How to Save for Retirement Without a 401(k)

Millions of people use 401(k) accounts to save for retirement each year.

These tax-advantaged savings accounts invest your money in long-term mutual funds, stocks, bonds and other securities to grow your nest egg over time.

But there’s a catch: You can only open a 401(k) at work — and not all employers offer them.

In 2020, about 33% of private industry workers didn’t have access to any employer-sponsored retirement plan, according to data from the Bureau of Labor Statistics.

Part-time workers and those who earn the lowest wages are even less likely to work a job with access to a retirement plan.

The truth is, you don’t need an employer to save for retirement. (Although 401(k)s are still great to have, especially if you get an employer match.)

You can take control of your future and save for retirement on your own. And we promise — it’s not as difficult or scary as it sounds.

4 Ways to Save for Retirement Without a 401(k)

1. Individual Retirement Account

Anyone who earns income can open an individual retirement account, or IRA.

Unlike a 401(k), these retirement accounts aren’t tied to your employment. They give you more hands-on control and usually offer more investment options than 401(k)s.

Opening an IRA is easier than ever before, thanks to low-cost robo-advisors and convenient micro-investing apps. We’ll dive into those shortly.

But first, let’s discuss the two types of IRAs: Traditional and Roth. Both offer a sweet tax break but in different ways.

Pro Tip

Use this side-by-side traditional vs. Roth IRA chart to compare features of both accounts. 

Generally, contributing to a Roth IRA makes sense if you plan to be in a higher tax bracket when you retire, while a traditional IRA can be a better choice if you expect to be in a lower tax bracket when you retire.

Another way to think about it: A traditional IRA can help you save money on your yearly tax bill while a Roth IRA helps you save money on taxes in retirement.

Pro Tip

You can always open and contribute to a traditional and a Roth IRA at the same time. This can help you take advantage of tax savings in different ways. 

Traditional IRA

A traditional IRA lets you worry about taxes later. You put money in your account today and enjoy tax-free growth until you make a withdrawal.

You’ll pay income taxes when you pull money out. How much you owe is based on your tax bracket for the year in which you make the withdrawal.

If you withdraw money before the age of 59-½ the Internal Revenue Service will slap on a 10% penalty (unless you qualify for an exception). Money in your account is earmarked for retirement, so the government doesn’t take kindly to early withdrawals.

Traditional IRA Facts

  • In 2022, you can contribute up to $6,000 a year, or $7,000 if you’re 50 or older.
  • You have to take required minimum distributions (mandatory withdrawals) from your account starting at age 72.
  • Withdrawals are taxed as ordinary income.
  • Early withdrawals before age 59-½ come with a 10% tax penalty.
  • Contributions are generally tax deductible.

That last item is key. When tax time rolls around, any money you added to your account throughout the year reduces your taxable income, which can lower your tax bill or even boost your refund.

However, not everyone can claim this deduction.

  • If your employer offers a retirement account (even if you don’t participate in it: Your adjusted gross income must be less than $66,000 for single filers (or $105,000 for married couples filing jointly) in the 2021 tax year to claim a tax deduction on your traditional IRA contributions.
  • If your employer doesn’t offer a retirement account: You can claim a tax deduction on your contributions regardless of your income.

Roth IRA

Roth IRAs come with a tax bite today but allow you to make withdrawals tax-free down the road.

You fund your account with after-tax money. It grows tax-free and you won’t owe any income tax when you make withdrawals.

However, you won’t get a break at tax time: Contributions to a Roth IRA aren’t deductible.

Roth IRA Facts

  • You can contribute up to $6,000 a year, or $7,000 if you’re 50 or older.
  • You can withdraw contributions anytime, tax- and penalty-free.
  • Money grows tax-deferred.
  • Contributions aren’t tax deductible.
  • No required minimum distributions.

High-income earners can’t contribute to a Roth IRA. In 2022, single filers can open a Roth account if their modified adjusted gross income falls below $144,000, or $214,000 for married couples filing jointly.

A great perk of Roth retirement plans is you can withdraw contributions anytime, tax- and penalty-free. Any of your own original money that you put in, you can take out without owing income taxes.

However, you can only pull the earnings (new money generated by your investments) out of a Roth IRA after age 59-½ and after you’ve owned the account for at least five years.

Otherwise, withdrawing investment earnings can trigger taxes and a 10% early withdrawal penalty.

How Do You Open an IRA?

You can open an IRA online without ever speaking with a human. Isn’t technology great?

Robo-advisors and micro-investing apps make it super easy to get started. You can also open an IRA at most financial institutions and brokerage companies, like Charles Scwab, Fidelity or TD Ameritrade.

Robo-Advisors

IRAs give you way more investment choices than 401(k)s. That’s great if you have investing experience, not so great if you’re just starting out.

