Credit Cards, Featured, News

3 Ways to Get a Credit Limit Increase

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In many cases, a credit limit increase can sound like a good idea. If you start out with a credit limit of $2,000, for example, it’s good to know that your limit can increase in the future so you can have more buying power and find it easier to maintain a low utilization rate.

Sometimes, increasing your credit limit will not always be in your best interest because it can tempt you to overspend. In that case, it’s also easy to drive up your utilization rate, which is how much you are spending versus how much available credit you have. If your utilization rate gets higher than 20%-30%, it can begin to hurt your credit score.

What’s worse, by overspending and not paying your credit card balance off in full each month, you can get into debt.

If you’d like to secure a credit limit increase for a credit card and you know that you’ll have a good sense of self-control over your spending, there are quite a few ways to obtain a credit limit increase.

In this article, we’ll go over your different options when it comes to obtaining a credit limit increase and what you might want as an alternative.

How to Ask for a Credit Limit Increase on Your Current Card

One of the most common ways to obtain a credit limit increase is to simply ask for one. Most credit card companies and banks allow you to request a credit limit increase online or you can do it by phone.

We’ve gone through the process of requesting a credit limit increase with various banks in detail, including Wells Fargo, Capital One, Discover, Barclaycard, American Express, and more, if you need specific instructions regarding the process.

When requesting a credit limit increase, it’s important to make sure you meet the criteria to be considered. Some banks have certain requirements and like to see your account paid off and in good standing, a good credit score, and recent spending activity on your end.

If you haven’t been consistent about paying your credit card bill on time, that may work against you when you decide to request a higher credit limit.

On the other hand, if you’ve been managing your card well and paying your bill on time and would like more buying power, you may want to consider requesting a credit limit increase just to see what the end result will be.

Sit and Wait (Automatic)

Some credit card companies will offer you a credit limit increase automatically so you won’t need to do anything on your end.

If you’ve been spending on your card regularly, paying your bill on time, and keeping your utilization rate low, you may receive an offer to increase your credit limit automatically.

In this case, you can either accept or deny the offer. In most cases, accepting the offer will be your best bet if you like the credit card and use it from time to time. Even if you don’t use the card often, having a higher limit will only help lower your utilization rate as long as your spending doesn’t increase significantly.

Consider a New Card

If you’re on the fence about getting a credit limit increase, you can always consider signing up for a new credit card instead. Adding a new credit card to your wallet can increase the number of accounts you have, which can be a positive move for your credit if you only have a low number of accounts total.

Some new credit cards also have great sign-up bonuses so you can take advantage of more cash back offers, an extended 0% APR rate, balance transfers, etc., and these are benefits you might not be able to receive if you only increase the limit on your existing credit card.

To find out if you’ll be approved for a new credit card without hurting your score, you can get pre-qualified, which typically allows banks to peek at your creditworthiness via a soft inquiry. Getting pre-qualified for a credit card can reduce your risk of getting denied, and it’s pretty simple. Find out how to do it here.

Also, another reason why you might opt to just get a new credit card instead of considering a credit limit increase is if you don’t like or use your current card often. If you have an annual fee, a high-interest rate, and little reward opportunities with your existing card, it won’t make much sense to increase your limit and buying power.

Instead, signing up for a new and better credit card can be more beneficial and help you save money, especially if it has no annual fee.

Get a Personal Loan

If you are thinking about a credit limit increase because you need the extra money but don’t want to obtain a hard credit inquiry, a personal loan is an alternative option.

There are quite a few internet-only personal loan companies that allow you to see if you are pre-approved for a loan without involving a hard credit inquiry. Personal loans also tend to have lower interest rates than credit cards, so if your main intention is to borrow money to cover an expense, this may be a better option.

To see if you qualify for a loan, use our online tool here. You just need to fill out one application, and MagnifyMoney will check your rate with multiple lenders (without harming your credit score) to help you find the best offer.

What to Do If You Get Denied

If you request a credit limit increase and get denied, you’ll usually receive a response explaining why you didn’t get approved. Once you know why you didn’t get approved, you can take the necessary steps to fix the issues outlined and request an increase again if you wish.

Be mindful that some banks will let you request a credit limit increase at any time, while others may require that you wait a few weeks or months before putting in a request again.

While waiting it out and correcting the issues that contributed to you getting denied should fix the issue, you can also try either of the alternative options mentioned above as well if you didn’t get approved for a credit limit increase the first time around.

Benefits of Requesting a Credit Limit Increase

Obtaining a credit limit increase can be a smart move and provide you with benefits like increasing your credit limit and having more buying power in the event that you need to use your card for a large expense or emergency. With a higher limit, you are less likely to max out your card.

A credit limit increase will also make it easier for you to keep your utilization rate low and preferably below 20%. The process may also be easier than applying for a brand new credit card, especially if you receive credit limit increase offers automatically.

Drawbacks of Requesting a Credit Limit Increase

Increasing your credit limit isn’t always the best option for everyone, so it’s only fair to go over some of the possible drawbacks of making this decision.

In some cases, you’ll receive an extra credit inquiry, which could be a hard credit inquiry when you request a credit limit increase. Increasing your limit can also increase the risk of overspending and getting into debt.

There’s also no guarantee that you’ll get approved for a credit limit increase, so your request can get rejected. Also, if you have a card with a high-interest rate and an annual fee, you might be better off signing up for a better credit card.

Final Word

Requesting a credit limit increase can seem like a good idea on the surface, but it’s not the best solution for everyone. You must determine your needs, current situation, and intentions before going through with your decision.

If you decide to move forward with obtaining a credit card limit increase, be sure to pay your credit card balance off in full each month and keep your overall utilization rate at 20% or lower.

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Featured, News, Strategies to Save

Are Discount Gift Cards Worth the Hassle?

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Gift card exchange sites are places where you can buy and sell gift cards. If you’re unfamiliar with the gift card exchange craze, here’s the rundown of how you can benefit:

  • Selling – You can sell unused gift cards on these sites for cash or other gift cards. According to estimates published by Market Watch, $750 million in gift cards were expected to go unused in 2014. Before your card is one of many that go to waste, you can sell it and get your hands on some money instead.
  • Buying – Gift card exchanges also sell gift cards for less than their value. Say you want to buy an iTunes gift card for your cousin Joe’s birthday. You may be able to find an iTunes gift card with $100 on it that’s selling for $95 or a 5% discount.

