Money Management

Love it or hate it, whole life insurance is an interesting financial product. 

Whole life insurance is an interesting product. Unlike term life insurance, a whole life policy can last your entire life, as long as you continue to make the payments. And that’s the rub. A whole life policy can cost five to 15 times as much as term life. At some point, whole life policyholders may grow tired of making the payments, even if their policy builds cash value over the years.

Here are two times whole life policyholders may consider cashing out.

1. Premium payments are out of reach

If you have a whole life policy, you know that the payments are higher than you would pay for a term life policy with the same death benefit (or more). However, a term life policy does not accrue cash value and is only active for a specific number of years.

Let’s say that your budget is stretched to its limit and you can no longer afford to make the payments on your whole life policy. You know that if you miss payments, the policy will be canceled and you’ll lose any money you’ve paid toward it.

You have a couple of options to consider.

Cash out

If you have cash built up in the policy, you can cash it out, cancel the policy, and purchase a term life policy with the same death benefit. If you’re still relatively young and healthy, a term life policy should be less expensive. If you’re older, though, you could pay just as much for a term policy purchased today as you’re paying for a whole life policy purchased years ago. A new policy is not always less expensive.

Ask about a 1035 exchange

Contact your insurance agent and let them know that you’re having trouble making payments. You may be able to exchange your current policy for another, more affordable, insurance policy. This is called a 1035 exchange, and it’s tax free.

With a 1035 exchange, you may even be able to use the cash value in your existing policy to buy a new type of policy or insurance riders that are not included on your original policy.

The tricky bit here is that you don’t want to move from one expensive policy to another. Make it clear to your agent that you need a less expensive plan.

Note: If you have beneficiaries who count on your income, canceling your policy without another life insurance policy in place is a dangerous financial move. Even if it means cutting back on other expenses or taking on a side hustle, few things are more important than a life insurance policy for the average family.

2. You no longer need the death benefit

Not everyone needs life insurance. If you’re getting older and have no beneficiaries to look out for, you may wonder why you’re still making whole life payments. You also have a couple of options.

Cash out

Cash out, cancel the policy, and invest the funds received.

Switch to a policy you do need

If you don’t currently carry long-term care insurance, ask your agent about using a 1035 exchange to switch from whole life to a policy with long-term care coverage.

Financial considerations

The catch associated with cashing out a whole life policy is that it will cost you. Here are two expenses the average policyholder can expect to face.

Surrender fees

Surrender fees vary by insurance company. Typically, the fee is a percentage of the cash value of the policy. The longer you’ve held the policy, the lower the surrender fee. That’s because surrender fees drop over time.

Federal income taxes

Any cash value you receive may be taxable as income. Let’s say you’re in the 24% tax bracket and have $20,000 in cash value. That means that you’re likely to owe $4,800 in income taxes.

Ask questions

The decision to surrender a policy is a serious one. If you don’t have another policy firmly in place it could cost those you leave behind — big.

Before you do anything, ask your insurance agent about other options. For example, if the reason you can’t make payments is because you’re chronically ill, you may be able to take cash out of the policy to help pay living expenses. If you’re terminally ill, you can also apply for “living benefits.”

The point is, your insurance agent is your best point of contact when it’s time to discuss options that will work for both you and those you care about.

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.

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It could be a move you sorely regret. 

Although it’s been a rocky year for cryptocurrency, many investors are still eager to put money into digital coins or hold onto the digital currency they bought last year. If you’re interested in buying cryptocurrency, it’s okay to do so as long as you understand the risks involved and tread lightly. That means not putting 80% of your money into crypto, but rather, starting small and seeing how that goes.

But if you ask Suze Orman, she’ll tell you that investing in cryptocurrency for retirement is a really bad move. And it’s advice worth heeding.

An asset that’s just too speculative

You’ll often hear that it’s smart to consistently fund an IRA for retirement so you have money to tap later in life. And you don’t want to just leave your retirement savings in cash. Rather, you should be investing that money so it can grow into a larger sum over time.

It’s also important to maintain a diverse mix of investments for retirement. That could help you enjoy gains and minimize losses during periods of volatility.

But if there’s one asset Suze Orman would caution retirement savers to stay away from, it’s cryptocurrency. The reason? It’s highly speculative.

Crypto has proven itself to be very volatile, but then again, so have stocks. But whereas stocks have been around for a long time, cryptocurrency has only been around for a little more than a decade. And it’s questionable as to whether it will still be an asset of value in a decade from now.

