Money Management

Don’t pay more for life insurance than you need to. Discover how seniors can save on life insurance with five key strategies. [[{“value”:”

When it comes to life insurance, the golden years are all about finding that sweet spot between ensuring ample financial protection for your loved ones and not letting the premiums drain your retirement savings. Yes, it’s a bit of a balancing act, but who says you can’t master it with a few smart moves?

Let’s walk through five thoughtful strategies that can help seniors secure life insurance that’s affordable and adequate.

1. Apply sooner rather than later

Think of your age as a pivotal number in the life insurance equation. Each birthday could potentially increase your premiums by 9%-12%, similar to how last-minute flight bookings can skyrocket. If you’re considering life insurance at 65, waiting until 67 might not seem like a big deal, but it could lead to paying higher premiums simply due to age. Acting swiftly can lock in lower rates, keeping your premiums more manageable in the long run. It’s a clear case where time really is money.

2. Shop around

Ever spent hours online hunting for the perfect vacation deal? Securing life insurance is a similar drill. You wouldn’t book the first flight or hotel you see; the same goes for life insurance. Gathering quotes from at least three different insurers can unveil a disparity in premiums for similar coverage, sometimes by as much as 55%.

According to Lincoln Heritage, men over 85 typically face monthly premiums ranging from $183 to $286 for $10,000 in final expense insurance. Women of the same age bracket can expect to pay between $136 and $211 per month for the same coverage. Ensuring you compare the same policy type, term, and amount is crucial for a true apples-to-apples comparison. This step ensures you really are getting a great deal, not just a good-looking number that might leave you underinsured.

3. Get a medical exam

Skipping the medical exam might sound appealing — it’s quick, easy, and stress free. While opting for a no-exam policy might seem convenient, it could lead to premiums that are higher than those for policies requiring a medical exam. If you’re in relatively good health, rolling up your sleeve for that blood test could work in your favor. Pass the health checks with flying colors, and you’re suddenly seen as a less risky bet, which translates to lower premiums for you.

4. Tailoring your coverage

When it comes to coverage, more isn’t always better. For every $100,000 in coverage, you might see an increase in premiums by $50 to $100 monthly, depending on your age and health. Scaling back from a $1 million policy to a $500,000 policy could halve your monthly payments. Assessing your actual financial obligations and coverage needs can help you avoid overinsuring and overpaying.

5. Opt for term life insurance

Whole life insurance might offer a lifetime of coverage and a cash value component, but it comes at a cost — often five to 15 times the premiums of a term policy. For example, a whole life policy for a 70-year-old could easily cost $500 or more per month for $100,000 in coverage, while a term policy might only set you back $100 monthly. For seniors, term life insurance offers a more budget-friendly way to secure essential coverage without the added expense of features they may not need.

Finding affordable life insurance as a senior is less about cutting corners and more about making informed, strategic choices. Armed with these strategies and an understanding of the numbers behind them, you’re well-equipped to navigate the life insurance landscape confidently. Remember, in the world of life insurance, knowledge, timing, and a bit of savvy can lead to significant savings.

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.
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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It’s a great thing to save in a 401(k). But read on so you can avoid some costly mistakes. [[{“value”:”

Although not everyone has access to a 401(k) plan, data from the U.S. Census finds that among workers aged 15 to 64, about 35% had access to a 401(k) or similar account, like a 403(b), in 2020. If you’re opening your first 401(k), you should know that you’re doing a great thing for your future self by making an effort to build retirement savings.

But it’s also important to do a good job of managing your 401(k). So with that in mind, here are some mistakes you’ll want to avoid the first year you start saving and investing in that account.

1. Not snagging your employer match

An employer 401(k) match is basically free money for your retirement that you can snag by contributing funds out of your own paycheck. It’s important to not only find out what your full employer match entails, but push yourself to contribute enough to claim that match in full. Pass it up, and you’re leaving free money on the table.

Remember, the money your employer puts into your 401(k) is money you can invest. So let’s say you’re 22 years old and get a $2,500 employer match this year. Over the past 50 years, the stock market has averaged an annual 10% return. If we apply that return to your 401(k), by age 67, that single $2,500 contribution from your employer could be worth over $182,000.

