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Reviews, Strategies to Save

BB&T CD Rates and Review

Editorial Note: 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 prior to publication.

Trying to find BB&T CD rates
Source: iStock

As you may know if you’ve done a search for BB&T CD rates, their website is not a helpful place to turn for information. Beyond a basic overview of their CDs on their website stating that they have CDs with terms ranging from seven days to five years, they do not give details on their current rates. BB&T did not respond to email and phone inquiries from MagnifyMoney asking why the bank does not publish its CD rates online. When we called their customer service number, a representative said BB&T’s CD rates change on a daily basis and said the best way to learn about CD rates is to call or visit a local branch.

So that’s what we did.

We reached out to BB&T branches on September 5th. After conducting this research, it’s not surprising BB&T makes their CD rates hard to find — they’re terrible.

BB&T CD rates and products

BB&T offers CD terms ranging from as short as seven days to as long as five years. They have eight CD options, each with different investment goals.

7-day to 60-month

For short-term investments, BB&T offers CDs ranging from seven days to 60 months. These personal CDs offer a fixed rate of return along with the flexibility to focus on developing either a short- or long-term investment.

BB&T CD Term

APY

Minimum Deposit Amount

3 Months

0.03%

$1,000

6 Months

0.05%

$1,000

1 Year

0.10%

$1,000

18 Months

0.15%

$1,000

2 years

0.20%

$1,000

3 Years

0.40%

$1,000

4 Years

0.45%

$1,000

5 Years

0.50%

$1,000

Rates as of September 5, 2018

Not only can you find better CD rates at other banks and credit unions for each of the terms BB&T offers, you can get those better rates with smaller minimum deposits. BB&T’s offerings are far from the best in every term length above — you can see some of the top options in our monthly roundup of the best CD rates.

With the seven-day to 60-month BB&T CDs, there are no penalty-free options for withdrawing your funds prior to the CD reaching maturity. The early withdrawal penalty is the lesser of $25 or 12 months of interest for longer-term CDs. So with smaller initial deposits, early withdrawal penalties will negate any interest you may have earned.

Can’t Lose

As the name of this CD implies, whether rates go up or down, you can’t lose. Well, actually, you can: The APY is so low, you’re almost certainly going to lose money to inflation.

At the 12-month mark of the CD’s term, you may make one withdrawal without paying any fees. So if the market rate is higher than what you’re currently getting, simply withdraw the money and reinvest at the higher rate.

If, however, the interest rate you’re receiving is better than what’s currently available, you also have the option of making a second deposit into the Can’t Lose CD, up to $10,000. This locks in the rate for the new investment amount for the remainder of the term. So whether rates go up or down, you’ll lock in the higher rate.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

30-month "Can't Lose"

0.25

$1,000

No penalty for one
withdrawal after 12 months

As of September 5, 2018

Still, you can find many CDs with better APYs than BB&T’s Can’t Lose, whether you’re looking for a 12-month investment or longer.

Stepped Rate

Laddering is a way to stagger your CD investments so you’re able to take advantage of increasing rates. With the Stepped Rate option from BB&T, laddering is built into the CD product. The initial CD starts out at a lower rate and increases each year. For example:

Months

APY

12

0.30%

24

0.40%

36

0.55%

48

0.75%

As of September 5, 2018

This product also allows you to make an additional deposit each year (up to $10,000). So if the interest rate you’re receiving is better than the market, you can invest more money into your existing CD to make a higher return. But if the current CD market is offering better rates than your existing CD, you can simply take advantage of that offer and still make a higher return.

In addition, you may make a withdrawal from what you initially deposited into your Stepped Rate CD after two years. So, again, if the market changes dramatically, you may withdraw your money with no penalty and reinvest in a better option.

Or you could create a CD ladder on your own, choosing CDs with better rates than BB&T’s — higher rates are certainly available.

Add-on

The Add-on CD option from BB&T offers a 12-month CD at 0.10% and an opening deposit of $100. You’ll need a BB&T checking account and a $50/month automatic deposit from your checking account into the CD. To get a personal account, you’ll just need to set up direct deposit or maintain a $1,500 balance.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

12-month Add-on

0.10%

$100

Greater of $25 or
6 months’ interest

As of September 5, 2018

Home Saver

If you’re in the market for a new home, and you want to earn a little more interest on the money you’re saving, consider the Home Saver CD. Starting with as little as $100, you’ll be able to deposit money earmarked for your new home every month and earn 0.40% APY. With this CD, as long as you’re withdrawing the money for use toward the purchase of your new home, you won’t pay any penalties for the withdrawal. But you will need a BB&T checking account set up for a monthly deposit of $50 into your Home Saver CD.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

36-month Home Saver

0.40%

$100

No penalty for
home purchase

As of September 5, 2018

College Saver

Similar to the Home Saver CD, the College Saver CD is meant for parents or students saving for college. It offers the benefit of starting at a higher APY (0.40%) with the flexibility of withdrawing the money up to four times per year to pay for the cost of attending school. As with the Home Saver, you’ll need to have a BB&T checking account with an automatic monthly deposit of $50. The College Saver offers terms of 36, 48, and 60 months.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

36-month College Saver

0.40%

$100

No penalty for
school costs

48-month College Saver

0.45%

$100

No penalty for
school costs

60-month College Saver

0.50%

$100

No penalty for
school costs

As of September 5, 2018

Treasury

This CD offers the ability to make additional deposits of at least $100 into your CD at any time and one monthly withdrawal without penalty. The CD has a six-month term with a variable interest rate tied to the U.S. Treasury Bill — if the rate goes up, you’ll make more money, but if the rate declines, you’ll make less. Right now, rates start at 1.96% and adjust quarterly. Throughout 2017, Treasury Bill rates increased almost every month and have continued to rise in 2018, reaching 1.969% in July. So this is a great option if you have the $5,000 minimum deposit amount and want a short-term investment with the option to add or remove funds from the CD.

CDARS

CDARS stands for Certificate of Deposit Account Registry Service and protects your principal and interest by making sure your money is placed into multiple CDs across a network of banks to keep your CDs insured by the FDIC (maximum limit for each CD is $250,000).

Other things to know about BB&T CDs

Does BB&T allow customers to take advantage of rising rates once they’ve opened a CD?

BB&T has two CD options that allow you to take advantage of rising rates: the 30-month Can’t Lose CD and the 48-month Stepped Rate CD. Both allow you to make a withdrawal before the CD comes to maturity in case rates increase (terms apply). They also allow additional deposits in case rates drop and you want to invest more at the existing rate of your CD. However, the current rates on those products are very low, negating the value of their flexibility.

About BB&T

BB&T (Branch Banking and Trust Co.) is a North Carolina-based bank with locations in 16 states and the District of Columbia, including Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and West Virginia.

BB&T offers a mobile app for both iOS and Android. While their website is easy enough to use, finding specific information, particularly about rates, is impossible. Their customer service number isn’t much help in that regard either, with most questions answered with a suggestion to visit a branch location. As a result, if you don’t live in an area with a branch, we don’t recommend using BB&T’s CDs. To find the BB&T branch closest to you, use their branch locator.

Pros and cons of CDs

A certificate of deposit (CD) may offer a higher return than you’ll get with your savings accounts, without the risk of loss that accompanies other investment options with higher return rates. The drawbacks associated with CDs are the inability to access your funds during the term of the investment without suffering a penalty and the risk of interest rates increasing while your money is locked into a CD for a specified term.

The bottom line: Are BB&T CDs right for you?

BB&T does offer some flexible deals to its customers, but in general, better CD rates can be found at both banks and credit unions with comparable terms. You can find them on our list of the best CD rates, which we update every month.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Ralph Miller
Ralph Miller |

Ralph Miller is a writer at MagnifyMoney. You can email Ralph here

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Earning Interest, Reviews, Strategies to Save

Review of Live Oak Bank’s Deposit Rates

Editorial Note: 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 prior to publication.

