What happens if your landlord tries to return your $500 security deposit but they don’t have your forwarding address? Or the company whose stock you bought in college is trying to send you dividend checks in the mail, but they never get cashed? In both cases, your money becomes “unclaimed property”.
After claiming your money, bank your funds somewhere you can watch them grow* – Chime® offers 2.00% APY7 with no monthly fees2
In total, Americans have $42 billion in unclaimed property, creating the world’s largest financial lost-and-found. On average, 1 in 10 Americans have unclaimed property in the form of uncashed checks, forgotten deposit boxes, and more just lying around waiting for their owners to come claim them.
Could you have unclaimed cash? How can you check? Let’s investigate.
What’s Ahead:
What is “unclaimed property”?
Unclaimed property is a financial asset that has an owner, but the owner hasn’t come to get it.
The most common examples of unclaimed property are checks that haven’t been cashed. These could be returns of security deposits for rent or utilities, final pay stubs, refunds, class action settlements, stock dividends, royalty payments, and more (all the more reason you should give your direct deposit information whenever possible).
Other examples that probably aren’t as applicable to the under-30 crowd include long-dormant savings and checking accounts, life insurance payouts, and tangibles such as forgotten security deposit boxes.
How and why does property go unclaimed in the United States?
Property goes unclaimed all the time in the United States, mostly because financial entities are unable to contact owners.
Let’s say your old leasing company tries to return your $500 security deposit. However, without your direct deposit information or your forwarding address, they’re kind of stuck. They might try to reach out to you via email or your cell, but most states only require the holder of the property to reach out to the owner via snail mail once.
If you don’t claim your $500 after the, erm, letter, the $500 enters a “dormancy period” of typically one year before the financial institution holding the money must officially declare it as unclaimed property to the state.
So basically, if you don’t cash your $500 check within a year of moving out, your leasing company will turn it over to the “lost and found” aka the state government.
What are the laws surrounding unclaimed funds?
Laws surrounding unclaimed property areextremely strict. Financial institutions are not allowed to keep the unclaimed property under any circumstances; they must report it to the state immediately after the dormancy period.
If they don’t, and try to pocket the goods, they’ll get into immense trouble with the IRS. Furthermore, there’s no statute of limitations on unclaimed property so the feds can come knocking anytime, and audit companies back for decades to make things right.
The lengths our government goes to in order to protect unclaimed property for individual Americans is pretty awesome, if you ask me. Without those property protection laws in place, many companies would probably begin leveraging every manipulation tactic in the book to cheat consumers like us out of our rightful property. For example, a lot of checks from financial institutions to individuals might start mysteriously disappearing from the mail…
After all, how would you feel if your landlord simply waited for you to forget about your deposit and spent your $500 on some tacky lobby statue?
Do unclaimed property laws change based on location?
Yes; each state has their own unclaimed property laws. Variables like dormancy periods, due diligence, and more might vary across borders.
For example, Alabama’s dormancy periods average three years, but for some reason, financial entities don’t have to report traveler’s checks as unclaimed until they’ve gone un-cashed for 15 years.
In New York, holders of the property must perform the following due diligence at least 90 days prior to reporting the property as unclaimed: contact the owners via snail mail at least once, twice if the value of the property exceeds $1,000.
Most states have similar laws calling for such comically little “due diligence.” But in all seriousness, I totally get it; companies don’t hire teams of private investigators to find Steve, who never cashed his $6.47 dividend check back in 2009. Rather, it’s our responsibility as consumers and patrons to keep our contact information up to date and make it easy for these institutions to pay us.
Who’s tracking unclaimed property?
Once the financial entity holding the unclaimed property reports it to the state, the state tracks it on a government-run database, accessible through a web portal.
While each state runs and maintains their own unclaimed property database, you don’t have to search every state you’ve lived in individually. Thankfully, there are trustworthy third-party sites that can show you a bird’s eye view of all the states where you have unclaimed property.
The two most popular unclaimed property sites are missingmoney.com and unclaimed.org. I like them both for different reasons.
Missing Money cuts to the chase, letting you find out if you have unclaimed property, and in which states, in less than a second. All you have to do is plug in your name and voila, a list with links to claim in each state appears (more on that in the next section).
Unclaimed.org, the official site of the National Association of Unclaimed Property Administrators, is a better destination for simply learning more about unclaimed property in general. It features a search function, but it’s less usable and accessible than Missing Money. Still, there’s tons to learn on Unclaimed.org if you’re curious to know more about this strange phenomenon.
How can I find out if I have unclaimed funds?
You can find out if you have unclaimed property in seconds by plugging your full, legal name into Missing Money’s search bar.
To my shock, I was one of the lucky Americans with unclaimed property. Woohoo!
One quick look at the “Reported By” column and I knew exactly what had happened. I own some shares of Disney stock and they’ve apparently been sending my dividend checks to an old address in Wisconsin. It’s been going on for so long that my unclaimed cash has accumulated into a nice pile that will cover my fall latte budget.
How can I claim my unclaimed funds?
If you also have unclaimed funds, all you have to do is click CLAIM next to your name (Missing Money will list everyone else with your name, so be sure to click the one that matches your current/past address to confirm it’s you).
Using the CLAIM button I was redirected to the WI state government website where I followed some pretty logical steps to complete my claim. To nobody’s surprise, the first thing they asked for was my direct deposit information.
Next, Wisconsin (and I assume most other states) requires you to provide three documents to prove your identity: a government-issued ID, proof that you lived at the address associated with the claim, and proof of your social security number.
My ID and work documents covered #1 #3, but #2 was a bit more of a challenge. I dug through my inbox and thankfully found a scan of my old lease for the building, so I submitted that.
Once I’d submitted everything and provided my digital signature confirming I wasn’t a bad guy, I finally reached the confirmation page. I wasn’t too surprised to see that it would take six to eight weeks for an update, and I expect it will take even longer due to COVID-19.
Even still, I’m grateful that I not only had unclaimed property, but that Disney reported it, the state government of Wisconsin tracked it, and the claim submission process was rigorous but user-friendly.
If you haven’t already, I very strongly encourage you to spend a minute on Missing Money, searching for unclaimed property belonging to you or your loved ones.
While technically there’s no big rush to claim your unclaimed property, it’s not doing anyone any good just sitting in a state escrow. You might as well file a claim and grab it now so you can begin multiplying it!
What should I do with my money once I receive it?
If it’s money you don’t need right now, why not toss it into a savings account and let it accumulate a little interest? I’m a fan of both Chime and the CIT Bank Savings Builder as options.
With a Chime Automatic Savings Account, you’ll enjoy an above-average interest rate of 2.00% APY7 right off the bat. Plus, you’ll have the option to round up every purchase to the nearest dollar, depositing the change into savings and filling your monthly statements with clean, whole numbers. ^
Open a CIT Savings Builder Account and you’ll score up to 1.00% APY compounded daily. In order to keep that sweet compounding interest, CIT requires you to maintain a balance of $25,000 or deposit at least $100 monthly, which I see as a perk; it ensures that you don’t neglect your savings account, lest you totally forget about it and find it on Missing Money in 10 years! See details here.
CIT Bank. Member FDIC.
* Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. ^ Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account. 2 There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account. 7 The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of November 17, 2022. No minimum balance required. Must have $0.01 in savings to earn interest.
Summary
I’ll admit that when I was first assigned to investigate “unclaimed money and how to get it”, I thought it sounded super sketchy. But nothing could be further from the truth.
Reclaiming your unclaimed money from the government is a smooth process, and one that you should repeat at least once a year. After all, it only takes a few seconds to check. Plus, searching for any unclaimed property could be a great way to share something new with your folks and even fund Christmas this year.
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Raiding your retirement accounts can be expensive. Withdrawing money before age 59½ typically triggers income taxes, a 10% federal penalty and — worst of all — the loss of future tax-deferred compounded returns. A 30-year-old who withdraws $1,000 from an individual retirement account or 401(k) could lose more than $11,000 in future retirement money, assuming 7% average annual returns.
In the past, there were a few ways you could avoid the penalty. Congress recently added several more, and some of those exceptions allow you to repay the money within three years. That would allow you to get a refund of the taxes you paid and — best of all — allow the money to start growing again, tax deferred, for your future.
You’re still better off leaving retirement funds alone for retirement, says Erin Itkoe, director of financial planning at Tarbox Family Office, a wealth management firm in Scottsdale, Arizona. If you can’t, though, you could at least limit the damage from taking the money out early, she says.
What you need to know about SECURE 2.0
The new penalty exceptions are part of Secure 2.0, a package of retirement plan changes that Congress passed late last year. Some exceptions are available for your IRA right now, while others take effect in coming years, says David Certner, legislative counsel for AARP. The exceptions also can apply to workplace plans, such as 401(k)s or 403(b)s, but it may require your employer to opt in, so check with your human resources department, Certner says.
However, the repayment option still isn’t available for most penalty exceptions. For example, you can avoid the penalty if you withdraw $10,000 from an IRA for a first-time home purchase or to pay higher education expenses, but you won’t be able to repay the money later and get the taxes refunded.
Disasters, terminal illness and family expansion
One new penalty exception that allows for repayment is for disasters. People who live in a federally declared disaster area and suffer an economic loss can withdraw up to $22,000 penalty-free. Income taxes still have to be paid on the withdrawal but the income can be spread over three years to reduce the potential tax impact. This exemption was made retroactive to Jan. 26, 2021.
Another potentially large exemption with the repayment option is one for terminal illness. Effective this year, the 10% penalty is waived for people whose doctor certifies that they are expected to die within seven years, says Itkoe, who’s also a certified public accountant serving on the American Institute of CPAs’ personal financial planning executive committee. There’s no limit on how much can be withdrawn.