If it’s your first year opening a 401(k), it may be your first year working, which means your salary may not be the most generous. If there’s not a lot of room after paying your essential bills to fund your 401(k), try picking up a side hustle to make it possible to contribute enough to snag your full employer match.

2. Letting your money sit in cash

We just saw that a single $2,500 contribution to a 401(k) could grow to over $182,000 if invested. Don’t just leave your 401(k) contributions in cash, such as if your plan offers a money market account. Your money might grow at a snail’s pace compared to what investing in the stock market might do for you.

Let’s say your money market yields only 2.00%. On a $2,500 contribution, 45 years later, you’ll have about $6,100. And sure, it’s more than what you started with, but it’s a negligible sum compared to $182,000.

To be clear, it’s a good idea to keep your emergency fund in cash. But that’s not a good idea for your nest egg.

3. Investing in a target date fund

You’ll very commonly find target date funds as an investment choice in a 401(k). In fact, with some 401(k)s, your money will automatically land in a target date fund if you don’t select alternate investments, like mutual funds or index funds.

Target date funds, on the one hand, make investing easy. You simply identify your projected year of retirement and your fund does all of the work for you.

During the earlier part of your savings window, it will invest your money more aggressively. As retirement nears, you’ll be shifted into more conservative investments to minimize your risk of losses.

Put bluntly, a target date fund is a good option for taking the easy way out when it comes to retirement investing. And look, that’s not an awful thing per se. If you’re someone who truly doesn’t have the head for researching investments and is risk averse, then it may be a suitable choice for you.

But if you stick to a target date fund, you may find that your 401(k)’s returns aren’t as strong as they could’ve been with another mix of funds. Plus, target date funds tend to charge costly fees that could eat away at your returns over time. So you may want to favor index and mutual funds instead.

If you’re going to work hard to save in a 401(k), your money should work for you. Make a point to snag every free dollar your employer will give you, steer clear of cash, and choose your investments carefully.

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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.
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In some situations, it’s best to get ahead of a mortgage. But read on to see why that advice may not apply to you. [[{“value”:”

The idea of being in debt doesn’t sit well with a lot of people. If you’re one of them, you may be inclined to try to pay off your mortgage as quickly as possible.

The upside of paying off your mortgage ahead of schedule is pretty obvious. The sooner you shed that debt, the less interest you pay.

Also, there’s something to be said for not having another monthly debt payment to make. So the peace of mind alone may be a factor that motivates you to put extra money into your mortgage.

In a recent Quicken survey, 64% of Americans said that it’s best to pay off a mortgage as quickly as possible to get out of debt. But that line of thinking may not apply to as many borrowers today.

When you have a really low mortgage rate

The average mortgage rate as of this writing is 6.82%, according to Freddie Mac. But if you signed your mortgage in 2020 or 2021, the interest rate on your home loan may be less than half of that. And if so, then paying off your mortgage ASAP is something you may not actually want to do.

For one thing, many savings accounts these days are paying upward of 4.00% interest. Savings account rates are variable, so that could change over time. But right now, why would you put extra money into a 3% mortgage if you can earn 4% on your cash by keeping it in the bank?

Also, when you put extra money into your home, you tie that cash up in an asset that’s not very liquid. And then it might cost you a lot of money to get that cash out.

Let’s say you put an extra $5,000 into your mortgage this year in an attempt to pay it off sooner. What if, a few months later, you need $5,000 for an emergency repair? If you’re forced to sign a home equity loan at 8%, you’re paying a higher rate of interest on that money than on your 3% mortgage.

You can get more mileage out of your money by investing it

It’s natural to want to minimize the amount of interest you’re forced to pay on a home loan. But even if you’re sitting on a higher mortgage rate (say, because you signed your loan more recently), paying it off early may still not make financial sense.

Let’s say you borrowed $200,000 for a home at 6.82%. That means you’re paying a total of $270,156 in interest over the life of your loan. If you get a $50,000 inheritance, you may be inclined to put it into your mortgage and pay off that loan early.

But over the past 50 years, the stock market has averaged an annual 10% return. If you put your $50,000 into stocks and generate that same return, in 20 years, it’ll be worth about $336,000. So even if you’re able to shed a chunk of that $270,156 in interest by putting a lump sum toward your mortgage in the middle of your payoff window, putting spare cash into stocks could still make more sense — even if your loan’s interest rate isn’t so low.