Year Established2008
Total Assets$3.4B
LEARN MORE on Live Oak Bank’s secure website
Chances are you haven’t heard of Live Oak Bank. After all, this lender, based mostly on the web, has only been around since 2008, and it mostly focuses on giving out small business loans to businesses in specific industries, such as veterinary practices or craft breweries.That’s no reason to pass it up for your personal banking needs, however. In fact, this little gem of a bank has one of the best-kept secrets in the personal banking world: it has one of the highest savings account interest rates you’ll find from an online bank. (More on that below.) And, most of its other personal deposit accounts offer relatively high rates as well.Let’s take a more in-depth look at its deposit accounts to see if they’re right for you.
Live Oak Bank’s Most Popular Accounts

APY

Account Type

Account Name

Compare Rates from Similar Accounts

1.80%

Savings

Live Oak Bank Savings Account

1.90%

Goldman Sachs Bank USA High-yield Online Savings Account

on Goldman Sachs Bank USA’s secure website

2.50%

CD Rates

Live Oak Bank 1 Year CD

1.90%

Goldman Sachs Bank USA High-yield Online Savings Account

on Goldman Sachs Bank USA’s secure website

2.80%

CD Rates

Live Oak Bank 3 Year CD

2.50%

Ally Bank High Yield 12-Month CD

on Ally Bank’s secure website

3.05%

CD Rates

Live Oak Bank 5 Year CD

2.70%

Synchrony Bank 36 Month CD

on Synchrony Bank’s secure website

3.10%

Goldman Sachs Bank USA High-yield 5 Year CD

on Goldman Sachs Bank USA’s secure website

Live Oak Bank’s savings account

When it comes to the best savings accounts with high interest rates, Live Oak Bank currently has one of the highest rates.

APY

Minimum Deposit

1.80%

Up to $5 million

(but only up to $250,000 is FDIC-insured)

  • Minimum opening deposit: $0
  • Monthly account maintenance fee: $0
  • ATM fees: None
  • ATM fee refunds: None

Live Oak Bank currently has one of the best savings account rates available. This means that Live Oak Bank is lowering the bar and allowing anyone to take advantage of these high interest rates, no matter how much is in his or her pocket right now.

Live Oak Bank wants you to use your savings account, and use it often, which is one reason why it has no monthly maintenance fee. If there is no activity on your account for 24 months and your balance is less than $10.01, Live Oak Bank will take the remainder of your balance as a Dormant Account Fee and close your account.

Getting money into a Live Oak Bank savings account from an external bank account can take a little bit of time depending on how you do it. If you request the money through Live Oak Bank’s online portal, the funds won’t be available for up to five or six business days. But if you opt instead to send the money to Live Oak Bank from your current bank, the money will be available as soon as it’s received. Your Live Oak Bank savings account will start earning interest as soon as the money posts to your account.

You can easily withdraw your money at any time via ACH transfer. Simply log into your Live Oak Bank savings account and electronically transfer it to whichever bank account you wish. It’ll be available in two to three business days.

You are limited to making just six withdrawals per month with this savings account. That’s not a Live Oak Bank thing; that’s a federal regulation imposed upon savings accounts in the U.S. If you absolutely can’t wait until next month to make another withdrawal past your allotted six per month, you’ll be charged a $10 transaction fee for each additional action.

Live Oak Bank CD rates

Live Oak Bank also has some of the best CD rates with a decent deposit amount.

Term

APY

Minimum Deposit

6-month CD

2.00%

$2,500

1-year CD

2.50%

$2,500

18-month CD

2.55%

$2,500

2-year CD

2.75%

$2,500

3-year CD

2.80%

$2,500

4-year CD

2.85%

$2,500

5-year CD

3.05%

$2,500

  • Minimum opening deposit: $2,500
  • Early withdrawal penalty:
    • CD terms that are less than 24 months — 90 days’ interest penalty
    • CD terms that are more than 24 months — 180 days’ interest penalty

Live Oak Bank currently offers the highest CD rates. This bank’s minimum deposit requirements also seem to be right on par with other bank’s minimum deposit requirements. Currently, the best CDs out there have minimum deposit requirements both above and below Live Oak Bank’s $2,500 benchmark.

Only U.S. citizens and permanent residents are eligible to open these accounts. It’s a relatively straightforward process to open a CD: Simply complete the forms online, provide any needed documentation (such as your current bank account details), and wait for an account approval. Once your account is open, you can transfer over your deposit, where it will be held for five days before officially launching your CD.

If you need to take out your deposit early, bad news: As with many CDs, you’ll face an early-withdrawal penalty at Live Oak Bank. If your original CD term was for six months, one year or 18 months, you’ll be charged 90 days’ worth of interest. If your original CD term was for longer than that, you’ll be charged a higher rate of 180 days’ worth of interest.

If you are able to resist the urge to withdraw your money early, congratulations! Your CD will automatically renew into a second CD with the same term length. However, don’t panic if that’s not what you want: You have up to 10 days after the CD has matured to withdraw your money penalty-free and park it in your own bank account (whether it’s with Live Oak Bank or not).

It’s easy to overlook Live Oak Bank for other larger, more established consumer banks like Ally or Discover Bank. But Live Oak has some of the best CD rates around, and the best savings account available on the market today.

Lest you be scared away by its smaller name, consider this: This tiny-but-growing bank is getting rave reviews from customers and employees alike. It carries an “A” health rating, and has a top-notch online banking portal. About the only thing missing is a checking account to let you seamlessly do all of your daily banking with this great company.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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Strategies to Save

Understanding How Overdraft Protection Works

Editorial Note: 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 prior to publication.

Understanding how overdraft protection works
Source: iStock

Have you ever written a check for an amount you didn’t have in your account and incurred a fee? Or have you ever been embarrassed by a declined debit card transaction? If the answer’s yes, you’ve had experience with overdrawn checking accounts.

You may have heard about overdraft protection and how it may help you pay for expenses when you lack the funds in your account. While this service has the potential to help you in times of need, it’s important to be aware of the drawbacks. In this post, we’ll discuss the ins and outs of the various types of overdraft protection, and how you can avoid overdrawing your account in the future.

Featured checking account with no overdraft fee

Institution
APY
Minimum Deposit Amount
Personal Account from nbkc bank
nbkc bank

0.90%

$0

LEARN MORE Secured

on nbkc bank’s secure website

Your deposit is FDIC-insured up to the maximum limit.

What is overdraft protection?

Overdraft protection is a way to fund an account that has been overdrawn. Without this service, you would most likely be charged an overdraft or non-sufficient funds (NSF) fee and have your transaction declined. The fees can add up every time your account is overdrawn, but this service can provide a safety net if you withdraw too much money.

How does overdraft protection work?

There are three types of overdraft protection that work in slightly different ways. While they ultimately transfer funds to your overdrawn checking account, the fees charged differ.

Here are the three options you may have for overdraft protection:

  1. Opt in for overdraft coverage for ATM and one-time debit card transactions. By opting in, you authorize the bank to pay any overdrafts from ATM and one-time debit card transactions. Beware banks often charge you high fees.
  2. Link your checking account to an eligible savings, secondary checking, money market account or line of credit like a credit card. If your account is overdrawn, funds will be transferred from your linked account. There is often an overdraft protection fee associated with the transfer of funds.
  3. Overdraft protection line of credit. If you overdraw your account, the line of credit transfers funds to cover the amount overdrawn plus any fees charged. The amount you overdraw is subject to a variable interest rate and a fee. Note, some banks may require a minimum annual income to open an overdraft protection line of credit.

Overdraft protection fees

If you have overdraft protection and overdraw your account, you will most likely be charged a fee. This fee is often a fixed amount that is charged per overdraft item and varies based on the protection you have.

Here are the fees associated with the options detailed in the previous section:

  1. Opt in for overdraft coverage for ATM and one-time debit card transactions: Typically $34 per overdraft item and an extended overdraft fee may apply if your account is overdrawn for a certain amount of days.
  2. Link your checking account to an eligible savings, secondary checking, money market account or line of credit like a credit card: Typically $10-$12 per transfer.
  3. Overdraft protection line of credit: Typically $10 or more per transfer, plus an APR of around 20% charged on the amount transferred.

While you can potentially be charged the fee multiple times in one day if you continue to overdraw your account, banks typically limit the amount of times you can be charged the fee in a day.

Understanding the overdraft protection law

In 2010, the Federal Reserve passed a law regulating overdraft practices for one-time debit card and ATM transactions. The law banned banks from automatically enrolling customers in overdraft protection for these transactions.

Prior to this law being passed, banks were allowed to process one-time debit card and ATM transactions in which consumers lacked the necessary funds and were charged an overdraft fee. But, the law changed that practice and required banks to allow customers to opt in or opt out of overdraft protection at any time.

If you opt in, the bank will process your one-time debit card and ATM transactions and charge a fee. While if you opt out, the bank will decline your transaction and won’t charge you an overdraft fee — but they may still charge an NSF fee.

The benefits of opting in to overdraft protection

Transactions are approved. This service may be helpful if you need a transaction to go through and can’t afford to have it declined in cases of emergencies or upcoming due dates on bills.

Less embarrassment when paying. If you’re someone who lives from one paycheck to the next, you may run into instances where you’re short of funds for needed expenses like groceries. It can be embarrassing to have your debit card declined due to insufficient funds, and this service may help you avoid those situations.

