There’s a saying that you should always read the fine print, and the same applies when it comes to a gym membership. If you’ve been thinking about joining Planet Fitness, here’s an explanation of how much a gym membership costs, what perks are included and the fine print to keep in mind.
What is Planet Fitness?
Planet Fitness is a gym with over 2,500 fitness centers. The chain provides a range of fitness equipment and services people can use to exercise and meet fitness goals.
How much does a Planet Fitness membership cost?
Planet Fitness has two main membership tiers: the Classic and the PF Black Card. Before signing up, keep in mind that you may be required to commit for 12 months. You must be a minimum of 18 years old to enroll, but 13- to 17-year-olds can join with a parent or guardian.
When considering the cost of a Planet Fitness membership, keep in mind that there is an annual fee of $49. You pay the annual fee in addition to the monthly membership fees.
Classic membership
This is the basic membership, and it starts at $10 a month before taxes and fees. You get unlimited access to your home club but can’t go to other locations. Perks include access to Planet Fitness app workouts and partner rewards and discounts.
The Classic membership may be ideal for people who are likely to go to the same gym each time they work out. It may also be good for people who just want to put their head down and exercise and don’t need extras.
PF Black Card membership
This is the second tier Planet Fitness offers, and there are far more perks. The PF Black Card membership starts at $24.99 a month before taxes and fees and comes with all the benefits mentioned above and more, including:
The ability to bring one guest.
Access to any Planet Fitness gym worldwide.
Access to equipment like tanning, massage chairs and hydromassage.
Use of Total Body Enhancement, a machine that combines red light therapy and vibration to produce various health and cosmetic benefits.
50% off select drinks.
Premium access to partner rewards and discounts.
If you have a sporadic schedule or travel often, this tier may be ideal since you’ll have access to multiple branches. People who enjoy having a workout buddy could also benefit since you can bring a plus one. Likewise, if you live with someone, be it a partner or roommate, you could split the cost of the gym membership and save a few extra dollars.
You can upgrade your membership from Classic to PF Black Card online or ask for assistance when you’re at the gym. Downgrading is also possible, but you’ll have to do that in person.
Also, if you usually use your credit card for payments to get those extra benefits, note that most Planet Fitness branches accept payments through checking accounts only.
Other perks that come with a membership
There are multiple amenities members can enjoy at Planet Fitness. These perks are available to all members, whether they’re at the PF Black Card or Classic.
Free fitness training
Some people want to use a personal trainer but can’t afford to because it’s not within their budget. Planet Fitness has a competitive edge there since they offer free fitness training. And you don’t have to be a PF Black Card member to access the training.
Trainers can be used as often as you need them. The first step is to sign up through the Planet Fitness mobile app or on your gym’s website. If you’d rather do it in person, go to the front desk at your local fitness location to sign up.
Customized workout plan
Some people feel overwhelmed when they’re in the gym because they aren’t sure which workouts or equipment will help them reach their fitness goals. Planet Fitness offers customized workout plans for all members that include a meeting with a certified trainer to chat about fitness goals, medical background and exercise history.
Group training sessions and group classes
Working out with others can be more motivating than working out alone. Planet Fitness offers group training sessions for members, including classes for upper and lower body, core and stretching.
Sign up for group training sessions online using the pre-booking feature or show up at class time to see if there’s space available. Every Planet Fitness location offers between 11 and 14 small group training sessions per day, which means you might be able to catch one even if you’re working 9 to 5.
Free Wi-Fi
It can be nice to have access to Wi-Fi at the gym to watch a show while on the treadmill or follow along to a fitness video. All Planet Fitness members and guests have access to free Wi-Fi, in case that’s an important perk for you.
Gym workouts via the Planet Fitness app
On days you can’t make it to the gym, members have access to a range of free workouts on the Planet Fitness app. These workouts can also be helpful for people who don’t know what exercises to do at the gym and want to follow along to a workout solo.
Referral program
Looking to save money on your gym membership? Planet Fitness has a referral program that can cut up to three months of membership fees each year. You get a free month for each person you refer who joins, but there’s a cap of three people. The referred friend can also join with $1 down and no commitment, which gives them flexibility in case they decide Planet Fitness isn’t for them.
How to cancel a Planet Fitness membership
There isn’t a uniform way to cancel a Planet Fitness membership — the cancellation process is different at each club. For most locations, you’ll have to go in person and cancel the membership, although there are a few that allow you to cancel by mail or online. For some people, this is a hassle, so that’s something to consider before signing up.
Another detail that could impact your cash flow is the timing of your cancellation. To avoid being billed the annual membership fee, you need to cancel by the 25th of the month prior to the annual fee date. Also, those who cancel before they’ve completed their minimum commitment will pay a $58 buyout fee.
Be mindful of these cancellation clauses. It can be easy to repeatedly forget to cancel your membership and end up paying for a membership you aren’t using.
Track your spending with the NerdWallet app
Track your budget and see all of your finances together in a single place. Get timely insights to make smart financial decisions – all for free.
What can employers do to make sure their financial benefits attract and serve a truly diverse workforce?
It’s a question that has become increasingly relevant since the Covid-19 pandemic shed a harsh light on the pervasive economic inequalities embedded in society and the workplace. While there have been gains in the average wealth of all demographic groups since 2019, the racial wealth gap remains stubbornly wide.
According to Federal Reserve data from the second quarter of 2023, Black families had about $986,000 less wealth, on average, compared with white families, while Hispanic families had about $992,000 less wealth, on average, than white families. Put more starkly: Black and Hispanic families had 24 cents for every $1 of white family wealth.
Even when they attend and graduate from college, minorities still face an uphill financial climb. According to the Education Data Initiative, Black college graduates owe an average of $25,000 more in student loan debt than white college graduates. Four years after graduation, black students owe an average of 188% more than white students borrowed.
And while women have increased their presence in higher-paying jobs traditionally dominated by men, the gender pay gap hasn’t gone away: On average, women are paid 83.7 percent as much as men, which amounts to a difference of $10,000 per year. The gaps are even larger for many women of color, according to the U.S. Department of Labor.
Given these realities, it’s important that diversity, equity, and inclusion (DE&I) programs and financial wellness initiatives are effectively combined to help address the problems of economic inequality throughout every segment of your workforce.
By helping underrepresented employees turn wages into long-term wealth, companies can play a pivotal role in driving financial success that impacts future generations and results in systemic change.
Where Do Financial Wellness and Diversity, Equity, and Inclusion Intersect?
These days, many employers of all sizes have a DE&I strategy or program in place to increase inclusion and remove bias and discrimination in the workplace. Financial wellness benefits are also growing in popularity as a way to attract, retain, and add value to employees.
While companies may actively promote both financial wellness and DE&I, they often overlook the potential synergy between the two. Understanding how these two human resource pillars work together can help amplify the relevance, effectiveness, and success of both programs throughout your workforce.