But robo-advisors can diversify your IRA portfolio for you, with exchange-traded funds (ETFs) and index funds based on your age, risk tolerance and goals. Most offer useful retirement planning and personal finance tools to visualize and easily manage your investments.

Many robos charge an affordable 0.25% annual account fee with low or no account minimums.

With most investment platforms, you’ll get your choice between a traditional or Roth IRA — or both. Some offer a SEP IRA for self-employed workers, too.

Interested in learning more? Here’s our roundup of the best robo-advisors on the market. 

Micro-Investing Apps

Micro-investing apps like Stash and Acorns make it easy to set up small, recurring contributions to an IRA. Plus, you can start investing with as little as $5.

Like robo-advisors, they’re easy to use, convenient and automated.

However, you might end up paying higher fees over time due to an app’s monthly subscription model. Stash and Acorns, for example, charge $3 to access a Roth or traditional IRA.

Paying $36 a year for a retirement account is steep compared to discount brokers and robo-advisors, especially for users with small account balances.

We’ve reviewed and compared the Linkbest micro-investing apps. Check out our top 5 picks for 2022. 

2. Health Savings Accounts

Using a health savings account (HSA) to save for retirement might seem like a strange idea.

But HSAs aren’t just a way to pay for expenses your high-deductible health insurance doesn’t won’t cover. They offer great tax advantages, making them a smart way to save for the future, too.

Think of it like a 401(k) for your health.

HSAs are said to hold a triple tax benefit because:

  1. Contributions are tax-deductible.
  2. Money within the account grows tax-free.
  3. Distributions are always tax-free when used for qualified medical expenses.

An HSA lets you save on taxes when you contribute. Funds in your account roll over year after year, and you’ll get a tax break for any contributions you make.

You’ll never pay taxes or penalties if you withdraw money from your HSA to pay for qualified health care costs. And when you turn 65, you can use money in your HSA however you want.

Best of all: You can invest money inside your account, just like you would a 401(k) or IRA. This lets your money grow over time, instead of sitting idle like it would in a traditional savings account.

It’s important to keep in mind that some HSA providers offer more — and better — investment options than others.

Some impose minimum balance requirements, transaction fees or investment fees. Nearly all providers charge annual account fees.

Technically, you can open an HSA even if your employer doesn’t offer one. But you can’t make contributions to the account unless you’re covered by a high-deductible health plan.

You can’t add money if you’re enrolled in Medicare or Medicaid either. (However, you can take HSA money out of your account in retirement to pay for things Medicare doesn’t cover, like eyeglasses or hearing aids.)

With eligible high-deductible health plans, you can contribute up to $3,650 a year to an HSA in 2022, or up to $7,300 for families.

3. Traditional Brokerage Accounts

Traditional brokerage accounts give you the benefit of investing for your retirement goals, but lack the special tax breaks IRAs, 401(k) and similar plans offer.

Traditional brokerage accounts are also called taxable investment accounts. You generally owe taxes when you sell securities for a profit, even if you don’t withdraw the money from your account. You’ll also pay tax on any dividend income.

Realized gains are taxed at your normal income tax rate or a lower long-term capital gains tax rate, depending on how long you’ve owned the security.

But that’s not always a bad thing. Using a taxable investment account can actually make sense in some situations.

First, you can make withdrawals from a taxable account at any time, regardless of age. You won’t get pinged by a 10% penalty from the IRS. (Although you may face stiff capital gains tax on earnings.)

This can make a taxable investment account beneficial if you’re saving for other mid- to long-term goals, like buying a house.

Another benefit is you can add as much money as you want: There’s no contribution limits. So taxable accounts can be attractive if you’re already maxing out your IRA or HSA.

As a quick reminder: Traditional brokerage accounts let you buy and sell investments like stocks, bonds, ETFs and mutual funds. You can open an account at financial institutions, online brokers, robo-advisors and investment apps like Robinhood and E*TRADE.

4. Retirement Accounts for Self-Employed People

Small business owners and self-employed people get a few other retirement savings options.

SEP IRA

Most major brokerage firms offer Simplified Employee Pension IRAs (SEP IRAs) and they’re easy to set up.

A formal written agreement is required, but the brokerage usually takes care of that for you.

Any business with one or more employees can open a SEP IRA, including independent contractors, self-employed people, sole proprietorships, LLPs, C corporations and S corporations.

That makes these accounts ideal for freelancers, solo entrepreneurs and gig workers.

A SEP IRA offers much higher contribution limits than a traditional or Roth IRA.

In 2022, you can contribute up to 25% of adjusted net earnings or $61,000 — whichever is less.

Because you can add employees to a SEP IRA, these accounts are also attractive for solo business owners who plan to add workers to their payroll in the future.

Solo 401(k)

If you’re self-employed or own a business with no employees, you can open a self-employed 401(k), also known as a solo 401(k).

You get two opportunities to save — as an employee, and again as the employer.

