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Millennials: It Pays to Rethink the Boomer Approach to Retirement

By Rachel Podnos, JD, CFP

Learn more about Rachel at NerdWallet’s Ask an Advisor.

To paraphrase one of the great musings of the American businessman and investor Charlie Munger, you don’t have to touch an electric fence to learn not to do it. In other words, it’s better to learn through observation and the mistakes of others than through making the mistakes yourself.

For this reason, millennials should take note of the situation many baby boomers find themselves in today as they near retirement age.

Lately, headlines about America’s impending retirement crisis are becoming more frequent, and they revolve around the fact that on average, the baby boomer generation is significantly under-saved for retirement.

Fortunately for them, it looks that they are likely to continue to receive at least some level of Social Security benefits, at least for now. Some also have pensions. This will cushion the retirement blow.

Our millennial generation is not likely to be so lucky. Pensions are almost completely a thing of the past. Social Security is in a tenuous position, and while it may work out fine, it’s not wise for us to count on it.

For us millennials, funding retirement falls squarely on our shoulders, and thankfully, it’s not too late to reframe the way we think about retirement so we can avoid making the same mistakes that our parents’ generation did.

So, what does this mean for us? Here are a few tips to ensure millennials position themselves well for retirement despite these obstacles.

Depend on yourself, mostly

Many members of the baby boomer generation have spent their entire working lives counting on a future stream of income from Social Security, a pension, or both, starting around age 65 and continuing for the rest of their lives. But when the government and pension providers created these retirement benefit programs, they didn’t count on people spending 30-plus years in retirement, which is becoming more and more common.

For this reason and others, these types of programs provide less funding over time.

So how will our retirement be funded? By us — that’s pretty much it. That means we should be saving at least 15-20% of our incomes now. If you have debt, paying that down counts toward your 15-20% savings goal.

If you have an employer-sponsored retirement plan, such as a 401(k), contributing is a no-brainer. It will reduce your tax bill and if you have an employer match, that’s free money. If you don’t have an employer-sponsored retirement plan, contribute to a traditional or Roth IRA.

Every time you get a raise, save at least half. You will get used to living on less than you make and you won’t miss the money that you “never had.”

Plan to work longer

The concept of 65 being retirement age seems kind of arbitrary now that many of us will live into our 90s (and increasingly 100s). A 30-plus year retirement seems a little extreme and would be a financial disaster for most Americans.

So let’s throw out this idea of a retirement age. Rather, as my father says, we should aim to “work longer, live more.” Instead of saving all of your travel and leisure goals for retirement, start pursuing them now and plan to work longer, at least part-time. It doesn’t even have to be in your profession — any stream of earned income will give you much more financial security than none at all.

Accurately forecast retirement spending

Many people assume that they will spend less during their retirement years than they did when they were working. In reality, this is rarely the case. In fact, many people spend even more during their early retirement years on travel, dining out and leisure activities. Many baby boomers who have been saving for decades are realizing that their lump-sum retirement nest egg will likely run out well before they die unless they make significant lifestyle changes. This is not a good place to be.

So what can we do to avoid this scenario? In addition to working longer, we should think honestly about how much we really spend and do the math to figure out what kind of lump sum we need to save to last us through retirement, given probable annual spending.

For many people, this number is in the millions. Becoming aware of that now gives you options and time to figure out how to get there.

Let’s learn from the mistakes of our parents’ generation and take action to make sure we don’t end up in an even more precarious position.

Rachel Podnos, JD, CFP is a financial planner with Wealth Care LLC.

7 Reasons the IRS Will Audit You

Nothing is inherently sinister about a tax audit.

An audit is simply the IRS double-checking your numbers to make sure you don’t have any discrepancies in your return. If you’re telling the truth, and the whole truth, you needn’t worry.

However, people who are consciously cheating the system do have reason to be concerned.

The IRS conducts audits to minimize the “tax gap,” or the difference between what the IRS is owed and what the IRS actually receives. Sometimes audits are random, but the IRS often selects taxpayers based on suspicious activity.

We’re against subterfuge. But we’re also against paying more than you owe. As you walk the line this tax season, here are seven of the biggest red flags likely to land you in the audit hot seat.

