Money Management

The right time to get life insurance coverage is when you’re young and healthy. Read on to learn other considerations for choosing when to buy life insurance. 

Life insurance coverage offers a vital form of protection against tragedy. This type of policy pays out when a covered person dies. The money provided by a life insurance policy can help surviving family members maintain their quality of life once someone has passed and can no longer provide income or services.

But, since life insurance costs money, many people may not want to rush into buying it before they need it. The big question is, when exactly is the right time to get life insurance coverage?

Buy life insurance at a young age

Life insurers charge people less to buy coverage if their risk of dying is lower. And younger people are less likely to die than older ones. As a result, it’s much cheaper to get a policy in place while a person is still young and healthy.

Insurance premiums tend to go up about 8% to 10% for each year older a policyholder is when signing up for coverage — although the extra cost per year tends to be lower for people in their 20s or 30s and higher for those in their 40s or 50s.

Once a level term life insurance policy is purchased, though, premiums won’t change for the life of the policy. So, those who want to be sure they have low-priced coverage throughout most of their adult life will want to buy it when they are still pretty young. Waiting just adds cost and increases the risk of not being able to get covered at all from a desired insurer.

Buy life insurance before pre-existing conditions develop

The Affordable Care Act requires health insurers to provide coverage to people with pre-existing conditions, but there is no law saying that a life insurance company must do the same. In fact, many health insurance companies do deny coverage to people with a variety of conditions such as heart disease or cancer or even less serious health issues like diabetes.

There are some options to get covered even when a standard whole life or term life insurance provider won’t provide a policy due to an existing medical issue. For example, there is guaranteed issue coverage, which is available to anyone without regard to their health history. However, guaranteed issue policies usually set the maximum death benefit low and have a waiting period.

To avoid being limited in what types of coverage can be purchased, and to avoid paying much higher premiums out of a bank account, it’s best to get life insurance before being diagnosed with a serious medical issue.

Buy life insurance as soon as there are current dependents or when there will be dependents in the future

Life insurance is intended to provide money to loved ones who depend on a person’s income or the services that person provides. So, getting covered is necessary whenever there are dependents in the picture.

For example, as soon as someone gets married and makes a joint commitment to buy a home with a spouse, life insurance coverage should usually be put in place because paying for a mortgage often requires both incomes.

Those who know they will someday get married, have kids, or be left responsible for aging parents should also think about getting coverage before that happens. This way, they can get the protections for their loved ones in place before premiums rise or a pre-existing condition crops up.

The reality is, life insurance is pretty affordable and is an essential purchase for most people, so there is no reason to wait. Those who don’t have coverage, but who think there’s a chance of needing it now or in the future should get their policy today.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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Cheating on your taxes? The IRS will pay big money to find out. Read on to learn how it works. 

Three hundred million dollars. That’s how much the IRS paid out in whistleblower rewards in 2018 alone. For over 150 years, the U.S. Treasury has enlisted the help of employees, attorneys, bookkeepers, family members and more to collect some of the estimated $1 trillion in unpaid taxes every year. Read on to learn more about the million-dollar fraud-catching IRS program.

The Whistleblower Office

Although the bounty program dates back to 1867, the IRS didn’t officially establish an office for whistleblower reports until 2006, when a framework for the program found its way into a spending bill. Since then, the program has seen a handful of minor changes, most recently in 2019.

In the United States, with our system of what the IRS calls “voluntary compliance” tax reporting, it can be difficult to root out taxpayers who are making misstatements and underpaying taxes. And while the IRS has developed some impressive technology-driven tools, it can be difficult for federal agents to catch indiscretions. That’s the idea behind incentivizing suppliers, accountants, and managers who know the ins and outs of businesses across the country to turn in fraudsters.

The Whistleblower Office itself manages some thousands of whistleblower reports every year. The Office reviews claims, routes them to the proper IRS unit, and determines and pays awards. Since 2007, claims received by the Whistleblower Office have recovered nearly $6.4 billion and paid out just over $1 billion in awards.

Staking a claim

Helping your favorite government agency, and getting a cut of the proceeds for your trouble, sure sounds like a great opportunity. However, it’s not as easy as pointing a finger and depositing a check into your bank account.

The Whistleblower Office generally rewards claims that are substantiated by proof of non-compliance. Without accompanying proof, the chances of the IRS recovering unpaid taxes, and the chances of you receiving an award, are slim. Generally, the Whistleblower Office will want information such as copies of books, records, receipts, contracts, emails, and bank statements.

You will also need to include a written report describing the alleged tax fraud, the evidence you have, where other evidence may be found upon search, your relationship with the taxpayer, and more. Naturally, you will also need to complete a special IRS form.

The reward

Qualifying for a reward based on your claim is a high bar to clear, which is why, since 2007, of the thousands of claims filed annually, only around 2,500 have resulted in a reward. But the payout can be substantial if you can prove your claim.

The size of a whistleblower’s reward will depend largely on two factors. Your cut is at the discretion of the IRS, so while specific and credible information might net you 30% of the recovered amount, submitting public information or having taken an active role in the fraud could drop you to the minimum of 15%. Additionally, how much the IRS rakes in will determine your award, as you may qualify to receive a percentage of all underpayment, including penalties and interest, as long as the take-in exceeds $2 million and implicates a taxpayer earning over $200,000.