Traditionally, financial well-being programs have focused on long-term savings and investing for retirement. But it’s becoming increasingly apparent that this approach doesn’t meet all the needs of an increasingly diverse workforce.
Depending on the individual, financial success can come in many forms, not just having enough for retirement. Success might also include paying off debt, saving for emergencies, or buying a first home. Understanding your workforce and its diverse needs — as well as understanding the importance of a broad-based definition of financial well-being — helps put you at the nexus of your DE&I and financial wellness goals.
Recommended: How to Support Your Low-Wage Workforce
Can Financial Well-Being Initiatives Enhance Diversity, Equity, and Inclusion in Your Workforce?
The answer is an overwhelming yes — as long as your financial well-being programs are designed to be customizable for employees on different financial footings with a range of financial goals and stresses. Here are some steps you can take to integrate your financial well-being and DE&I programs.
Ensure Fair Pay for All Employees
This may seem like a basic concept, but it still needs plenty of attention. Doing everything you can to close the race and gender pay gaps in your organization shows your commitment to both DE&I and financial well-being — and to making them work together.
Recommended: How Employers Can Help Close the Racial Wealth Gap
Embrace Flexible Financial Contribution Programs
Personalized, relevant financial benefits can help you meet your employees where they are in terms of financial challenges and goals. When you offer a range of financial well-being benefits, you give employees the power to choose the financial programs that can help them the most.
The pandemic highlighted for many people the need for short-term, goal-oriented savings as well as long-term investing. Programs that can resonate strongly with today’s diverse workforce and its many needs include: emergency savings accounts; student loan repayment programs, including 401(k) matches for employees paying off student loans; budget counseling, and debt management tools. Established college tuition reimbursement and retirement savings programs are also vital parts of a holistic financial wellness program.
Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?
Get Creative
Don’t be afraid to think out of the box when it comes to expanding financial well-being programs so that you can include all employees. Many employers are reimagining traditional approaches to leaves and paid time off — for example, allowing employees to transfer unused PTO balances into accounts like emergency savings or 529 tuition savings plans.
Creativity is also important when it comes to education efforts. Simply offering new programs is not enough. Education efforts should be accessible, interactive, and customized so that each employee can find the information they need and act on it.
SoFi at Work has noticed that some employers are adopting a “learning journey” approach that allows workers to choose their own paths depending on where they are on their journey towards their individual financial goals and aspirations.
Recommended: Are Your Benefits Helping Women — Especially Moms — Achieve Financial Wellness?
Choose Credible Partners for a Sustainable Program
To provide this extra support and guidance across a broad spectrum of financial needs, you’ll need to choose credible partners that can provide expertise, platforms, and cost-effective services in specific areas. Good partners can help you launch personalized and sustainable programs that are accessible in the short-term, but also build the foundation for your department’s long-term goals.
The Takeaway
Employers can play a key role in ensuring that all employees have the same opportunities for financial success and control of their own financial futures. Democratizing financial well-being can not only create a more diverse and inclusive workplace, but ultimately a more equitable future for all of us.
SoFi at Work can help. We provide the benefits platforms and education resources that can enhance financial wellness throughout your workforce.
Photo credit: iStock/pixdeluxe
Products available from SoFi on the Dashboard may vary depending on your employer preferences.
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Car incentives nearly vanished during the past several years, thanks to pandemic-driven supply chain issues for auto manufacturers. As vehicle inventories dwindled and consumer demand outweighed supply, automakers had no reason to offer incentives like rebates or low-rate financing. The good news is that auto incentives, while still below prepandemic levels, are starting to return.
According to Kelley Blue Book, a Cox Automotive company, auto incentives — as a percentage of the average new-vehicle price buyers paid — reached 5.9% in February 2024. That’s compared with a general range of 10% to 11% before COVID-19 hit and 2% in fall 2022. In February, auto manufacturers spent an average of $2,808 per vehicle in incentives, up 88% from a year ago.
With inventories returning to normal and some auto manufacturers again sweetening deals to move vehicles, here’s how you can find and possibly save with car incentives.
Tips for saving with auto incentives
Although new car prices have declined since peaking in late 2022, the average price a buyer pays remains around $47,000. Incentives are one way to whittle down that price tag, and certain strategies can help maximize savings.
Be flexible about the vehicle you buy
Traditionally, auto dealers strive to have 60 selling days’ worth of cars in stock. As auto production has returned, some manufacturers — like Toyota — remain well below the 60-day mark, while others — including Ford, Nissan and Buick — are overstocked and more likely to offer incentives and discounts to move cars.
“The key right now is to be flexible about which vehicle you consider,” says Sean Tucker, senior editor for data company Cox Automotive. “If you had your heart set on something from Toyota, you’re probably not going to find a great deal. They just don’t have trouble selling cars right now.”
Auto manufacturer websites are a good place to research auto deals and incentives — including cash rebates, low-rate financing and lease deals — that are available for various makes and models. Such incentives often vary regionally, so you can usually narrow a search by ZIP code. Also, auto research companies like Edmunds maintain webpages with current car deals and incentives by carmaker.
Tucker suggests that incentives for leasing and electric vehicles are both good sources for saving in the current market. Auto dealerships are trying to restore the leasing cycle that feeds the used car market, so many dealerships are offering lease deals.
“It’s actually relatively easy right now to get a good lease on an EV,” Tucker says. “And that might even be a good idea just from a technology standpoint, because three years from now, when your lease is likely coming up, there may be far better EVs on the market.”
Know what incentives you qualify for
To ensure you receive every incentive available to you, know exactly which incentives you qualify for before engaging with a car dealer. Joseph Yoon, consumer insights analyst at Edmunds, recommends telling the dealer upfront what you expect in the way of incentives.
“The dealer is not going to offer it to you unless they’re deeply desperate to get the deal done,” Yoon says.
As part of your research, be aware of the different types of incentives available, because in some cases they can be combined.
Auto rebates provide a certain dollar amount to reduce your overall cost of buying, financing or leasing a vehicle. The rebate reduction should be on top of any other discount you’ve negotiated.
Low-rate financing is an incentive offered by automaker captive lenders — although you’ll need to have good or excellent credit to qualify and may be limited on loan length. As of March 5, 2024, Cox Automotive reported that 14.2% of new vehicle financing transactions had an APR of 3% or less. Only 3.2% of transactions had a 0% APR. While low-rate offers are available, they aren’t plentiful.
Loyalty incentives may be available if you have a certain car brand and want to buy or lease another one from the same manufacturer.
Demographic-focused incentives — for example, if you’re a recent college graduate, military member or educator — are also offered by some auto manufacturers and dealers.