1. Making math errors

When the IRS starts investigating, “oops” isn’t going to cut it. Don’t make mistakes. This applies to everyone who must file taxes. Don’t accidentally write a 3 instead of an 8. Don’t get distracted and forget to include that final zero. Mistakes happen, but make sure you double- and triple-check your numbers if you’re doing your own taxes. You’ll be hit with fines regardless of whether your mistake was intentional. If your math is a little shaky, using good tax preparation software or a tax preparer near you can help you avoid unfortunate errors.

2. Failing to report some income

Easy way to score an audit? Don’t report part of your income. Let’s say you’re employed herding sheep for Farmer Joe and you pick up a little extra cash writing articles for a sheep-shearing publication on a freelance basis. You may be tempted to submit only the W-2 form from your herding job and keep the freelance writing income on your Form 1099 under wraps. (Form 1099 reports the nonwage income you get from things like freelancing, stock dividends and interest.) Well, guess what? The IRS already knows about income listed on your 1099, so it’s only a matter of time before it discovers your omission.

3. Claiming too many charitable donations

If you made significant contributions to charity, you’re eligible for some well-deserved deductions. This bit of advice is common sense: Don’t report false donations. If you don’t have the proper documentation to prove the validity of your contribution, don’t claim it. Pretty simple. Claiming $10,000 in charitable deductions on your $40,000 salary is likely to raise some eyebrows.

NerdWallet is a free tool to find you the best credit cards, cd rates, savings, checking accounts, scholarships, healthcare and airlines. Start here to maximize your rewards or minimize your interest rates. Romona Paden (contributing writer) Find tax software that will help Be supported in case of an audit Identify the best features Don't pay for more than what you need See our recommendations 4. Reporting too many losses on a Schedule C

This one is for the self-employed. If you are your own boss, you might be tempted to hide income by filing personal expenses as business losses. But before you write off your new ski boots, consider the suspicion that too many reported losses can arouse. The IRS may begin to wonder how your business is staying afloat.

5. Claiming too many business expenses

Along the same lines as reporting too many losses is reporting too many expenses. To be eligible for a deduction, purchases must be 1) ordinary and 2) necessary to your line of work. A professional artist could claim paint and paintbrushes because such items meet both requirements. A lawyer who paints for fun and doesn’t turn a profit on the works couldn’t claim art supplies as a deduction. The question to ask is: Was the purchase absolutely necessary to performing my work duties?

NerdWallet is a free tool to find you the best credit cards, cd rates, savings, checking accounts, scholarships, healthcare and airlines. Start here to maximize your rewards or minimize your interest rates. Romona Paden (contributing writer) FIND YOUR BEST CREDIT CARD Filter by features and rewards Compare hundreds of deals Pick the card that suits you Get started 6. Claiming a home office deduction

Home office deductions are rife with fraud. It may be tempting to give yourself undeserved deductions for expenses that don’t technically qualify. The IRS narrowly defines the home office deduction as reserved for people who use part of their home “exclusively and regularly for your trade or business.” That means a home office can qualify if you use it for work and work only. Occasionally answering emails on your laptop in front of your 72-inch flat screen TV doesn’t qualify your living room as a deductible office space. Claim a home office deduction only if you have set off a section of your home strictly for business purposes. Be honest when you report expenses and measurements.

7. Using nice, neat, round numbers

In all likelihood, the numbers on your 1040 form and supporting documents will not be in simple, clean intervals of $100. When making your calculations, be precise and avoid making estimations. Round to the nearest dollar, not the nearest hundred. Say you’re a photographer claiming a $495.25 lens as a business expense; round that to $495, not to $500. An even $500 is somewhat unlikely, and the IRS may ask for proof.

Updated March 21, 2017.

This News Could Affect Your Student Loans

If you turned off the news, ignored the notifications on your phone or simply couldn’t keep up the past few weeks, it’s time to catch up on some major events in higher education financing. Here’s a rundown of the news that affects anyone applying for, and many of those paying back, student loans, and what to do if you’re one of them.

1. Some student loan borrowers in default lose protection from fees

The news: Federal Family Education Loan (FFEL) borrowers who go into default may now be subject to collection fees even if they immediately start on a repayment plan. You’re affected only if you have federal student loans through the FFEL program, which was discontinued in 2010.

The background: Federal student loans repaid monthly go into default when you’ve missed payments for 270 days, or nine months. In July 2015, the U.S. Department of Education issued guidance that gave FFEL borrowers in default a break. The guidance prevented guaranty agencies, which administer FFEL loans, from charging collection fees if borrowers followed through on plans to repay their loans within 60 days of contact from the agency.