A three-year repayment period also now applies to the penalty exception when you have or adopt a child. This exception allows each parent a $5,000 withdrawal within the 12 months after a child is born or adopted.
Exceptions for domestic abuse and financial emergencies to come
Next year, the 10% penalty is waived for victims of domestic abuse. The penalty-free withdrawal is limited to the lesser of $10,000 or 50% of the account’s value and can be repaid over three years.
Also effective next year is a penalty-free distribution of up to $1,000 for some emergency expenses. People can take one such withdrawal per year if the money is repaid. Otherwise, only one distribution is allowed every three years.
Note that both of these exceptions are “self-certified.” That means you provide a written statement asserting that you meet the requirements without having to supply other documents or proof, says Itkoe.
Other SECURE 2.0 penalty exceptions
A penalty exception to pay for long-term care insurance kicks in for 2026, but it only applies to workplace plans, not IRAs. Note that the withdrawal — which is limited to the lesser of $2,500 or 10% of the account balance — can only be used to pay insurance premiums, not to pay for the actual care, Certner notes.
Secure 2.0 also expanded the “public safety employee” exception for early withdrawals from workplace plans.
In the past, the 10% penalty didn’t apply for withdrawals from workplace plans if the worker left a job in the year they turn 55 or older, or age 50 for public safety employees. Now, private-sector firefighters and state and local corrections officers also can qualify for the public safety exception after they turn 50. In addition, public safety employees with at least 25 years of service with the employer sponsoring the plan can now avoid the penalty regardless of their age.
This is just a summary of the new penalty exceptions. The rules are complex enough that people should consult a tax professional before taking a withdrawal, Itkoe says. The pro also can help file an amended tax return if the withdrawal is repaid.
But no one should assume that the exceptions make retirement plan withdrawals a good idea since most people won’t pay the money back even if they have the option to do so, she says.
“Drawing from a retirement account should always be a last resort,” she says.
Veterans Life Insurance Group policies are a good option for those in the military, and that is why they received an honorable mention for our list of the best life insurance companies in the United States.
If you have ever shopped for life insurance, then you are likely well aware that there are many different variables that you need to be cognizant of before deciding on your coverage. One such factor is ensuring that you will have the proper amount of protection for your needs. This means that your loved ones or beneficiaries will have enough funds for paying final expenses, paying off big debts, or paying ongoing living expenses if or when the unexpected should occur.
It is also important that you have the proper type of insurance coverage. For example, today, there are many different variations of life insurance protection that you can choose from. While this helps insureds in custom choosing coverage to fit their needs, you also don’t want to pick a policy that isn’t suitable for your specific time frame and your possible long-term savings goals.
There is also another criterion that many people may not realize is important – but should. This is ensuring that the company through which the coverage is purchased is strong and stable financially and that it also has a positive reputation for paying out its policyholder claims. The reason that this is essential is because you don’t want to place your loved ones or beneficiaries in the hands of an insurance company that may not make good on its financial promise to pay out – especially in their time of need.
With this in mind, it is always important to do a thorough review of an insurer before moving forward with the purchase of its coverage. One company that had a good, solid reputation in the life insurance industry is Veteran’s Group Life Insurance Company of Valley Forge, Pennsylvania.
The History of Veteran’s Group Life Insurance
Veteran’s Group Life Insurance Company, also known as Veteran’s Life Insurance Company, has somewhat of a long history regarding names, mergers, and acquisitions. Between the years of 1974 and 1980, National Independence Life Insurance Company operated, and then on January 1, 1981, National Independence became Veteran’s Life Insurance Company.
For more than 26 years, Veteran’s Life Insurance Company operated out of Valley Forge, Pennsylvania. Then, on July 1, 2007, Veteran’s Life Insurance Company merged into Stonebridge Life Insurance Company. Stonebridge was headquartered in St. Louis, Missouri. (Previously, Stonebridge Life Insurance Company was known as J.C. Penney Life Insurance Company, from December of 1967 to May of 2002).
Several years after the merger of Stonebridge and Veteran’s, on October 1, 2015, Stonebridge Life Insurance Company merged into Transamerica Life Insurance Company. This company is operated out of Cedar Rapids, Iowa, and it specializes in life insurance, variable life and annuity contracts, and disability insurance coverage.
Veteran’s Group Life Insurance Company Review
Veteran’s Life Insurance Company, when operating, was headquartered in Valley Forge, Pennsylvania. The company offered a variety of coverage products, including life insurance protection.
It also offered personal injury and property damage, recreational vehicles, and accounts receivable. The company also offered auto insurance, outsourcing, and motorcycle insurance to its customers.
Financial Strength, Ratings, and Better Business Bureau Grade
Before the merger of Veteran’s Life Insurance Company, this insurer was rated by A.M. Best Company as an A (Excellent), and it also had an issuer credit rating of a+. As Veteran’s Life Insurance Company has now been disbanded, these ratings are no longer effective.
Concerning Transamerica Life Insurance Company, the following ratings apply:
A+ from A.M. Best
AA- from Fitch
A1 from Moody’s
AA- from Standard & Poor’s
Transamerica Life Insurance Company has been an accredited company through the Better Business Bureau since December 15, 2014. The company has been given the grade of A+, out of an overall grade scale of A+ through F.
Over the past three years, Transamerica has closed 278 complaints with the Better Business Bureau, of which 97 have been closed within the past year. Of these 278 complaints, 196 were having to do with the company’s products and / or services, 41 had to do with the company’s billing and / or collections, 30 had to do with the company’s advertising and / or sales issues, 10 had to do with delivery issues, and 1 had to do with guarantee / warranty issues.
Life Insurance Products Offered Through Veteran’s Group / Transamerica Life Insurance Co.
Transamerica Life Insurance Company provides a wide variety of different life insurance products. These include both term and permanent coverage, as well as accidental death coverage.
Term Life Insurance Coverage
Term life insurance is considered as the most basic type of life insurance coverage. This is because term provides death benefit protection only – and because of this, term can be a very affordable type of life insurance protection.
Transamerica offers several different term life insurance options. These include policies with term limits of 10 years, 15 years, 20 years, 25 years, or 30 years. Coverage can range from a low of $25,000 up to a high of $1 million in face amount. Most of the policies that are offered through Transamerica will require the applicant to undergo a medical exam as a part of the underwriting process.
Term life insurance policies that are offered via Transamerica include the:
Trendsetter Super Series
Trendsetter LB (Living Benefits)
Whole Life Insurance Coverage
Whole life is a type of permanent life insurance protection. This means that the policy offers a death benefit, along with cash value build up. The cash value is allowed to grow tax-deferred, which means that there is no tax that is due each year on the gain, but rather tax is only due at the time of withdrawal.
Both individual and group whole life insurance policies are available through Transamerica. Also, there are whole life insurance policies available through Transamerica with face amounts of between $2,000 and $50,000 that can assist loved ones in paying for final expenses, such as funeral and burial costs.
Universal Life Insurance Coverage
Universal life insurance is another type of permanent life insurance coverage. While universal life offers both a death benefit and a cash value component, this type of coverage is more flexible than whole life insurance. This is because the policyholder, within certain limits, may choose how much of the premium can go towards the death benefit and how much of it can go towards the cash value. In addition, the amount and the frequency of the premium may also be modified, provided that there is a sufficient amount of cash value in the policy.
Variable Universal Life Insurance Coverage
Variable universal life insurance is yet another type of permanent life insurance. Here, too, there is a death benefit and a cash component of the policy. However, the policyholder can invest the cash component in equity investments such as mutual funds – and because of this, the cash has the opportunity to grow substantially due to market movements. It can also, however, lose value due to market risk. With that in mind, it is important to have a good understanding of all of the potential risks involved before purchasing a variable life insurance product.
Final Expense Life Insurance Coverage
Final expense life insurance coverage is also offered through Transamerica Life Insurance Company. While it may be difficult for most people to discuss, end of life expenses can be high – in fact, today, the average funeral can cost upwards of $10,000. This is especially the case when factoring in such expenses as one’s headstone, burial plot, flowers, transportation, and the memorial service itself.
When loved ones do not readily have access to this much money quickly, a final expense life insurance policy can be a good solution to ease financial worries – and to avoid having to dip into savings or other assets to pay these bills.
Transamerica’s final expense life insurance is a whole life insurance policy – which means that it provides a death benefit and a premium amount that is locked in a guaranteed. It also means that there is a cash value component that will provide tax-deferred savings over time.
There are three different final expense policies to choose from through Transamerica. These include the following:
With accidental death insurance, an amount of death benefit is paid out to beneficiaries if an insured die as the result of a covered accident. This benefit will be payable either on its own or in addition to other life insurance coverage.
This type of coverage can also provide benefits in case of a covered accident where the insured loses a limb and / or their vision. The purchase of an accidental death insurance policy does not require a medical exam in order to qualify. This type of coverage may be purchased as a stand-alone policy, or in conjunction with another insurance plan.
There are various options available about accidental death coverage. These include:
Plan A: This policy will pay out a benefit that is equal to $250,000 for a covered accidental death. The benefit will double and payout the amount of $500,000 for common carrier accidents.
Plan B: This plan will pay out a benefit that is equal to $125,000 for a covered death that is accidental in nature. The amount of the benefit will double to the amount of $250,000 for common carrier accidents.@media(min-width:0px)#div-gpt-ad-goodfinancialcents_com-large-mobile-banner-1-0-asloadedmax-width:250px!important;max-height:250px!important
It is important to note that there are some limitations and exclusions included on these policies.