When can you benefit from overdraft protection?
You may benefit from overdraft protection if you find yourself in a situation where you don’t have the money to cover the cost of an unexpected emergency. For example, say you have a $0 balance in your account but your car broke down because of a flat tire. In this situation, you have your checkbook but don’t have the needed cash or credit card to pay for the tow and service on your card.

If you enrolled in this service and linked an eligible savings account that has the needed funds, you could write the check. Then, the bank would transfer the funds from your savings account to your checking account. You would be charged a $10-$12 overdraft transfer fee, but that’s minor compared to the typical $34 NSF you would be charged if the check bounced.

The drawbacks of using overdraft protection

Fees may still apply. If you enroll in overdraft protection, you may still be charged fees, such as an overdraft protection fee or an NSF fee. And you may incur multiple fees in one day.

High fees for overdrafts funded by credit cards. If you use a credit card to fund your overdraft, it is considered a cash advance which often comes with high APRs over 25% and a cash advance fee that is 3% or 5% of your withdrawal.

When is overdraft protection not worthwhile?
If you opt in for overdraft protection on ATM and one-time debit card transactions and make unnecessary transactions when you have a $0 balance, you can see fees add up quickly. For example, say your account charges a $34 overdraft fee up to four times a day. You’re unaware you currently have a $0 balance in your checking account.

You decide to go to the mall and use your debit card to make three separate purchases: pants for $20, a shirt for $10, and a hat for $8. In total you spent $38 on clothes, but incurred $102 in overdraft fees. That makes the effective cost of your clothing purchase an alarming $140. It’s pretty obvious that it would’ve been a better decision to opt out of the service for ATM and one-time debit card transactions so those transactions would’ve been declined.

Which type of accounts can be linked to a checking account for overdraft protection?

You can link several accounts to your checking account for overdraft protection, including: savings, secondary checking account, money market or line of credit like a credit card. Note that linkable accounts may vary by bank, so refer to your overdraft protection agreement for eligible accounts.

How to avoid overdrawing your account

If you want to prevent future overdrafts, the tips below may help you avoid overdrawing your account, and are general best practices when it comes to financial products:

  • Open a checking account with no overdraft fees. There are banks that offer checking accounts with no overdraft fees. So, instead of being hit with the average $34 fee, banks most likely will decline the transaction — if you aren’t opted into overdraft protection.
  • Don’t overspend. You may have trouble managing your spending, which may lead you to overdraw your account. You can create a budget to get a better picture of your finances and see where you can cut costs to avoid overdrawing your account. A good rule of thumb is don’t spend more than you can afford.
  • Set up low balance alerts. Many banks allow you to set alerts when your balance reaches a certain amount. This is a helpful feature that can make you aware when funds are running low and when you should minimize spending.
  • Review your account balances. It’s important to keep track of how much money is in your checking account. You can keep a register or log in to online banking to stay up-to-date on your account balance. This way, you know how much you can afford to spend.
  • Don’t write checks before you have the money in your account. You may run into issues if you write checks in advance of having the necessary funds in your account. While you expect to have the needed funds in your account when the check is cashed, things may change and result in you lacking the funds to fulfill the check.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Alexandria White
Alexandria White |

Alexandria White is a writer at MagnifyMoney. You can email Alexandria at alexandria@magnifymoney.com

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Strategies to Save

How to Choose a Financial Planner

Editorial Note: 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 prior to publication.

How to choose a financial planner
iStock

As you age, your financial needs tend to become more complex. This is often a result of taking on more responsibilities like having children, taking care of aging parents or owning a home, all while managing your own career, student loan debt and retirement savings. Naturally, it can be overwhelming to create a plan, update it and monitor it while maintaining a busy schedule. That’s where hiring a financial planner can be valuable.

What is a certified financial planner?

Financial planners can help guide you through complicated financial situations and use their expertise to help make tough decisions and manage your emotions. A financial planner may have a variety of qualifications or certifications, but one of the most widely known and accepted is the Certified Financial Planner (CFP) designation.

The designation was created in 1985 by the Certified Financial Planner Board of Standards (CFP Board) to promote “the value of professional, competent and ethical financial planning services, as represented by those who have attained CFP® certification.” CFPs must have have between 4,000 and 6,000 hours of experience, maintain high ethical standards, complete a rigorous set of education requirements and pass the CFP exam.

Those who have obtained the designation have mastered several key areas of financial planning including: retirement planning, income taxes, investment analysis, estate planning, ethics and insurance.

What does a financial planner do?

As mentioned earlier, financial planners help guide you through some of life’s most challenging financial decisions. When doing this, most financial planners will generally perform the following set of steps with each client. For many planners, this entire process could occur over several meetings and will not be completed in one sitting.

First, the planner will gather information and key details about your financial situation. This often includes a discussion about where you are financially and where you plan to be. A planner may also ask for some documents, including tax returns, any investment statements, trust and insurance documents. Next, the planner typically analyzes the data and determines whether there are any changes that need to be made and will present their findings to you.

After discussing the data and potential changes, the next step is implementing the items in the plan. Depending on the scope of your financial plan, this could be done in one meeting or over several meetings.

Lastly, you and your financial planner will typically agree on how often to monitor the plan and make changes. You may re-evaluate the plan every year or once a quarter, depending on the plan’s depth and complexity. However, most planners ask that you come in when major life changes occur like getting married, having a child or a experiencing a significant change in income.

The challenges in choosing a financial planner

It can be tricky to pick a financial planner, including finding someone with the right credentials and experience at a cost you can afford. In the following sections, we discuss some of the biggest challenges consumers face when looking for a financial planner.

The difference between a financial planner and a financial adviser

There is plenty of confusion around the term “financial planner” and “financial adviser.”

“Just about anyone can use the title ‘financial planner,’” said Dan Drummond, CFP Board’s director of communications. “There are also over 170 financial services designations out there — an alphabet soup of letters that may seem overwhelming.”

Not every person who calls him or herself a financial planner or financial adviser has the CFP designation, as the designation is optional and not required to practice. And someone who goes by the title, financial adviser can be a certified financial planner so long as they have completed the designation and are in good standing with the CFP board. CFPs will almost always have the “CFP®” behind their name.

Practically speaking, the differences between a planner and adviser are a bit more clear, though the terms are often used interchangeably. Typically, financial advisers spend the majority of their day focused on selling investment and insurance solutions to clients mostly (but not exclusively) for a commission. While financial planning is something that an adviser may do, it is often a service done on the side and not their main function. On the other hand, a financial planner’s main function is planning and less about selling products. Keep in mind that in this situation, both positions could still be called certified financial planners if they meet the board’s requirements.

Determining whether or not you need a financial planner

Whether you need a financial planner or not will be determined by the complexity of your situation.

The people in the following situations tend to see the most value in a financial planner:

  • New parents and newlyweds
    • Starting a family is not only expensive, it’s also easy to overlook some of your financial needs while you’re adjusting to all the changes you’re experiencing. For example: Newly married couples should check their beneficiary information on their accounts to ensure they are up-to-date and that their life insurance coverage is sufficient.
  • Business owner
    • If you own a business, you have a different set of financial tools at your disposal. One quick example is choosing the right retirement plan for your business. While most people have to choose between a Roth and traditional IRA, business owners have more options with different limits and requirements. Also, depending on how your business is set up, you may need a succession plan to exit the business as well.
  • High-income earners and people with a high net worth
    • Those with a high income or high net worth may find a financial planner useful when navigating tax liabilities and investments.
  • Close to or in retirement
    • If you’re getting close to retirement, a financial planner can help determine how prepared you are for it and how long your money may last in retirement. For those who are already retired, a planner may help you avoid running out of money.
  • Complicated health or estate issues
    • Health care can get very expensive in retirement. Health care expenses for retirees rose to an average of $275,000 per couple, excluding long-term care expenses, according to a 2017 estimate from Fidelity. This is an increase of $15,000 from 2016.
    • For those who own multiple properties and businesses, a financial planner may be able to help determine the types of wills, titles or trusts needed to ensure your assets are distributed according to your wishes.

How much does a financial planner cost?

It can be difficult to compare the costs for a financial planner. This is because each planner may base their cost on different metrics (see below). In some cases, they may charge a flat fee based on a percentage of your total assets, also known as assets under management (AUM), or just a flat dollar amount. The important thing here is that your planner is transparent and upfront with their costs. One way to ensure this is by asking if your financial planner is held to the fiduciary standard. This standard requires that the planner act only in your best interest when providing recommendations.