All told, it’s easy to see why you may be inclined to try to pay off your mortgage as soon as possible. But carrying that mortgage instead could actually end up being a savvier financial decision.

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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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This writer had to pivot when she realized how costly daycare would be. Read on to see if you should do the same. [[{“value”:”

Although I’ve been a self-employed writer for many years, at one point during my career, one of my clients offered me a full-time position that I opted to take. I was planning to have kids and liked the idea of a steady paycheck instead of a random one, so I accepted a full-time role prior to having my son.

Once I had my son, I continued to hold down that job, even though it meant paying about $15,000 a year for daycare. At the time, the numbers made sense because I was still bringing home a decent chunk of money after child care costs, commuting expenses, and taxes.

The numbers stopped working out in my favor, however, when I had twin daughters a few years after my son. At that point, I was looking at daycare tuition for three children simultaneously. And since my local center had recently raised their prices, I was quoted somewhere in the vicinity of $54,000 a year for full-time care. Once I got that number, I knew what I had to do.

When quitting your job makes sense

The number my daycare center quoted me for my three kids didn’t shock me. After all, I knew what I was paying for one child. Because of this, I specifically made sure to start building my freelance client base back up when I was pregnant with my daughters. I knew that putting three kids in daycare wouldn’t make sense for my personal finances given what I was earning, and that a better bet was to just work as a freelancer when I could.

In the end, my income definitely took a hit for the first couple of years after I had my daughters. Since they were so young and it was tough to procure child care other than the occasional babysitter, I didn’t have so many hours available to work.

Once my daughters turned 2, I was able to get them into an extended-day preschool program that made sense financially. And my son was able to start kindergarten by then. So from there, I had more coverage and my income therefore went up.

Still, I ran the numbers on those two years when I didn’t earn very much and found that my decision still made financial sense. By barely paying for child care those two years and working when I could, I earned more money for my family than I would have by staying at my full-time job but losing such a massive portion of my income to child care.

It pays to run the numbers

Whether you’re having your first child, your second, or your fifth, if you’re worried that the cost of child care will pretty much wipe out your salary at work, then you may want to consider another arrangement.

Let’s say you have a 2-year-old and a 4-year-old. Care.com puts the average cost of having two toddlers in daycare at $556 a week. That’s about $29,000 a year.

Meanwhile, let’s figure you earn $50,000 a year and bring home $39,000 after taxes. If you’re forced to spend $29,000 on daycare, that cuts your take-home pay to $10,000, not even accounting for commuting. And while you may be able to eke out more income by allocating funds for daycare in a dependent care flexible spending account and snagging a tax break, all told, you may be looking at bringing home under $1,000 a month.

At that point, you may just want to see if it’s possible to work part-time via a series of side hustles. You may, for example, be able to do some data entry work during the day while your kids are napping, and then do something like drive for a ride-hailing service at night if you have a partner who’s out at work during the day but is home from 6:00 p.m. onward.

Of course, you may need to be mindful of health insurance. If leaving a full-time job means losing your coverage, then you may need to rethink that plan. In that case, it could very much make sense to bring home little money after paying for daycare if it means retaining your employer-sponsored health coverage.

But otherwise, run the numbers and see what works for your household budget. You may find that continuing to work full-time just doesn’t make sense when you consider the cost of paying for child care.

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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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It’s by no means impossible to get a mortgage when you’re self-employed, but it can be harder than if you’re a salaried employee. Read on to learn more. [[{“value”:”

In February, the median existing home sale price was $384,500, according to the National Association of Realtors. If you’re buying a home in that price range, you probably need to finance it with a mortgage — unless, of course, you happen to just have around $400,000 sitting in your bank account waiting to be spent.

To qualify for a mortgage, you generally need to meet a few criteria. You typically need to have a decent credit score (for a conventional mortgage, the minimum score is 620), a reasonable debt-to-income ratio, and proof of income.

But the latter can be a harder requirement to satisfy when you’re self-employed. So it’s important to be prepared for a slightly more complicated road to mortgage approval if you’re not someone on salary who brings home the same paycheck month after month.