There are quite a few gift card exchange websites you can use to find deals.

In this post, we’re going to take a look at the popular gift card exchange sites to compare savings and how each one works. We’ll also dig into the major gift card search engine, Gift Card Granny, to review the process of using it to shop for and sell gift cards.

Lastly, we’ll give you our take on whether or not the deals you can get from buying and selling cards are worth your time.

Buying and Selling Gift Cards

The how-to process of buying and selling gift cards is pretty similar for each gift card exchange site so we’ve broken down what you need to know in the following two sections.

Buying gift cards

Most sites allow you to buy both e-cards and physical gift cards. E-cards are delivered to you by email after purchase. Physical gift cards can take from several days to over a week to get to you through snail mail.

A factor that can make shopping for gift cards tedious is finding a site that has the card inventory that you need. Gift card availability varies from seller to seller. Some sites have loads of cards you can buy, and others have very few on sale from restaurants and stores you may never visit.

One very important to thing to mention before we compare savings is that customers have complained about buying cards from popular gift card sellers that didn’t work or had no money on them when they arrived. This is why gift card exchanges have money-back guarantee policies.

If you buy gift cards, you must choose an exchange site that has a money-back guarantee that lasts at least several weeks. This way you have enough time to receive the card, test the card, and request a refund if it doesn’t work. We’ve included the guarantee period in our savings comparison below.

How gift card discounts compare from site to site

For our shopping example, we want to buy a Macy’s gift card and we want the card to have as close to $50 on it as possible because it’s for a gift.

We searched for deals on CardCash/ABC Gift Cards, Cardpool, GiftCardBin, Giftcard Zen, and Raise because each of these six exchanges has no fees, a money-back guarantee, a variety of cards for sale, and a user-friendly website.

Here’s what we found:

Gift-Card-Purchasing

*CardCash and ABC Gift Cards are the same company but can offer different savings rates on gift cards. For Macy’s the savings happens to be the same.

ABC Gift Cards and CardCash take the cake for the best percentage off discount in this example at 13.25% savings.

But GiftCardBin gives you a Macy’s gift card with exactly $50 on it. The person receiving the gift will probably be more appreciative of getting a full $50 on the card than $43.90 (unless it’s a gag gift).

Overall, in this example we can get between 5% to 13% off of our Macy’s gift card.

Savings will vary depending on the type of card you’re looking for. Even the inventory and discount can change for Macy’s cards from day to day, but this gives you an idea of what’s offered.

Selling gift cards

Now let’s move on to selling those gift cards you have piled up from Christmas and your birthday.

Some exchange sites will take both e-cards and physical cards. For sites that will take e-cards off your hands, you type in the e-code that’s on the e-card to go through with the transaction. The company will give you a free shipping label to send in physical cards.

How deals for gift card sellers compare from site to site

Let’s say you’re sitting on a $50 Macy’s gift card and you don’t intend to shop at that store.

We searched for trade deals from CardCash/ABC Gift Cards, Cardpool, GiftCardBin, and Raise.

Here’s what you can get for a Macy’s card:

Gift-Card-Selling

As you can see, the most value is given when you trade a gift card for another gift card.

At a quick glance, Raise appears to give you the most cash back for the trade, but you have to factor in the listing fee and whether someone will buy the card for that asking price.

You may notice Giftcard Zen doesn’t make our list for places to sell your Macy’s card when it made our list for places to buy a Macy’s card.

We went to Giftcard Zen to see what the site offers for a card trade and found the company is not currently accepting cards from Macy’s. Again, inventory and what a site will accept is ever changing.

This is where Gift Card Granny comes into the picture and tries to make your life easier.

Instead of having to search each and every gift card site for deals, Gift Card Granny is where you can compare buying and selling opportunities in one place.

Gift Card Granny — The Gift Card Exchange Aggregate

If you want to search a number of gift card exchange websites all at once, Gift Card Granny is a great source. The shopping experience on Gift Card Granny is like shopping for hotels and flights on Kayak.

You type in the gift card you’re looking to buy or sell, and the Gift Card Granny search engine pulls up deals from various gift card sites, including sites we mentioned above.

We went through a scenario with Gift Card Granny to weigh in on the recommended deals. Here’s what we found.

Finding places to buy cards using Gift Card Granny

Let’s go back to our initial scenario where we were buying our cousin Joe an iTunes gift card for his birthday.

Gift Card Granny came up with a bunch of options after we typed iTunes into the search bar.

gcg-options-iphone

We clicked on Card Kangaroo first since the check mark means it’s a Gift Card Granny Premier Partner. After getting redirected to the Card Kangaroo site, we discovered that there are no iTunes gift cards available even though the deal is listed on Gift Card Granny. It may be because Gift Card Granny has a lag in inventory updates.

This doesn’t come as a complete shock since Card Kangaroo was left off of our roundup from above for having a pretty slim gift card stock for buyers.

itunes-giftcards

So we decided to dig into two more options, GiftMe and Gift Card Spread. GiftMe has the highest savings percentage on the list, and Gift Card Spread is another Gift Card Granny Premier Partner.

GiftMe turns out to be an app that you need to download to your phone first before you can buy and sell your cards. We downloaded the app and found that there is indeed a $100 iTunes gift card available for $88.52.

GiftMe-App

To buy a card on GiftMe, you have to fill out your name and address. You also have to take a photo of the front and back of your credit card to be verified before purchase.

According to the app FAQ page, GiftMe will delete the photo after verification, and the app is PCI compliant. PCI is a security standard for transmitting credit card data, but to err on the side of caution, you probably shouldn’t be sending photos of your credit card to anyone.

That leaves the third and final top savings option that we looked into, Gift Card Spread. Gift Card Spread has iTunes gift card inventory for a little over 10% savings.

Gift-card-spread

You need to sign up for an account to buy a card from Gift Card Spread. In some cases, you may have to verify yourself as the credit card holder before purchasing by answering questions or going on a three-way call with the company and your credit card issuer.

Based on this experience shopping on Gift Card Granny, you’ll probably have to click around through several deals before you find a gift card seller that has the right stock and that doesn’t have a buying process that’s asking for too much of your personal information.

The exchanges we listed in our large roundup above appear on Gift Card Granny but not as one of the top savings options.