On Thursday, the U.S. Department of Education withdrew that rule, stating the earlier guidance “would have benefited from public input.” This opens up the possibility that guaranty agencies will charge FFEL borrowers fees even if they start repaying their defaulted loans within 60 days. Collection costs can reach 25% of the loan’s total principal and interest, depending on how you bring your loans back into good standing.

What it means for you: If you took out FFEL loans, meaning you borrowed before July 1, 2010, you aren’t protected from collection fees if you proactively make a plan to repay your loans after default. It’s unclear when agencies could start collecting those fees, though, says Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.

Avoid default by signing up for income-driven repayment, which will lower your federal loan bills to a more manageable amount per month. You can sign up for free on your own at studentloans.gov or contact your student loan servicer for help.

2. IRS Data Retrieval Tool goes offline

The news: The IRS Data Retrieval Tool allows for the automatic transfer of income data into both the online Free Application for Federal Student Aid, known as the FAFSA, and the Income-Driven Repayment Plan Request form. In early March, the tool became unavailable. The Education department and the IRS said in a joint statement on March 9 that use of the tool was suspended “following concerns that information from the tool could potentially be misused by identity thieves.” It will be offline for several weeks, according to the department.

The background: The FAFSA is known for its complexity. But since the IRS Data Retrieval Tool became available in 2010, students and families have made fewer errors on the form and have filled it out in less time, according to a statement by the National Association of Student Financial Aid Administrators. Applicants for income-driven repayment plans, and those already enrolled who must recertify their income annually, also rely on the tool to complete their forms quickly and accurately.

What it means for you: If you haven’t yet completed the FAFSA, don’t wait for the tool to come back online to do so. Failing to submit it means losing access to federal financial aid — including loans, grants and work-study — and, potentially, aid from states and schools. Some funds are also first come, first served, so the sooner you submit the FAFSA the more aid you may receive.

Without the IRS Data Retrieval Tool, students and families must manually enter their 2015 tax information using their tax returns. Ask your tax preparer for a copy, or download it from the tax return software you used. The National College Access Network also advises FAFSA filers to request a copy of their official tax return transcript. You may need it if you’re selected for a process called verification, which confirms the accuracy of the information on your FAFSA. In 2014-15, the Department of Education asked 26% of FAFSA applicants to complete the verification process, according to a November 2016 report from the Institute for College Access & Success.

3. Proposal could inspire more companies to help repay student loans

The news: Rep. Rodney Davis, R-Ill., introduced a bill last month that could encourage more employers to add student loan repayment assistance as a workplace benefit. The bill, HR 795, would allow companies to give up to $5,250 a year to employees or directly to their lenders to help pay off student loans tax-free. That means employees wouldn’t pay income tax on that amount, which could be an incentive for those with student loans to work at companies offering the benefit.

The background: More and more companies — including Staples, PwC and Fidelity — have begun offering student loan repayment as a perk for employees. Fidelity, for instance, offers $2,000 a year paid to the borrower’s student loan servicer, up to a lifetime maximum of $10,000. A NerdWallet analysis found an employee with $29,400 in total student loan debt would pay it off three years faster if they received an annual $2,000 benefit for five years.

What it means for you: The bill hasn’t passed the House of Representatives, but if it becomes law, employees at companies that adopt it would see student loan relief. Critics of the proposal say employees who earn more would see a greater tax benefit from the program, and that the borrowers most in need of help are those who don’t have full-time jobs with lots of perks. Or, says Sandy Baum, senior fellow at the Urban Institute, “They should pay higher wages rather than paying back students’ loans.”

You can also access programs available now to lower your loan payments. Income-driven repayment is best for those with federal loans who can’t afford their loan bills; signing up will cut the payments to 10% to 20% of your income each month. Those with high-interest private loans, or who don’t plan to use federal programs like income-driven repayment or loan forgiveness for public-sector workers, can try student loan refinancing. When you refinance student loans, a private lender will replace your current loans with a new one at a lower interest rate, as long as you have good credit and solid income or access to a co-signer.

Brianna McGurran is a staff writer at NerdWallet, a personal finance website. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe.

3 Sneaky Ways Debt Can Change How You Think

For some people, debt leads to sleepless nights and anxiety about incessant collections calls. But for others, it causes quieter changes that still leave them drowning in bills without a clear way out.

Understanding the ways in which your debt can affect the way you feel, think and act may give you perspective that’ll help you conquer it. Here are three subtle ways you may be responding to being in debt.