Other Products Offered
In addition to life insurance coverage, Transamerica offers annuities and disability insurance. It also offers dental insurance, long-term care insurance, and Medicare Supplement insurance coverage in order to help seniors from having to pay high out-of-pocket expenses due to Medicare Part A and B coinsurance and deductibles.
How to Find the Best Premium Quotes on Life Insurance Coverage
If you are seeking the best premium quotes on life insurance coverage from Veterans Life Insurance Company, Genworth Life Insurance, or from any life insurance carrier – then it is typically your best course of action to work with either an agency or an independent brokerage that has access to multiple life insurance providers. This is so that you can more directly compare, in an unbiased manner, numerous life insurance policies, benefits, and premium quotes – and from there, you can make the decision as to which one will be the best for you.
We know that purchasing life insurance coverage can often seem a bit overwhelming. There are many variables to be aware of – and there are lots of carriers in the market that you can compare and contrast. It always helps to have a guide to walk you through the process. This is especially the case if you have a specialized situation such as a health condition or if you have been turned down for coverage in the past. But the good news is that today, there are still many options regarding coverage and premium price that may be available to you. So, contact us today – we are here to help.
If you contribute to a 401(k) retirement account, you may be able to take a loan from the plan. The maximum amount you can borrow is limited to the lower of $50,000 or up to 50% of your vested account balance. However, some plans may impose lower limits or not offer loans at all. In addition to these restrictions, borrowing from your 401(k) calls for taking into account some significant additional limitations and considerations. A financial advisor can help you save for retirement.
401(k) Loan Basics
You can access funds in your 401(k) by withdrawing money or, in many cases, by taking out a 401(k) loan. If you withdraw money early, before reaching age 59.5, you may have to pay a 10% penalty as well as owe any taxes due. Borrowing against the balance in your plan lets you tap that money at a younger age without having to pay these costs, which makes a loan look more attractive. In order to avoid penalties, however, you’ll have to pay back the loan, including interest.
While IRS rules and federal law allow 401(k) loans, plans are not required to offer them. Some don’t, while others but only with additional restrictions. In all cases, if you borrow the money you have to pay it back, with interest, like a regular installment loan. If you don’t pay on time, your loan may be treated as a withdrawal, activating the penalties and taxes that would be due on a withdrawal.
How Much You Can Borrow
Government rules allow for loans of up to $50,000 or 50% of the vested assets in your account. The lower of these two amounts set the limit. So, for example, if you have $75,000 in fully vested funds in your 401(k), your maximum loan amount would be 50% of that or $37,500.
If 50% of the vested assets in your account come to less than $10,000, you can borrow up to $10,000. Individual plans may have lower limits, however, and some don’t allow loans at all. The only way to be sure you can borrow or how much you can borrow, is to review your plan’s terms.
Multiple 401(k) Loan Limits
You can take out more than one loan at a time from your 401(k). However, that won’t let you get around these limits. If you add up the total balance of all your 401(k) loans, they must not exceed the plan limit. Time is also a factor. According to IRS rules, to calculate the effective cap on what you can borrow if you already have one loan, determine the highest outstanding balance of all your 401(k) loans during the previous 12 months.
Next, determine the outstanding loan balance on the day the proposed new loan would be taken out. Subtract the current outstanding balance from the average of the previous year. Now subtract this figure from the absolute maximum loan amount. This figure represents the largest allowable total loan balance, including previous loans as well as the new loan.
For example, say you can borrow up to $50,000 from your plan and one year previously took out a $40,000 loan that you have since paid down to $32,500. The difference between these amounts is $7,500. Subtracting $75,000 from $50,000 gives $42,500. That is the maximum allowed amount for all loan balances at this time. Since you already owe $32,500, you can borrow up to another $10,000, which will put your total outstanding loan balance at $42,500.
Practical 401(k) Loan Limits
The fact that you can take out a loan of up to $50,000 from your 401(k) doesn’t mean that you should. This financing technique comes with some potential minuses that require careful consideration. Opportunity cost is one. When you borrow from your 401(k), the money you borrow is temporarily removed from your investment portfolio. This means you miss out on potential market gains. The more you borrow, the more you could miss.
Failure to repay a 401(k) loan is another. If you don’t make all your payments within the loan’s time frame, usually five years, the outstanding balance will be treated as a taxable distribution. You’ll owe on it then plus, if you’re under age 59.5, a 10% early withdrawal penalty. Borrowing more than you can really pay back could be a costly error.
If you lose or change your job, whether voluntarily or involuntarily, the outstanding loan balance becomes due, typically within 60 days. If you don’t pay, again it will be treated as an early withdrawal and subject to penalties and taxes. If your employment situation is uncertain, a 401(k) loan may not be the best idea.
Finally, if you have taken out a loan, depending on the plan you may not be able to contribute to your account until you have paid it all back. This could cause you to lose out on employer matches as well as the benefits of current income tax deductions. If it takes longer to pay back a bigger loan, you could miss out on more valuable matches.
The Bottom Line
Borrowing from your 401(k) can provide a convenient and cost-effective source of funds in some situations. Legal, regulatory and specific plan rules limit the maximum amount you can borrow, with either $50,000 or 50% of your vested account assets as the absolute cap. Some plans impose lower limits. Other considerations including opportunity costs and repayment challenges may suggest borrowing less than the rules allow.
Tips for Retirement Planning
Before making a decision about borrowing from your 401(k), consider consulting with a financial advisor who can help you assess whether a 401(k) loan aligns with your long-term plans. Finding a financial advisor doesn’t need to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
SmartAsset’s 401(k) Calculator can tell you whether your retirement saving plan is on track.
Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
Your employer technically will always know when you borrow money from your 401(k). One of the tricky parts about managing a 401(k) loan is that, even though this money belongs to you, your employer can set terms and conditions around taking the loan. The employer may even disallow loans completely. Here’s how 401(k) loans work and what you should keep in mind if you’re thinking about taking one. A financial advisor can help guide you through the process of taking a 401(k) loan or recommend alternatives.
What Is a 401(k) Loan?
A 401(k) is a tax-advantaged retirement account that your employer provides. Money is deducted from your paycheck and saved in the account on a pretax basis. This lets you invest a full dollar for every dollar you earn, unlike the rest of your income on which you pay taxes and only keep a portion of those earnings.
This tax-advantaged status means that you ordinarily cannot sell assets and withdraw money from your 401(k) until you near retirement age or meet the qualifying criteria for a hardship withdrawal. If you do, the IRS will require you to pay the taxes you would have paid on the income you invested along with a 10% early withdrawal penalty.
If your 401(k) provider allows it, you can borrow money from the account with a 401(k) loan. Unlike a hardship withdrawal, you must repay this money back into the portfolio. If you make regular payments and repay the money on time, often within five years, you do not have to pay any taxes or penalties on the loan. But if you fail to repay the loan on time, the IRS will consider it an early distribution and you’ll owe taxes and penalties on the money you borrowed.
A 401(k) loan can be a good way to solve pressing financial problems, such as unexpected job loss or a sudden emergency. While it’s sometimes referred to as an interest-free loan from yourself, this is not accurate. When you take money from your 401(k) you lose out on any growth that this money would have had during the loan period. This is a real loss, one that grows the longer you take to put the money back in.
Your Employer and a 401(k) Loan
The rules governing 401(k) loans aren’t universal – they can vary from plan to plan, employer to employer. Unlike hardship withdrawals, which are generally defined and governed by the IRS, the terms of 401(k) loans are set by your employer when the program is established.
This means that your employer can decide:
If their 401(k) program will allow loans at all;
If their 401(k) program will allow loans freely, or only under certain conditions;
If there are conditions, what those conditions are;
The maximum amount of a loan (up to 50% of the account’s value);
Some repayment terms
As part of running and managing the 401(k) program, your employer will have an officer or agent who monitors all contributions, withdrawals and other aspects of the plan. This person is known as the “record keeper.” He or she may be an employee of the company or work for an external firm that the company hires to run the 401(k) program on its behalf.
On an institutional level, your employer has access to these records. This means that every withdrawal from an employee 401(k), including loans and hardship withdrawals, can be known by certain company employees.
However, it’s important to note that this does not mean your immediate supervisor or any specific colleagues will have access to this information. The details of a 401(k) plan are generally considered confidential financial information, so it’s likely that your company will have rules around who can see those records. The smaller your firm, the more likely it is that a close colleague will have access to 401(k) records. At a larger company, though, it’s likely that only finance or human resources personnel, along with upper management, will have the right to see those records.
In either case, the answer is the same though. Yes, your employer as an institution will know if you take out a loan from your 401(k) portfolio. However, that information is not necessarily available to any specific colleague.
Bottom Line
Your employer sets the rules for taking loans out of its 401(k) program, which means that as an institution certain employees will have the ability to know every withdrawal and loan that someone makes. However, that does not mean that any individual manager or coworker will have access to this information.
Retirement Savings Tips
Keep the IRS contribution limits in mind each year and max out your retirement accounts when you can. If you have a 401(k), 403(b) or 457 plan, you can contribute up to $22,500 to your account in 2023, plus another $7,500 if you’re 50 or older. You can save another $6,500 in an IRA ($7,500 if you’re 50 or older).
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
The average overdraft fee ranges from $20 to $35, Federal Deposit Insurance Corporation (FDIC). Banks charge overdraft fees if you spend more than the money you have in your account. If you lose track of your purchases – or if you expected a deposit to clear but it didn’t, leaving you short on funds – your bank could hit you with hefty overdraft charges.
It’s a high price to pay for an innocent money mistake. Even worse, if you leave your account in overdraft for several days, your bank could charge additional fees, leaving you in a deep financial hole.