Finding places to sell cards using Gift Card Granny

Gift Card Granny will tell you the offers available for the type of card you want to sell.

The options will include places where you can sell your card instantly and others where you have to list your card for sale until someone buys it, such as Raise (we talked about Raise above) and eBay.

gcg-giftcard-sell

Be careful when selling cards on eBay because scams are rampant. You can even take a peek at the eBay community discussions here and here where someone shamelessly explains how they’ve scammed sellers out of gift cards.

A common way buyers seem to scam sellers is by asking for the serial number of a gift card to “confirm the amount” and then draining the card before paying. Scammers may also receive the card and then, to get a refund, complain to eBay that they never got it.

The bottom line is, proceed with caution when selling gift cards on eBay. It may be best to avoid the risk entirely.

Overall when it comes to buying and selling gift cards, Gift Card Granny does make it easier to compare options head-to-head even though you have to do some detective work to find good deals.

Gift Card Exchanges: A Much Better Deal for Buyers than Sellers

An honest opinion about the gift card buying process is that going through tedious sign-up forms and verifications for minimal savings (i.e., a $1.50 discount on a $15 iTunes gift card) may not be a good use of your time. Companies don’t want to get burned in the transaction, so they take extra precautions to confirm that your form of payment will work before releasing a gift card to you.

It’s an entirely different story if you can get something like 20% off of a $200 iTunes gift card. The $20 savings could be well worth the wait but only if the verification process is secure. Taking photos of your credit card or ID is still a little much even for $20.

As for the selling aspect, be aware again that this isn’t quick money (unless the site you exchange with has physical locations). The exchange website will need to confirm your gift card balance, which can take several business days, before they’re willing to send you cash or another card of your choosing.

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College Students and Recent Grads, News

Watch Out for This 16% Student Loan Fee

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Watch Out for This 16% Student Loan Fee

The Trump administration has made it possible for debt collectors to once again charge hefty fees to some student loan borrowers who miss several payments in a row — even if those borrowers make an effort to get back on track right away.

These fees, which can be as high as 16%, are typically levied against the borrower’s entire outstanding loan balance and accrued interest charges. The so-called “collection charges” are meant to help recoup losses incurred by pursuing unpaid debts.

In a recent letter, the U.S. Department of Education rescinded an Obama-era rule that forbade guaranty agencies — debt collectors charged with recouping unpaid federal student loan debt — from charging defaulted borrowers collection fees if the borrowers began a repayment plan within 60 days of defaulting on their loans. In the new letter, the agency said the previous guidance should have included time for public comment and review before it was issued.

The reversal comes days after the Consumer Federation of America released an analysis of Department of Education data that shows the rate of student loans in default has grown 14% from 2015 to 2016.This certainly isn’t the first Obama-era rule or legislation the new administration has sought to undo, with an Obamacare replacement plan on its way to a vote in the House and plans to unravel regulations meant to crack down on for-profit colleges and universities.

A Department of Education spokesperson declined to comment.

Bad news for 4.2 million borrowers

The changes will impact borrowers who took out federal student loans under the old Federal Family Education Loan (FFEL) Program. The FFEL Program was phased out in 2010 and replaced with the current Direct Loan Program, but millions of borrowers are still paying back FFEL loans issued prior to that change. Those who have loans under the Direct Loan Program will not be impacted by the changes.

As it stands, some 4.2 million FFEL borrowers are currently in default on loans that total $65.6 billion, according to Department of Education data. Loans are considered to be in default after 270 days of nonpayment.

The changes will raise the stakes for borrowers struggling to make payments on their federal student loans, and make it even more important for those borrowers to avoid missed payments.

Fortunately, federal student loan borrowers are eligible for several flexible repayment methods, as well as forbearance and deferment.

An Ongoing Debate

The debate over a servicer’s right to charge borrowers a default fee has gone on for several years.

In 2012, student loan borrower Bryana Bible sued United Student Aid Funds after she was charged more than $4,500 in fees after defaulting on her loans. She started a repayment agreement to resolve the debt within 18 days, but was still charged fees.

The Department of Education sided with Bible and said companies had to give borrowers 60 days after a loan default to start paying up before they are charged fees. The Obama administration backed the Department of Education and issued the letter when the court asked for guidance on the issue.

There is one clear winner with this rule change: debt collectors.

“Rescinding the [previous guidance on collection fees] benefits guarantee agencies at the expense of defaulted borrowers,” says financial aid expert Mark Kantrowitz. He adds the change may increase the cost of collecting defaulted federal student loans, since borrowers will have less incentive to quickly rehabilitate their defaulted student loans.

What Happens If I Default on My Federal Student Loans?

Federal student loans are considered to be in default after a borrower misses payments for 270 days or more.

About 1.1 million federal student loans were in default status in 2016, according to Department of Education data.

The consequences of going to default are severe.

  • The entire balance of your loan + interest is immediately due
  • You lose eligibility for deferment, forbearance, and flexible repayment plans
  • Debt collectors will start calling
  • Your credit will suffer
  • And … your wages and/or tax refunds could be garnished

Are you missing federal student loan payments?

You’ve got options.

  • Contact your loan servicer ASAP
  • Find out if you’re eligible for a flexible repayment plan
  • Or ask about forbearance

Already in default?

  • Ask your loan service about loan rehabilitation
  • If you make 9 on-time payments over the course of 10 months, your default status will be lifted

You’ve only got one shot to rehabilitate your federal student loans after going into default. Don’t miss it.

 

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Articles, News

Why You Should Apply the 72-hour Rule to Your Tax Refund

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Why You Should Apply the 72-hour Rule to Your Tax Refund

Ka-ching! Your tax refund just hit your checking account. Time to apply the 72-hour rule.

Whether your refund is in the thousands or hundreds, the urge to spend the funds might instantly become overwhelming. Maybe you already had an idea of what you want to spend the money on and you’re all set to hand over your refund for it. Or, maybe the money means you finally have enough to make a large purchase you’d otherwise need to save for.

Whatever your reason, don’t spend your refund quite yet. If it’s not an immediate emergency (read: root canal, car accident, flood, etc.), let the cash burn a hole in your pocket for about 72 hours.

Journalist and money expert Carl Richards came up with the “72-hour rule” to kick his habit of buying every book he wanted on Amazon, ending up with a pile of unread books. Now, he says he lets a book sit in his shopping cart for at least 72 hours before hitting “buy,” and he’s saving money only buying books he will actually read. You can apply a similar practice to your spending habits.