Stacking more than one incentive, when possible, can help you take advantage of every dollar available to you. If you have to choose between multiple incentives, for example, either a rebate or low rate from the same manufacturer, use an auto loan calculator to run each scenario and see which will save you the most money in the long run. Also, consider whether taking a cash rebate at the dealer and financing elsewhere could save you even more.
About EVs, Yoon says auto manufacturers and dealers are motivated right now to offer savings on top of the federal incentive, because “there’s still a little bit of inventory left from 2023 that they really, really, really want to get rid of as the 2024 models [are starting to] hit.”
Plan to negotiate and comparison shop
If you know you qualify for a $1,500 car rebate, don’t assume that’s the best you can do — even if the dealer tells you it is. The ability to negotiate car prices for some models has also reappeared, and incentives should be in addition to any amount you negotiate off the manufacturer’s suggested retail price. You can use valuation tools on car-buying sites to see what people are paying for the car you want and whether negotiating a lower price is realistic.
Finally, if you can find more than one dealership with the vehicle you want, present the deal you expect to each and let them compete for your business. Dealers receive factory-to-dealer discounts to help move certain vehicles, usually slower-selling ones. They can choose whether to pass these savings on to you and may be more motivated to do so if they know you’re shopping for the same car elsewhere.
Yoon says if a dealership isn’t willing to “play ball,” you shouldn’t hesitate to walk away. “Cars cost literally more than they have ever cost the consumer, and so you should, rightfully so, fight for every dollar that you can save.”
Your wardrobe isn’t the only thing that deserves a bit of a spring upgrade. With the start of a new season just a few days away, now is the perfect time to switch up your home decor to reflect the changing weather and embrace all the airy spring vibes. Adding pops of color, fresh scents, lightweight linens, and fresh flowers are always on our spring to-do list, but this year, we tapped some of our favorite interior designers to find out their go-to spring home updates. If you too are ready to refresh your home for the season, adding another throw pillow to your living room and a spring wreath to your front door is just the beginning. Here are all the spring decor ideas designers are using to update their homes this season.
1. Freshen up your bathroom
The bathroom may not be your first thought when it comes to sprucing up your home for spring, but making a few swaps in this area can really make an impact. Infuse some spring energy into your bathroom with a new shower curtain, bathmat, or towels in fun colors or patterns. These simple upgrades will have you looking forward to your nightly skincare routine, just so you can appreciate how cute your bathroom is.
Anthropologie
2 colors available
Anthropolgie
7 colors available
3 colors available
2. Display your produce
Channel your inner Dakota Johnson and turn your fruit into decor by displaying it in a stylish bowl. Not only is this a practical method of storing produce, but it’s also an easy and affordable way to add a pop of color to your kitchen. Display the bowl on your kitchen counter or dining table for a simple centerpiece that takes seconds to put together.
Anthropologie
2 colors available
Pottery Barn
3. Swap out your art
One of the easiest ways to freshen up your decor is by swapping your artwork—whether it’s within your gallery wall, on your kitchen counter, above your mantel, or on your side table. Studio McGee styles art so well each season, so we always look to them for inspiration for how to style artwork throughout the year. For example, if you currently have dark, moody landscape art on your entryway table, swap it with a print that includes pastel colors throughout instead. Easy changes like this can take your home from muted winter vibes to bright and fresh spring vibes in no time.
Threshold x Studio McGee
Threshold x Studio McGee
Etsy | MellowPrintDesigns
Etsy | HeirloomLaneCo
4. Change up your candle scents
Whether you keep a candle lit during your daily Zoom calls or always light a favorite fragrance as you wind down for the evening, why not switch up your scents in honor of the new season? Designer Adnan Anwar, who swears by this practice, shared a few of his favorite candle picks for spring. “I tend to switch out the musky, cedary, leathery scents for lighter and more herbal ones,” he said. “I especially love garden mint candles.”
Designer Leah Phillips agreed. “I switch out those earthy candles for ones that are more floral and bright. I have one called Urban Flower Market that is truly spring in a bottle.”
Anthropologie
Pottery Barn
5. Switch your table linens and accents
It doesn’t matter if you live solo or share a dining space with four roommates—your kitchen table deserves a little seasonal love! “I’m someone who gets an irrational amount of joy from setting the table for dinner,” designer Emma Beryl said. “Even if I’m just ordering a pizza, I really enjoy using nice glassware, napkins, and silverware because it makes the end of the day a little more celebratory.”
When spring arrives, Beryl grabs delicate glassware and linen napkins in bright colors from her cabinets. She added, “I especially love to use all shades of blue and green in the spring because it relates to the outdoors and the generally verdant feeling of the season.”
5 colors available
2 colors available
Crate & Barrel
5 colors available
Hearth & Hand with Magnolia
6. Add airy touches
Want to embrace light and airy living room ideas? Tuck those flannel blankets into storage and embrace lighter accents. For designer Danielle Muzynoski, that means giving her space a once-over and opting for timeless home decor that brings airy touches all around. “I’ll switch my dark, heavy pottery for a hand-blown glass vase, for example,” Muzynoski shared. “Pillows and blankets will be changed to lighter colors and linen textures.”
Brooklinen
3 colors available
2 colors available
Hearth & Hand with Magnolia
7. Opt for spring-like bed linens
Your winter sheets kept you warm and cozy during the chillier months, but now that spring is here, away they go! “One of the best ways to update your home each season is fresh linens in the bedroom,” designer Kathleen Walsh shared. “I have sets for fall and winter as well as spring and summer. They keep my room interesting and help me transition into a seasonal mindset.”
If you usually gravitate toward neutral color schemes and paint colors in your home, a subtle touch of color peeking out of your bedding can bring a happy, fresh feeling to your room without it being too much of a contrast. Opt for sheets in shades of light pink, blue, yellow, and green.
Brooklinen
10+ colors available
10+ colors available
Threshold with Studio McGee
8. Incorporate florals
Florals for spring? Groundbreaking (we had to). But seriously, there’s a reason why vases full of fresh flowers are a must for designers. “Adding fresh, colorful flowers like tulips or hydrangeas in the primary rooms of my home makes it smell and look like spring,” designer Whitney Durham said.
Designer Charli Hantman, on the other hand, is partial to emerald green hydrangeas and anemones. “There is something about how delicate they are that makes me forget the cold winter weather and start dreaming of summer,” she said.
But don’t worry—there’s no need to spend a ton of money during this beautification process. “You can really have fun and get creative with the different colors and varieties of flowers offered at your local deli or supermarket,” designer Jennifer Hunter noted. “No need to get too fancy here!”
9. Update your vases
While you’re thinking about flowers, you may want to take this opportunity to update your vase collection. Designer Kate Jacobowitz likes to display her fresh flowers in new vases and vessels that she picks up online. “Etsy is such a good source for fun, quirky pottery,” she said. “I love pieces with unusual shapes and color combinations grouped together; they are even interesting enough to stand on their own on days when fresh flowers just aren’t in the cards!”