1. Defaulting to short-term thinking

People who are in debt tend to think in the short term, often because they’re driven by fear, says Gian Gonzaga, who has a Ph.D. in psychology and is the chief data officer at the student loan refinancing company Earnest.

“Fear makes you narrow your decision to the thing that is the most concerning and worrying to you,” Gonzaga says. “That can actually take away from your ability to think creatively about what other ways you’ll be able to dig your way out of [debt].”

People with multiple kinds of debt may focus on certain ones, sometimes at the expense of others. Sixty-eight percent of student loan borrowers say they’re focused on paying off obligations such as credit card balances and mortgages before their student debt, according to a new survey by NerdWallet and Harris Poll. Nearly half of student loan borrowers surveyed (47%) have missed a student loan payment, including borrowers who have skipped a payment to pay their rent or mortgage (17%) or a credit card bill (13%).

To avoid potential late fees and dings on your credit report, make sure you’re paying at least the minimum amount due each month on all your debts.

2. Opting for simplicity over savings

Many borrowers prefer to repay their smallest debts first, even though they could save more money by prioritizing their debts with the highest interest rates, according to a 2011 study published in the Journal of Marketing Research. Smaller debts may seem more manageable, or completely paying off a small debt seems more attainable, than paying off the full loan balance, the study says.

It’s not unreasonable to want to focus on your smaller debts first, though. The motivation you gain by paying off those debts could increase your productivity for repaying the remaining, larger debts, according to a 2015 study published in the Journal of Marketing Research. However, if you’re able to muster the motivation on your own, it’s best to put your extra money toward the highest-interest loans first.

3. Resigning yourself to your debt

If you’ve been in debt for a long time — say, 10 years — you could experience what’s known as learned helplessness, Gonzaga says. In other words, you may stop trying to become debt-free and instead resign yourself to life in debt.

By not being open to the possibility of getting out of debt, you may miss new opportunities to improve your money situation. For example, student loan refinancing has become available only in the last several years, Gonzaga notes. Borrowers who gave up looking for student loan help 10 years ago may not know about that option.

To get out of the learned helplessness mindset and feel empowered to change your situation, try thinking more long term, Gonzaga says.

“Frame things in terms of a future self you want to be,” he says. “Then start thinking about steps to get there.”

Depending on the type of debt you have, those steps may be different. For instance, consolidating your debt may help if you have personal loans or credit card debt. If you have student debt, switching to an income-driven plan or refinancing may be good solutions.

You have the power to take control of your financial life. If you need help, consider meeting with a credit counselor or researching strategies on your own.

This article was written by NerdWallet and was originally published by USA Today.

Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email: teddy@nerdwallet.com. Twitter: @teddynykiel.

Mortgage Rates Monday, March 20: Down; Renters Less Optimistic on Home Buying

Mortgage rates today dropped for 30- and 15-year fixed loans by two basis points and one basis point, respectively, while 5/1 ARMs were unchanged, according to a NerdWallet survey of mortgage interest rates published by national lenders on Monday morning.

House_pricetag Mortgage Rates Today, Monday, Mar. 20 (Change from 3/17) 30-year fixed: 4.44% APR (-0.02)15-year fixed: 3.81% APR (-0.01)5-1 ARM: 3.96% APR (0.00) See your personalized rate offers NAR: Consumers upbeat; renters wary on home buying 

More consumers, especially in rural areas and the Midwest, are growing increasingly confident in the U.S. economy and housing this year, but renters aren’t so optimistic about their ability to buy a home in the near future, according to a recent survey from the National Association of Realtors.

In the quarterly Housing Opportunities and Market Experience survey, years of positive job growth and post-election hope for more improvement this year has boosted consumer confidence in the economy to 62%, the highest share in the survey’s short history. That’s an “extraordinary reversal,” the NAR said, rising from 54% last quarter and 48% in March 2016.

» MORE: How much home can you afford?

Consumers’ confidence in the economy is also fueling a more positive outlook about households’ personal finances in the next six months. The survey’s monthly Personal Financial Outlook Index shows respondents’ optimism about their own financial situation surged to 62.6 in March,  the highest reading in the survey. That’s up from 59.8 in December and 58.1 in March 2016.

That confidence in the economy doesn’t translate to home-buying enthusiasm for renters. Just 56% of renters believe now is a good time to buy a home, a drop from 57% last quarter and an even sharper decline from 62% in March 2016. Younger families, renters and those living in the West, where home prices are highest, are the least confident, the survey found.