Why wait 72 hours?

Our brains respond positively to instant gratification. It’s why so many of us find it difficult to save money or lose weight. We want the item or food now, and when there’s nothing stopping us, why wait?

You need the space between receiving the money and spending it to think. The shorter that space is, the less time you have to think and the more likely you are to spend the funds impulsively.

“People often look at their tax refund as found money like lottery winnings or inheritance. The temptation to spend surprise money on something fun or frivolous is strong,” says Denver, Colo.-based Certified Financial Planner Kristi Sullivan.

You want to avoid doing that. Your tax refund isn’t lottery winnings or an inheritance. It’s your hard-earned money being returned to you with no interest gained.

Tax refunds averaged $2,860 in 2016, according to the IRS. This year, a SunTrust survey found about 1 in 4 Americans already planned to spend their refund money on a large purchase before they even received the funds. That proportion rises to 36% among millennials and 40% among Gen-Xers, according to SunTrust.

That’s no bueno, considering the average citizen admits they can’t pull together $400 in case of an emergency.

James Kinney, a certified financial planner based in Bridgewater Township, N.J., says “hitting the pause button on spending impulses gives the rational brain time to think” of more practical ways to use the money like getting out of debt, contributing to a college savings fund, or adding to your savings.

Although he acknowledges when you’re living paycheck to paycheck, it’s a little harder to resist a sudden — albeit predictable — boost to this month’s budget.

“People feel constrained by their paycheck all through the year, then suddenly this windfall of money gives them the ability to splurge. The temptation can be hard to resist,” says Kinney.

Here are a few ways you can manage the temptation, and the time.

While you wait…

Weigh your wants vs. needs

The waiting period is supposed to help you to spend your tax refund responsibly, right? Consider all of the expenses the money could go toward. Should you buy the new iPad or pay off your credit card? How about that car loan? Time to weigh your options.

Sullivan says that means you should pit your “wants” against your “needs.”

“A need that you haven’t already bought is rare. Wants are everywhere. Time to reflect might have you making a more mature decision with your money,” says Sullivan.

Do some soul searching to see where your financial priorities lie. You might find your need to pay off your credit card this month to avoid paying more in interest outweighs how badly you want that new gadget. Think about it.

Review your finances

Since your tax refund might consume your every thought for three days, you might as well use the time to think about your overall financial picture.

“Sit down and think about other pressing financial issues, and how you plan on paying for them,” says David Frisch, a Melville, N.Y.-based financial planner. He suggests you review bank statements, brokerage accounts, long-term goals, and other financial considerations, then give some thought to whether or not you’re on track to achieve them.

For example, if you realize you don’t have enough in your emergency fund to cover three to six months of expenses, you might decide to put the money there instead of spending it. Or, if your refund could completely pay off a high-interest debt like a credit card, you might decide to free yourself from the debt burden.

Make sure you don’t get a huge refund every year

Most Americans receive a refund because the government withheld too much in taxes. The government uses information you gave them to decide how much of your paycheck to withhold each pay period.

“Changing your withholding will give you more of your money during the year so that you will not get a large refund that you might be tempted to spend frivolously,” says Alfred Giovetti, president of the National Society of Accountants.

You can change information on your withholding forms on your own if you’d like. Use this IRS calculator to determine your proper withholding and figure out what information you need to correct on your W-4 form. Then, contact your employer’s human resources department to turn in a new W-4 with the correct information.

If you’d rather have some assistance, you can contact a professional. Work with your accountant or financial adviser to change information on your W-4 and its equivalent withholding form for the state in which you reside.

“Plan with a good tax accountant to get a small refund or a small liability by changing your withholding, so that you do not rely on the refund as ‘mad money,’” says Giovetti.

Treat yourself

We admit, waiting sucks, but it doesn’t have to be complete torture. Sullivan suggests taking the edge off with a small reward for each day you wait.

“It could be an ice cream cone, a long phone chat with a friend, an hour reading a trashy novel, or whatever makes you happy,” she says.

Just make sure the reward you choose isn’t too expensive, and you should avoid getting into more debt. Your “reward” could serve as a break while you comb through your finances.

The takeaway

Take some time to think before spending whenever you receive unexpected income, and you might make better spending decisions. Maybe you need only 24 hours, instead of 72, or maybe you need a little longer to decide what to do with money, but the same lesson applies. If you’re considering a purchase that’s a “want” and not a “need,” think before you buy.

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Featured, News

Should You Take Social Security Benefits at 62?

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Should You Take Social Security Benefits at 62?

The vast majority of workers choose to receive their Social Security benefits as soon as they turn 62. And they could be leaving a lot of money on the table. In fact, nearly three-quarters of the 39 million retirees in the U.S. are receiving reduced benefits because they began taking Social Security before they reached full retirement age, according to the Social Security Administration’s 2015 Annual Statistical Supplement.

In fact, you’ll only receive 75% of your benefits if you start taking Social Security at 62. For every year until you reach “full retirement age” (66), the greater your benefit check will be. The chart below shows you exactly how much your benefit will be affected by electing your benefits early.

screen shot 1

But decisions like this are rarely cut and dried. If you’re younger than 62 and contemplating when you should elect your Social Security benefits, we’re going to discuss the factors you should consider first.

3 Reasons You Should Take Social Security Benefits at 62

The Social Security retirement benefit is a bit of misnomer because you don’t actually have to be retired to receive the benefit. Under certain circumstances, electing your Social Security benefit at 62, or any other time before full retirement age (66), could be the right decision for you.

  1. You need the income to meet your basic daily needs. When considering whether or not you should begin receiving Social Security benefits at age 62, look at your budget. Since Social Security will effectively serve as a paycheck, think about whether or not you actually need the additional income.
  2. You don’t have longevity in your family. Nobody wants to leave money on the table. If you don’t have longevity in your family or simply expect your lifespan to be shorter than average, it is worth considering taking your benefits early. Just keep in mind that upon your death, however, your spouse will receive a lower survivor’s benefit than he or she would have if you had waited.
  3. You need to be retired. There are a host of indications that it is time to retire. If you’re realizing one or more of them, but your retirement savings are not enough to sustain your lifestyle, electing your benefits at 62 could be a wise decision.