As the employee, you can make tax-deductible or Roth retirement contributions up to 100% of your compensation, with a maximum of $20,500 in 2022 ($27,000 if you’re 50 or older).

On top of that, as the employer you can put in up to 25% of your earned income. However, total contributions (not including additional contributions for those 50 and over) can’t exceed $61,000 in 2022.

You’re eligible to open a solo 401(k) if you generate profit from a sole proprietorship, LLC or any other business organization so long as you don’t have any employees besides you and your spouse.

Unique Features of Self-Employed 401(k)s

  • People 50 and older can make annual catch-up contributions.
  • You can make Roth contributions.
  • You can’t add employees to the plan (besides your spouse).
  • Opening an account can be a little trickier and more time consuming than opening a SEP IRA.
  • Might offer higher annual contribution limits and bigger tax deductions than a SEP IRA.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder. 

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Guide to the Senior Community Service Employment Program (SCSEP)

During the pandemic, workers 55 and older lost jobs earlier, were rehired slower and faced higher unemployment rates than younger workers, according to an October 2020 study by The New School for Social Research.

These obstacles are especially daunting for low-income seniors, who may lack the education, training or wrap-around resources necessary to re-enter the labor force.

If you’re 55 or older and unemployed, a free work-based job training program from the Department of Labor can help.

It’s called the Senior Community Service Employment Program (SCSEP), and it provides subsidized, part-time community service work to thousands of low-income American seniors each year.

Keep reading to learn who’s eligible and how to apply.

What Is the Senior Community Service Employment Program?

The SCSEP was created more than 55 years ago as part of the Older Americans Act of 1965.

The program aims to provide subsidized, part-time, community service work and training for people ages 55 and older with low incomes.

The Department of Labor received $402.9 million in funding for SCSEP in 2021, according to the agency’s fiscal budget. It allocates those funds to various state agencies and 19 national nonprofit organizations.

The SCSEP helps pay the salary of an estimated 56,0750 older Americans who participate in the program each year.

How Does the SCSEP Work?

The SCSEP is federally-funded and administered by states, which contract with local community service organizations. (Goodwill and AARP are two of the biggest).

The SCSEP is specifically designed to meet the employment needs of older workers.

Participants are placed with a local nonprofit or government agency and get paid to work 20 hours a week.

You’ll get paid the federal, state or local minimum wage — whichever is highest.

Pro Tip

The federal minimum wage in 2022 is $7.25. So  you can expect to earn at least $145 a week before taxes, or about $7,540 a year. 

Sponsor agencies are required to provide you with supportive career services like resume writing and computer training. They also place you in a hands-on work assignment with a local nonprofit or government agency.

This makes SCSEP a “win-win” for older workers and nonprofit groups alike, said Emily Allen, AARP Foundation’s senior vice president of programs.

“The participants get hands-on experience and the community organization gets extra manpower to carry out their mission,” Allen told The Penny Hoarder.

These entry-level to mid-level community service jobs include work such as learning how to operate the ordering system at a food bank or answering phones at your local Council on Aging.

Allen said roles like this give workers current work experience, which is attractive to potential employers.

“It’s often easier to find a job when you have a job,” Allen said. “Program participants are actively working in an assignment, and that really speaks to an employer.”

When you’re not in the field, organizations like AARP work one-on-one with SCSEP participants to identify their skills and career objectives.

“We focus a lot on developing the soft skills and digital skills they need to look for and obtain employment,” Allen said.

The goal of the SCSEP is to serve as a bridge to full-time, unsubsidized work.

In other words, your SCSEP gig won’t last forever. Allen said participants usually stay in the program for about a year.

Still, many agencies go on to hire SCSEP workers as full-time employees. Even if they don’t, you can take the skills you learned to get a permanent position somewhere else.

Who Is Eligible?

You’ll need to meet certain criteria to qualify for the SCSEP.

To be eligible, you must:

  • Be at least 55 years old.
  • Be unemployed.
  • Have a family income of no more than 125% of the federal poverty level.

In 2022, 125% of the U.S. poverty level is $16,100 a year for a single person or $21,775 a year for a household of two people.

Pro Tip

You can check to see if your household meets 125% of the poverty threshold by using this tool on Benefits.gov. 

Keep in mind: Income from certain government benefits doesn’t count for SCSEP eligibility purposes.

For example, any SSI or Social Security Disability payments you receive aren’t included as income, and neither is 25% of your Social Security retirement benefits.

According to the Department of Labor’s website, SCSEP gives employment priority to the following demographics:

  • Veterans and qualified spouses
  • Individuals ages 65 and older
  • People with disabilities
  • Residents of rural areas
  • People who are homeless or at risk of becoming homeless

How the SCSEP Works in Your Area

You can use the Older Worker Program Finder tool on the federal CareerOneStop site to find a SCSEP location in your area.

Chances are you’ll find one. According to a 2021 Department of Labor report, SCSEP-funded services are available in nearly 3,000 U.S. counties and territories.