Fortunately, you may be able to get those overdraft fees refunded. We’ve got some secrets that can help you do exactly that.
More importantly, you can learn how to avoid overdraft fees through account monitoring, low-balance alerts sent to your phone, or even finding a bank with no overdraft fees.
Can you get overdraft fees waived?
Yes, you can take steps to convince your financial institution to waive your overdraft fees. Banks and credit unions understand that errors can occur. An occasional miscalculation or a one-off oversight in managing your account doesn’t define your banking behavior. Most financial institutions recognize that.
If you’re a loyal customer who typically maintains a positive account balance, your bank or credit union may be willing to waive an overdraft fee as a gesture of goodwill. Typically, though, you’ll only receive this grace from your bank once per year or so. How do you do it?
Call customer service or stop into a branch and ask the representative to waive your fees. They will most likely check your bank account history to see if overdrafting is a habit or a one-time offense. If you haven’t hit overdraft recently, the bank is likely to waive the fee.
If the first person you ask says no, ask for a bank manager or a supervisor. Persistence – and kindness – is key to receiving the customer service you deserve. It also helps to bring your account balance positive before you ask for an overdraft fee to be waived.
How to Get Overdraft Fees Refunded: A Step-By-Step Guide
1. Know the Charges
Before contacting your bank’s customer service department, you want to know how much you were charged in overdraft fees. Review your bank statement or online account to identify each overdraft fee.
2. Prepare for the Phone Call
With the total amount of the fees in mind, get set to make your case with the customer service representative. Have your account information and the total charges available to save time. Be prepared to explain why you believe the overdraft fees should be refunded, including pointing out how quickly you rectified the negative balance.
3. Contact Your Bank
Next, reach out to your bank or credit union’s customer service department. Politely explain your situation, focusing on why the fees occurred and why you feel they should be refunded. Be kind and let the customer service representative know you appreciate their hard work.
4. Be Persistent
If the first person you speak with refuses to waive the fees, don’t give up. Ask to speak to a manager. If that doesn’t work, call again another day. Persistence can result in a successful overdraft fee refund.
Use an App That Helps with Getting a Refund
The digital age brings many tools to simplify personal finance management. Several mobile banking apps not only assist you in tracking your spending and balances, but can also negotiate overdraft fees with financial institutions on your behalf.
Other apps offer cash advances to help you avoid overdrafts on your bank account.
Here are a few personal finance apps to consider:
Trim: Trim is a financial management app that analyzes your account for recurring charges. It can negotiate with financial institutions to lower or eliminate unwanted fees, including overdraft charges.
Cushion: Known for their AI negotiation bot, Cushion scans your linked accounts for various bank fees, including overdrafts, and then initiates negotiations with your bank to get these fees refunded.
Dave: This app offers interest-free cash advances to avoid overdrafts. Dave also alerts you when your account is approaching a low balance. If necessary, the app can provide a small advance to tide you over.
Chime: Although primarily a fintech that offers banking services, Chime offers SpotMe, a feature that allows you to make transactions that exceed your account balance, up to a certain limit, without incurring overdraft fees.
Mint: While Mint doesn’t negotiate fees on your behalf, it provides comprehensive account monitoring and sends you alerts about low balances and upcoming bills, helping you avoid overdraft situations.
What to Do if You Can’t Get Your Overdraft Fees Covered
Even after your best efforts, the bank may not refund those fees. Here’s what you can do next:
1. Fix the Account as Quickly as Possible
If your account has a negative balance, deposit money as soon as you can to get back into the black. Leaving your account in the negative can lead to additional fees, like extended overdraft fees.
2. Sign Up for Alerts
Most banks and credit unions offer low balance alerts, which can help you avoid overdraft fees. These alerts notify you when your account balance is getting low, so you can deposit more money before any transactions push you into the red.
3. Get Free Overdraft Protection
Consider setting up overdraft protection, which can link your checking account to a savings account, credit card, or line of credit. If you don’t have enough money in your checking account to cover a transaction, your financial institution can transfer funds from your linked account to cover the difference, often for a smaller fee than an overdraft charge.
4. Stay Up to Date on Your Account Balance
Regularly checking your account balances can prevent surprises. You can do this through your bank’s mobile banking app, online banking, or by calling customer service. Also, be mindful of automatic payments that might be scheduled to come out of your account.
5. Consider Switching Banks if You’re Still Struggling
If you’re constantly receiving overdraft fees and can’t get them waived, it may be time to switch banks. Some online banks and credit unions offer accounts with no overdraft fees, while others might be more lenient when refunding overdraft fees.
How to Avoid Overdraft Fees in the Future
Track Your Account Balance
Maintaining an ongoing awareness of your account balance is the first line of defense in preventing overdraft fees. Make a daily habit of checking your account balances through your bank’s mobile banking app or online account. Consistent tracking can help you understand your spending habits better and ensure you’re never caught off guard by a lower-than-expected balance.
Turn Off Overdraft Protection
Overdraft protection is a feature offered by many financial institutions as a way to help you avoid non-sufficient funds fees. While it can be beneficial in some cases, it can also lead to a chain of overdraft fees if your linked accounts also run low on funds. If you find that overdraft protection is causing more harm than good due to associated fees, it might be worth turning it off.
Link Another Account
On the other hand, if you don’t have overdraft protection, consider turning it on. You can link your checking account to a backup account like a savings account or a secondary checking account. If your primary checking account ever lacks sufficient funds for a transaction, your bank can automatically pull funds from the linked account to cover the shortfall. This practice can provide a crucial safety net to prevent overdrafts, and the associated transfer fees are usually smaller than overdraft charges.
Set Up Alerts
Another effective way to avoid overdraft fees is by setting up low balance alerts. These alerts, usually customizable through your bank’s app or online interface, notify you when your account balance falls below a certain threshold. This early warning system gives you ample time to transfer or deposit money into your account before any transactions could potentially lead to an overdraft situation.
Switch Banks
If overdraft fees persist or if your bank’s policies aren’t aligned with your financial management style, don’t be afraid to shop around for other options. Several banks and credit unions do not charge overdraft fees, offering a more forgiving environment for occasional balance miscalculations.
In particular, online banks often have more customer-friendly fee structures because they save on the overhead costs associated with running physical branches. Making a switch could save you from future overdraft fees and potentially offer other financial benefits as well.
Reap the Benefits of Multiple Checking Accounts
Managing your finances across multiple checking accounts can be an effective strategy to curb overdraft fees. This approach allows you to segregate your funds based on their purpose, providing a clearer picture of your available balance for different types of expenses.
One strategy is to dedicate one account specifically to fixed expenses such as rent, mortgage payments, or utility bills. This account serves as a holding place for funds needed to cover these recurring costs and is replenished every time you receive income.
Then, you can set up a separate checking account for variable, everyday expenses such as groceries, dining out, or personal shopping. An unforeseen debit card purchase or ATM withdrawal from your everyday spending account won’t impact your ability to pay critical bills.
Multiple accounts can also help you visualize and manage your budget better. You’ll know exactly what portion of your income goes towards bills and what amount is left for discretionary spending, which can help you avoid spending beyond your means.
Conclusion
Overdraft fees can quickly eat into your bank account balance, but with the right strategies and habits, you can avoid these charges. Remember, it’s not just about managing your money today, but planning for a financially stable future.
With diligent account management, setting up low balance alerts, and even switching banks if necessary, you can keep more money in your pocket and avoid the stress and cost of dealing with overdraft fees.
Employer-sponsored 401(k) plans are a popular way for workers to save for retirement, but they’re not the only way. If you’re self-employed or your employer doesn’t offer a 401(k), there are retirement savings vehicles out there that will work for you. Let’s take a look at both solo 401(k) plans and IRAs. If you’d like personalized advice about planning for retirement, consider working with a financial advisor.
What Is a 401(k)?
A 401(k) is an employer-sponsored retirement account that offers tax benefits. A traditional 401(k) will be withdrawn from your paycheck pretax and will only be taxed when you withdraw from it in retirement. A Roth 401(k) is similar, but the money that goes into it is already taxed, so it won’t be taxed when you withdraw from it in retirement. You can withdraw from your 401(k) penalty-free beginning at age 59 ½.
Once you deposit money into a 401(k), it’s invested according to your choices—you’ll be presented with investment options when you complete the paperwork. That money will grow not just through contributions, but through interest and earnings on those investments.
These plans were specifically created to incentivize workers to save for retirement. If you contribute to a traditional 401(k), your taxable income is reduced due to the 401(k) withholdings. If you’re contributing 6% of your income to a 401(k), you don’t owe taxes on that 6% of your income. With a Roth 401(k), instead of saving on taxes in the year, you contribute money to your 401(k) and you’ll enjoy the savings when you withdraw it in retirement.
Can You Open a 401(k) Plan Without an Employer?
As a 401(k) plan is an employer-sponsored retirement account, there’s an option for a self-employed person with no employees to open one with themselves as the sponsor. This is called a solo or one-participant 401(k) plan.
A solo 401(k) works exactly like a traditional 401(k) plan you would get with an employer—you’re just the employer and the account holder. Just like a 401(k) plan with an employer, there are contribution limits, but they’re much higher because you are serving as both employee and employer. We’ll cover those contribution limits later.
If you’re not a self-employed person, your best option is likely an individual retirement account (IRA). Whether you opt for a traditional IRA or a Roth IRA, both are tax-advantaged savings vehicles that will help you prepare for the future and have similar benefits to 401(k) plans.