3 Reasons to Wait to Take Social Security Benefits Until After Age 62

The most common reason someone will tell you to wait until full retirement age is that your annual benefit is reduced if you take it sooner. If you elect benefits at age 62, expect to receive a 25% smaller benefit that you would receive at age 66, for the rest of your life. In addition to the downside of a reduced benefit, think about how these factors apply to your life:

  1. You can afford to wait. If your budget does not rely on the additional income that will be provided by Social Security, your patience will be handsomely rewarded. Your benefit amount increases with each year you wait, up until you turn 70.
  2. You’re still working and making too much money. “Too much money” sounds quite relative, but in terms of Social Security, individuals who elect benefits before full retirement age will have their benefits reduced by $1 for every $2 earned over $16,920. For people older than full retirement age, but younger than age 70, benefits will be reduced $1 for every $3 earned over $44,880.
  3. You will get a larger benefit if you wait.
  1. You’re rewarded for your patience in two ways, and the first is through earnings alone. Your Social Security benefit is determined by the 40 highest-earning quarters of your work history. So, if you’re 62 or older and earning more money each quarter, it could mean a larger monthly benefit when you eventually elect Social Security.
  2. Whether or not your earnings increase during the final quarters of your working years, the Social Security Administration will also reward you for waiting to take your benefit until age 66 or later.

screen shot 2

3 Ways to Boost Income and Avoid Taking Social Security Benefits Early

The Annual Statistical Supplement does not discuss why so many people elect benefits before full retirement age, but if you are considering an early election of your benefits due to an income need, judge the following first:

  1. Your budget
  1. Can you generate enough monthly savings to offset your Social Security benefit before full retirement age? The benefits of waiting to take your Social Security benefit far outweigh the costs, so if you’re able to apply a short-term solution for a larger, long-term benefit, it could be in your best interest.
  1. If retired, take a part-time job
  • According to the 2015 Annual Statistical Supplement, the average monthly benefit for a retired worker was $1,329. If after assessing your monthly budget, and the deficit you hoped to fill with Social Security is close to or below what your monthly benefit would be, think about a part-time job. Your annual income will likely fall below the threshold for a reduced benefit, and you will avoid a lifelong reduction in Social Security benefits.
  1. Consider adjusting your portfolio to a more income-oriented allocation
  • Disclaimer: This approach should be discussed with a professional. If you have retirement or investment accounts, you have two strategies at your disposal to help generate income:
    1. Take dividends in cash, rather than reinvesting. While this may provide a stream of income, it could also slow the growth of your investments.
    2. Adjust your asset allocation to one that is income-oriented. Then, take the dividends in cash.
  1. Acknowledging that this approach is more complicated than the previous two, it is also a prudent one because it is reversible. The last thing you want to do, as you approach what could be decades in retirement, is permanently reduce any stream of income.

The Bottom Line

Think about the timing of your Social Security like a tattoo. Both can act like a double-edged sword in your life and, for discussion’s sake, are irreversible. Deciding to get a tattoo is not always a good decision; similarly, electing to take Social Security at 62 is not always a smart choice either. However, the reverse is also true, and the only way to know if this choice is right or wrong is to weigh the factors at play in your life against the consequences of your decision.

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Best Places to Retire Early 2017

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Best Places to Retire Early 2017

The rise of the FIRE (Financial Independence and Retiring Early) movement has given way to a new emphasis on retiring early. Rather than leaving the workforce at the typical age of 62, FIRE retirees aim to retire in their 40s or 50s. This lofty goal typically requires an aggressive savings plan, as early retirees must live off their savings until they can expect to withdraw benefits like Social Security or dip into their 401(k) or IRA savings without facing a penalty.

In a new study, MagnifyMoney ranked 217 U.S. cities to find the best and worst places to retire early.

Methodology

We sought to find cities that had a combination of a low cost of living (highest priority), a great quality of life and access to employment if needed to supplement income.

Each city was given a final composite score out of 100 possible points. The composite score was based on those three factors, each weighted differently: cost of living (50%), quality of life (30%), and employability (20%).

Within each of these three categories, we looked at specific elements that play a key role in determining the best city to retire early.

Cost of Living: The cost of groceries, housing, utilities, transportation, health care and other goods and services.

Quality of Life: Weather (average annual temperature and number of sunny days); access to arts and entertainment services; walkability.

Employability: Early retirees may choose to incorporate part-time work into their lives even after they retire to stay active and supplement their existing savings. We looked at the minimum wage, unemployment rate, average commute time and state income tax for each metro.

Key Findings

Looking for a low cost of living? Move to the South or Midwest

Cities in the South and Midwest dominated the list of best places to retire early, mostly due to a lower average cost of living than any of the four regions studied. Southern and Midwestern cities boasted an average cost of living score of 63 —13 points higher than the average score across all 216 cities studied of (50).

The South and Midwest also boasted the two highest overall early retirement scores (57 and 56, respectively).

The South may be the best bet for early retirees looking for the option of part-time work to supplement their income as well. The region scored the highest employability score of any other area. The employability score was based on the unemployment rate, minimum wage, average commute time and state income tax.

Favor quality of life over low cost of living? Head Northeast

-Early retirees will need to save a pretty penny to retire in the Northeast, but they may find retirement more entertaining at least. Although the Northeast earned the highest score of any region for quality of life (67, well above the national average of 50), the region suffered due to its relatively high cost of living. It earned the lowest cost of living score of any region with a paltry 17.

Western cities had a poor showing in all three categories, barely eeking out a higher final score than the Northeast. But whereas the expensive Northeast was buoyed by its relatively high quality of life score, the West was dragged down on all three fronts.

The 10 Best Cities to Retire Early

The 10 Best Cities to Retire Early

The 10 Worst Cities to Retire Early

10-Worst-Cities

 

RANKINGS BY REGION

Region-Wise

MIDWEST: The 10 best cities to retire early

MIDWEST-10-Best-Cities

MIDWEST: The 10 worst cities to retire early

MIDWEST-10-Worst-Cities

NORTHEAST: The 10 best cities to retire early

NORTHEAST-10-Best-Cities

NORTHEAST: The 10 worst cities to retire early

NORTHEAST-10-Worst-Cities

SOUTH: The 10 best cities to retire early

SOUTH-10-Best-Cities

SOUTH: The 10 worst cities to retire early

SOUTH-10-Worst-Cities

WEST: The 10 best cities to retire early

WEST: The 10 best cities to retire early

WEST: The 10 worst cities to retire early

WEST: The 10 worst cities to retire early

Sources:

Cost of living:

http://coli.org

Quality of life:

Employability:

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Costco is Raising the Cost of Membership Fees — Here’s How Much More You’ll Pay

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For the first time in six years, Costco will hike the cost of its annual membership fee for individuals and businesses. The increased prices will go into effect June 1, 2017, the wholesale retailer announced on Thursday.