Commission-based: These planners only receive payments through commissions on products they sell. These products could include life insurance, mutual funds or annuities. This can present a major conflict of interest. They’re incentivized to sell products whether or not those products make sense for you.

Fee-based: Fee-based advisers can earn commissions off product sales, but they also offer services for flat fees paid by their clients. While this eliminates some conflicts, fee-based service models still leave the door open for a planner to make a recommendation that isn’t necessarily the best for their clients.

Fee-only: Fee-only financial advisers are not the same as fee-based. Fee-only advisers are paid a set fee by their clients for the services they provide. They do not earn commissions off product sales. For this reason, there are inherently no conflicts of interest between you and your adviser if they’re fee-only. Fee-only planners are only getting paid by you to provide advice.

How to choose a financial planner

Choosing a financial planner goes beyond picking someone based on their credentials alone. Though the CFP is widely regarded as the gold standard, there are many designations that make it difficult to accurately compare one planner to another. You should also take experience and compatibility into account. Your financial planner should have experience with dealing with clients that fit your profile (e.g. income, business ownership, age) and needs.

Some also prefer planners who have had experience investing in down markets. Additionally, you should seek out a planner you trust — one you feel comfortable speaking openly with and one who listens to you.

Questions to ask a financial planner

The following questions are designed to help you not only understand your financial planner’s background but find out what areas they specialize in and if those areas fit with your goals.

  • What kind of designations do you have?
    • Common designations other than CFP are the certified public accountant (CPA), Chartered Life Underwriter (CLU), Chartered Financial Analyst (CFA) and Chartered Financial Consultant (ChFC). If they do not have a designation, you may want to ask if they are working toward them. Many of these designations require three years or more of industry experience and certification tests that are only offered a few times per year.
  • What services do you offer?
    • Not every financial planner will offer the same services, and can vary significantly based on the planner’s comfort level, team and experience. You will want to ask this information early in the conversation to ensure they can help you meet your needs.
  • What is your specialization?
    • Some financial planners choose to specialize in a particular area such as taxes or estate planning. If your situation is more complex, you’ll want to seek out a planner who specializes in your needs.
  • Do you work with any outside specialist? If so, are you compensated for that?
    • Some areas of your financial plan cannot be executed by your planner unless they are an attorney. This includes things like wills and trust agreements. You’ll also want to know if they are being paid by that outside specialist, as this could be a conflict of interest.
  • What kind of clients do you work with?
    • This will give you more information on the planner’s experience level and expertise.
  • Are you a fiduciary?
    • A fiduciary is required to act in the best interest of the client. If the planner answers no, you should ask them to disclose all potential conflicts of interest.
  • How are you compensated?
    • Generally a financial planner’s compensation will fall into three categories: commission based, fee-based, fee-only (discussed in detail above).
  • What happens if I am unable to get in contact with you?
    • Is there a 24-hour hotline you can call to get help? Is there a backup staff? When you have a financial emergency and your planner is not available, you will still need guidance. Your planner should have some system in place.
  • How often do you communicate with clients?
    • Having a planner is not valuable if you do not communicate with them. At a minimum, you should be having an annual sit-down with your financial planner.
  • What is your investment philosophy?
    • The answer to this question will help you assess your fit with the financial planner. Your financial planner’s philosophy will depend on their investment experience and any additional credentials they may have.
  • How are you evaluated?
    • Some financial advisers are evaluated by management solely on the amount of commissions they generate or the amount of money they manage. Others are evaluated by client surveys or a combination of all three. Ask how they are evaluated, and this should give you insight about how you will be treated as a client.

How to find a financial planner

Now that you know what to look for, your next step is to find a financial planner. Each of the following are all groups who feature fee-only financial planners that uphold the fiduciary standard.

XY Planning Network: XYPN is the leading organization of fee-only financial advisers who specialize in serving Gen X and Gen Y clients. All of their members can work virtually, which means you can choose the best adviser for you regardless of physical location.

Garrett Planning Network: GPN is another organization of fee-only planners who serve clients from all walks of life. Their advisers offer planning services on an hourly basis.

National Association of Professional Financial Advisors: NAPFA is the largest organization of professional advisers who meet the highest set standards in the financial planning industry.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Kevin Matthews II
Kevin Matthews II |

Kevin Matthews II is a writer at MagnifyMoney. You can email Kevin here

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Strategies to Save

How to Build Wealth at Any Stage in Your Career

Editorial Note: 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 prior to publication.

Your individual financial wealth, or net worth, is built over a lifetime. Financial situations vary widely at birth, and as you go through life, your situation changes. A host of factors can alter your “wealth.” Your income may rise, or it may fall. You may start a new career; you may change careers. You may experience setbacks, large and small.

You can read plenty about what you should do, but real-life wealth-building strategies rarely go according to plan. So we asked several people at various stages in their lives to share how they cultivated their personal wealth — including the setbacks, regrets and breakthroughs they experienced along the way.

Building wealth when you’re just starting your career

When Meredith Dean, 25, was getting ready to move from Georgia to New York City to start her first post-grad job, she was terrified.

“I was told by everyone that it was going to be super expensive and it was not going to be feasible,”’ said Dean, who at the time had just graduated from The University of Georgia with a bachelor’s in Journalism.

She immediately focused on keeping her expenses in check: She sold her car and used the savings to kickstart her life in New York. She also made sure she wasn’t spending more than 40 percent of her salary on housing. Dean lived in a tiny three-bedroom apartment with no kitchen and two roommates. It was close enough to walk to work, and when she had to travel anywhere else, she used public transportation.

But keeping her costs low was only the first step to building wealth at the start of her career.

Wealth-building strategy

Dean’s advice for those in their first years out of school: monetize a hobby you love.

Just a few months into her new job, Dean started a business that builds online portfolios for students and recent grads trying to land their first jobs. She got the idea for it after making a website for her then-boss and created the company, The Dean’s List, in the hours after her 9-to-5.

“I thought, ‘Man, I’m doing this for a lot of people and I’m loving this. Why don’t I start doing this for students?’” said Dean. After the idea struck, she pulled an all-nighter to create a website for her new company and never looked back. Today, Dean serves one or two clients a week through The Dean’s List, in addition to her full-time work.

“I now have these extra funds that I can rely on in case there is an emergency or if there is a trip I really want to go on,” said Dean. “It’s really nice to feel comfortable at 25 and not have any debt.”

Top tips

Start early

For Dean, a crucial component to building wealth at the beginning of her career was not starting in a hole: She started working as a restaurant hostess in her hometown of Milton, Ga., at age 15, and around the same time, she learned she could have almost all of her college tuition paid for if she graduated high school with at least a 3.0 GPA under Georgia’s Zell Miller Scholarship program. Primarily because of that scholarship, Dean didn’t have any debt when she completed her undergraduate degree in 2014.

Don’t quit your day job

Although Dean started her own company, she kept a full-time position. And she really lives the ideal that having multiple income streams is crucial to building wealth — at one point, she even picked up a third job.

Surround yourself by people who support your goals

While living in New York, Dean attended a Jeffersonian dinner at another recent UGA graduate’s place. At a Jeffersonian dinner, all guests must stay on one topic for the entire dinner — and it just so happened on that night the conversation topic was personal finance and women in finance.

“I learned so much from that dinner,” said Dean. Not only did she pick up a little newfound knowledge on everything from saving to investing, she also connected with a supportive group of friends.

“Surround yourself with the right people that push you forward, that motivate and inspire you,” Dean said. “That’s going to help you build wealth.”

Lessons learned

“I just really wish I would have taken a personal finance course,” said Dean, when asked about her biggest wealth-building regret.

She’d been saving in her retirement account and had an emergency fund. But after two years exclusively using her debit card, Dean hadn’t learned much about building credit. She didn’t get her first credit card until she left New York for her current home, Charlotte, N.C., in 2016.

Once in Charlotte, she found she needed a car. “I had no established credit to get a car, so my dad had to cosign for it,” Dean said.

She ended up educating herself about personal finance, but recommended college students take at least one personal finance course before they graduate, as long as they can afford to take the course (or if their school even offers one).

Building wealth early on in your career

Building wealth when you’re just starting your career

Although Jimmy Chan, 35, and his partner, Sue, 36, landed good jobs and bought a house together shortly after they earned undergraduate degrees in 2008, they still weren’t the best with money.

“We had to borrow money just to furnish our new home because we didn’t have extra savings,” said Chan. At the time, Chan, a computer engineer, was paying down his student loans on an entry level IT salary. Having to borrow money for furniture completely wiped them out, he said. But, it was the wake-up call they needed to avoid getting into any more debt.