“We always want to keep our positions filled, so there’s usually a recruitment going on for new participants,” Allen said.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

How to Pay Off Your Mortgage Early

If you own a home, your mortgage payment is probably your biggest monthly expense.

But what if you could eliminate that huge financial obligation ahead of schedule — and own your home free and clear?

There are a few tried-and-true ways to pay off your mortgage early — simple changes like making an extra monthly payment as well as more complex and expensive options like refinancing.

Paying off your mortgage early doesn’t make sense for everyone. It’s important to consider your individual circumstances, including your monthly budget. But if your top priority is paying off your mortgage faster, these tips can help you make it a reality.

Rules Around Making Extra Mortgage Payments

Most loan servicers let you pay off your mortgage early without penalty — but this isn’t always the case.

Some companies only accept extra payments at specific times. Others may charge prepayment penalties.

Check with your loan service provider to see if any restrictions apply to extra mortgage payments.

You also need to clarify that you want your extra payments applied to the principal of your loan — not to interest or the next month’s payment. By hacking away at the principal, you reduce how much you shell out in interest over time.

Lenders usually give you the option online to apply extra payments to the principal only.

If this option isn’t clearly marked, reach out to your loan company for instructions.

6 Ways to Pay off Your Mortgage Early

Before you decide you don’t have enough extra money to pay off your mortgage early, check out these six strategies. They’re not as painful as you might think.

1. Make One Extra Payment a Year

Making 13 mortgage payments in a year instead of 12 may not sound like a big deal — but it really adds up.

How effective is this strategy?

One extra payment on a $250,000 30-year fixed-rate mortgage with a 3.5% interest rate means you’ll pay off your mortgage debt four years early and save more than $20,000 in interest.

There are a couple ways you can squeeze extra mortgage payments out of your yearly budget.

One option is depositing one-twelfth of the monthly principal into a savings account each month. So, if your monthly principal is $850, set aside about $71 a month.

At the end of the year, empty the account to fund your 13th mortgage payment.

If you’re worried about dipping into savings, you can always pay one-twelfth extra on your mortgage each month. So, instead of paying $850, you’d pay $921.

This way, you’ll pay the equivalent of an extra payment by the end of the year.

2. Pay Biweekly

Setting up a biweekly payment schedule is an easy way to cross off 13 mortgage payments in a single year.

Some mortgage lenders let you sign up for this option, which allows you to make half of your mortgage payment every two weeks.

This results in 26 half-payments — or 13 full monthly payments — each calendar year.

That means you’ll pay less interest over time while lowering your principal balance at an accelerated rate.

Biweekly payments can be a good strategy for homeowners who get paid every other week. This way you can schedule your house payments around your paydays.

However, some lenders may charge extra fees if you opt for biweekly payments. Others may not offer the service at all.

If that’s the case, explore your other options, such as setting aside a little extra cash each month or making a slightly larger monthly payment like we discussed earlier.

You’ll still reap the benefit of making one extra payment each year — you just won’t get the convenience of your lender creating a monthly payment split for you.

3. Pad your Payment Each Month (If You Can Afford It)

It might not always be possible to make that extra mortgage payment each year, or set aside one-twelfth of the principal each month.

If there’s not much wiggle room in your budget, you can still take smaller steps to chip away at your principal.

Even $50 a month in extra payments can result in a dramatic drop in your loan balance and how much interest you pay over the life of your loan.

One strategy is to simply round up your mortgage payment to the nearest $100 when you can afford it. So if your mortgage payment is $875, pay $900 instead. (As always, ask your loan servicer to put the difference toward the principal).

If you want to take a small, gradual approach, you can increase your mortgage payment each time you get a raise at work.

You don’t have to put all your bumped up take-home pay toward your mortgage (that’s probably not a great idea anyway). Instead, apply a percentage.

Let’s say your new raise at work means $600 more in your bank account each month. If your top priority is paying off your mortgage as quickly as possible, assign 70% to 80% of your new raise to your monthly payment (in this case $420 to $480).

If your dollars are better spent on different financial priorities, like beefing up your 401(k) contributions or paying down higher-interest debt like credit cards or student loans, then assign just 10% to 25% of your new raise to your mortgage ($60 to $150 using the former example).

This gradual ramp-up might be a good strategy if you’re young and plan on steadily increasing your annual income over time.

4. Refinance Your Loan

Another way to pay off your mortgage early is to refinance your loan for a shorter term and/or at a lower interest rate.

For example, you could refinance a 30-year mortgage for a 20-year or 15-year term.

The monthly payment will almost certainly be bigger and you’ll pay closing costs, though those are generally folded into the loan balance. Regardless, refinancing your current loan can be a good idea because it dramatically reduces your long-term interest payments.

Here’s an example of what refinancing to a shorter term might look like.