Some traditional IRAs will also allow you to deposit pretax income and only pay taxes upon withdrawal in retirement. IRAs offer a great deal of freedom because, outside of income thresholds, they are not related to your employment status and you can open one anytime. Roth IRAs are funded with taxed income, but withdrawals aren’t taxed unless you withdraw before the age of 59 1/2.
You’ll need an employer identification number (EIN) to open a solo 401(k), but you can easily find a provider for the retirement accounts mentioned. Compare reviews and choose one with the benefits and features that work for you.
How Much You Can Contribute to Your Retirement Account
Understand how much you can contribute to your retirement accounts, without an HR department to help you, you could run into trouble. The IRS sets contribution limits that often change. Here are the limits for 2023:
Solo 401(k): Solo 401(k) limits are a bit more complicated because you are serving as both the employee and employer. These are divided into elective deferrals, of up to $22,500—or $30,000 if you’re 50 or older—and employer nonelective contributions of up to 25% of compensation as defined by your plan. Total contributions cannot exceed $66,000. The IRS recommends using the worksheets in Chapter 5 of Publication 560, Retirement Plans for Small Business to figure out your allowable contribution rate and tax deduction for your 401(k) plan contributions.
Traditional and Roth IRAs: Both types of IRAs have the same annual contribution limit of $6,500—$7,500 if you’re 50 or older—or your taxable compensation for the year if it’s less than those numbers
The Bottom Line
While your options are a little different without an employer-sponsored 401(k), there are fantastic retirement savings options available for self-employed workers or those that don’t have plans available through their employer.
Do some research to see which one is right for you, then open a retirement account to prepare for the future while unlocking tax savings.
Retirement Planning Tips
Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Use SmartAsset’s free retirement calculator to see if you’re on track to meet your retirement goals.
Whether you are a freelancer, side hustler, or run a full-time business, opening a separate business bank account should be your first move after starting your business.
A business bank account helps you keep your business finances and personal income and expenses separate. Having a business bank account for all your business finances makes it easy to run records and track your costs and deductions at tax time.
Business checking accounts can also help business owners establish credit, which they can use for net terms with suppliers or to take out business loans or business credit cards.
But which business checking account is best? And can you find good options with free business checking accounts?
12 Best Free Business Checking Accounts
We’ve done the legwork for you, compiling a list of the 12 best free business checking accounts available in the U.S. today.
1. Bluevine: Best Free Business Checking Account Overall
Bluevine offers one of the most comprehensive and best free business checking accounts you’ll find. It has no monthly maintenance fees, no overdraft fees, and an annual percentage yield APY of 2% on up to $250,000 of your balance if you meet monthly activity goals. To qualify, simply make $500 in debit card purchases with your Bluevine business debit or receive $2,500 per month in customer payments to your account.
Bluevine offers features that make it great for a team, including the ability to open multiple sub-accounts and even have separate logins for employees or contractors, like accountants and virtual assistants.
While some free business checking accounts have transaction limits, your Bluevine business checking account does not. Funds are backed by Coastal Community Bank, Member FDIC. Coastal Community Bank provides business banking services for Bluevine customers.
2. Capital One Business Bank Account: Best for Local Branches
If you’re looking for personalized service at local branches, consider Capital One business checking. Capital One offers two tiers of checking accounts: Basic and Enhanced. Both accounts offer unlimited digital transactions, free overdraft coverage, access to Capital One’s mobile app, no ATM fees at 70,000 Capital One, Allpoint, and MoneyPass ATMs, and low monthly fees that are easily waived when you meet minimum balance requirements.
Capital One Enhanced business checking is designed for larger businesses who can meet $25,000 average daily balance requirements needed to waive the $35 monthly service fee. Enjoy free incoming wire transfers, five free outgoing wire transfers monthly, and a remote scanner for mobile check deposits.
3. GO2bank: Best for Online Banking
GO2bank is a complete mobile banking solution with digital banking services provided by Green Dot Bank. The bank offers many features in its online business checking account that will appeal to business owners and their employees, including co-branded debit cards, optional overdraft protection, and a co-branded app for businesses. You can also get a secured business credit card through GO2bank.
Waive the monthly fees with qualifying direct deposits, and receive ACH payments up to two days early. You can also purchase eGift cards for yourself or as employee incentives and earn up to 7% cash back.
4. Found: Best for Freelancers
Hailed as the debit card for the self-employed, we rate Found as the best free business account for freelancers. It has no monthly maintenance fees, no minimum deposit or minimum balance requirements, and no credit check to open your account.
Found has a few features that can help you streamline your business. By evaluating your income and expenses, Found can calculate your tax bill, categorize tax write-offs, and even auto-save the correct amount from each deposit to cover your quarterly taxes. You can also send invoices from the app.
Found is a financial technology company, not a bank. Deposits are FDIC insured through Piermont Bank.
5. First Citizens Bank Basic Business Checking: Best for Checking Account Choices:
Most business checking accounts have one option for a business owner. First Citizens has four choices to help you choose the right business checking account with the features you need. The basic business checking account offers 100 transactions with no monthly fee, and has a minimum opening deposit of $100.
Business Banking I is free with a merchant account or a minimum daily balance of $25,000. It offers processing of up to $250 transactions per month, plus $10,000 in cash processing, including cash deposits. Business Banking II has similar features with 500 free transactions and $15,000 in cash processing, including cash deposits. There is a $50 monthly fee unless you have a merchant account or an average daily ledger balance of $50,000.
Business Banking III is best for larger enterprises who want choices and do a high volume of business. Process up to 750 transactions free each month, with $20,000 in cash deposits. You’ll need a merchant account or $75,000 in your average daily ledger balance to avoid the monthly maintenance fee.
Business Banking I, II, and III accounts also let you customize your plan with additional discounted services.
6. Novo Business Checking Account: Best for E-commerce and App Integrations
Novo is not a bank, it’s a financial technology company with deposits backed by Middlesex Federal Savings, Member FDIC. Novo is one of the most tech-forward financial institutions on our list, offering easy integration with apps like Shopify, Wise, Stripe, Square, and Quickbooks.
The Novo Business Checking account has no monthly fees, no minimum balance requirements, no cash deposit fees, and ATM fee reimbursement for out-of-network ATM use. Account holders can also get discounts on popular business software and services, including LegalZoom, Constant Contact, and Stripe.
7. Mercury Banking For Start-ups: Best for Start-ups
Bootstrapped and venture-backed startups of every size have unique needs in a business checking account. A Mercury free business checking account helps your money stretch further with no monthly fee, no minimum balance requirements, and no minimum deposit to open. You can earn 5.11% annual percentage yield APY with mutual funds invested through Mercury Treasury if you have an account balance of $250,000 or more.
Mercury free business checking offers unlimited free transactions, including no cash deposit fees, for businesses who process less than $200,000 per month. The account offers team management tools, debit cards for multiple employees, and capabilities to open multiple checking and savings accounts to manage cash flow.
Plus, your Mercury account is backed by up to $5 million worth of FDIC insurance through partner banks. Banking services are provided by Choice Financial Group and Evolve Bank & Trust, Members FDIC and deposits are held in various partner banks.
8. U.S. Bank Silver Business Checking: Best for Sign-up Bonus
If you’re looking to earn free cash to boost your business, consider a U.S. Bank Silver Business checking account with a $100 minimum deposit before June 30, 2023. You can earn a $500 bonus when you make new deposits of at least $5,000 and maintain a minimum balance of at least $5,000 until 60 days after the account opening. Increase that to $15,000 in new money deposits and maintain that balance for 60 days and earn $750 deposited into your new business checking account.
U.S. Bank offers tons of benefits for business owners, including no transaction fees for up to 125 transactions each month, 25 free cash transactions (or up to $2,500 in free cash deposits, whichever comes first), no monthly maintenance fee, and 50% off on your first check order, up to $50.
Larger businesses may prefer a Gold Business Checking Account, with no transaction fees for up to 300 transactions per month. It also has a waivable $20 monthly fee.
There is also a Platinum Checking Account Package with 500 free transactions and a $30 monthly fee. This fee is waived by meeting monthly minimum balance requirements.
9. Chase Business Complete Banking: Best for Payment Processing
For those who want to avoid online only banks and are looking for a big bank with international recognition and branches and ATMs across the U.S., Chase Business Complete Banking offers a solid solution. It comes with many ways to waive the monthly service fee.
Chase also makes it easy to accept credit and debit card payments without using a third-party payment processor. Chase QuickAccept is a built-in feature as part of Chase Business Complete Banking. You don’t need to apply for a separate merchant account, and the transaction fees are competitive with other credit card processing companies.
QuickAccept also allows you to access money faster with same-day deposits with no added fees. If you need a merchant payment processing provider that works in synch with your bank account, Chase Business Complete Banking could be the best choice for you.
Right now through August 3, 2023, businesses can earn a bonus up to $500 when they open a Chase Business Complete Checking account and meet requirements, which including total deposits of $15,000 or more. Deposit just $2,000 or more and snag an easy $300 for your new business checking account.
10. Huntington Business Checking 100 (Midwest): Best for Community Banking
Huntington National Bank, headquartered in Columbus, Ohio, since 1866, offers three business checking accounts, including a business interest checking account, Unlimited Plus Business Checking.
The top-tier account includes unlimited transactions, plus cash deposits of up to $25,000. Waive the $40 monthly fee with up to $50,000 in total deposit relationship balances across business accounts. Designed for larger businesses, the Unlimited Plus Business Checking allows you to choose two bonus services such as a fraud tool, waived returned deposited items fees on up to 25 items per month, or two free incoming domestic wires monthly.