Anthropologie
Threshold with Studio McGee
Threshold with Studio McGee
Etsy | SunnysShopLA
10. Lean into plants
If you’re more of a plant person, bring on all the green friends this spring! “I’m always looking for ways to incorporate more indoor plants around the house,” designer Leah Walder noted. “I’m using them as centerpieces, in my bookshelves, and in baskets by the entryway. It really makes our home feel more alive and ready for spring!” Whether you opt for live plants or realistic faux options, the fresh impact can’t be denied.
Pottery Barn
Hearth & Hand with Magnolia
Threshold x Studio McGee
11. Change out your coffee table books
Don’t forget to give your coffee table a springtime refresh, too. “I always change out my coffee table books,” said designer Muzynoski. “So while I had all neutrals out for winter, I might pick out some fun colored covers like pinks and greens for spring.” Not only will these books work as spring living room decor, but they’ll also give you and your guests something pretty to peruse while hanging out on the sofa.
Julie Pointer Adams
Anita Yokota
12. Shop your own home
Home design trends make us want to redo our homes constantly, but TBH, you don’t need to purchase a single item in order to transform your space for any season, including spring. Designer Ann Flanagan shared a tried-and-true trick that will help add some oomph to your home without breaking the bank. When it’s time for a refresh, Flanagan will sort through a bin of home decor she keeps in her basement. “This bin is full of items I love, but not everything I love always has a place,” she explained. “I play around by swapping in pieces and others out. Since I don’t subscribe to trends, most items are classic, and that way, my space feels new without having to go shopping.”
Back in late 2023, we got in the car with the Federal Reserve with the promise of a trip to our favorite place: the land of lower interest rates. In 2024, we keep asking “are we there yet?” The more we ask, the farther we seem to be from the destination.
This trip began with all the best intentions. Softer inflation and cooler economic data led the Fed to expect an opportunity to cut rates several times in 2024. The Fed communicated as much in mid-December. Markets took things a step further with futures contracts pricing in 6 cuts by the end of the year. “6 rate cuts” was a refrain that echoed throughout the mortgage and housing industries. Suddenly, too many people were risking disappointment by not understanding the HIGHLY conditional logic behind the 6 cut mantra.
It wasn’t necessarily a mistake for the market to get so far ahead of the Fed’s official outlook. After all, the Fed has a history of cutting rates MUCH faster than its projections suggest. But the decision would ultimately be dependent on continued progress on inflation, and more economic cooling.
With the release of this week’s inflation data, we now have two consecutive months that raise serious objections to the notion that the Fed will be able to cut any time soon.
This is a chart of the core Consumer Price Index (CPI) in year over year terms. This is the inflation metric that the Fed wants to see at 2% and they’ve been clear in saying they can cut rates if they’re confident that we’ll get there. It shows clear, substantial progress toward that goal:
The following chart shows the same thing, but now in more granular month-over-month terms. This allows us to better assess progress toward the 2% annual goal. It shows the past range that’s been consistent with that annual goal, but more importantly, it shows inflation moving up and out of that range last month. This week’s report maintained the same “too high” level.
The news wasn’t quite as bad from the week’s other key inflation report, but it certainly didn’t help. The Producer Price Index (PPI), which measures wholesale inflation, has also now seen the highest two consecutive months since inflation first began to calm down in 2022.
While PPI doesn’t usually move markets as much as CPI, and while the results were arguably not as troubling, it actually caused a bigger jump in rates because it added insult to CPI’s injury. It also happened to be flanked by upbeat labor market data. The following chart shows ongoing jobless claims, which had recently crested 1.9 million for only the second time since hitting long term lows.
On the road to lower rates, this week’s economic reports are tantamount to the driver actually making good on the threat to “turn this car around!” Here’s how rates reacted, as seen in terms of 10yr Treasury yields (highly correlated with mortgage rates in terms of day to day movement).
And here’s the context going back to the initial rate rally in November and December:
The trajectory for mortgage rates is substantially similar as seen in the chart below, at least if you’re looking at the blue line. The orange line shows Freddie Mac’s weekly rate survey which was badly tricked by the timing of rate movement over the past two weeks in conjunction with its laggy methodology. Specifically, it’s a 5 day average ending on Wednesday. As such, if the previous week sees decent improvement on Thursday and Friday, and the new week doesn’t see most of its deterioration until Thursday and Friday, the most recent mark will move down instead of up. This is exactly what happened during this cycle.
Looking ahead, next week’s obvious focus is Wednesday’s Fed Announcement. To be sure, there is no chance of a rate cut at this meeting. Instead, markets will focus intently on the Fed’s updated rate projections. These only come out 4 times a year, so this will be the first update since December 13th and it will provide valuable insight as to how the past 2 months of higher inflation readings have affected the Fed’s rate outlook.
This morning’s line-up of econ data is certainly not the most relevant to the bond market, but the NY Fed Manufacturing index has registered an impact at times. This is not one of those times. While volume suggests traders waiting to make trades at 8:30am, there was no bias toward higher or lower levels at that particular time. Some selling pressure was already in place starting at 8am and more selling kicked in just before 9am. The other data wasn’t relevant, but the big miss in NY Fed (-20.9 vs -7.0) arguably could have been. The fact that it offered no help is a sign of the troubled times for bonds.
Interest-only mortgages let you pay just the accruing interest on your loan for an introductory period — but they come with high payments once that period ends.
These loans mainly benefit those planning to move or anticipating a big income increase within a decade.
Since the Great Recession, interest-only mortgages have been hard to find due to their high risk.
An interest-only mortgage allows you to pay only the interest on your loan for a set period. This type of mortgage can help you more easily afford the payments in the short term — but not without some drawbacks. Here’s what to know.
What is an interest-only mortgage?
An interest-only mortgage is a home loan that allows borrowers to make interest-only payments for a set amount of time, typically between seven and 10 years, at the start of a 30-year term. After this introductory period ends, the borrower pays principal and interest for the remainder of the loan at a variable interest rate.
In the early 2000s, homebuyers gave in to the instant gratification of mortgages that allowed them to make interest-only payments at the start of the loan, so long as they took on supersized payments over the long term. This was one of the risky practices that contributed to the housing crisis in 2007, leading to the Great Recession. In the end, many people lost their homes.
Some lenders still offer interest-only mortgages today — often as an adjustable-rate loan — but with much stricter eligibility requirements. They are now considered non-qualified mortgages (non-QM loans) because they don’t meet the backing criteria for Fannie Mae, Freddie Mac or the other government entities that insure and repurchase mortgages. Simply put: an interest-only mortgage is a riskier product.
How do interest-only mortgages work?