  • Let’s imagine you have a 30-year mortgage that’s been paid down for eight years. When you bought your home for $349,000, you put a 6% down payment on it.
  • With a 4.5% interest rate, you’d still owe about $439,000 in principal and interest for the final 22 years of the loan.
  • If you refinanced into a 15-year mortgage at a 3% interest rate, your monthly mortgage payment would increase by roughly $250.
  • But you’d eliminate your loan seven years ahead of schedule and save yourself $94,000 of interest in the process.

A shorter term on a mortgage means it goes away sooner, but you’ll need to allocate more of your monthly budget for housing.

That’s because refinancing to a shorter term will likely increase your monthly mortgage payments —  especially if you refinance earlier in the life of the loan.

It makes sense — the repayment period gets crunched down, so you have to pay more over a shorter period.

On the other hand, if you bought your house longer ago when interest rates were higher, refinancing now at a lower rate could mean only a small increase in your monthly payment. But you’ll still enjoy big savings long-term.

You need to make sure your monthly budget can handle this added expense.

If your finances are tight, paying hundreds of dollars more a month on housing is risky. It can limit your ability to meet other financial priorities, like saving for retirement or maintaining a healthy emergency fund.

If you think your income may decrease in the future, it’s wise to explore other options, like contributing extra cash to your mortgage when you can afford it like we discussed earlier.

You’ll also need to consider refinancing closing costs, which typically total 2% to 3% of your loan principal amount. As an example, a $200,000 mortgage refinance could cost you $4,000 with a 2% refinancing fee.

You’ll want to make sure those fees don’t negate the interest savings, otherwise refinancing to pay off your mortgage early doesn’t make much sense.

5. Recast Your Mortgage Loan

An alternative to refinancing your mortgage is recasting the loan.

Mortgage recasting is the process of reducing your mortgage balance by paying a lump-sum on the principal. Your mortgage lender then adjusts your repayment, or amortization, schedule to reflect the new balance.

The result: Smaller monthly mortgage payments. You’ll also save money on interest over the life of your loan.

Recasting has a few benefits. First, your monthly payments get smaller, not larger.

You’ll also pay significantly lower closing costs compared to refinancing. Recasting fees are typically a few hundred dollars — not several thousand.

Recasting won’t change your interest rate, though. That’s nice if your interest rate is already low — not so nice if it’s high.

It’s also debatable if recasting your loan will actually help you pay off your mortgage faster. After all, it doesn’t shorten your loan term — it just reduces how much you pay each month.

But at least in theory, lowering your payments can make it more feasible to pay off your mortgage early. If you’re paying $1,200 a month instead of $1,600, it might be easier to make that one extra payment a year, for example.

Recasting isn’t an option for everyone.

You need a pretty big chunk of cash to put down on your mortgage balance. Lenders often set a minimum amount, such as $5,000 to $10,000. Others may require 10% of your outstanding mortgage balance.

If you’ve recently come into an influx of extra money, mortgage recasting may be an attractive option.

However, not all mortgage lenders offer recasting and not all loans are eligible (FHA loans and VA loans, for example, don’t qualify).

In that case, you can still make a lump sum payment on your own (we’ll talk more about that next). Doing so still decreases your loan balance, but your monthly payments won’t get any smaller.

6. Put Any Windfall Toward Your Mortgage

If you’re serious about getting out from under the major monthly expense of a mortgage payment, consider putting unexpected cash toward the principal.

Tax refunds, work bonuses and inheritance payments give you a chance to pay off a chunk of your mortgage without significantly impacting your monthly budget.

Other windfalls can include profits from selling a car, gaining access to trust money, cashing out an investment or winning the lottery.

Since VA and FHA loans can’t be recast, making a big payment toward the principal yourself is a nice alternative. Plus, you won’t pay any closing fees.

You’ll need to decide if stashing your newfound cash in an illiquid asset is the right move for your finances. But it’s a good option if you’re laser focused on paying your mortgage off early.

Just make sure to coordinate with your loan servicer so the money goes toward reducing your principal, not paying off interest.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Retirement Checklist: 5 Things to Know Before Leaving the Workforce

Millions of Americans quit their jobs this year as the Great Resignation took hold of the U.S. labor market.

But many of those workers didn’t really quit — they retired.

The United State’s retiree population has grown by about 3 million since the pandemic, according to The Washington Post. That’s about double pre-pandemic retirement trends.

Generous federal stimulus checks, strong stock market gains and rising home values prompted some better-off Americans to retire early.

Meanwhile, some Americans with modest incomes were forced into retirement due to job loss, COVID-19 health concerns and caregiving responsibilities.

If retirement is on your radar in 2022, here’s a checklist of things to know and do before calling it a career.

5 Essential Things to Put on Your Retirement Checklist

Retirement is calling your name — but can your budget handle it? Check out these tips to avoid financial stress and worry during your golden years.