The Unlimited Business Checking account offers similar features, with unlimited transactions, free cash deposits on up to $10,000 per month, and a choice of one bonus service. Waive the $20 monthly fee by maintaining a minimum balance of at least $10,000. A Business Checking 100 account offers up to 100 transactions per month, and up to $5,000 in cash transactions with no monthly fee.
Huntington is devoted to the local communities it serves and spotlights small business owners on its website. It also specializes in SBA loans and offers a linked business money market account to earn interest on savings with no monthly maintenance fee if you maintain an average daily balance of $10,000+.
11. Relay Business Checking: Best for Money Management
Relay online banking offers up to 20 primary business checking accounts for members of your team or for different business expenses, plus 50 virtual or physical Visa debit cards. Designed to assist with cash flow and money management, your Relay online banking account allows automated transfers into the various checking accounts based on percentage of income or flat-rate dollar figures.
Your Relay online and mobile banking account also includes up to two business savings accounts with APYs of 1% to 3%. Best of all, unlike many free business checking accounts that are only free if you meet transaction or balance requirements, Relay has no monthly maintenance fee, no transaction fees, no overdraft fees, no ATM fees, and no minimum balance requirements.
12. Axos Basic Business Checking Account: Best for No Fees
Axos Bank has been voted best online bank by Money Magazine and its business offering stands out for small business owners as a straightforward business checking account with no transaction fees, no monthly maintenance fee, and no minimum opening deposit. You also don’t have to worry about balance requirements or ATM fees. You’ll even receive unlimited reimbursements for using out-of-network ATMs within the U.S.
You will need to maintain a minimum balance of at least $5,000 for the first five statement cycles to earn a $100 account opening bonus. You will receive $25 into your business account each month you maintain the minimum requirements. However, if you close the account within 120 days, you might have to pay a $100 early closure fee.
What to Consider When Choosing the Best Free Business Checking Account
The best free business checking account for your business depends on the volume of cash deposits, number of transactions, the size of your company and your general banking needs.
It’s important for a business of any size, including a sole proprietor or 1099 contractor, to open a business checking account to keep business funds separate from your personal checking account and other personal finances. This is especially important at tax time.
Many of the business bank accounts on our list of best free business checking accounts make it easy for you to track your business finances. They offer end-of-month or quarterly reports or integrate with QuickBooks or other accounting software to make money management easy. This, along with costs, quality of customer service, mobile apps, and more should factor into your decision when you choose a small business checking account.
Monthly Maintenance Fee
Account fees have long been a fact of life for individuals and business owners, but they no longer have to be with so many free checking accounts available today. Some of the banks on this list, including Axos and Relay, offer no monthly fee of any kind. Others make it easy to waive the monthly fee by meeting balance requirements.
See if there are any balance requirements, direct deposit requirements, or minimum debit card purchases to avoid the monthly service fee, and if you will be able to meet those minimums easily each month.
Easy-to-use Online and Mobile Banking
Even basic business checking today should have a robust app and mobile banking solutions, including mobile check deposits, capability to turn your debit cards on or off, and to monitor spending in a user-friendly app.
You may think online-only banks have better mobile capabilities, but that’s not always the case. All the best business checking accounts on our list have intuitive, user-friendly mobile apps.
Low Minimum Opening Deposit Requirements
Most of the free checking accounts on our list have low minimum opening deposit requirements. Some may have higher minimums to earn a bonus on your business checking account. Make sure to read the fine print and know the minimum deposit requirements if you want to earn that sign-up bonus.
Reasonable Fees
While it’s possible to find a business checking account with no monthly service fee, your bank may have some fees. Read the fine print so you know exactly what you’re getting for your money. It should be easy to avoid ATM fees, overdraft fees, and even monthly fees.
However, you may have to pay for wire transfers, out-of-network ATMs, and other transactions. Unlike personal accounts, it’s common for business bank accounts to have fees if you deposit cash. Sometimes, a certain number of cash transactions is included in your monthly fee.
Customer Service
It’s important to research the bank’s customer service before you commit to a business checking account. Online only banks, especially, may have limited ways to reach customer support. Find out if they offer 24/7 service. Many people prefer online banking for the convenience and low account fees. But if you experience a problem, you want to make sure you can get help promptly.
Positive Customer Reviews
When you’re looking for the best business checking account, it pays to research the opinions of other business owners like you. Customer reviews can give you a feel for the level of customer service, ATM fees, monthly fees, fraud protection, and more.
Practical Transaction and Cash Deposit Limits
Many of the best business checking accounts offer unlimited transactions and reasonable monthly limits to deposit cash. Many banks offer different tiers of business checking accounts, so you can pay a set monthly fee for the level of service you need.
Linked Business Savings Account or Business Interest Checking Account
If you want to earn interest on your cash reserves, look for a checking account that pays interest or for a bank with a high interest savings account. Pay attention to account fees, withdrawal limits, and
Consider the Need for a Bank With Physical Locations
Online banking offers lower monthly fees and convenience. But if your business needs to deposit cash regularly or you just want personalized service and relationship banking, you might prefer a bank account at a financial institution with brick-and-mortar locations.
Questions to Ask Before Deciding on a Business Checking Account
When you’re shopping around for a free business checking account, consider your needs, the number of transactions you conduct daily, your account balance, and whether you prefer a traditional bank or are willing to consider online only banks for your business checking needs. Ask yourself the following questions so you can compare your options.
Will you be making regular cash deposits?
Many business checking accounts charge a fee if you want to deposit cash. Sometimes, a number of cash deposits will be included in your monthly fee. Make sure to pick an account with the capabilities you need.
Do you prefer a bank or credit union?
You might prefer the personalized service of a credit union instead of choosing a large bank or an online bank. When you’re evaluating credit unions, compare all the features and fees the same as you would evaluate business bank accounts.
Do you need to process customer transactions?
Banks like Chase offer credit card processing as an add-on feature to their services. If you are using an online bank, you might want one that integrates with Stripe, Square, or other payment processors. The capability to process customer transactions is one element that sets a business bank apart from a personal checking account.
Do you want to earn interest on your balance?
Several banks on our list offer high yield savings accounts, which is a benefit for small businesses, start-ups, and any business that wants to earn free money from their balance. You might also consider an interest earning business checking account like Bluevine, which pays interest on your checking account balance.
Business Checking vs. Money Market Account
A money market account is a special savings account designed to hold money that you may need to access in the short term. Some money market accounts offer higher APYs than other savings accounts. A money market account often has limits on the number of fee-free withdrawals per month.
Most business owners will want to open a free business checking account and link it to a money market account to earn interest on cash reserves.
What You Need to Open a Small Business Checking Account
You may not need an Employer Identification Number or Tax ID number to open a business checking account. If you have one, you should open the account using that number instead of your Social Security number to help keep your business and personal funds separate.
But if you are a freelancer and file taxes as a sole proprietor/self-employed, you can open your business checking account with your SSN. However, if your business has a DBA (doing business as) you will need a certificate or paperwork showing that name.
Likewise, if you are an LLC, you’ll need your business registration along with your EIN. If you have a partnership, you’ll need your partnership agreement and paperwork showing the business name.
Beyond that, you can open a business checking account with your business address, a phone number, email address and the minimum deposit (if required). Visit a branch for personalized service or open your free business checking account online.
FAQs
See what people are asking about free business checking accounts.
Do you need to pay account or transaction fees?
Some business checking accounts have monthly fees that you can waive by meeting specific requirements. You may also pay ATM fees, fees for cash deposits, and fees for wire transfers or international transactions.
Read the fine print or speak to a personal banker to choose the account that’s right for you.
Can you open a business checking account with no credit check?
Most banks and credit unions will allow you to open a business checking account with no credit check. By maintaining a positive balance in your account, you can build your business credit. A credit check may be required for business loans, lines of credit, or “net” terms with vendors.
What are the most important features of business checking accounts?
Most business owners are looking for business checking with no ATM fees and no monthly fee or easy ways to waive the monthly fee. Beyond that, consider the type and number of transactions you complete monthly, whether you need payment processing capabilities, and if you want a linked savings account to earn interest.
What banks offer free business checking accounts?
Many online and traditional banks offer free business checking or easy ways to waive the monthly fee. The list above describes 12 of our favorite options in free business checking.
From the hustle and bustle of Union Square to the peaceful tranquility of small villages like Cold Spring, New York is a great pace to live and work. New York residents have plenty of options when it comes to financial institutions, including some of the best credit unions and community banks in the country. Our goal is to make finding the right bank easier with this list of the best banks and credit unions in New York.
11 Best Banks in New York
New York City is known for Wall Street, but there’s far more to New York than its financial center. No matter where you live in the state, you can choose to go with a credit union, regional bank, local bank, or the biggest bank in the country. Don’t rule out online banks, either, since many have competitive offerings.
Here’s our list of the 11 best banks and credit unions in New York to help you narrow it down to one solid option.
1. New York Community Bank
It may be a New York bank, but New York Community Bank is one of the largest banks in the country. NYCB’s parent company is New York Community Bancorp, Inc., which also owns Flagstar Bank and has branches in New York, New Jersey, Ohio, Florida, and Arizona.
You’ll get access to more than 56,000 ATMs through NYCB’s ATM network, which includes both Allpoint and Presto! machines nationwide. NYCB also offers great rates on CDs. You can get a 6-month CD that earns 4.50% APY or a 12-month CD with a rate of 4.25% APY.