With an interest-only loan, you’ll pay interest at a fixed or adjustable rate during the interest-only period. The interest rates are comparable with what you might find with a conventional loan, but because you’re not paying any principal, the initial payments are much lower. However, they may still include property taxes, homeowners insurance and possibly private mortgage insurance (PMI).
Even though you’re only required to pay the interest at first, you still have the option of paying down the principal during the loan’s introductory period.
At the end of the initial period, borrowers must repay the principal either in one balloon payment at a set date, which can be very large, or in monthly payments (that also include interest) for the remainder of the term. These payments of principal and interest are going to be larger than the interest-only ones. And, because your principal payments are being amortized over only 20 years instead of 30, those payments will be higher than those of someone with a traditional 30-year loan.
You can refinance after the interest-only period is over, although fees will likely apply.
Example of an interest-only mortgage
Say you obtain a 30-year interest-only loan for $330,000, with an initial rate of 5.1 percent and an interest-only term of seven years. During the interest-only period, you’d pay roughly $1,403 per month.
After this initial phase, with our interest-only loan example, the payment would rise to $2,033 per month — assuming your rate doesn’t change. Many interest-only loans convert to an adjustable rate, so if rates rise in the future, yours will, too (and vice versa).
With a 30-year fixed-rate mortgage for the same amount, you’d pay $1,882 per month. This includes principal and interest, and also accounts for the higher rate on this type of loan — in this case, 5.54 percent.
With both the traditional fixed-rate option and our interest-only loan example, you’d pay a total of about $677,000, with around $347,000 of those payments going toward interest. As you can see, however, you’d ultimately have a higher monthly payment with an interest-only loan. If your interest-only loan requires a balloon payment instead, you’d be on the hook for several hundred thousand dollars.
How to qualify for an interest-only mortgage
Interest-only loans have been harder to come by since the housing crisis of the mid-2000s. Fewer lenders offer them, and banks have set stricter requirements to qualify.
Banks generally only offer an interest-only mortgage to a well-qualified borrower. You’ll likely need:
A credit score of 700 or more
A debt-to-income (DTI) ratio of 43 percent of less
A down payment of 20 percent or more
Solid proof of future earning potential
Ample assets
Should you consider an interest-only mortgage?
The best candidates for an interest-only mortgage are borrowers who have full confidence they’ll be able to cover the higher monthly payments when they arise. This kind of home loan might be right for you if:
You’re in graduate school and want to keep repayments low for now — but anticipate having a high-paying job in future
You have a trust that will start releasing assets at a future date
You flip houses and need to keep expenses down during the remodel
You expect to move before the end of the introductory period
Interest-only loans can be a prudent personal finance strategy under certain circumstances, but they’re not a good idea for everyone. Here are some pros and cons:
Pros of interest-only mortgages
You get more house for your money. You can enjoy a larger home for less money while you save up for a larger mortgage. That’s assuming you have a sound plan in place for when those larger payments eventually kick in. Bankrate’s affordability calculator can help you estimate how much house you can afford.
Interest-only payments are smaller than conventional mortgage payments. The initial monthly payments on interest-only loans tend to be significantly lower than payments on conventional loans, and the interest rate may be fixed during the first part of the loan. Bankrate’s interest-only mortgage calculator can help you determine what your monthly payment would be.
You kick higher payments down the road. You can delay making large mortgage payments or avoid them entirely if you plan to move out of your home before the introductory period ends.
If interest rates are high now, you can avoid them. If rates are anticipated to be lower in the future, you can keep your monthly payments relatively affordable and then reap the benefits of lower rates by the time the interest-only period ends.
Cons of interest-only mortgages
You won’t build home equity. As long as you’re only paying interest, you’re not building equity in your home. And if your home’s value depreciates, you could end up upside-down on your mortgage or risk negative amortization.
You might get an unaffordable payment after the interest-only period. You could encounter serious sticker shock when the interest-only period ends, and your monthly payments suddenly double or triple, or if you have to make a sizable balloon payment at the end of the initial period.
You’ll be at the mercy of market interest rates. If rates have risen since the loan originated, when the intro period ends, you may have a payment much higher than you want.
If your income changes, the home may be unaffordable down the road. Your anticipated future income might not match your expectations, saddling you with more house than you can afford.
Alternatives to an interest-only mortgage
Before you take on this kind of loan, ask yourself: what is an interest-only mortgage going to do for you? Make sure you think long-term.
If you want to avoid this higher-risk form of home financing, you can explore other types of mortgages. Many adjustable-rate mortgages also have a long, low-interest introductory rate period — and, since the payments include some principal, you’ll be building equity during it.
If you’re drawn to interest-only loans because of the low monthly payment, explore government-backed loans like one from the Federal Housing Administration (FHA). These can give you more affordable payments without the future jump that comes with an interest-only mortgage.
Can I change to an interest-only mortgage?
It is possible to refinance a traditional mortgage to an interest-only loan, and borrowers might consider this option as a way to free up money to put toward short-term investments or an unexpected expense. So, how do interest-only loans work as a refi? You would meet the same scrutiny and requirements as you would if applying for a first-time interest-only loan.
The same eligibility criteria for refinancing also apply, and some lenders may raise the bar since it is a higher-risk loan.
In any refinance, you will need to receive a home appraisal and pay closing costs and fees. Refinancing can cost 3 percent to 6 percent of the home’s total amount. In addition, if you have less than 20 percent equity in your home, you will be required to pay PMI.
“Housewright Gallery is the texture I crave when thinking about great home goods stores, and I’m very glad it is local. There hasn’t been a project in the past four to five years that hasn’t benefited from at least an incredible throw blanket or vintage piece from the shop. The bonus? An incredibly thoughtful and engaging gallery of art from some of the Pacific Northwest’s most treasured names as well as up-and-comers that [designer and founder] Tim [Pfeiffer] and the whole team support so well.”
— Brian Paquette, Interior Designer and Founder of Brian Paquette Interiors
The Inside
The Inside
“We love The Inside for fun custom throw pillows in unique prints you can’t find anywhere else. You can choose from two different pillows shapes, seven different sizes, and over 100 different fabrics ranging from moody velvet to floral, botanical, and animal print. If you’re looking for a unique print (or even a cool gift for the home decor lover in your life), look no further!”
—Heather Goerzen, Lead Interior Designer at Havenly
Jayson Home
Jayson Home
“Cameron [Shepherd] and I both previously lived in Chicago and Jayson Home will always have a special place in our hearts. Aside from being beyond gorgeous, the brick and mortar store is a place I’m not only inspired by, but can also find pieces that are totally unique. Anything from a $25 tray for styling to custom sofas and vintage casegoods, Jayson Home really does have it all. Now that I live in Los Angeles, I find myself defaulting to its online store as a trusted source for all of my clients.”