1. Know Your Social Security Full Retirement Age

You can start collecting Social Security retirement benefits as early as age 62. But if you opt in early, your monthly benefits will be reduced significantly.

You aren’t eligible for full Social Security benefits until you reach what’s known as your full retirement age.

Full retirement age used to be 65, but that hasn’t been the case for a while.

The Social Security Administration now bases your full retirement age on the year you were born:

  • If you were born between 1943 and 1954, your full retirement age is 66.
  • If you were born between 1955 and 1960, your full retirement age increases gradually up to age 67.
  • Anyone born since 1961 has a full retirement age of 67.

You get a larger monthly benefit by working past your full retirement age.

Your benefit amount increases for every month you do not accept Social Security benefits, although this added benefit maxes out at age 70.

Pro Tip

Waiting until you reach age 70 can result in a monthly benefit that’s 77% higher than if you claimed at 62.

2. Learn About Ways to Maximize Your Social Security Benefit

Like we mentioned above, you can increase your Social Security benefit by working past your full retirement age.

There are other ways to boost your monthly benefit, but unfortunately, there aren’t any quick fixes.

Nearly every strategy that might increase your Social Security check boils down to this: Work longer, earn more money and wait as long as possible.

Work at Least 35 Years

Social Security uses your 35 highest-earning years to calculate your benefit, so it’s wise to stay in the workforce at least that long.

Working more than 35 years can really pay off, especially if you’re making significantly more than you were in your early career because you get to replace some of those low-earning years with higher wages.

Report All Your Earnings

Make sure to report earnings you make from tips, freelancing and self-employment throughout your career. Failing to report these earnings could reduce the amount of Social Security you get later on.

Marriage and Divorce Make a Difference

How much you receive from Social Security also depends on your marital status.

For example, if you’re divorced and not remarried, you might be eligible to claim benefits based on your ex’s work record (provided that your marriage lasted at least 10 years). Doing so won’t impact their benefits.

Or, if your current or ex-spouse dies, you could qualify for 100% of their benefit if you meet certain requirements.

3. Know the Social Security Earning Limits if You Plan on Working in Retirement

Yes, you can work and collect Social Security at the same time.

But if you make more than $19,560 a year in 2022, your Social Security benefits will go down.

Here’s how it works:

  • Once you hit full retirement age, working doesn’t impact your Social Security benefits — no matter how much you earn.
  • If you’re not yet at full retirement age but receive Social Security benefits, you can make up to $19,560 a year without penalty. (For context, that’s $1,630 a month, or $376 a week).
  • After that, your benefits are reduced by $1 for every $2 you make over $19,560.

Here’s an example.

Let’s say you started collecting Social Security at 62 and receive $1,200 a month.

A couple years later, you go back to work and earn $30,000 in a calendar year.

That’s $10,440 over the limit, so your yearly Social Security benefits would be reduced by $5,520, or $460 a month.

In other words, making $30,000 during a year that falls between 62 and your full retirement age reduces your $1,200 monthly check to $740.

But — and this is really important — that money isn’t gone forever.

Once you reach full retirement age, Social Security will recalculate your monthly benefit amount and give you credit for the months they reduced your payment.

4. Get Familiar With Your Health Care Options

Health care will likely be one of your biggest expenses in retirement.

That’s why it’s essential to understand your health care options.

  1. If you retire before age 65, you’ll likely lose coverage at work and need to find your own health care.
  2. At 65, you’re eligible for Medicare.

Early retirees can find themselves in a tough health care situation.

You might be able to get coverage through a spouse’s plan, assuming you’re married to someone with workplace health coverage. (If they’re on Medicare, they can’t add you to their plan).

Another option is to extend your employer’s insurance benefits through COBRA for 18 months. But at an average cost of $400 to $700 per person per month, it’s a pricey option.

Other health insurance options for early retirees include:

  • Try to find a part-time job that offers health care coverage. Just be mindful of those Social Security earning limits.
  • Find a plan on the Health Insurance Marketplace. Losing health coverage at work qualifies you for a 60-day special enrollment period on the Marketplace — the federal government’s health care shopping and enrollment service for uninsured Americans.
  • See if you qualify for Medicaid in your state. Especially if you know your income in retirement will be small.
  • Get private health insurance on your own. This can be complex and costly, especially if you’re in poor health or on a limited income.

We’d love to say things get easier when you turn 65 and enroll in Medicare, but that’s not always the case.

Contrary to popular belief, this federal health insurance program isn’t free and it doesn’t cover all your health care costs.
There’s a lot to know about Medicare — much more than we can cover here.