Fees:
No monthly maintenance fees
No overdraft fees
Balance requirements:
$1 minimum deposit to open
ATMs:
Fee-free at New York Community Bank ATMs
Fee-free at Allpoint and Presto! ATMs nationwide
$2.50 fee for each out-of-network ATM transaction
Interest on balance:
Up to 4.50% APY on CDs
Additional perks:
2. Chime
Chime is a modern online banking service that features a wide array of benefits, including fee-free overdrafts up to $200, early direct deposit access, and no monthly fees or foreign transaction charges.
With Chime, you can also get a secured credit card to help boost your FICO Score® with no interest or annual fees. In addition, it allows for fee-free transfers and savings growth with an APY of 2.00%.
You also stay informed with daily balance notifications and transaction alerts. Safety is a priority with secure processes in place, FDIC insured funds up to $250,000, and round-the-clock support channels for any assistance required.
Fees:
No monthly service fees
No overdraft fees
Balance requirements:
No minimum opening deposit required
No minimum daily balance required
ATMs:
Fee-free at 60,000+ ATMs nationwide
$2.50 fee for out-of-network ATMs
Interest on balance:
2.00% APY on savings
Additional perks:
Secured credit card helps you build credit with no credit check required
SpotMe covers up to $200 in overdrafts
3. Chase Bank
National banks have plenty to offer, including expanded brick-and-mortar branches and a wide range of banking products. Chase Bank is one of the largest banks in the U.S., with branches and ATMs in 48 states and the District of Columbia.
Currently, Chase is offering a $200 bonus for its Chase Total Checking account. This account comes with a $12 monthly fee, but Chase will waive it if you receive at least $500 monthly in direct deposits, maintain a $1,500 daily balance, or have an average $500 daily balance across all your Chase accounts.
Fees:
$12 monthly fee (waived with requirements)
$34 overdraft fee
Balance requirements:
No deposit to open
No minimum balance requirement
ATMs:
Fee-free at 15,000+ Chase Bank ATMs nationwide
$3-$5 out-of-network ATM fee
Interest on balance:
0.01% APY on savings accounts
Up to 3.75% on CDs
Additional perks:
$200 bonus for new checking account
Bonus and 1.5% unlimited cash back on credit card
4. NBT Bank
Based in Norwich, New York, NBT Bank has branch locations in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire, Maine, and Connecticut. You’ll find two checking accounts that don’t charge monthly fees.
Classic Checking includes unlimited check writing and is designed for those who prefer the experience that comes with traditional banks. NBT’s eChecking account has you managing everything. The biggest benefit to eChecking is that your balance earns interest.
Fees:
No monthly fees
$35 overdraft fee
Balance requirements:
No deposit to open
No minimum daily balance requirements
ATMs:
Fee-free at NBT Bank ATMs
$1.50 fee for out-of-network ATM withdrawals
Interest on balance:
0.01% APY on eChecking
Up to 0.03% APY on savings
Additional perks:
Competitive rates on loans
Multiple business checking accounts
5. Capital One
One of the top national banks in New York is Capital One, which has branches and cafés across the country. Although there are fewer branches these days, some locations have been turned into cafés with coffee and free Wi-Fi along with banking services. But wherever you are, chances are you’ll find a Capital One ATM. You can withdraw cash at any Capital One, MoneyPass, or Allpoint ATM nationwide.
Fees:
No monthly maintenance fees
No overdraft fee
Balance requirements:
No deposit to open
No minimum daily balance requirements
ATMs:
Fee-free at Capital One ATMs
Fee-free at any MoneyPass or Allpoint ATM
$2 fee for out-of-network ATM transactions
Interest on balance:
Up to 4.10% APY on savings
Up to 4.75% APY on CDs
Additional perks:
Cash deposits at any CVS location
Some branch locations have cafés and free Wi-Fi access
6. GO2bank
Online banks like GO2bank have their perks. You’ll often find competitive interest rates and low fees. However, mobile banking does have its limits, and that’s where GO2bank stands out.
You’ll not only be able to withdraw cash at any Allpoint ATM, but you can also deposit cash at more than 90,000 retailers across the country. As long as you’re okay with not having an in-person banking experience, GO2bank could be a solid option.
Fees:
$5 monthly fee (waived with requirements)
$15 overdraft fee
Balance requirements:
No opening deposit minimum
No minimum daily balance required
ATMs:
Fee-free at Allpoint ATMs nationwide
$3 fee for out-of-network ATM transactions
Interest on balance:
Up to 4.50% APY on savings
Additional perks:
Secured credit card helps you build credit with no credit check required
Deposit cash at 90,000+ retail locations nationwide
7. Santander Bank
Santander Bank is a regional bank with branch locations in New York, Connecticut, Delaware, Florida, Massachusetts, New Hampshire, New Jersey, Pennsylvania, and Rhode Island. The free checking account option is Simply Right Checking, which waives the $10 monthly fee as long as you have at least one activity on the account each month. This includes any deposit, withdrawal, transfer, or payment posted to the account within each calendar month.
Fees:
$10 monthly fee (waived with requirements)
$15 overdraft fee
Balance requirements:
$25 opening deposit
No minimum daily balance required
ATMs:
Fee-free at 2,000+ Santander Bank ATMs
$3 fee for out-of-network ATM transactions
Interest on balance:
0.03% APY on savings accounts
Up to 5.50% APY on CDs
Additional perks:
8. HSBC
HSBC isn’t just a national bank. It’s multinational, with locations across the U.S., as well as in Latin America, Europe, Africa, the Middle East, and Asia. This is a bank for high rollers, with a steep fee of $50 monthly if you don’t meet minimum requirements. Those requirements are either a $75,000 balance, monthly direct deposits of at least $5,000, or a residential mortgage loan of at least $500,000.
If you travel internationally, though, HSBC is worth considering since you can use your debit card at any ATM worldwide with no fees. HSBC also rebates up to five U.S. third-party ATM fees each month.
Fees:
$50 monthly fee (waived with requirements)
No overdraft fee
Balance requirements:
No minimum opening deposit
No minimum daily balance required ($5 to earn interest)
ATMs:
Fee-free at 55,000+ Allpoint ATMs nationwide
No fees for out-of-network ATM transactions
Up to five third-party U.S.-based ATM fees rebated monthly
Interest on balance:
0.01% APY on checking
Up to 4.15% APY on savings account
Up to 4.50% APY on CDs
Additional perks:
Unlimited rewards credit cards available
In-app support for international transactions
9. Corning Credit Union
Corning Credit Union membership is open to anyone who lives, works, worships, or attends school in Chemung County or Corning, New York. Membership is also open to residents of select areas in North Carolina, Pennsylvania, and South Carolina. The best thing about Corning Credit union is that its basic checking account earns 3.00% APY.
Fees:
No monthly fee
$32 overdraft fee
Balance requirements:
No minimum daily balance required
ATMs:
Fee-free at Corning Credit Union ATMs
$1 fee for out-of-network ATMs (waived for first four each month)
Interest on balance:
Up to 3.00% APY on checking
Up to 1.00% APY on savings
Up to 4.60% APY on share certificates
Additional perks:
Competitive rates on loans
Wide range of rewards-earning credit cards available
10. Dime Community Bank
If you run a business in the New York City or Long Island area, Dime Community Bank has plenty to offer. Dime’s business checking accounts come with a $12 monthly fee for up to 250 items, but Dime will waive it as long as you have an average daily balance of $10,000 each month.
Small business owners might find this on the high side, but if you have more than 250 items each month, that fee goes up to $25 with a balance requirement of $20,000 to waive it. But if you can meet the minimums, or you don’t mind the fee, you might like the extra services offered to members.
Fees:
$12 monthly fee (waived with requirements)
$35 overdraft fee
Balance requirements:
No minimum opening deposit required
ATMs:
Fee-free at Dime Community Bank ATMs
$1.50 fee for out-of-network ATMs
Interest on balance:
Rates not publicly disclosed
Additional perks:
Wide range of loans that serve small businesses
Access to legal, real estate, and accounting services
11. TD Bank
TD Bank is a national bank with hundreds of branches across New York. Although TD’s checking account comes with a $4.95 monthly fee, everything else is free, including overdrafts. One of this bank’s standout features, though, is its CD rates. Currently, you’ll get 5.00% APY on a six-month CD, with the option to bump up the rate if the market changes.
Fees:
$4.95 monthly fee
No overdraft fees
Balance requirements:
No minimum opening deposit required
No minimum daily balance required
ATMs:
Fee-free at 2,600+ TD Bank ATMs nationwide
$3 fee for out-of-network ATMs
Interest on balance:
Up to 3.51% APY on savings account
Up to 5.00% APY on CDs
Additional perks:
Live 24/7 customer service available online
Same-day replacement for lost debit card
Methodology
If you live in New York, chances are you know there’s no shortage of options. But we strove to create a list that brings together a little of everything. Not every customer wants the biggest bank, but plenty of customers would rather have a larger bank with a robust set of features. We combined small, local banks, credit unions, and large, corporate banks to ensure you can find the best bank for you.
Of course, it’s vital to make sure you’re going with a secure bank. We narrowed our list to those banks that had solid reputations and a history of serving New York residents. Beyond that, we made sure each bank offers savings accounts as well as checking, and we included a few that have features that would appeal to small business owners.
When you’re ready to open a bank account, it’s important to compare banks to make sure you’re getting the best rates. Many banks and credit unions can offer a great banking app and chat support, but you might prefer the personal touch you get with a local bank. Whatever your choice, pay close attention to fees and interest rates to ensure you’re getting the best deal for parking your money.
The other day, a dear friend of mine in her mid-20s told me she was saving up to buy a house in her 30s.
Her plan for amassing a down payment was to simply make a big withdrawal from her 401(k) when the time was right.
When I reminded her that the combined taxes and penalties could be as much as 30% (meaning she’d lose $15,000 out of a $50,000 withdrawal), she frowned.