The Montreal couple managed to pay off the IKEA debt, and Chan repaid his C$10,000 in student loan debt in his 20s. Still, they didn’t really start getting their financial lives in order until a few months shy of Chan’s 30th birthday.

Wealth-building strategy

Chan and his partner took the approach of starting with small goals and sticking to them. To kickstart their wealth-building, they found ways to live more frugally with the goal of living below their means. They cooked at home, packed lunches and avoided taking on more debt. They worked their way up to setting aside 20 percent of their income, on average, Chan said.

“Once we started to make small adjustments and were seeing results we were motivated,” said Chan. “It may take you 3 months, or 6 months, until you gain that confidence. Once you achieve [your] goal you can say, ‘Wow, we did it again.’”

That strategy allowed the couple to max out their retirement contributions, pay down their mortgage faster and launch Chan’s photography business, Pixelicious, which he operates in addition to his day job in IT.

“You work, you earn money, you save and you invest and you just keep on that cycle,” said Chan. “The payoff is that it gives us options. If we wanted to go on a vacation we would just go because we were able to save diligently.”

Top tips

Start now, start small

Chan’s two pieces of advice for people building wealth early in their careers are

  1. Start small with what you can handle.
  2. Make the most of the time you have to invest and earn compound interest on their savings.

Chan said he’s seen an increase of about 30 percent in his salary since he started his first job, so most of the wealth he and his partner have established has been through staying ambitious and disciplined.

Avoid paying interest on debt

After the IKEA loan, the couple avoided debt.

“We made a priority very early on that besides the mortgage we did not want any outstanding debt,” said Chan. “We have kept it a priority as long as I can remember.”

Keep multiple income streams

In 2015, the couple said they used some $20,000 of their savings (non-retirement, non-emergency fund savings) to launch Chan’s professional photography business. Chan operates the business in his free time, outside of his job in IT. Today, the business is profitable and has increased the household’s income by about 10 to 15 percent, Chan told MagnifyMoney.

“The business venture is a cherry on top,” said Chan. “It helps us to diversify our income streams.” He adds that the business’s income gives the couple more options and helps avoid financial stress overall.

Work together

Chan said the one of the most impactful parts of his wealth-building journey has been being on the same page with his partner.

“Every financial decision was decided as a team,” said Chan. “We both contribute. It doesn’t matter if one earns more than the other one.”

With the exception of his student loans, the couple has tackled their debts and savings goals together. When it came to Chan’s business, Chan said, Sue was supportive and they made the decision to invest the money together. They would both delay taking a vacation and instead put the money toward the business.

“Be honest and upfront about your financial goals from the get go and work together to realize your dreams,” said Chan.

Lessons learned

Chan said that there was a point when he thought money was the most important thing in the world — and then he lost money in the stock market.

“I’ve made mistakes. I’ve put money in places, in stocks, where I should not have been,” said Chan. “I lost a few thousand bucks in a stock that crashed I thought it was the end of the world. We started arguing. We started fighting.”

Chan told MagnifyMoney that he, like everyone else, is destined to make mistakes or lose some money along the way. But he said that he’s learned that money is only one aspect of your life and that it’s not the most important component, even as you’re working to build wealth — your relationships are. He added that you should accept your mistakes and come back even stronger.

Wealth-building in the middle of your career

Wealth-building in the middle of your career

Shortly after he graduated from Pepperdine University with a bachelor’s in business, Terence Michael began his career as a film producer in Los Angeles. It was the early 1990s.

Michael, now 49, worked for three months with other producers, then launched his own production company. He said it took several years to get his first couple of films going, and the income was inconsistent. He often stayed at his parents’ house and did odd jobs to scrape by.

Eventually at 29, after producing a few successful films, Michael bought a house. He fixed it up and sold it two years later, and he took a break from producing at age 31 to continue this pattern of real-estate investing. Even as he returned to producing a few years later, he kept the real-estate side hustle going. A couple of decades into his career, his resume includes highlights like “Duck Dynasty” (executive producer) and “Planet Primetime” (executive producer), as well as his own film and TV company, 100 Percent Terry Cloth. On top of that, he’s continued to build wealth through a host of real estate and investing activities.

Wealth-building strategy

Michael said his greatest wealth building strategy has been making the most out of what he calls “proximity potential” — combining the things he knows with the worlds or business industries he knows. He coined the term in his book “Produce Yourself.”

Instead of paying fees to brokers and agents to buy and sell houses, Michael got a mortgage broker’s license after his first few sales. He sat at a Starbucks and took courses online until he earned his real estate broker’s license.

With the license under his belt, he could act independently as a self-employed broker representing clients and form an independent mortgage company. Knowing that people in the entertainment industry may receive income sporadically, and understanding the difficulty that presents when getting a mortgage, Michael focused his business on helping that population.

Top tips

Make money off of what you own

“You can find some financial independence by having a good job, but you’re never going to have real wealth unless you have ownership vehicles,” said Michael.“I don’t know if anyone in history has ever created financial wealth [just] by working for someone else, with just a paycheck.”

In addition to running his production company, Michael:

  • works as a showrunner on other production projects;
  • brokers mortgages;
  • is a superhost on Airbnb;
  • hosts the “Produce Yourself” podcast;
  • coaches entrepreneurs and young couples on how to invest and grow their money

Michael said having his side hustle in real estate allowed him the financial stability to pursue his main purpose and passion, film and TV.

“Whenever I’m developing, raising money, and trying to sell, it’s nice to have all of these other streams flowing,” said Michael.

Lend and receive

Michael saves for retirement, but puts any extra funds into online platforms that lend money to other people and businesses.

He started off with investments in peer-to-peer lending platforms like LendingClub and Prosper. Then, he realized he could do the same with real estate and have his money secured by an asset, so he invested heavier on platforms like Ground Floor, Patch of Land and Yield Street.

“That I would call my savings, because if you keep laddering in eventually after a year, year and a half, it starts laddering it out,” said Michael.

Teach what you know

Michael wrote his book, “Produce Yourself,” in 2017 and started a podcast with that same title later that year. He said he decided to write the book after friends and colleagues asked him about his side hustles, multiple streams of income and how he did it all while working in Hollywood — and the book and podcast led to yet another income stream.

Lessons learned

Although Michael’s never lived “a story where [he] was in the gutter and crying for help,” he still attributes his success to a network of family and friends: “I know that whatever risk I take, I won’t go hungry and I will have someplace to sleep.”

Having a support system is important, but so is understanding what you’re getting into. Michael said he has experienced things like bad tenants and investments that have fallen through. It happens all the time, but having multiple investments going at once makes it easier to weather.

Building wealth when you’re making a career change

Building wealth when you’re making a career change

In 2017, police officer Adam Doran in Kansas City, Mo., wanted to make a career change. A few years prior, he had found himself deep in debt, facing foreclosure and trying to cover fixed expenses that exceeded his income by about $1,100 each month. On top of that, the recently divorced Doran had a 5-year-old daughter to care for.

“I can’t adequately describe the anxiety of that situation, but it was incredibly stressful,” said Doran.

That was about six years ago. Last year, having bounced back from that low place and growing increasingly tired of police work, Doran put together a six-week finance class at his church. It went so well, he said, people were asking him if he would be their financial adviser and his wife suggested a career change. Doran has since obtained his life and health insurance licenses and has started working towards certification in financial advising. He retired from his policing career in January 2018.

Of course, making a career switch can be very difficult. Doran was going from a steady job in law enforcement to becoming an entrepreneur, all while trying to continue paying down his debt and building wealth.

Wealth-building strategy

Though Doran is only a few months into his new career, he has attributed his stability during this time of change to strict discipline. After his divorce, his faith played a significant role in his ability to move forward, Doran told MagnifyMoney.

“I prayed a lot,” he said. “And I made a renewed commitment to giving 10 percent of my gross income back to God.”

His decision to tithe (give 10% of his income to church) and save money consistently became the foundation of his financial recovery. Maintaining that discipline helped Doran learn that finances are mainly behavioral, he told MagnifyMoney.

“The kind of person that has the discipline to faithfully give and save a percentage of their money, consistently without fail, regardless of the circumstances, is bound to encounter success financially,” Doran said.

Top tips

Diversify your income

While leaving the police force meant Doran was leaving behind a steady paycheck, it wasn’t his only stream of income. Doran fully owns a rental property and has multiple assets growing in value, he told MagnifyMoney. So when he decided to make a professional shift, he wasn’t betting his entire financial future on the new career.

Stay the course

When it came time to transition into his new line of work, Doran focused on staying the course. He’s continued to pay off his debts to free up more and more of his income. His investments in real estate also supply him with passive income streams.

“It was pretty cool that I had monthly checks coming in from rents on rental properties and payments on private loans,” said Doran.