Enforcing tax laws in the United States can be a tall order for the IRS, and without the help of an insider, it can be almost impossible to detect some frauds. As a result, the Whistleblower Office of the IRS puts a bounty on the heads of tax cheats, and will readily pay hundreds of thousands of dollars for a good tip.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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The Fed is raising interest rates yet again. Read on to see how that might affect your credit card balance. 

Inflation has been a nagging problem for consumers since mid-2021. And over the past two years, many people have had no choice but to dip into their savings accounts to cover basic expenses like food and housing.

The Federal Reserve has been trying to slow the pace of inflation, and it’s done so by raising interest rates. In fact, the central bank hiked interest rates 10 times between March 2022 and May 2023 before hitting pause on rate hikes in June in response to cooling inflation.

But at its July meeting, the Fed made the decision to raise interest rates once more, to the tune of 0.25%. That’s apt to make borrowing even more expensive across the board. And it’s certainly bad news for consumers with existing credit card balances.

Rising interest rates are a problem for credit card borrowers

When you sign an installment loan, like a personal loan, you lock in a given interest rate and pay the same amount of money to your lender month after month until that debt is whittled down to $0. With a credit card, the interest rate on your balance can be variable and therefore rise and fall with market conditions. Since the Fed’s actions are only driving borrowing costs upward, it means that if anything, the interest rate on your credit card debt is more likely to increase than decrease in the near term.

Of course, the more interest you’re paying on your credit card balance, the harder it’s going to be to shed. And also, the more you might run the risk of not being able to make your minimum monthly payments.

The latter is really not a good thing at all, though, because being late with even a single credit card payment could drag your credit score down in a very big way. Once that happens, you risk getting denied the next time you apply for a loan. Or, you might get approved, but at a very high interest rate.

It’s a good time to chip away at your debt

The Fed’s July rate hike may not be the last one it implements in 2023. Some financial experts predict that the central bank will opt to raise interest rates at least one more time this year. (For context, the Fed still has three more scheduled meetings before the year is up.)

That’s why now’s a really good time to pay down your credit card balance. Cutting expenses is one way to go about that, but that could prove difficult at a time when inflation is still driving various costs up. So a more efficient way to free up cash to pay off your credit cards is to look at getting a side job.

Despite the fact that some economists are still predicting a near-term recession, the labor market is strong, and that extends to the gig economy. Picking up a second job could do the trick of putting more cash in your pocket — and allowing you to whittle down your credit card balances to minimize the amount of money you’re forced to pay in interest.

The danger of carrying a credit card balance forward is losing scores of money to interest charges and getting trapped in a cycle of debt. If you already owe money on your credit cards, you clearly can’t go back in time and change things. But you can do your part to try to eliminate that debt as quickly as possible.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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The central bank has raised interest rates yet again. Read on to see how that might affect your savings. 

The Federal Reserve has been trying to solve the problem of inflation for well over a year now. Beginning in March 2022, the central bank began raising its benchmark interest rate in an attempt to slow the pace of inflation.

And the Fed’s efforts have worked. Last month, annual inflation was measured at 3%, per June’s Consumer Price Index. And while that’s not quite where the Fed wants inflation to be — it’s targeting 2% — we’re getting closer.

In fact, the Fed was so pleased with the progress made on the inflation front that it opted to pause rate hikes in June after 10 consecutive increases. But on July 26, the central bank announced that it would be raising interest rates once again by 0.25%. And while that’s not the best news for consumers who are looking to borrow money or who are already carrying credit card balances, it’s actually positive news for savers.

Savers stand to benefit from rate hikes

The Federal Reserve does not determine what interest rates different banks offer for products like savings accounts and CDs. Rather, savings account and CD rates are determined by banks on an individual basis.

But when the Fed raises its benchmark interest rate, banks tend to respond by offering up higher interest rates for consumers. And that makes the central bank’s latest rate hike not such a bad thing at all for people with money in the bank.

Right now, many high-yield savings accounts are paying 4% interest or more. That’s really a risk-free return.

Unlike stocks, whose value can fluctuate based on market conditions, the deposits you put into your savings account are guaranteed, provided your bank is FDIC-insured and you’re not putting in more than $250,000 (that limit rises to $500,000 with a joint account). So to be able to sit back and earn 4% or 4.5% on your money without taking on any risk is really nice. And in light of the Fed’s latest rate hike, you could soon be looking at an even higher interest rate on your money.

Should you boost your savings now?

Given that there’s been talk of a near-term recession, it’s a good idea to boost your savings in general. Your goal, in fact, should really be to have enough cash to cover a minimum of three months of essential expenses. And the fact that banks are paying nicely right now should only motivate you that much more.

With that in mind, you don’t want to put so much money into savings that you’re not investing at all. Over the past 50 years, the stock market has delivered an average annual return of 10% (before inflation), as measured by the S&P 500. Compare that to 4% or 4.5% in a savings account, and over time, stocks are probably a better bet for growing long-term wealth.

But it certainly wouldn’t hurt to give your emergency fund a lift at a time when so many financial experts are cautioning consumers to gear up for a broad economic downturn. And the fact that you might get paid a higher amount of interest to do so only sweetens the deal.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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