democrats are in agreement. Biden has asked his education secretary to determine the legality of a presidential executive order reducing all student loan debt, but there is a possibility that Congress could pass a bill for debt forgiveness.

Other options

There are other suggestions regarding student loan forgiveness, centered around specific segments of the population:

Considering Age

Twenty years ago, the Government Accountability Office determined that 3 percent of households headed by a person 65 years of age or older maintain a student loan balance, and that percentage has risen in the 20 years since. In some cases, these loans are likely from people returning to school for second degrees or from loans taken out for their children’s education.

There is a suggestion that the government could cancel all student debt for anyone 65 years of age or older. That would impact approximately 2 million Americans.

Considering Occupation

A new push to cancel student debt for doctors and nurses or others in the health profession has come about as a result of the coronavirus pandemic. Estimates are that there are 1 million health care workers who would benefit from having their student debt wiped out.

Considering Income

Setting a maximum income level for student loan forgiveness has been suggested. In some cases, the conversation is about those who earn less than $100,000 to $125,000 per year depending on what you are reading, while others have suggested forgiving loans for those who make less than $50,000 per year.

There are other ways to obtain student loan forgiveness, depending on one’s occupation or other factors. The U.S. Department of Education offers information on those opportunities, and also about debt relief for borrowers with permanent disabilities.

Going Forward

The question about student debt loan solutions is in suspension until Oct. 1 and there may or may not be a lot of discussion about the college debt between now and then. That’s part of the reason that if you have student debt you need to be thinking about what that amount will be when that date rolls around. But if you’ve been able to set aside those loan payment amounts, you’ll be in much better financial shape.

Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.

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Source: thepennyhoarder.com