—Jill Norman, Principal Designer and Co-founder of Studio Mesa
Advertisement – Continue Reading Below
Eleven Home Aesthetics
Eleven Home Aesthetics
“I absolutely love Eleven Home Aesthetics for cute vintage accessory finds like candle holders, vintage books, and pottery. They have great one-of-a-kind pieces that add charm to your home.”
–Antonella Spina, Founder of Luma Interior Design
Cailini Coastal
Cailini Coastal
“I love Cailini because it has been so well edited and has a different approach than other brands. It is very personal and Meg [Young, the founder] brings a California view point that would work for all houses. Love her color sense and especially love her accessories and table top; lobster napkins, great placemats, and faux flowers.”
—Lynn Morgan, Founder of Lynn Morgan Design
Hawkins New York
Hawkins New York
“Hawkins New York is a great brand for unique homewares. The label makes its own pieces with partners from all over the world, in addition to selling a selection of pieces made by other brands it loves. This spot is a go-to for unique glassware and vases, plus all things kitchen: barware, linens, cups and mugs, plates, cutting boards, and more.”
— Heather Goerzen, Lead Interior Designer at Havenly
Advertisement – Continue Reading Below
Soho Home
Soho home may carry furniture and goods on the pricier end of the spectrum, but dig a little deeper on the website and you’ll find more affordable decorative items. “When I’m looking for decor to make a room feel special, I often find myself browsing the offerings at Soho Home. Created to reflect the aesthetic of the many iconic Soho House properties around the world, Soho Home helps bring the look and feel of these rich interiors into individual homes. I love browsing their site and often find inspiration in the unique selection of forms, colors, and textures featured on their product pages.”
—Cameron Shepherd, Principal Designer and Co-founder of Studio Mesa
Gramercy
“I love shopping for unique blankets at Gramercy. It carries a wide variety of colors, textures, and different price points. Gramercy sells these beautiful cotton Sferra throws that are really well priced. They are available in a plethora of colors and can bring a pop of color on the back of a chair. They are machine washable, which is so nice. I will use these blankets on top of ottomans or sofas where a dog may curl up so that they don’t ruin the upholstery. Then you just toss this blanket in the wash and good as new! My favorite color is the silver sage!”
—Paige Goodloe, Founder of Paige Goodloe Interiors
H&M Home
“I love H&M Home for vessel finds, they have some really pretty glass vases that feel both modern and a bit art deco. We just purchased this vase for our Neo-Grec Revival project and it looks really high quality.”
–Antonella Spina, Founder of Luma Interior Design
Advertisement – Continue Reading Below
Utopia Goods
Utopia Goods
“Sophie Tatlow, the founder of Utopia Goods, alongside her husband Bruce, is a friend of mine. Bruce’s hand drawings lovingly capture Australia’s unique animals and flowers. They are especially good at creating a festive table top—I currently have my eye on the Grevillia Blue Napkins.”
—Ingrid Weir, Interior Designer at Ingrid Weir
T.J.Maxx
“Our shopping method is always to mix high-and-low items throughout a space. Our go-to budget-friendly stores are Target and Walmart, but we also love T.J.Maxx and HomeGoods! Although our focus is always on top quality and customer service, we like to mix price points within a space when appropriate. There are so many platforms available to our clients now that we are very conscious of where and how we source. For basic pieces that are not unique to one project (like shelf knick knacks) we pop into local big box stores that are more budget approachable and shop online for even more inventory options.”
—Gaelle Dudley, Founder of GLDESIGN
Jamie Young
Jamie Young
“When we came across Jamie Young Co. we knew it would become a staple for our design firm. The pieces are all so aesthetically beautiful and each item is so unique. Recently, we purchased the Foundation Decorative Vase and Elevated Decorative Vase, which are such a striking pair of ceramic pieces and are beautifully finished by hand. They are stunning and the perfect addition to our clients’ bookcases. Jamie Young’s pieces are unique and are obviously aesthetically beautiful, but what really stands out is the quality of the craftsmanship. Each time I sink into the leather seat of the Abilene chair or open the doors of the Chauncey bar cabinet, I am instantly reminded of that quality.”
—Laura Chappetto, Owner and Principal Designer of Element Design Network
Advertisement – Continue Reading Below
CB2
“Accessories are the ‘cherry on top’ in the design process and by far our favorite part! Every client and each project is different, but we approach the process in the same way each time. We create a shopping list by room and then go on the hunt! We start with some of our favorite online sources, most of which are wholesale vendors, but a couple of our favorites are retail vendors. CB2 is fantastic—we love us a good ‘object de art’ and CB2 is always bringing in new options!”
—Miranda Cullen, Principal Designer and Founder of Inside Stories
Ben Affleck and Jennifer Lopez, aka Bennifer, have finally found their perfect love nest — one that’s modeled after a famous queen’s lavish chateau.
It may have taken them two years and three failed escrows but the wait paid off because this mansion is the ultimate luxury home for the power couple.
Many were confused over the stars’ indecision to commit to buying a property. With an unlimited budget at their disposal, it was a little out of the ordinary that these A-listers kept changing their minds.
According to reports, the two looked at mansions in the range of $35 to as high as $85 million in the most exclusive neighborhoods. But none of them quite passed the mark, leading people to believe that there was trouble in paradise. Or are they just really picky?
All doubts were cast aside when the lovebirds set their eyes on this mansion. They instantly fell in love with the property! They paid $61 million in cold cash and the deal took just one week to close, per TMZ.
What’s not to love? This stunning mansion is inspired by one of the most iconic chateaus in history.
The mansion was modeled after Marie Antoinette’s chateau, Le Petit Trianon
Dubbed the Wallingford Estate, the Beverly Hills abode features French-style architecture that was originally modeled after Marie Antoinette’s private chateau, Le Petit Trianon.
The queen’s manor, located on the grounds of the Palace of Versailles, was a gift from her husband, King Louis XVI.
Known for her love for all things opulent, Marie Antoinette adored her private estate. It served as a place of refuge, where the queen staged operas, productions, and lavish parties.
See also: 24 celebrities who live in Beverly Hills & their million-dollar homes
The Wallingford’s exterior features stately columns, large windows, and a rectangular shape that echoes the iconic design of Le Petit Trianon.
While the interiors have been modernized with state-of-the-art technology and contemporary furniture, it still retains its French Neoclassic ambiance.
Ben and J.Lo’s house has 12 bedrooms and 24 bathrooms
Situated on a 5.2-acre lot, the megamansion boasts a total of 12 bedrooms and 24 bathrooms across an impressive 38,000 square feet of indoor living space — providing plenty of living space for Ben and Jen’s blended family.
You can take a closer look inside Ben Affleck and Jennifer Lopez’s new mansion here (swipe to see the revamped interiors):
The couple are co-parenting peacefully with their exes (Jennifer Gardner and Marc Anthony) and share five children between them.