The raise will affect about 35 million members.

Here’s how much more you’ll be paying for your Costco membership:

Primary Costco Members

“Primary” Costco members (both individuals and businesses) pay $5 more, bringing the cost of an annual membership to $60.

Executive Costco Members

Members at the “Executive” tier, who earn 2% cashback on their purchases for the year, among other perks, will see their annual membership fee rise by $10 to $120. Executive members also receive discounts on Costco Services such as check printing, identity theft services and roadside assistance.

Perhaps to dull the sting of the higher membership fee, Costco has decided to raise the cap on the amount of cashback executive members can earn each year — from a maximum of $750 to $1000.

How to save on Costco shopping

Costco membership fees might be going up soon, but Costco members can recoup some of the lost funds in savings by using certain credit cards.

Costo’s Anywhere Visa card is a good option for frequent shoppers. The card has no annual fee and earns better rewards than its predecessor, including 2% back on Costco purchases, 4% on gas, 3% on restaurants and 1% on everything else.

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New Study Shows Number of Americans with Past-Due Medical Debt Down 6%

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Fewer Americans are struggling to pay back medical debt.

The rate of American adults aged 18 to 64 with past-due medical debt dropped from 29.6% to 23.8% between 2012 and 2015, according to new study released by researchers at the Urban Institute.

Not surprisingly, people who did not have insurance were more likely to say that they currently had unpaid bills from a health care or medical service provider (a rate of 30.5%). But with the rise of high-deductible health plans, even people who have insurance find themselves in medical debt — 22.8% of insured consumers had past-due medical debt, according to the study.

When researchers looked at past-due debt by region, the differences were particularly staggering. There was “enormous variation across states,” according to Senior Research Associates Kyle Caswell and Michael Karpman, who authored the study.

Eight of the 10 states with the highest rates of past-due medical debt were in the South, including Mississippi, Arkansas, West Virginia, South Carolina, Kentucky, Oklahoma, Alabama, and Georgia. The other two were midwestern states Indiana and Missouri.

The researchers could not point to a solid conclusion as to why Southerners were harder hit by medical expenses.

“Of course we would like to understand better why, but it does give us a starting point for asking questions as to why the population differs from state to state,” said Caswell.

Why are rates of past-due medical debt dropping? It would be easy to conclude that the drop is due to the implementation of the Affordable Care Act. People today are simply more likely to have insurance, as the rate of uninsured Americans has fallen from 16.6% to 10.5% since the implementation of ACA in 2013, according to the Kaiser Family Foundation.

But Caswell and Karpman said it would be a stretch to give all the credit to the expansion of health care under the Affordable Care Act. The steady drop in unemployment and a general improvement of the U.S. economy over the last few years could also play a role, making it more likely that people can afford to cover out-of-pocket medical expenses.

As the Urban Institute’s report found, simply carrying health insurance isn’t enough to protect consumers against unexpected medical bills. Their findings are bolstered by a recent report by the Kaiser Family Foundation, which found 70% of people with medical debt also have insurance, mostly through employer-provided plans.

How to Tackle Unpaid Medical Debt

In just moments, an unexpected medical emergency can put the average American family in thousands of dollars of medical debt. That can pose a burden, considering about of 47% Americans would struggle to scrape together $400 in case of an emergency according to the Federal Reserve’s 2016 Report on the Economic Well-Being of U.S. Households.

Families with medical debt say the debt undercut their ability to save and afford basic household needs, the Urban Institute’s study found. To cope, families may rely more on credit cards and other forms of debt to make ends meet.

According to the Consumer Financial Protection Bureau, outstanding medical debt makes up more than half of all collection notices on credit reports. Past-due medical debt can seriously harm your credit score. If bills go unpaid for long enough, consumers may wind up facing a lawsuit or even bankruptcy.

To help avoid these types of consequences, follow these tips to tackle medical debt you can’t afford to pay:

Ask for a detailed billing statement and check for errors

You may receive a billing statement from your insurer or medical provider, but it may not give the full picture of services you received. Request a detailed, line item statement and review it carefully for any errors. It’s possible you could have received treatment from an out-of-network doctor without your knowledge. Or, there may be duplicate charges or charges for care you didn’t receive. If you find errors, contact the provider directly and have them corrected and a new statement sent.

Negotiate with your medical provider directly

You might be able to negotiate down your medical debt or arrange a payment plan with the medical provider, whether it’s your doctor’s office, a hospital, or your insurer. Along the way, keep careful records of who you talk to and what was said. Here’s a step-by-step guide on how to negotiate a medical bill with a health insurance company.

Try a 0% APR credit card

If your bill isn’t overwhelmingly large, you could try paying the debt off with a credit card with an introductory 0% interest period. Since you won’t be charged interest, you’ll pay less over the period. Before you apply, make sure you’ll be able pay off the balance before the 0% interest introductory period expires.

Pay off medical debt with a personal loan

If you’ve been unable to negotiate or you are struggling to find a 0% APR credit card deal, a personal loan may be another option. Depending on your credit history, rates on personal loans range from 4.7% to 36%. We’ve pulled together a list of six great personal loan options here.

Negotiate a settlement with a collection agency

Past-due medical debt eventually gets charged off and sold to a collection agency. But that doesn’t mean your window to negotiate has totally closed. If you have access to enough cash, ask if you can settle the debt for a lesser amount and forgive the remaining balance. Just be aware that forgiven debts can be treated as taxable income in some cases.

Seek help from a medical billing advocate

If you’ve been unsuccessful in trying to negotiate down your medical debt, the debt has significantly damaged your credit, or you are on the brink of filing bankruptcy, consider reaching out to a medical billing advocate. Don’t confuse these advocates with debt settlement or repair firms, which should be treated with caution.