“Inventory conditions are even worse than a year ago, and home prices and mortgage rates are on an uphill climb,” NAR chief economist Lawrence Yun said in the release. “These factors are giving many renter households a pause about it being a good time to buy, even as their job prospects improve and wages grow. Unless there’s a significant boost in supply levels this spring, these constraints will unfortunately slow or delay some prospective buyers’ pursuit of purchasing a home.”

Homeowners looking to lower their mortgage rate can shop for refinance lenders here.

NerdWallet daily mortgage rates are an average of the published annual percentage rate with the lowest points for each loan term offered by a sampling of major national lenders. APR quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.

Deborah Kearns is a staff writer at NerdWallet, a personal finance website. Email: dkearns@nerdwallet.com. Twitter: @debbie_kearns.

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What Is a Rewards Checking Account?

Rewards checking accounts might earn interest or provide a generous sign-up bonus, but some carry high monthly fees — think $20 or more — unless customers keep their accounts padded with an almost comically high balance or meet some other requirement.

Still, finding a rewards checking account that doesn’t have steep fees and requirements is possible. Here’s a look at how to qualify for one of these accounts — and whether you should even want to.

Rewards checking basics

Rewards checking accounts often come with excellent perks, such as:

  • One-time sign-up bonuses between $50 and $200
  • High annual percentage yields (often 1% or higher)
  • Reimbursements for ATM surcharges
  • Airline miles
  • Cash back

Sometimes, the highest APYs are tied to balances. For example, you may earn a high rate only if you keep your balance under $10,000. Know the requirements involved, including what it takes to waive the monthly fee, in order to get the best deal.

How to qualify for rewards checking

Although the criteria to receive these benefits vary by account, generally you’ll have to meet a few requirements, such as:

  • Making 10 to 15 debit card transactions each month
  • Having at least one direct deposit or one ACH automatic withdrawal clear your account each month
  • Using self-service options such as electronic statements, online banking, ATM deposits or online bill pay at least once each month

You may be asked to fulfill all of these requirements, some combination of the three or different ones altogether; keeping a minimum balance is another popular one. It depends on the account. Check to see what those requirements are, and ask yourself whether you could meet them on a regular basis.

» MORE: What is a checking account?

Is a rewards checking account worth it?

If an account truly is free, there isn’t much downside to choosing one that offers rewards as well. Even if you don’t qualify for any of the add-ons, you’ll still have a free account. That’s a win in and of itself.

Problems arise, though, if you find yourself straining to meet the monthly requirements to have fees waived. For example, by forcing more debit card transactions than usual, you may end up overstepping your budget and triggering an overdraft. In that case, the interest you’ve earned won’t make up for excessive spending and fees.

Rewards can play a role, but not the main one

There’s nothing wrong with having rewards sway your decision if you’ve narrowed down your search to two accounts that suit your needs. If that’s the case, then by all means go for the one that does more than just store your money.

But don’t let flashy rewards lure you into signing up for an account that could do more harm than good.

Tony Armstrong is a staff writer at NerdWallet, a personal finance website. Email: tony@nerdwallet.com. Twitter: @tonystrongarm.

Updated March 20, 2017.

How I Ditched Debt: Penny Pinchin’ Mom

How to Cash a Check Without Paying Huge Fees

No bank account? There are still ways to cash a check. We’ve rounded up some of the lowest-cost methods.

But before you go to cash your check, a few pointers:

  • Bring identification, such as a state-issued driver’s license or other government ID
  • Just before cashing, endorse the back of the check with your signature on the line with the X
  • Aim to get your own checking account, where you could likely cash checks for free.  Read on for tips on getting approved.
Where to cash a check

The bank or credit union that’s on the check: You should be able to cash a check at the financial institution of the person or company that wrote you the check. Banks and credit unions often charge a fee of 1% to 3% of the amount of the check for this service.

Computer-generated paychecks often cost less to cash than personal, handwritten checks. If you were to cash a $500 computer-printed check from your employer at the bank where it was drawn, you’d pay a fee of about 1%, or $5.

Major retailers and grocery stores: Many large merchants provide check-cashing services, generally for less than $10 per check. Wal-Mart, for example, charges a $3 fee to cash checks up to $1,000 and $6 for anything larger.