His properties and business also allow him to take tax deductions he didn’t have before, so he gets more money back from the government at tax time.

Read and network

Doran looked to books and mentors to learn about personal finance and investing. He went online, searched LinkedIn and attended in-person investor gatherings to meet people who had spent years in the field he was just starting to get to know.

“I also did my best to connect with those who had gray hair, because I figured they would, and they did, have success and failure stories and experiences I could learn from,” said Doran.

He read books like “Think and Grow Rich,” “Conversations with Millionaires” and “How Successful People Think” to change his mindset about money and help him make decisions that could grow his business.

Lessons learned

So far, he hasn’t learned any of the tough lessons that are sure to come with his career change, but Doran has plenty of other things in his past that have helped him better approach his finances. He’s said that he wouldn’t change anything about his recovery and wealth-building process, but has expressed regret over the bad decisions that got him into the situation.

“I wish I hadn’t borrowed money on vehicles or gotten into a house that was too expensive for me. But, I suppose that was all part of the process of living and growing that I was supposed to go through to help me become who I am today,” he said.

Building wealth in retirement

Building wealth in retirement

Markus Horner, 69, of Sachse, Texas, ran his residential maintenance business for just over 25 years before a knee injury forced him to retire at 67. During his working years, Horner struggled to save much money for retirement.

“I was able to contribute a little bit but not a whole lot,” said Horner about his retirement nest-egg. “I wasn’t making enough to be able to do that back then, but now I can.”

That’s because just before he retired two years ago, one of the customers he was installing a front door for introduced him to swing trading: short-term trading on the stock market.

Wealth-building strategy

Horner said the money he used to start his swing trading business is money he had saved up over a long period of time while working as a maintenance man. Swing trading is a short-term trading method one can use on stocks and options. Swing traders look for stocks with short-term price momentum, and they hold assets for two days to two weeks before they sell.

Now, in addition to Social Security and the income he receives as a disabled veteran, Horner is able to use income from swing trading to help support his family, fund his hobbies and pad his retirement savings.

“It’s not for everybody, but it’s something I find very, very interesting,” said Horner about the business.

He said he uses some of the extra funds to cover bills here and there, but the majority goes to his savings, helping his daughter pay for graduate school and to an expensive, longtime hobby: building hot rods.

“Hopefully I will make enough that when I do pass away — whenever that occurs, hoping its a number of years from now — there will be enough money that my wife will be able to live comfortably,” Horner said — although, he noted that the family doesn’t necessarily need his income, since his wife, Lourdes, 59, still works as an opthamologist.

“She makes enough there that we could live off of her income if we chose to,” said Horner; his wife also has a pension and ample retirement savings in a 401(k) and Social Security she can tap into when she retires. “But I like to work and make my own money so I will have something to help me build my hot rods.”

Top tips

Don’t limit yourself

Those looking for additional income to help them through their retirement years shouldn’t feel limited in their search. Horner advises they look for something they like to do that they find interesting.

“I did not know that swing trading even existed until two years go,” said Horner. “Look around, don’t limit yourself to just one or two or even three things.”

Set up a savings account

Horner said it’s “absolutely critical” for those strapped for cash in retirement to set up a savings account if they haven’t already, and they should automate the savings.

That’s something he and his wife did in the years just before he retired. They set up an automatic transfer to their savings account for every Friday, and increased the amount over time as their incomes rose. They started out saving $25, Horner said, and now, they are saving about $200 every Friday.

“We are at a point where we can do that and not struggle. But we couldn’t do that in the beginning,” said Horner.

That’s why he suggests people start small, and gradually learn to live with less. After about five years, the couple had saved more than $10,000, Horner told Magnifymoney.

“And that’s the money I used to start my trading account. $10,000. That’s how I got started,” said Horner.

Lessons learned

Horner said his biggest financial regret is not having been able to put money into a retirement account during his younger working years.

Although he said he wish he’d learned about swing trading earlier, it was probably good timing, as it wouldn’t have been something he thinks his younger self could have done.

“Being a swing trader requires tremendous patience. I did not have the patience 30 years ago that I have now,” said Horner. “If you don’t have the willingness to be patient, you will actually lose money by being impatient.”

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Strategies to Save

Understanding the Differences Between Credit Unions vs Banks

Editorial Note: 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 prior to publication.

Credit unions vs banks

Credit unions are known for having more flexibility in their offerings and lower rates for some financial products.

Because credit unions generally don’t pay state or federal taxes and are nonprofits, they can offer their members loans at relatively low interest rates; many people turn to credit unions when they need financing for a big purchase like a car or a home renovation.

Yet for all the benefits they carry, credit unions remain underused. In 2018, big banks still hold 77% of all household savings. Credit unions, on the other hand, struggle to chip away at holding a measly 10% of household savings, according to the Credit Union National Association.

The grassroots, low-fee structure of credit unions can be appealing to consumers who want to save money on banking services. However, if you’re thinking of transitioning to a credit union, make sure you’re aware of the drawbacks, too.

Main differences between credit unions vs banks

Product offerings

If you’re looking for an institution that can act as a one-stop shop for most if not all of your financial needs, consider looking at a bank. Many banks — especially the big-name banks — can offer many different product types simply because they have more capital than a little neighborhood credit union.

One exception to this rule might be internet-only banks, which by definition have no physical branch locations you can visit. These banks tend to run the gamut in terms of what products they offer. Some of these banks, such as Live Oak Bank and Marcus by Goldman Sachs®, only specialize in one or two things that they do really well — an online savings account, for example. Still, other online-only banks like Ally Bank do offer a range of product offerings like investment services and mortgages.

Fees

Because credit unions are nonprofits, they often don’t have to worry as much about gouging their members with high fees that you might find at traditional banks. However, that’s not always the case. In fact, a March 2017 survey of 57 different rewards checking accounts from banks and credit unions listed on DepositAccounts, another LendingTree-owned company, showed that credit unions actually charged slightly higher fees than their traditional bank counterparts. Here are how the fees panned out in the survey:

Institution

Overdraft fee

Third-party ATM fee

Monthly service fee

Credit Union

$29.83

$1.15

$2.52

Bank

$28.67

$0.56

$0.96

In general, if you are looking for low fees, we recommend starting your search with a credit union. Don’t discount banks, however — as the above case shows, sometimes banks offer lower fees than credit unions, especially internet-only banks.

Yield and rewards

Credit unions are often able to pass off their profits to you in the form of higher deposit account rates because they aren’t as driven as big banks to increase profits to benefit shareholders. Indeed, in the same March survey of rewards checking accounts mentioned above, credit unions came out slightly ahead with an average interest rate of 1.99% APY. Banks, on the other hand, only offered 1.71% APY.

Although credit unions offer better interest rates in general, one area where they lag behind is in sign-up bonuses. Many big banks will offer up to $500 or more in sign-up bonuses; something you’re unlikely to see with a small credit union.

Eligibility

There’s no doubt about it: Credit unions do take some work getting into. Since they’re formed around a common purpose or a common segment of the population, they can afford to be picky about who they accept as members. In many cases, you can join a credit union you’re interested in simply by making a donation to a particular charity. With some credit unions, however, you don’t have this option and you might just be plain out of luck if you don’t qualify.

“Credit union membership typically requires you to open and maintain a savings account. No other accounts can be opened without the ‘membership’ savings account,” said Ken Tumin, founder of DepositAccounts, another LendingTree company. “This savings account requirement doesn’t exist at banks.”

Banks, on the other hand, will work with almost anyone who walks in the door as long as you have the relevant account setup information, like a government-issued ID, a Social Security number etc.

Branch locations

If it seems like there’s a local bank branch on just about every corner, you’d be right. According to an 2016 analysis by DepositAccounts, there are almost four bank branches in the U.S. for every credit union branch.

Moreover, if you belong to a small local credit union and move away or travel, you can be plain out of luck for finding any branches near you. Big banks like Wells Fargo and Chase, on the other hand, are widespread in just about every community. If walking into a local branch — wherever you might end up — is most important to you, then a bank may be the way to go.

ATM access

At first glance you might think credit unions would also be at a disadvantage when finding in-network ATMs due to their small size compared with banks. To get around this particular disadvantage, many credit unions have joined a network of ATM providers. One of the most popular is the CO-OP Financial Services network, and you’ve probably heard of it if you’ve ever been a member of a credit union.

If your credit union is a part of the Co-Op network, you’re eligible to use any of 30,000 different ATMs nationwide (and even in a few foreign countries) without paying any surcharge fees. Compare that with a big bank like Wells Fargo, which only offers 13,000 ATMs, or PNC Bank, which only offers 9,000 ATMs in 19 states — fewer than half of what most credit unions offer. If using ATMs is more your style, credit unions are the clear winner.