There won’t be any shortage of space for their big family in this huge mansion!
Like its sprawling grounds, everything about this house is grand. The double-door entryway opens to an expansive living room with double-height ceilings and large skylights that make the space even more massive.
White walls with frame molding display sophistication, while large windows allow plenty of natural light to brighten up every corner of the open floor space.
JLo previously shared a glimpse of the mansion’s downstairs area on Instagram while celebrating the success of Mother with her friends. Walking from the stairs to the bar, fans got a view of the gorgeous interiors of the ground floor.
Another highlight of this property is its secured grounds — a top requirement among high-profile celebrities. The mansion is surrounded by tall hedges and comes fully fenced with secured entrance and exit gates from two different private streets.
This design layout safeguards the often-photographed couple from prying eyes and paparazzi. And we know all too well how much Ben Affleck ‘loves’ paparazzi, don’t we?
Recreational amenities include a 155-foot-long infinity pool, a home theater, spa areas, a full-service salon, and a sports complex complete with a basketball court, a pickleball court, a fully equipped gym, and a boxing ring.
Visitors can also enjoy a slice of luxury living in the 5,000-square-foot guest penthouse. This structure also houses the garage area, which is large enough to fit 90 cars!
It’s one of the most luxurious homes in all of Beverly Hills
Fitting for one of Hollywood’s most famous couples, Ben and Jennifer’s new house is one of the city’s most impressive mansions and was once one of L.A.’s priciest listings.
Sitting mere minutes away from the Beverly Hills Hotel in the gated Wallingford Estates community. It had previously been owned by healthcare entrepreneur Jeoung Lee before real estate mogul Gala Asher picked it up for $22 million back in 2016.
What followed was an extensive renovation that brought the sprawling mansion into the 21st century. Asher then sought to capitalize on his big investments in the property by listing it for a whopping $135 million in 2018.
With no takers, a series of price adjustments followed, until the famous couple finally took it off the market in 2023. The final sale price was $60,850,000 — which amounts to $1,601/sqft.
The moral of Ben and Jen’s house-hunting saga? Patience pays off. By holding off on their purchase, they were able to find a perfect palace to call their home. A happily-ever-after ending for a Hollywood royal couple.
More stories
Where does Adele live? A look at the $58M ‘house that Rocky built’
See Lady Gaga’s house in Malibu, which she calls her ‘Gypsy Palace’
No matter what age you are, it’s never too soon to start thinking about — and actively saving for — your retirement. With reports coming out regularly about the severe retirement savings gap in the U.S., it seems as though the majority of Americans are vastly underprepared for this life event.
If your employer offers a 401(k) at your place of work, this is a great way to get started (or continue) saving for your golden years. Before you jump in, find out exactly what a 401(k) is and how it can help you prepare for retirement. If you already contribute to a 401(k) plan, make sure you know what to expect when it comes time to retire.
How does a 401(k) work?
A 401(k) plan helps you save while investing your contributions in various mutual funds. Employers offer this type of retirement plan, so you can’t sign up for one unless you go through your place of work.
As an incentive to save, you receive a tax break. Depending on the type of 401(k) you choose (or your company offers), you either receive that tax break when you make the contribution or when it comes time to withdrawal.
Employer 401(k) Matching
Many employers offer a match to any contribution you make. This usually happens in one of two ways: they’ll either match dollar for dollar up to a certain limit or up to a percentage of your salary.
The most common type of 401(k), the traditional 401(k), allows you to make any contribution tax-deductible each year. So if you contribute $6,000 a year, you get to knock that off your taxable income amount. If you’re on the edge of a tax bracket and make a sizeable 401(k) contribution, you might even be able to jump down into a different bracket with a lower tax rate.
401(k) Tax Rules
While your investments continue to grow each year, they remain temporarily protected from taxation. Unlike other types of investments, you don’t pay any annual tax on your 401(k) earnings until you start to make withdrawals. At that point, you’ll be subject to regular income tax when you take out money each month.
As you continue to make 401(k) contributions throughout your year, you can adjust your investments to become increasingly less volatile. The idea is that as you get closer to retirement age, you have less risk to ensure a solid nest egg when you need it.
The Benefits of a 401(k)
A 401(k) is a retirement savings plan sponsored by an employer. It allows employees to save and invest a portion of their paycheck before taxes are taken out. Contributions to a 401(k) are made with pretax dollars, which can lower your taxable income in the current year and potentially result in a lower tax bill.
Some other benefits of a 401(k) include:
Employer matching contributions: Many employers will match a portion of their employees’ 401(k) contributions, effectively giving you free money to save for retirement.
Tax-deferred growth: Any investment earnings on your 401(k) account grow tax-free until you withdraw the money in retirement.
Potential for tax credits: Depending on your income and participation in a 401(k) or other qualified retirement plan, you may be eligible for certain tax credits that can help reduce your tax liability.
Retirement income: A 401(k) can provide a source of income in retirement, which can help you maintain your standard of living when you are no longer working.
Convenience: Many 401(k) plans offer a range of investment options, and the contributions are automatically deducted from your paycheck, making it easy to save for the future.
The money you withdraw from a 401(k) in retirement is subject to income tax, and 401(k) plans have contribution limits. However, overall, a 401(k) can be a valuable tool for saving for the future and reducing your tax liability.
401(k) Contribution Limits
There are limits to your 401(k):
While it’s a great financial tool, you can only contribute up to $22,500 each year, amounting to $1,875 per month if you divide it out monthly. If you’re over the age of 50, you’re allowed to contribute up to $30,000 a year ($2,500 per month). These contribution limits are in place so that you can only benefit from so much tax savings each year.
Required Minimum Distributions
Another rule associated with a 401(k) is that you must start taking “required minimum distributions” at some point. That means once you hit a certain age, you must begin withdrawing funds from your 401(k) account — and paying taxes on them.
Currently, the requirement is that you start taking distributions the year after you turn 70 ½. Then you have to take out distributions by December 31 of each following year. Your minimum required amount is determined by the IRS based on your life expectancy. There’s nothing quite like a government tax agency predicting your lifespan, is there?
Still, this information helps you determine what kind of tax burden you can expect when you’ve finally retired. While your income may be lower, your deductions might be as well. After all, you probably don’t have kids left at home to claim as a deduction. And if you’ve paid off your mortgage, you won’t have that interest to deduct either.
It’s great not to have those expenses, but it can be helpful to talk to a tax professional to get a better idea of your taxes, especially in that first year of retirement or required minimum distributions. The more prepared you are, the more financial flexibility you can have!
401(K) Plan Types
There are two main types of 401(k) plans: traditional 401(k)s and Roth 401(k)s.
A traditional 401(k) allows you to contribute pretax dollars to your account. Your contributions and any investment earnings in the account are tax-deferred. This means you won’t have to pay taxes on them until you withdraw the money in retirement. When you withdraw the money in retirement, it is taxed as ordinary income.