When you’re someone whose income fluctuates

Every time a mortgage lender gives out a loan, it runs the risk of losing money by not getting repaid. (And in case you were wondering, lenders don’t take much comfort in foreclosure as their fallback option, as it’s a complicated process for them to navigate.) As such, lenders tend to do a pretty thorough job of vetting applicants’ finances before writing these large loans.

You can bet on your mortgage lender checking your credit score, reviewing your existing debts, and generally examining your credit report as part of the application process. But you should also expect to have to take extra steps to show proof of income.

For salaried workers, providing proof of income often means showing a few recent pay stubs. You may also need to provide a recent W-2.

When you’re self-employed, you often do not make the same amount of money each month. So your lender needs to get a general sense of what your income looks like.

To that end, expect to have to provide tax returns from the past two years. If you own a business, you should expect to submit a copy of your personal tax returns as well as your business returns.

You may also need to provide added proof of income, such as:

A list of current clients you work withProof of a current professional licenseBank statements from the past two years

How to increase your chances of getting approved for a mortgage when you’re self-employed

Plenty of mortgage lenders write loans to freelance employees. But if you want to increase your chances of success, it’s worth taking these steps:

Boost your credit score, whether by paying bills on time or checking your credit report for errors and correcting themLower your debt-to-income ratio by paying off an existing installment loan or credit card balanceProvide your mortgage lender with copies of existing contracts with clients that show you’ve got work lined up for the foreseeable futureShop around with different lenders, which could also help you snag the best mortgage rate possible

When you’re self-employed, you generally need to jump through some extra hoops to prove that you’re capable of paying your loan back. But if you’re willing to make that effort, you may find that getting a mortgage isn’t as hard as you think.

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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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First-time abatement can help taxpayers in good tax standing avoid penalties — if you can qualify. Read on to learn more. [[{“value”:”

The American tax system is complicated, and the idea of paying penalties can be especially scary if you, like most, aren’t super familiar with how it all works. If you have to pay a tax penalty for not filing on time or failing to pay, there may be something you can do to lessen that burden. It’s called first-time abatement, and if you qualify, it can actually reduce the penalties you owe.

Here’s what you need to know about it.

What is first-time abatement?

First-time abatement is administrative relief provided by the IRS that’s available to those who are in good tax standing. That means you can’t have had any penalties for the previous three years’ of tax returns, and you have to have filed the same tax return type for those years. (Hence the phrase “first-time.”)

You also can’t have four or more Failure to Deposit penalty waiver codes in the past three years, and any Failure to Deposit penalties can’t have been charged for Electronic Federal Tax Payment System (EFTPS) avoidance, per the IRS.

For those who qualify, it can remove any failure to file and failure to pay penalties that would otherwise apply. So for example, if you owe $10,000 on last years’ taxes, you would be subject to a 0.5% failure penalty, or $50 per month. First-time abatement would either wipe that out or at the very least, reduce it.

How to file for first-time abatement

You should receive a letter or notice about your tax situation from the IRS if you owe tax penalties, and if so, there will be a toll-free number listed that you can call to request first-time abatement. While some requests can be accepted over the phone, keep in mind that you may have to send a written statement or Form 843, Claim for Refund and Request for Abatement.

You can also appeal a first-time abatement rejection if you feel that you should have been granted that. But once you’re approved, the IRS would then either reduce or remove the related penalties and subsequent interest.

How to shore up your tax situation this year

If your tax situation has proven difficult to predict, leading to issues like failure to pay, it’s a good idea to start using tax software to help you file your tax return correctly and on time. Plus, depending on the program you choose, it may provide access to educational materials that can help you better understand your tax situation and plan accordingly. Or, if you prefer a more personal option, a qualified tax professional can help. Once you find a potential tax preparer, be sure to check their credentials using the IRS’s directory of federal tax return preparers to make sure they’re up to the task.

You may also want to consider starting to pay your taxes quarterly (this is generally required if you’re self employed or operate a freelance business.) You may even want to start paying monthly, since that may be easier to keep up with and track. Either way, you can use IRS Direct Pay to get it done. That way, you’ll be ahead of any potential tax bill, or at least reduce it.

The IRS doesn’t exactly make it easy for some individuals to avoid penalties, offering complex rules that can be difficult to follow if you don’t fall into the W-2 only camp. Still, if you take the time to understand your options, you’ll be much better prepared for next year’s taxes, and you’ll be able to avoid those pesky penalties.

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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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