Operating hours

Operating hours vary widely between credit union vs banks, even within different branches. If you’ll be going in to visit a branch, the best suggestion might be to research potential banks and credit unions in your area to see which ones offer hours that will work with your schedule.

One exception is online banks, many of which offer 24/7 phone service. After all, it’s still cheaper for these banks to staff a call center to serve the entire country rather than hire someone to man a branch 24/7 in the middle of nowhere. If you don’t mind calling in to chat with a teller rather than visiting them face-to-face when you have a question, an online bank might be just the thing for you.

Technology

Because credit unions pass off their savings onto members in the form of cheaper loans and higher-yielding products, many don’t have enough cash to invest in the latest and flashiest technology like big banks.

That’s not always the case. There are some credit unions like AlaskaUSA® Federal Credit Union and PenFed® Credit Union which offer modern technology like mobile phone apps with remote check deposit. This nifty feature lets you deposit a check anywhere with the snap of your smartphone camera. But, more often than not, many credit union websites you’ll visit offer antiquated technology that looks like it could be your little brother’s first coding project.

If the latest, hottest bank technology is what you seek, consider starting your search with a bank rather than a credit union.

Autonomy and governance

One of the major benefits of credit unions is that they’re owned by members — including you. When you join a credit union, you generally need to put at least $5 in some type of “share savings” account. This establishes your membership in the credit union, and it even allows you to vote in board elections. In short: You are a member, not a customer, of a credit union. As a member, you get a say in terms of who’s in charge.

Banks, on the other hand, view you as a customer, just like any other business. Banks are usually privately owned, unless it’s a publicly-traded company. With a bank, you generally get no say in how the institution is run. Banks can — and do — set policies that’ll earn their owners and shareholders money made off your back, rather than redistributing it to other banking customers like credit unions do.

If being a member and not a customer is important to you, a credit union is your best bet.

Bottom line: Credit unions vs Banks

There are a lot of differences between credit unions vs banks. We recommend searching for the best financial institution based on what’s most important to you.

A bank might be best for you if you:

  • want to visit a branch in-person to conduct your banking
  • want the latest technology
  • aren’t as concerned about fees and using ATMs

A credit union might be best for you if you:

  • want a good selection of ATMs wherever you go
  • want higher rates and lower fees
  • want to be a member of your financial institution, not a customer

Searching for only banks or credit unions can help narrow down your search, but don’t be afraid to consider other options as well. “Credit unions, especially large ones, have taken on many of the traits of banks,” said Tumin.

In other words, even though these differences generally hold true, there are often exceptions. For example, some banks offer much higher rates on their savings accounts than any credit union, or some credit unions might have unscrupulous business practices despite their nonprofit status.

But by starting your search with either credit unions or banks, you can help narrow down a seemingly infinite amount of choices to a reasonable amount and find the best financial institution for you.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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Strategies to Save

How Retirement Planning Can Help You Save for the Future

Editorial Note: 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 prior to publication.

Retirement planning
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Retirement planning, like any other long-term goal, requires some forethought and intention. Slow and steady wins the race when it comes to padding your nest egg, but many Americans are struggling to adequately prepare for their golden years.

Almost 50% of families in the U.S. have nothing at all set aside for retirement, according to research from the Economic Policy Institute. It’s little wonder that three in 10 workers say the topic stresses them out.

The truth is that it’s never too late to up your savings game. Whether you’re right on track or way behind schedule, retirement planning can make saving for the future a little easier. Here’s what you need to know.

What is a retirement plan?

A retirement plan is exactly what it sounds like — a strategy for shoring up your financial security when you’re no longer in the workforce. This begins with figuring out how much money you’ll actually need in retirement. (We’ll dive into this shortly.) From there, it’s about earmarking a reasonable amount of monthly income for your future self.

It would be wonderful if our income divided itself evenly between all our financial goals, but that’s rarely the case. Throughout your life, it’s normal to alternate between hitting your retirement savings goals and pulling back in order to fund other financial priorities, like paying down debt or building your emergency fund. Effective retirement planning usually requires some trade-offs, a little bit of effort and the ability to tweak and course-correct along the way as life happens. In other words, retirement planning is dynamic.

“The plan that gets you to retirement is more than likely not going to be the plan that gets you through retirement,” Jim Brogan, a Knoxville-based certified retirement financial adviser, told MagnifyMoney. “Until you retire, you’re in a saving phase of life; after you retire, you’re in a spending phase.”

Retirement plans take many forms. If you don’t know your 401(k)s from your IRAs, rest easy. Let’s unpack the details.

Types of retirement plans

401(k)s

This employer-sponsored retirement account automatically takes a percentage of each paycheck and earmarks it for retirement. The beauty of a traditional 401(k) is that your contributions are tax-deductible, which is a nice perk come tax time. The lower your taxable income is, the lower your tax liability will be. On top of that, because your retirement savings aren’t taxed when you contribute them, that means your money can grow tax-free. When it comes time to pull that money out for retirement, it’ll then be taxed as ordinary income.

401(k)s come with a number of perks, the biggest being if your employer offers any sort of match — that’s free money. Every company is different, so you’ll want to contact your HR rep to clarify the details. Some employers, for example, will match 100% of your contributions up to 3% of your salary. Others might match half of your contributions up to 3% to 5% of your earnings. That means you’ll cash in on your employer making regular deposits into your account, which is the most effective way to leverage all that 401(k)s have to offer.

Just keep in mind that the IRS does put a cap on how much you, as an individual, can kick into your 401(k). For 2018, you can contribute up to $18,500, unless you’re 50 or over, in which case you can contribute up to $24,500.

Side note: 403(b)s are similar to a 401(k). They’re essentially the same, except that instead of being sponsored by private companies, they’re available to certain employees at public schools, nonprofits and churches.

Individual Retirement Account (IRA)

This kind of retirement account has nothing to do with your employer. You open it independently and can load it up with a maximum of $5,500 every year. (If you’re 50 or over, that number jumps to $6,500.) There are two main types of IRAs: traditional and Roth.

You can open an IRA at many major banks, investment firms or any of the new robo-advisory services that have cropped up over the years.

Traditional IRA

Roth IRA

Like 401(k) contributions, what you put in counts as a tax deduction. Your money also grows tax-free, but it is taxed as ordinary income when you make withdrawals during retirement.

Just keep in mind that if you tap into it prior to age 59½, you'll typically have to pay taxes on it, plus a 10% penalty.

The Roth IRA works a little differently. You won't enjoy that tax break when putting money in, but your cash does grow tax-free and you won't get hit with taxes when you withdraw during retirement.

In fact, you can pull from it whenever you want, even prior to retirement, without any penalties. The only time you'll be penalized is if you tap into the appreciation (i.e. your investment returns) before age 59½.

One other thing worth mentioning is that Roth IRAs also come with income limits. If you’re single, your annual earnings have to be under $135,000; it’s under $199,000 for married folks filing their taxes jointly.

Pensions

If your employer offers a pension, they’ll kick money into your plan during the years you’re still working. Then when you retire, that money comes your way either in a lump sum or as a monthly payment — think of it as a retirement paycheck of sorts that’ll likely be considered regular taxable income.

How much you’ll get depends on a number of factors, like your salary and how long you worked for the company. A pension provides peace of mind because the money is guaranteed to be waiting for you in retirement, which makes retirement planning a little easier.

Health Savings Accounts (HSAs)

Don’t let the name fool you. Health savings accounts (HSAs) can double as retirement-saving vehicles that go beyond medical expenses and are offered by certain employers.

If offered by your employer, you can make contributions before taxes are taken out, typically via automatic withdrawals from your paychecks. (If you open an HSA yourself, any contributions you make can be claimed as a tax deduction, which lowers your taxable income.)

You can tap into this fund tax-free to cover qualified medical costs at any time, but the reason it’s great for retirement is that once you hit 65, that money is yours for whatever you like — free and clear, tax-free, whether it’s for medical expenses or not.

HSA rules: The main catch is that you have to be enrolled in a high-deductible health plan to qualify. This translates to a deductible that’s at least $1,350 for individuals; $2,700 for families. Contribution limits apply. For 2018, they cap out at $3,450 for single individuals; $6,850 for families. There’s also a catch-up contribution for 55+ folks, which allows you to kick in an extra $1,000. Check to see if your employer offers an HSA; if they don’t, anyone can open one if they meet the eligibility requirements.