But here are a few important guidelines about Medicare:

  • If you’re already receiving Social Security benefits when you turn 65, you’ll be automatically enrolled in Medicare. You don’t need to do anything else.
  • If you have coverage through a Marketplace plan, COBRA through a past employer or TRICARE for retired military members, you’re required to enroll in Medicare when you turn 65.
  • You may not need to sign up for Medicare right away if you’re still working and enrolled in your employer’s group health plan or if your spouse is still working and you’re covered under their plan. But be sure to check with your employer.
  • Otherwise, your Medicare eligibility begins around your 65th birthday, and you have a seven-month window to sign up.

You can only qualify for Medicare before age 65 if you’ve been on Social Security Disability for at least 24 months. People diagnosed with end-stage renal disease or ALS also qualify.

5. Understand How Your Social Security Benefits Are Taxed

Your Social Security benefits are technically income. So do you owe taxes on Social Security?

In some cases, yes.

If you have additional income, whether it’s from a job or investments, there’s a good chance at least part of your Social Security will be taxed.

If you’re a single filer:

  • 0% of your benefit is taxable if your income is below $25,000.
  • Up to 50% of your benefit is taxable if your income is between $25,000 and $34,000.
  • Up to 85% of your benefit is taxable if your income is above $34,000.

If you’re married filing jointly:

  • 0% of your benefit is taxable if your combined incomes are below $32,000.
  • 50% of your benefit is taxable if your combined incomes are between $32,000 and $44,000.
  • 85% of your benefit is taxable if your combined incomes are above $44,000.

Keep in mind that “taxable” doesn’t mean that’s what you pay in tax. Suppose you’re a single filer with $30,000 of income: $20,000 from Social Security benefits and $10,000 from 401(k) withdrawals.

That simply means that your income will be $20,000 in the eyes of the IRS: $10,000 from the 401(k), plus 50% of the $20,000 from your Social Security benefits. Uncle Sam can’t touch the remaining 50%.

If Social Security is your only income source, you most likely won’t pay any taxes on it. The average benefit amounts to just $18,516 per year and you can make up to 25,000 before taxes kick in.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Best Investment Apps 2022 | For Beginner or Experienced Investors

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Picking the best investment app can be a tough decision. After all, there are a lot to choose from.

From micro-investing mobile apps that buy fractional shares with your spare change to active trading platforms equipped with advanced trading tools and market commentary, there’s an investment app for every skill set and budget.

Each of our top picks offer $0 account minimums, low account fees, retirement accounts and educational resources.

All of these apps are good for beginners, but some offer users more control, customization and investment selection than others.

When choosing an investment app, it’s important to consider if you want a passive portfolio or a self-directed portfolio.

The first manages your investments day-to-day for you. The second puts you in the driver’s seat: You’re responsible for picking and managing your own investments — and gauging your personal risk tolerance.

We tend to favor robo-advisors because they’re affordable, easy to use and don’t require much ongoing maintenance.

Below, you’ll find our full list of the best investment apps along with answers to frequently asked questions and insight from financial experts about how to pick the right investment app for you.

Best Investment Apps: Features Summary

Investing App Account Fees Account Minimum Balance Best For

Betterment Digital

0.25% annual fee

$0

Passive investing

Stash

$1 to $9 monthly fee

$0

New investors

E*TRADE

0% to 0.30%

$0

Frequent, active traders

SoFi Automated Investing

No annual or monthly fee

$0

Advisor access

Fidelity Go

$0 to $3 monthly

$0

Low-cost management

Webull

No annual or monthly fee

$0

Intermediate investors

Betterment Digital

Best for passive investing
5 out of 5 Overall
Key Features
  • Automated portfolios
  • Tax-loss harvesting
  • Bank account with debit card
Betterment is a goal-based robo-advisor offering managed portfolios, cash accounts and financial planning tools. Investment features include automatic rebalancing, daily tax-loss harvesting and socially responsible investing options. Its banking account earns interest and its debit card reimburses all ATM and foregin transaction fees. There’s no minimum account balance requirement.
Betterment
Account minimum
$0
Fees
0.25%
Account types
Individual/joint brokerage account, traditional IRA, Roth IRA, SEP IRA, checking account, savings account
Investment choices
Exchange traded funds (ETFs)
Additional Details
Betterment uses a hands-off investment strategy to get your money in the market. You can’t buy or trade stocks with this investing app: Rather, Betterment automatically invests your money into diversified ETFs. It picks the ETFs inside your portfolio based on your risk tolerance and financial goals.
Customers with a $100,000 minimum balance in their investment accounts can opt into the Betterment Premium plan for an account management fee of 0.40%.
Premium customers get more in-depth financial advice and unlimited access to phone calls with a financial advisor.
Check out our Betterment review for a full rundown of the app's features and offerings.