A Roth 401(k) is similar to a traditional 401(k), but contributions are made with after-tax dollars. This means you won’t get an immediate tax break on your contributions, but qualified withdrawals from the account in retirement are tax-free.
Some 401(k) plans may offer both traditional and Roth options, allowing you the flexibility to choose the type of plan that best meets your needs.
There are also types of 401(k) plans that are designed for specific types of employers, such as safe harbor 401(k)s and SIMPLE 401(k)s. These plans may have different contribution limits and rules for employer matching contributions. So, it’s important to understand the details of the plan you are enrolled in.
What’s the difference between a traditional 401(k) and a Roth 401(k)?
While a traditional 401(k) offers upfront tax savings in return for taxes paid later during retirement, a Roth 401(k) flips the situation around. Instead, your contributions are made with your taxable income. In return, you don’t have to pay any taxes when you start withdrawing from your account during retirement.
While you miss out on tax savings upfront, you’re only paying on the original contribution amount. If you had to pay taxes when you withdraw, you’re also paying taxes on everything you’ve earned, which is hopefully a lot more money than you started with.
Roth 401(k) Requirements
There are requirements to qualify for the Roth 401(k) benefits:
First, your account must be open for at least five years. You also have to wait until you’re at least 59 ½ before you can start taking distributions, unless you’ve had a disability.
A Roth IRA is particularly useful if you’ve accumulated a lot in retirement savings and other investments. While many people have less income when they retire, that’s not always the case. You may have a comprehensive portfolio of investments, in which case you could be better served by not paying taxes on at least part of your withdrawals.
If you’re nearing retirement and expect to drop in your tax bracket soon, there may be no sense in using a Roth 401(k) now. A Roth 401(k) can be a great choice if you have a lower income now because you’re earlier in your career or have tons of tax deductions because of kids and a mortgage.
Like all retirement plans, there are better products for different points in your life. By constantly reassessing how you contribute to your retirement savings, you can maximize your tax benefits now and in the future.
See also: IRA vs. 401(k): Where Should You Invest Your Money?
Employer Contribution Match
An employer contribution match is a feature of some 401(k) plans in which the employer agrees to contribute a certain amount of money to an employee’s 401(k) account based on employee contributions.
For example, an employer might offer a 50% employer match on the first 6% of an employee’s salary that the employee contributes to their 401(k) account. In this case, if the employee contributes 6% of their salary to their 401(k), the employer would contribute an additional 3% (50% of the employee’s contribution).
Employer contributions are a way for employers to encourage their employees to save for retirement and to provide an additional source of retirement income for their employees. Employers may also use contribution matching as a way to attract and retain top talent.
Employer contribution matches may have certain rules and requirements, such as vesting periods, that determine when an employee becomes fully entitled to employer contributions. Make sure you understand the details of any employer contribution match offered by your employer to make the most of this benefit.
What happens if you leave your job?
Don’t worry. You don’t lose your 401(k) savings if you leave your current employer. You typically have a few different options available to you. First, you can leave it in the company plan if they allow it. You won’t be able to continue making contributions or any changes to your allocations. But you can access it when you’re ready to retire.
401(k) Rollover
Or you can do a rollover:
A rollover allows you to switch the funds to another retirement plan without paying any tax penalties. You can either do an IRA rollover or use a plan from your new employer. You do need to make sure your new employer’s plan allows for rollovers.
Then you can continue your contributions as normal, following the rules of the new account, whatever it may be. An IRA is always a viable option because you’re in control of how you invest. And while the annual contribution limit is $6,500 (or $7,500 if you’re 50 or older), it doesn’t count when you’re rolling over funds.
Your final option for handling your 401(k) when you leave your job is to cash it out. If you do this, you’ll be subject to all the relevant penalties. These include a 10% early withdrawal penalty and income taxes for both federal and state. The exception to the early withdrawal penalty is if you are at least 55 years old when you leave your employer.
How much should you contribute to your 401(k)?
How much you decide to contribute to your 401(k) should depend on numerous factors. At the very least, you should contribute the maximum amount allowed to receive a matching contribution from your employer. That essentially equals free money, which you should never pass up.
Next, think about your financial picture as a whole. What kind of debt do you have? If you have any high-interest credit card or loan balances, you may want to focus your efforts on paying those down before contributing more to your retirement plan. Lower interest debts, like a fixed student loan, may not be as pressing to repay.
Furthermore, consider these recommended saving strategies:
Emergency Fund
You’ll probably want a three to six-month emergency fund in case you lose your job or get a sudden illness or injury. Having a large chunk of money stashed away in an easy-to-access savings account can provide you with financial security here and now.
Roth IRA
Once you’ve got your overall savings plan in order, it’s time to start figuring out where else to invest for retirement. Before you max out your traditional 401(k), think about picking up a Roth IRA. This helps you diversify your retirement plans for tax purposes.
Like a Roth 401(k), a Roth IRA lets you pay taxes on your contributions now, so you don’t have to pay anything when you make withdrawals during retirement. It can certainly help you spread out your tax burdens over the course of your life.
Still have money left over to invest?
If you do, revisit your 401(k). Remember, you can contribute up to $22,500 so you can certainly divert more of your income towards that maximum.
How else should you prepare for retirement?
Preparing for retirement takes a constant reassessment of your current needs versus your future goals. As easy as it is to say, “You need to contribute this-many-thousands of dollars a year to survive retirement,” the reality is that it’s much harder to actually do that.
But saving for retirement is still a challenge worth conquering. Even if you’re in your 40s and haven’t started saving a dime, you can start today. Once you’ve got your current savings fund in place that you can use for emergencies, implement some of these easy tips to get ready for retirement.
For now, worry less about picking the perfect type of account and focus on the habit of retirement saving.
Here are some ideas to get you started:
How to Save Extra Money:
Downsize your living expenses, one step at a time.
Place your tax refund into a retirement account.
Stream television instead of paying for cable.
Cut back on eating out.
Stay healthy to reduce future healthcare costs.
Pay down high interest debt like credit cards.
Sell your stuff and put the money towards retirement.
How to Strategically Manage Your Retirement Accounts:
Create a retirement savings goal as a percentage of your income.
Pay yourself first by setting up auto direct deposit to your retirement account on payday.
Take advantage of higher IRA contribution limits when you’re 50+.
Audit your accounts every year.
Consolidate multiple accounts (like IRAs) to reduce fees.
Put your end-of-year bonus into a retirement account.
Bottom Line
Investing in your retirement is really investing in yourself. Taking advantage of your employer’s 401(k) is an important part of the equation. In addition to making regular contributions, be sure to explore all of your options for financing your retirement. A healthy portfolio mix isn’t difficult to develop, and there are plenty of resources available to help you get started.