Prepaid cards: Prepaid debit cards allow you to deposit your check, adding it to the card’s balance, through certain ATMs, via mobile deposit or at some retailers, such as Wal-Mart. Once you load money on the card, you can spend it anywhere that accepts the card’s payment network — often a Visa or MasterCard network. But the card isn’t attached to a checking account and doesn’t help to build credit like a credit card does.

There may be a charge for a deposit to a prepaid card. Cards themselves often cost around $5, and there’s also usually a monthly service fee of about $5.

Where not to cash a check

Payday lending store: For many people, cashing a check is a relatively straightforward transaction, but for nearly 16 million adults who don’t have a bank account, it can be hard to find a place that won’t charge a hefty fee for the service. Payday lending stores, for example, charge up to 10% of the check value. For a $500 check, that’s a fee of $50.

Get a checking account

Major retailers and prepaid debit cards are options for cashing a check, but your own bank or credit union is better since it likely won’t charge a fee for the service. Because of this, it’s worth getting a checking account, even if you’ve had trouble with one in the past.

If a financial institution has closed your checking account — because of unpaid overdrafts, for example — it may be hard to open a new account. That’s because you may have a record with ChexSystems, a company that tracks closed checking and savings accounts.

Some banks and credit unions will let you open a second chance checking account. These accounts may come with monthly fees, which can offset some of the money you save by avoiding the payday lender. But if you keep a second chance account in good standing for about a year, you may be able to upgrade to a free regular checking account, which will save more money in the long run.

» MORE: How to write a check

Margarette Burnette is a staff writer at NerdWallet, a personal finance website. Email: mburnette@nerdwallet.com. Twitter: @margarette.

Updated March 20, 2017.

What Is a Senior Checking Account?

Retirement, movie theater discounts, kicking youngsters out of seats at the front of a bus — who says getting older isn’t fun? But some perks of seniority can become pains if you don’t fully understand them. For example: Say your bank offers a senior checking account. Should you get it?

The quick answer: not necessarily.

Features designed for older customers

A senior checking account is essentially a regular checking account that offers features specifically designed for older customers. Requirements and perks vary by bank, but the minimum age to qualify usually is between 50 and 65, and fee waivers and free checks tend to be the top selling points.

These accounts aren’t everywhere. Of the eight biggest retail banks in the U.S., only two offer perks for seniors. But if the senior checking option at your bank or credit union has you curious, here are some things to consider before you open an account.

Perks of a senior checking account

The features of a senior checking account vary from institution to institution, but they can include:

  • Free checks
  • Free paper statements
  • No fees for using ATMs not affiliated with your bank
  • No fees on money orders
  • Higher interest rates than regular checking accounts
  • Discounts on safe-deposit boxes

Banks and credit unions may offer different combinations of these features or have other perks.

» MORE: NerdWallet’s best free checking accounts

Downsides of a senior checking account

Some senior checking accounts can save you money, but others can end up costing you more than a regular checking account would. Some of the most common downsides include:

  • Higher monthly maintenance fees. One bank might offer a senior account with a $10 maintenance fee, while its standard checking account charges only $5. You might be able to avoid that fee if you have a minimum or average balance of $1,000, but you might end up paying double if your balance regularly dips below the threshold.
  • A minimum balance to qualify for interest rates. Some banks offer dividends for balances as low as $500; others will wait until you have at least $1,500. Depending on how much you plan to keep, you might be better off stowing your money in a savings account or a certificate of deposit.
  • Waivers on fees that are seldom incurred to begin with, such as sending a cashier’s check or requesting reports beyond your monthly statement, are unlikely to benefit you much.

You’ve worked for a long time and, hopefully, have saved and built a cushion. If so, you may be able to keep a higher balance in your account. But once you’ve retired, your account might run lower than it did when you were earning a paycheck. If you can’t keep above the balance requirement on a senior account, you could lose hundreds of dollars a year in fees.

Read, ask questions and thoroughly understand the fine print of any account before you sign up.

» MORE: NerdWallet’s best rewards checking accounts

Deciding whether to get an account

So how should you determine whether a senior checking account is a good option, something worth moving your money into?

  • Research and compare nearby credit unions and banks, and assess whether their perks will ultimately save you money. Keep your eyes especially peeled for minimum balance requirements and monthly fees.
  • Consider if the benefits will realistically save you money. If they will, great. If they won’t really apply to you, skip it.
  • Make sure to compare senior checking accounts with regular checking accounts. You may find that the latter is still the better deal. Many banks offer free checking accounts, with perks such as free checks, higher interest rates or ATM fee reimbursements.
Next steps

Senior checking accounts and their features vary from bank to bank and credit union to credit union. Assess each option, read the fine print and see whether such an account makes sense for you. And if you find none of them really suits you, stick with the one you’ve got.