“Well, I can’t just put the money in a savings account. Interest rates suck these days – the highest I’ve seen is 1%, and that doesn’t even cover inflation!”
She had a point. So why not invest the money, I asked?
“Well, I don’t know much about stocks, I don’t have the patience for real estate, and crypto scares me.”
That’s when I told her she was the perfect candidate for a lazy portfolio.
“A what? Look, buster…”
Once I backpedaled and explained the concept, she understood that I wasn’t calling her a bum, but rather, keying her into a lesser-known but highly effective investment strategy.
In this piece, I’m going to clue you in, too!
What’s Ahead:
What is a “lazy portfolio”?
A lazy portfolio is a bundle of stock market investments that requires little to no active maintenance by you. They’re most commonly made up of between one and five index funds, which are like big bundles of stocks, bonds, and other investments that you can buy just like shares of a regular stock (more on those later).
Aside from the occasional deposit or gentle asset reallocation, lazy portfolios don’t require any work.
You can buy $5,000 or $10,000 worth of index funds today and literally do nothing but watch them for 10 years. Doing this means you’ll have a successful lazy portfolio that will, hopefully, generate good rates of return.
But wait – don’t you have to be constantly buying and selling stocks to make money in the stock market?
Not at all – in fact, it’s better if you don’t. Unlike with day trading, you don’t mess with your lazy portfolio – through thick and thin, you let it sit and generate compound interest for years.
You can think of a lazy portfolio like a baby 401(k) that you design yourself and withdraw from much earlier.
Here’s why being “lazy” is a good thing
I love the movie The Wolf of Wall Street and the investing madhouse r/WallStreetBets, but both entities continue to perpetuate a common myth about the stock market: that you need to day trade to make money.
Nothing could be further from the truth.
In truth, multiple academic studies have found that the overwhelming majority of retail investors end up losing money.
“Don’t be misled with false claims of easy profits from day trading,” Burton Malkiel, Princeton professor and Chief Investment Officer of Wealthfront, told CNBC.
The harsh reality of investing in the stock market is that unless you’re a highly trained wealth manager with decades of experience and a team of analysts, you’re probably going to lose money day trading (and even they tend to struggle to pick winning stocks).
That’s why it’s better not to day trade, and be lazy instead. Rather than researching, buying, and selling stocks every day for the next 10 years, you’ll be better off buying index funds in the next 30 minutes and going about your day (or decade).
What are lazy portfolios made up of?
Lazy portfolios are most commonly made up of a small mix of index funds. Here’s a breakdown of what those are and why they’re so effective for passive investing.
Index funds: the building block of lazy portfolios
Index funds are a form of ETF, or exchange-traded fund, which are like big bundles of stock and other investable assets. When you buy shares of an ETF, you’re effectively buying up shares of dozens or hundreds of companies at once.
Each ETF must be individually approved by the SEC and have an appealing “theme” to it. For example, there are blockchain ETFs; ETFs that track the oil industry; and even quirky, unique ETFs that contain shares of companies trying to appeal to Millennials.
So, while stocks let you invest in a company, ETFs let you invest in an entire industry, concept, or strategy.
Now, what makes index funds as unique as ETFs is that they’re designed to reflect the performance of an entire market index, such as the S&P 500 or the U.S. bond market. To illustrate, here are two of the most popular index funds for building lazy portfolios:
The Vanguard Total Bond Market Index Fund (BND), which reflects the performance of the total U.S. bond market.
The Vanguard Total Stock Market ETF (VTI), which, big surprise, reflects the performance of the overall stock market.
So by buying shares of VTI and BND, you’re essentially investing in “the stock market” and “the bond market.” I know – the idea of investing in the whole stock market all at once sounds meta and maybe a little ridiculous, but bear with me.
Index funds are extremely popular for one simple reason
If you’re new to the stock market, you should know that pretty much every investor dabbles in index funds. Everyone from Warren Buffet to your grandparents has a stake in them – in fact, here’s how Mr. Buffet himself feels about index funds:
“In my view, for most people, the best thing to do is owning the S&P 500 index fund,” he told CNBC.
Index funds are popular among amateurs and pros alike for one simple reason: they reliably produce around 3% to 10% APY year after year. Index funds that track the S&P 500 are particularly high-performing, which is why many actively-managed mutual funds will say they “beat the S&P 500” as a benchmark for success.
Between 3% and 10% APY may not sound like a ton of interest but lemme tell ya, it’s plenty. Compound interest is a powerful ally, after all. Take a look at MU30’s Compound Interest calculator below to get a sense for yourself:
So to illustrate, let’s take a look at what happens if you opened a “one-fund lazy portfolio” today by buying $10,000 shares of the Vanguard S&P 500 ETF (VOO).
How much money would your lazy portfolio be worth in 10 years?
The answer is about $40,000. As I said, it literally pays to be lazy!
Now, most investors choose to put multiple index funds in their lazy portfolios for added diversity, but even one-fund lazy portfolios like 100% VOO are common and highly effective (clearly).
Why index funds are better than mutual funds or robo-advisors for building lazy portfolios
To start, mutual funds and robo-advisors are both excellent tools for smart investing. I’m not knocking them, but there’s a reason many investors don’t use them for lazy portfolios.
For the uninitiated, mutual funds are like ETFs, but they’re actively managed – there’s a team of professionals constantly mixing up the assets in the fund in an attempt to maximize returns for investors.
Similarly, robo-advisors are AI programs that take your money and build a portfolio for you, which, depending on your risk parameters, may contain a mix of ETFs, mutual funds, stocks, bonds, and more.
But lazy portfolio builders tend not to use either resource for one simple reason: fees.
Both mutual funds and robo-advisors will charge you a fee of between 0.25% and 2% to cover their costs of managing the fund – and since lazy portfolios are fire-and-forget, many passive investors would rather pick the index funds themselves and just avoid the fees.
To be clear, index funds and ETFs in general charge fees as well, but they’re typically less than a fifth of what a mutual fund charges (usually under 0.40%).
How to Build The Right Portfoilio – 3 popular lazy portfolios to consider
There’s a saying in the personal fitness community that there are 100,000 personal trainers with 100,000 “perfect” workout regimens.
The same applies to lazy portfolios in the investing world – there are (at least) 100,000 institutional investors with 100,000+ ideas on how to build the right lazy portfolio. After all, there’s a lot of flexibility in designing lazy portfolios – they may only contain a few index funds at most, but there are over 1,700 index funds to choose from!
Before you get overwhelmed, here are three solid examples to consider:
1. The basics: Rick Ferri’s Lazy Three Fund Portfolio
Author and CFA Rick Ferri literally wrote the book on index funds and publishes simple, yet effective, lazy portfolios for amateur investors to use. Here’s his bread-and-butter, the Lazy Three Fund Portfolio:
40% Vanguard Total Bond Market Index Fund (BND).
40% Vanguard Total Stock Market Index Fund (VTI).
20% Vanguard Total International Stock Index Fund (VXUS).
2. For a little more diversity: David Weliver’s Fidelity Portfolio
For a little added diversity, MU30’s very own David Weliver designed an everything-but-the-kitchen-sink portfolio touching four different markets:
20% iShares Core S&P Total US Stock Market (ITOT).
20% iShares S&P Small Cap 600 Value (IJS).
40% iShares Core MSCI Total International Stock (IXUS).
20% iShares Core US Aggregate Bond (AGG).
3. If it ain’t broke: Warren Buffet’s 90/10 Portfolio
For maximum gains and minimum effort (you know, the very essence of a lazy portfolio) you really can’t go wrong copying the best. Warren Buffet’s 90/10 portfolio is one of the highest-performing, yet simplest, lazy portfolios in existence.
But perhaps the best part of the 90/10 portfolio is that Buffet specifically designed it to stick it to fund managers who charge high management fees.
According to author and investor Rob Berger, Buffet claimed this fund…
“will be superior to those attained by most investors – whether pension funds, institutions, or individuals – who employ high-fee managers.”
And the portfolio has outperformed those actively managed funds, year after year. If you need any final endorsements, Buffet advised his trustees to place his and his wife’s money into this portfolio after his death.
90% Vanguard S&P 500 ETF (VOO).
10% Vanguard Short-Term Treasury Index Fund ETF (VGSH).
What platform should I use to build a lazy portfolio?
You can build and monitor a lazy portfolio on pretty much any trading platform that lets you buy ETFs, but some are better suited for hosting lazy portfolios than others.
Here are just two options:
M1
Unlike most popular trading apps, M1 is tailor-made for passive investing. It’s easy to buy a few ETFs, build a lazy portfolio, and monitor it over time without the temptation of selling or day trading. If you choose to lean on robo-advisor support, it’s also available.
But the best part about M1 is the community. There are thousands of passive investors on the M1 subreddit ready to lend their strategies and support.
Webull
Many investors like to keep their active and passive investing portfolios on separate apps so they don’t accidentally or impulsively sell their index fund holdings – but if you’re confident you can juggle both on one platform, check out Webull.
Unlike its rivals, Webull offers an advanced trading dashboard and detailed analytics for free. Plus, you’ll get complimentary shares just for joining, making it a great landing pad for short- and long-term investors.
Summary
Lazy portfolios are made up of a handful of index funds that you buy once and let sit and mature for at least 10 years. The healthy and consistent annual performance of index funds like Vanguard S&P 500 ETF (VOO) makes lazy portfolios a 100% viable investing strategy, one used by amateur and institutional investors alike.
If you’re looking for a way to invest money so you can buy a house or pay off your student loans in 10 years, don’t overthink it: get lazy.