You can find a medical billing advocate through the National Association of Healthcare Advocacy Consultants or the Alliance of Claims Assistance Professionals. These services aren’t free, and whether or not it makes financial sense to hire a pro depends on how much money you stand to save by lowering your debts. Advocates typically charge about $80 to $150 annually, a flat fee or a percentage of your savings says Denise Sikora, Secretary of ACAP.

Look for a charitable foundation that can help

You may want to consider reaching out to a nonprofit for assistance. If you were diagnosed with a particular condition, look toward organizations such as the Lupus Foundation of America for individuals with lupus or the American Kidney Fund for those with kidney disease. You can also apply for grants from nonprofits that provide more general assistance such as the Patient Access Network and the HealthWell Foundation, which may be able to grant funds toward medication assistance or other medical costs. With these foundations, limits for assistance may depend on your diagnosis and other factors.

Consider bankruptcy as a last resort

If the debt is more than 50 percent of your annual income, bankruptcy might be a viable move to make. Let the hospital know you’re considering bankruptcy first, as they may then be open to negotiation. Be aware the filing bankruptcy can adversely impact your credit for years after the fact.

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Trump’s Congressional Speech Debrief: 5 Changes He Has in Store for Obamacare

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Trump’s Congressional Speech Debrief: 5 Changes He Has in Store for Obamacare

In his first speech to Congress Tuesday night, President Donald Trump outlined the overhaul he and his administration plan to make to the Affordable Care Act, known as Obamacare.

The proposed new health care plan now heads to the Congressional Budget Office and could face more changes as Democrats and Republicans battle over it in the House and Senate.

Trump urged Congress “to save Americans from this imploding Obamacare disaster.”

The president promised to repeal and replace Obamacare. Here are five key ways he plans to dismantle the current health care system.

You could be in a high-risk pool if you have a pre-existing condition

“First, we should ensure that Americans with pre-existing conditions have access to coverage, and that we have a stable transition for Americans currently enrolled in the health care exchanges,” Trump said in his speech Tuesday night.

A draft of revisions to the Affordable Care Act leaked to Politico on Feb. 24 references high-risk pools, although Trump did not discuss them in his speech.

States would have the ability to create high-risk pools for people with pre-existing conditions who are searching for health care. According to the draft, states would receive $100 billion over nine years in “innovation grants” that would be used to fund high-risk participants, news outlets such as CNN reported.

“High-risk pools would need a lot of taxpayer funding to work properly, experts say,” the Commonwealth Fund, a private nonpartisan foundation that supports independent research on health and social issues, tweeted after Trump’s speech.

You could receive a tax credit — even if you don’t deserve one

Tax credits and expanded health savings accounts could help Americans purchase their own coverage. It should be “the plan they want, not the plan forced on them by our government,” Trump told Congress.

Tax credits based on age, with the elderly receiving higher tax credits, would take the place of Obamacare’s income-based subsidies.

“For a person under age 30, the credit would be $2,000. That amount would double for beneficiaries over the age of 60, according to the proposal,” reported Politico prior to the speech.

The credits were also heavily criticized by some GOP members.

“So the headline is that the GOP is reducing subsidies to needy individuals when in fact, the growth of the taxpayer-subsidized reimbursements will actually increase,” Rep. Mark Meadows (R-N.C.) told CNN. “The total dollars that we spend on subsidies will be far greater. So you can be a millionaire and not have employer-based health care and you’re going to get a check from the federal government — I’ve got a problem with that.”

“What are tax credits & savings accounts going to do for those who don’t have money to spend on healthcare in the first place?” tweeted Advancement Project, a national civil rights organization.

Chris Rylands, a partner in the Atlanta office of Bryan Cave LLP, says many people are worried that the tax credits will make it difficult for low-income participants to afford coverage.

Under the current system, many individuals eligible for a subsidy are immune to price hikes in insurance because the government picks up such a large portion of the cost. The proposed Republican system might make them better consumers, says Rylands, whose practice focuses on employee benefits.

“However, given the complexity of health insurance plans and the opacity of the pricing of health care services, it’s not clear whether individuals can really become well-informed consumers,” Rylands says.

You could lose Medicaid

Trump said his changes would give governors the resources and flexibility they need with Medicaid “to make sure no one is left out.”

Under the Trump administration’s revisions, Medicaid would be phased out within the next few years. Instead, states would receive a specific dollar amount per citizen covered by the program. States would also receive the ability to choose whether or not to cover mental health and substance abuse treatment.

“Medicaid is the nation’s largest health insurer, providing coverage to nearly 73 million Americans,” tweeted the Commonwealth Fund after Trump’s speech. In a follow-up tweet, it said capping spending for Medicaid will reduce coverage rates and increase consumer costs and the federal deficit.

However, the Center for Health and Economy, a nonpartisan research organization, reported in 2016 that block-granting Medicaid in the states will lead to additional savings. H&E projects that the decrease in the use of Medicaid funds, by block-granting Medicaid in the states and the repeal of the Medicaid expansion, would be an estimated $488 billion from 2017 to 2026.

Rylands points out that this will not be a popular provision in Congress.

“What I heard here — although [Trump] didn’t say so in so many words — is that they want to try to turn Medicaid into a block grant program, similar to what was done with welfare reform in the 90s,” Rylands says. “However, I suspect many governors from both parties will not like this because it could mean states will pick up more of the tab for Medicaid.”

You could pay less for drugs

Trump proposes legal reforms to protect patients and doctors from unnecessary costs that make insurance more expensive and bring down the “artificially high price of drugs.”

Alongside medical device manufacturers and insurers, the pharmaceutical manufacturing industry is obligated by the Affordable Care Act to pay a yearly fee. It was determined the industry would pay $4 billion in 2017, $4.1 billion in 2018, and $2.8 billion each year after. However, proposed revisions to the Affordable Care Act include repealing the tax.

Some consumer advocacy groups are hopeful that repealing the taxes will reduce drug prices.

“From life-saving cancer drugs to EpiPens, high Rx prices push critical care out of reach for those who need it,” tweeted AARP Advocates, a nonprofit advocacy group for senior citizens.

You could purchase cheaper health insurance across state lines

“Finally, the time has come to give Americans the freedom to purchase health insurance across state lines — creating a truly competitive national marketplace that will bring costs way down and provide far better care,” Trump told Congress.

Under the current law, many states have the choice whether or not to allow insurers to sells plans between states. However, even when allowed, there isn’t much incentive for health care providers to do so.