Amber Murakami-Fester is a staff writer at NerdWallet, a personal finance website. Email: amufe@nerdwallet.com.

Updated March 20, 2017.

What to Know About FSAs, HSAs and Taxes

Medical expenses can take a big bite out of your wallet. A couple of special accounts, however, are good remedies for both your doctor and tax bills.

A medical flexible spending arrangement is a workplace account you contribute to as a deduction from your salary that reduces your taxable income. You then can use the funds to pay for certain medical costs that come out of your own pocket, such as insurance copays, prescriptions and other items needed to meet your health policy’s deductible.

A health savings account is a savings plan to which you make contributions you can then use to pay a variety of medical costs. Only people with a qualifying high-deductible health plan are eligible. Contributions are tax-deductible, and the account’s earnings if invested are tax-free, as are withdrawals for eligible medical expenses.

We’ve written about the basics of FSAs and HSAs — how to open an account, what is and isn’t covered — some of which are determined by Internal Revenue Service rules. Here, though, we’ll focus on their tax implications and advantages.

How much can you contribute?

The IRS establishes the maximum you can contribute to an FSA each year based on inflation. For 2016, the FSA contribution limit was $2,550. The limit in 2017 goes to $2,600.

The maximum amount you can contribute to your HSA also depends on inflation, as well as the type of high-deductible insurance policy you have. For 2016, the individual coverage contribution limit was $3,350 and the family coverage limit was $6,750. For 2017, the amount for singles goes up slightly to $3,400 while the family coverage limit remains at $6,750. If you are age 55 or older, you can contribute an additional $1,000 to your HSA.

» MORE: Find the best tax software

How are contributions made?

Once you set up your medical FSA at work, contributions will automatically come out of your paycheck and go into your account each pay period. The money is contributed before taxes are calculated, so your payroll tax bill should be a bit smaller.

If your HSA is based on a high-deductible health plan you get through work, your employer might set up paycheck contributions to your account, meaning the money will go into the HSA tax-free. However, if you make HSA contributions directly, you claim a deduction for that amount when you file your tax return. You don’t have to itemize to claim the HSA deduction. Instead, complete the main HSA tax form — Form 8889 — and claim the amount there on line 25 of Form 1040. You have until the annual April tax-filing deadline to put money into an HSA for the prior tax year.

How do I access the account?

With an FSA, you must provide receipts to the account administrator for qualified medical expenses to be reimbursed. If your company provides you an FSA debit card, you can use it to pay for medical expenses, but then you may be asked to provide receipts to prove the purchases were eligible.

You’ll likely receive a debit card linked to your HSA balance to use. Along with other annual tax forms, your HSA manager will issue a Form 1099-SA showing distributions from the account. You should keep receipts and documentation of what you spent the funds on, in case the IRS questions whether the amounts you report on Form 8889 went to qualifying medical expenses.

» MORE: Top tips for middle-class tax filers

What if I don’t use all the money?

The major drawback of an FSA is that it is a use-or-lose plan. If you end up having a healthy year and have money left in your FSA at the end of the benefits period, your employer gets the excess money. Some workplaces offer rollover options (limited to $500 by IRS rules) or a few months’ grace period (sometimes to mid-March) to spend FSA funds, but they are not required to do so.

You don’t have to worry about forfeiting HSA money — there are no deadlines to withdraw funds, even if you no longer have the same high-deductible health plan. HSA balances also can be invested in mutual funds or other devices, and the money can continue to grow tax-deferred and be used tax-free to pay for qualifying medical expenses at any time.

Do take care, though, to use HSA money for medical reasons. If you are younger than 65 and use the funds for other purposes, that amount becomes taxable income, and you could face an additional 20% tax on the nonmedical use of HSA money. Once you turn 65, you can use HSA money for anything, but you’ll owe tax on withdrawals that aren’t used to pay medical expenses.

This Q&A covered some main points of FSAs and HSAs and your taxes. But as with all things tax, there are exceptions and special rules for certain situations. You can find more in IRS Publication 969. If you have additional questions, talk with your company’s human resources or benefits department.

Kay Bell is a contributing writer for NerdWallet, a personal finance website.

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