Taxable investment accounts

Tax-advantaged accounts, like 401(k)s and Roth IRAs, are by far the best way to maximize your retirement planning efforts over the long haul. If you have some extra income leftover, directing it toward a taxable investment account is another way to build up your nest egg.

Brokerage firms offer these accounts as an additional way to save for retirement. Sure, they don’t come with tax benefits, but they also offer more freedom since you aren’t handcuffed to contribution limits, salary restrictions or early withdrawal penalties.

That said, you’ll have to ask yourself if it makes better financial sense to max out your 401(k) and/or IRA before looking to an investment account. Either way, you’ll definitely want to at least contribute enough to recoup any 401(k) employer match. Every case is different, but don’t be so quick to dismiss investment accounts because of the tax factor.

How to plan for retirement at every age

No matter what stage of life you’re in, you can always be working toward your retirement goals. Here’s what our experts have to say.

Retirement planning in your 20s:

“Your 20s is the best time to get into the habit of paying yourself first by automatically saving a portion of every paycheck,” Mark Wilson, an Irvine, Calif.-based certified financial planner, tells MagnifyMoney.

Time is on your side. Thanks to the magic of compounding interest, your early saving years are most powerful. Because you have more time to recover from any market setbacks, most experts recommend investing aggressively in stocks vs. safer, low-yield investments like bonds. A simple way to do that without getting too in the weeds is to sign up for a target-date fund.

Let’s say you open a Roth IRA and add just $50 a month starting at age 25. Assuming an average of 7% annual returns, you’ll have accumulated over $128,000 by the time you turn 65.

But how do you manage retirement savings if you have debt or can barely cobble together an emergency fund?

“For most 20-somethings, the number one goal isn’t saving for retirement,” Douglas Boneparth, a New York City-based certified financial planner, told MagnifyMoney. “Your 20s is really the time where you need to focus on equipping yourself with a strong foundation in personal finance.”

You may need excess income to help fund your financial goals, whether that be building a three- to six-month emergency fund, paying down high-interest debt or whatever matters most to you. That said, if your employer will match your 401(k) contributions in some way, passing on it means leaving free money on the table.

“Taking that match is a no-brainer; you could immediately get maybe a 25% or even 100% return on those first dollars,” said Wilson.

This certainly isn’t to say you shouldn’t get a jump on retirement planning — it just means that getting yourself on solid financial ground should be top of mind. Begin by getting a firm grasp on your income and expenses, then creating a realistic budget that feels doable for your lifestyle. After all your monthly bills are paid, how much is left over? This is what Boneparth refers to as “mastering your cash flow.”

How much should you save? He says earmarking 10% to 15% of your income for retirement is the ideal scenario, but if this isn’t feasible, the idea is to squirrel away at least enough to get an employer match. The most important thing is getting into the routine of saving. You can always dial up your efforts as you start earning more.

The main takeaways for your 20s:

  • Establish a strong financial foundation — track your income and expenses, and create a realistic budget.
  • Identify your financial goals, then use excess monthly income to fund them little by little.
  • If your employer offers a 401(k) match, try to contribute enough to lock down this free money.
  • Get into the habit of setting aside some portion of every paycheck for retirement. A little can go a long way when it comes to compounding interest.

Retirement planning in your 30s:

By this point, most people are earning more than they did the decade before, of course many also have new expenses — a mortgage, kids, child care bills etc.

Having competing money goals never really goes away, but padding your retirement fund should be a priority at this point. Brogan says that if you’re just starting to save for retirement now, you should aim to sock away 10% to 15% of each paycheck.

“This can feel overwhelming for someone who’s already established in their work life and used to spending that money, so I suggest starting small,” he said.

For example, begin by saving just 2% of your income, then increase it gradually every year. You can also direct, say, 50% of every work bonus or a percentage of every tax refund or raise to your retirement accounts. Using cash windfalls feels less painful since they’re separate from your monthly budget.

Also, if you don’t have life insurance, it’s time to seriously consider it. This is doubly important if you are a primary breadwinner or you have children who depend on you. Check out our guide to life insurance here.

The main takeaways for your 30s:

  • Shoot to set aside 10% of your income for retirement. If this feels overwhelming, start small and gradually work your way up.
  • If you’re short of your goal, boost your efforts by leveraging cash windfalls like work bonuses, raises and tax refunds.

Retirement planning in your 40s:

Our financial priorities are always evolving, but many people in this phase of life feel particularly torn between two biggies: college savings versus retirement. Parental instincts often nudge us to take care of our children before ourselves, but our experts actually say that your retirement should come before financing your kids’ education.

“Unlike college, there are no scholarships or loans you can get for retirement,” warned Wilson. “If you’re behind on retirement savings, this is the time to kick it up because by the time you get into your 50s, it’s only going to get harder.”

On that note, Wilson says those just getting started should strive to save no less than 15% of their income for retirement at this point. This obviously may require some budgeting overhauls. Tracking your expenses may help you reveal areas of wasteful spending. Can you negotiate down any bills or go without cable, for example? Can you pick up a side gig or consolidate high-interest debt to free up more money for retirement? Every little bit helps.

The main takeaways for your 40s:

  • If you haven’t started saving at this point, strive to earmark 15% of your income for retirement. This may require reworking your budget. Remember: Something’s always better than nothing, even if it’s short of that 15% mark.
  • Retirement savings on track? If possible, up your account contributions.

Retirement planning in your 50s

Now you’re really on the home stretch. Once you get five to 12 years out from retirement, Brogan suggests really sitting down and asking yourself what your income needs will be like once the time comes. This is important as fewer than 50% of Americans have actually calculated their retirement number, according to the U.S. Department of Labor.

Begin by clarifying how much guaranteed income will be provided. Social Security benefits and pensions, for example, fall into this category. To ballpark your Social Security benefits, check out this handy guide. According to the Department of Labor, these benefits, on average, are equal to roughly 40% of your pre-retirement earnings.

If, for instance, you’ll be getting $40,000 in Social Security between you and your spouse, and you’ve decided you need about $65,000 a year to live comfortably, that means you’re going to have to draw $25,000 from savings each year to maintain that lifestyle. (Just be sure to adjust for inflation.)

Those who aren’t quite hitting their savings goals can contribute more to 401(k)s and IRAs once they turn 50, at which point the IRS allows for higher contribution limits. The same goes for Health Savings Accounts once you turn 55.

The main takeaways for your 50s:

  • Think about what your income needs will actually be like in retirement. Then pinpoint any guaranteed income like Social Security benefits, pensions and so on. How much will you actually need to draw from your retirement accounts each year?
  • Continue kicking into your retirement accounts.
  • If you’re behind, consider leveraging catch-up contributions.

Retirement planning in your 60s

The average retirement age in the U.S. is 63, according to the Statistic Brain Research Institute. The good news is that those who are behind still have some time to shore up their finances before leaving the workforce. One of the best strategies is having a practical retirement date.

“Working an extra two years is the easiest way to make a big impact on your nest egg,” said Wilson.

Another workaround is to delay when you start taking your Social Security benefits. According to the Social Security Administration, you can begin cashing in on them at age 62, but how much you get increases every year that you get closer to what’s considered full retirement age (67). Here’s how the SSA breaks it down:

Age you start collecting Social Security

How much of your monthly benefit you'll get

62

70%

63

75%

64

80%

65

86.7%

66

93.3%

67

100%

One other tidbit: About five years before you retire, Brogan recommends beginning to set aside whatever money you’ll need during your early years of retirement — say, the first five years or so — into stable investments. If you find yourself in the middle of a market downturn right after you step away from your job, having some money in a traditional savings account, for instance, means you won’t have to liquidate money in the market while it’s down.

The main takeaways for your 60s:

  • Be reasonable about your retirement date. Staying in the workforce could majorly boost your nest egg.
  • Consider delaying your Social Security benefits, if necessary.
  • About five years before you retire, start setting a few years’ of retirement income into an account that’s separate from the stock market.

Final thoughts on retirement planning

Retirement planning is far from a one-size-fits-all approach, but some general rules of thumb do apply. Read up on which type of retirement account feel right to you. Then set yourself up for long-term success (and reap the benefits of compound interest), by beginning to save as early as possible. If your employer offers free money by way of a 401(k) match, all the better.

Once you get into your 60s, you can ratchet up your savings even more by settling on a reasonable retirement date and delaying your Social Security benefits, if possible. Of course, you’ll have to tweak and adjust along the way as life happens, but accommodating other financial goals doesn’t have to be an either/or situation.

The most important thing is to nurture the habit of routinely earmarking some portion of your earnings for your nest egg — in good times and bad.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Marianne Hayes
Marianne Hayes |

Marianne Hayes is a writer at MagnifyMoney. You can email Marianne here

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