Difficulty building a network and attracting enough customers to create a large enough risk pool makes this option unappealing to insurers, the Center for Health and Economy reported.

Whether this proposed change will result in a healthy competition in the industry or in a race to the cheapest offer remains to be seen, says Rylands.

“This has the potential to undermine traditional state regulation of insurance … since it would allow insurance companies to sell into a state without having to comply with that state’s particular insurance laws,” Rylands says.

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Tax Tips for Recent College Graduates

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Tax Tips for Recent College Graduates

When life changes, so do your taxes, and graduating from college brings several life changes that can affect your tax return. You may go from being claimed as a dependent by your parents to filing on your own for the first time. You may move out of state, collect a paycheck for the first time, and start paying off student loans. All of these events present opportunities to save — and costly pitfalls to avoid. To help you keep more of what you earn in this next phase of life, check out these tax tips for recent college graduates.

Figure out if your parents can still claim you as a dependent

If you just graduated, you may still be eligible to be claimed as a dependent on your parents’ tax return. Dependency rules are complex, but essentially, for your parents to claim you as a dependent:

  • you must be under age 24 at the end of the year,
  • you must be a full-time student (enrolled for the number of credit hours the school considers full time) for at least five months of the year,
  • you must have lived with your parents for more than half the year (you are deemed to live with your parents while you are temporarily living away from home for education), and
  • your parent must have provided more than half of your financial support for the year.

If you meet all of these tests, your parents can still claim you as a dependent and take advantage of the dependency exemptions and education credits.

Even if your parents claim you as a dependent, you may still be required to file your own return if you had more than $2,600 of unearned income (interest, dividends, and capital gains) or more than $7,850 of earned income (wages or self-employment income).

Get reimbursed for moving expenses if you moved in order to take a new job

If you moved for a new job after graduation, you might be able to deduct any unreimbursed moving expenses, as long as the new job is at least 50 miles away from your old home. Those expenses include costs to pack and ship your belongings and lodging expenses along the way, but not meals. You can also take a deduction for 17 cents per mile driven for 2017 (down from 19 cents per mile in 2016).

If you moved out of state, you might have to file two state returns if you had taxable income in both states. Many students have a part-time job while in school and take a full-time job in another state after graduation. Rules vary drastically by state. In some states, you will have to claim 100% of your income on your resident state return, then receive a credit for any taxes paid to another state. In this case, you may be better off working with a professional who can help guide you through filing in both states.

Make sure you’re withholding the right amount from your paycheck

When you start your new job, the human resources department will ask you to complete a Form W-4 to indicate how much of your paycheck you’d like your employer to take out for taxes. Working through the questions on the form is simple enough, but it doesn’t take into account how much of the year you’ll be working.

Most new graduates end up having too much federal tax withheld in their first year, effectively giving the government an interest-free loan, says Bradley Greenberg, a CPA and partner at Kessler Orlean Silver & Co. in Deerfield, Ill.

That’s because graduates rarely start new jobs right at the start of a new year. You may graduate in May and start working in June, or graduate in December but not find a job until February. Yet you are taxed as if you have been earning that pay for the entire year.

“The withholding tables are designed with the assumption that one makes the same amount of money for each pay period of the year, regardless of how many pay periods were worked,” Greenberg says. “For example, a June graduate starting a job on July 1 for $50,000 will have the same taxes withheld per pay period as a colleague with the same salary, marital status, and number of exemptions, but who worked the entire year.”

Greenberg recommends two courses of action for new graduates:

  1. Set up your withholding in your first year of employment so less tax is withheld. Then make sure you adjust it on the following January 1, so you don’t have too little tax withheld in your first full year of employment, or
  2. View this as a savings plan and file your taxes as early as possible next year to get your refund from the IRS.

Take advantage of student tax credits

If your parents can no longer claim you as a dependent, you may be eligible to claim valuable tax credits for any tuition you paid during the year. There are two tax credits for higher education costs: the Lifetime Learning Credit and the American Opportunity Credit.

For 2016, there is also the tuition and fees deduction (Congress failed to renew this deduction, which expired on December 31, 2016, so it is not available for 2017). The rules and income limits for each credit and the deduction vary, but the IRS offers an interactive tool on their website to help you determine which tax break applies to you.

If you used student loans to pay for your education, you can take a deduction for up to $2,500 of interest paid on a qualified student loan. If your parents made loan payments on your behalf, you are in luck. Typically, you can only deduct interest if you actually paid the debt, but when parents pay back student loans, the IRS treats it as if the money was given to the child, who then repaid the debt.

Don’t ignore your 401(k) or health savings account at work

New college graduates may be financially strapped and hesitant to divert part of their paycheck into a retirement plan or health savings account, but opting out means missing out on substantial tax-saving and wealth-building opportunities.

If your employer offers a matching 401(k) contribution, as soon as you’re eligible you should contribute at least enough to get the employer match. Otherwise, you’re missing out on free money. If you select a traditional 401(k), you can save on next year’s taxes. That’s because any contributions you make will be tax free, and they will reduce the amount of your income subject to federal income tax as well as Social Security and Medicare (FICA) taxes.

For better or for worse, many employers now offer high-deductible health insurance plans. These plans often come with health savings accounts (HSAs). Any money you set aside in an HSA can be used for any qualifying medical expense, from co-pays to prescriptions. The best part is that money you put into your HSA is not taxed, so you can potentially save a lot by using your HSA for medical expenses rather than paying out of pocket.

HSA funds stay in the account until you use them and are portable, meaning you can take it with you even if you leave your job. If you have big medical bills down the road, the funds can come in handy. If not, think of them as another tax-advantaged way to save for retirement.

Bring in a professional if you think you need help

If this is your first time filing on your own, you may be wondering whether you should do it yourself or pay someone to prepare your return for you. If you have a simple return with just a Form W-2 and perhaps some interest income, you could save money by buying some tax software and doing it yourself. MagnifyMoney’s guide to the best tax software is a great place to start.

But if you have dependents, investments, or a small business, you may be better off going to a reputable accountant.

Doing your taxes is never fun, but for recent college graduates, they may not be as big a headache as you might have heard. Keep in mind that tax laws often change, and everyone’s situation is a little different. But taking the time to know which tax breaks apply to you can make your post-college life significantly easier.

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