It’s easier to determine the value of a given stock based on information on the company behind it — namely, by looking at that company’s assets, cash flow, products, and so forth. It’s harder to figure out what cryptocurrency is worth, and what it will be worth in the future.

One of the biggest question marks surrounding cryptocurrency is whether it will become a widely accepted form of payment. Some merchants already accept crypto payments today. But for the most part, you can’t just pay in crypto the same way you can hand over a wad of cash or swipe a debit or credit card.

That makes cryptocurrency pretty risky — more risky than stocks. If cryptocurrency doesn’t become a mainstream payment option at some point in the future, its value could plummet.

We also don’t know to what extent cryptocurrency will be regulated over time. That, too, adds to the risk of owning it.

Look to cryptocurrency as a shorter-term asset

As a general rule, it’s a good idea to load up your portfolio with quality investments you hold for a long time. But crypto may be the exception to the rule. It may be a better bet to think of cryptocurrency as a shorter-term asset, and stick to investments that are more tried and true for your retirement nest egg.

You’re going to need a sizable amount of savings to cover your living costs once your career ends. And you don’t want to put your future financial security at risk by banking too heavily on crypto.

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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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Dave Ramsey is spot on with this important warning. 

Buying a house is something many people look forward to. But, while this purchase can be one of the best of your life, it can also be one of the worst if you jump into property ownership before you are financially ready to take on a mortgage loan and the other costs of homeownership.

Dave Ramsey has warned that there is one situation where you should absolutely never buy a house, and on this issue, the finance guru is spot on. Here’s Ramsey’s warning as well as some additional details on why his advice is something everyone should listen to.

Don’t buy a house in these circumstances

According to Ramsey, you absolutely should not buy a property if you don’t have some cash to invest in the transaction.

“You should never buy a house with no money down. That’s it,” Ramsey said. He explained that if you are unable to come up with cash for a down payment, this is a clear red flag that suggests you are not yet in a good place to take on all of the big expenditures that come along with owning your own place.

“There are other costs involved with homeownership (HOA fees, emergency repairs, homeowners insurance premiums, etc.) that may end up putting you in a bad spot financially,” Ramsey explained. “If you can’t cover a down payment, you won’t be able to handle those costs, either.”

Why Ramsey is right

Ramsey is absolutely spot on when he says you don’t want to move forward with buying a house unless you have savings. If you have a hard time coming up with money to put down, you may indeed become easily overwhelmed with all of the new things you have to pay for.

That’s not the only reason why buying a house without a down payment can be such a big disaster. There are plenty of other problems as well.

You’ll have limited — and likely costly — loan options. As Ramsey points out, most lenders require some money down. If you find a lender offering a $0 down payment loan, chances are it will come with higher fees, a higher interest rate, or other unfavorable terms.You’ll end up trapped in your house. In a best case scenario, property values will rise. But, even if that happens, if you have no money down, you won’t be able to sell your house for enough cash to pay off the loan and cover all the fees (like real estate commissions). You’d need to see your property go up substantially in value or pay your loan for a long time before you could break even on a sale. And if property values go down, you’d be in worse shape.You’ll likely have to pay for mortgage insurance. If you have less than 20% down, you have to pay for mortgage insurance to protect your lender in most circumstances.

Ramsey said you should make sure to have a minimum of around 5% down and ideally more. For most people, it’s best not to move forward without at least a 10% down payment in order to make sure you have enough equity that you aren’t trapped in the home.

It may seem like a pain to save up all this cash, but if you don’t do it, you could really end up regretting it after moving in.

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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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TikTok creators can help you find the best Costco bargains that fit your budget. 

Many people invest in a Costco membership to save on groceries and everyday essentials. If you’re looking for tips on what Costco buys are worth your money, you may want to look to social media for guidance. TikTok is an excellent place to watch videos to effectively plan your next Costco haul. Keep reading to discover the best TikTok accounts for Costco shoppers.

The eight best TikTok accounts for Costco shoppers

Check out the below TikTok accounts for lots of Costco shopping inspiration and ways to save.

1. Costcobuys

Costcobuys is a popular TikTok account with more than 485,000 followers. The videos highlight available Costco products that you might want to check out and money-saving deals. This account also shares the top five buys for the week each week, so you can find out which bargains are worth it.

2. Floridamomof3

This account features a mother-daughter duo — and they’re big fans of Costco. The majority of their videos are Costco product reviews. Some of their videos compare Sam’s Club and Costco products to help shoppers decide which warehouse club version is the best. This valuable resource can help you decide what items to put in your cart the next time you go to Costco.

3. Costcoguide

Another TikTok account that Costco shoppers will love is Costcoguide. With over 500,000 followers, these videos get a lot of attention. You can learn more about new products and fantastic buys that fit your budget. With so many products available, Costco can sometimes be overwhelming, so this account can help you create a better shopping list.

4. Costcocouture

For shoppers who like to use their Costco membership to load up on clothes and accessories, Costcocouture is an excellent TikTok account to follow. These videos showcase affordable fashion finds at the popular warehouse club. If you want to upgrade your wardrobe without going into credit card debt, you’ll enjoy their content.

5. Designedbycarissa

Costco sells much more than food, toiletries, and electronics. You can also find great home decor items. Carissa shares home decor tips on her TikTok account. While she highlights deals available at various stores, Costco is one of the retailers she regularly visits. She will guide you toward the right buys if you want to make your home a better place while following a budget.

6. Richlivingcoaching

This couple shares their journey to living a debt-free life. Through their videos, they discuss financial topics like how to save more money and pay off debt faster. They also share the best money-saving deals found at Costco and Trader Joe’s. This is a good account to follow if you want to stretch your dollars further while shopping at Costco.

7. Sophieshemirani

Sophie shares a mix of content with her TikTok community, including must-try easy recipes, and her favorite healthy shopping finds. She frequently shops at Costco and makes videos sharing her weekly hauls. If you follow a healthy lifestyle and want some cost-effective Costco recommendations, you should give Sophie a follow.

8. Costcoaisles

Another can’t-miss TikTok account is Costcoaisles. Most of the videos show off new products, discuss top Costco finds, and which items are a big win for your wallet. Whether you’re a new member or you’ve been shopping at Costco for a while, this account is a valuable resource.

Discount finds can help you stay on top of your money goals

With increasing prices everywhere, buying groceries and everyday household items can get expensive quickly. You can keep more money in your checking account by loading your shopping cart with great deals at retailers like Costco. These TikTok creators may help you get more value from your Costco membership so you can reach your personal finance goals.

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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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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We may not escape an economic downturn after all. 

For much of 2022, financial experts were sounding repeated warnings about a 2023 recession. And there’s a reason for that.

The Federal Reserve implemented several aggressive interest rate hikes in 2022 in an effort to slow the pace of inflation. The goal there is to make it more expensive for consumers to borrow money so that they’ll cut back on spending to a modest degree, thereby bridging the gap between supply and demand that’s been causing inflation levels to remain elevated.

Of course, the Fed needs to strike a very fine balance to get what it wants. To be clear, the Fed does not want to spur a recession. Rather, it wants what it calls a soft landing — a moderate pullback in spending that allows consumer prices to come down without battering the economy broadly. But that soft landing is hard to achieve, which is why so many experts have cautioned that an economic downturn is coming our way.

Over the past few weeks, though, some of those once-dire recession warnings have softened. In fact, a number of experts have acknowledged that a near-term recession might be mild. Or, we may not land in full-blown recession territory even if the economy slows down.

But if you ask former Federal Reserve Chairman Alan Greenspan what he thinks, you may not like the answer. That’s because he was quoted as saying that a near-term recession is the “most likely outcome” of the Fed’s recent string of rate hikes.

That soft landing may not happen

Greenspan clearly has a solid pulse on the economy and the effect of interest rate hikes. He served five terms as Federal Reserve Chairman between 1987 and 2006. He was also the last person in that role to successfully achieve a soft landing.

In the 12-month period that followed February of 1994, the Fed nearly doubled interest rates to 6% on Greenspan’s watch. Yet that didn’t result in a recession.

But Greenspan thinks today’s circumstances are different. Inflation is so rampant right now that the Fed really can’t afford to pump the brakes on rate hikes. And as borrowing becomes prohibitively expensive, consumers will eventually have no choice but to curb their spending to a notable degree.

How to prepare for a recession

If Greenspan thinks a recession is coming in 2023, then that’s a warning worth listening to. And one of the best ways to do so is to boost your savings.

At a minimum, you should aim to have enough cash in your savings account to cover three full months of essential living costs. But if you’re able to grow that balance so you can cover, say, five months’ worth of bills, you’ll be in an even stronger position to get through a recession.

Remember, during a recession, unemployment levels tend to pick up. And so the danger is that many people could wind up out of a job.

If you have enough savings, you can get through a period of unemployment without long-term financial repercussions. But if you don’t have adequate savings, you might land in debilitating debt that drags you down for years on end.

Of course, just because Greenspan predicts a near-term recession doesn’t mean that downturn will be long and drawn out. But it’s a good idea to prepare for a period of economic decline, even if it ends up being fairly mild and short-lived.

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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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