Stash

Best for micro-investing
5 out of 5 Overall
Key Features
  • Hands-on micro-investing
  • Fractional shares
  • Educational resources
You can pick your own individual stocks and bonds with Stash’s $1 per month Beginner plan, which includes a savings/checking account and plenty of educational resources on investing. At $3, the Growth plan offers an automated portfolio option along with access to IRAs. At $9 per month, Stash+ offers users two UGMA/UTMA custodial accounts for minors.
Stash
Account minimum
$0; $5 to start investing
Fees
Beginner, $1/ mo; Growth, $3/mo; Stash+, $9/mo
Account types
Individual brokerage account, Roth IRA, traditional IRA, UGMA/UTMA custodial accounts
Investment choices
ETFs, stocks, bonds
Additional details
Stash is popular with beginner investors because it lets you buy fractional shares with just $5.
The micro-investing app can create a diversified investment portfolio for you, or you can pick from more than 3,000 stocks, ETFs and bonds if you want a more hands-on approach.
However, Stash’s flat monthly fee is unlike many other robo-advisors, which charge a management fee as a percentage of your portfolio balance.
This can make Stash’s price a drawback for users with low account balances.
Still, at $1 a month, Stash Beginner is a fairly affordable investment account, considering you also get access to a bank account and a Stash debit card. This entry-level option is also cheaper than Acorns, Stash’s biggest competitor.
Check out our Stash review for a full run-down of the app's features and offerings.

E*TRADE

Best for active trading
5 out of 5 Overall
Key Features
  • Wide array of investment options
  • 4,400 no-load, fee-free mutual funds
  • Advanced trading tools
E*TRADE offers a wide selection of financial products, making it ideal for active and advanced investors. In 2019, the investment app eliminated all stock and ETF trading fees. It also features over 4,400 no-load, no transaction-fee mutual funds. Investors with a $500 minimum balance can opt into an automated Core Portfolio for a 0.30% annual management fee.
E*TRADE
Account minimum
$0
Fees
0% self-directed accounts; 0.30% annual fee for automated accounts
Account types
Brokerage accounts, traditional & Roth IRAs, savings, checking, custodial account, IRA for minors
Investment choices
Stocks, ETFs, bonds, options, mutual funds, futures and CDs
Additional details
E*TRADE’s sleek mobile app makes it easy to buy and trade stocks on the go.
The company also offers a more advanced platform called Power E*TRADE, where experienced and intermediate traders can utilize more than 145 charting tools, options strategies, risk-reward analysis and a live-streaming Bloomberg TV feed.
The Power platform also includes a paper trading feature, which lets you hone your investing skills and test strategies without committing real money.
Power E*TRADE isn’t a separate brokerage account — just a different platform with its own mobile app. Like the original platform, there’s no trading costs or account management fees.
Check out our E*TRADE review for a full run-down of the app's features and offerings.

SoFi Automated Investing

Best for access to a financial advisor
5 out of 5 Overall
Key Features
  • Access to a financial advisor
  • No annual management fee
  • Automatic rebalancing
SoFi Automated Investing is an easy-to-use robo-advisor with two stand-out features: No annual advisory fees and unlimited access to certified financial planners. Like other robo-advisors, SoFi takes a passive investment strategy with ETFs and diversified portfolios. While this investment app offers great value for new investors, it lacks some advanced features such as tax-loss harvesting.
SoFi Automated Investing
Account minimum
$0; $5 to start investing
Fees
None
Account types
Individual/joint taxable account, Roth IRA, traditional IRA, SEP IRA, Keogh plans
Investment choices
ETFs
Additional details
SoFi Automated Investing is a robo-advisor platform that offers users a rare combination: A low-cost robo-advisor with free access to real-life financial advisors.
SoFi also offers an attractive platform for more experienced traders: SoFi Active Investing.
It provides an almost unbeatable fee structure: No account minimums, no annual advisory fees and free stock and ETF trades. It also offers fractional share investing.
Active Investing users can trade 21 different cryptocurrencies for a flat fee of 1.25% per trade.
However, the platform lacks access to some fundamental investment types, including bonds and mutual funds. It also lacks some advanced trading options, such as options trading.

Fidelity Go

Best for low-cost management
4.5 out of 5 Overall
Key Features
  • No fees for small account balances
  • No investment expense ratios
  • Integration with other Fidelity accounts
While Fidelity Go lacks some of the bells and whistles offered by other investment apps, its 0% advisory fee for account balances of $10,000 or less makes it a great option for new investors. Portfolios are comprised of Fidelity Flex Funds, mutual funds with no investment expense ratios. Customers with an existing Fidelity IRA or taxable account can easily opt into this robo-advisor service.
Fidelity Go
Account minimum
$0; $10 to start investing
Fees
$0 for accounts below $10,000; $3 monthly fee for $10,000 to $49,999; 0.35% per year for $50,000 and up
Account types
Individual/joint brokerage account, Roth IRA, traditional IRA, health savings account
Investment choices
Mutual funds
Additional details
With Fidelity Go, investors have a choice among 14 portfolio options — half are retirement portfolios, and the rest are taxable. No matter which you choose, they’re created from Fidelity Flex funds.
These funds have holdings across four asset classes including U.S. stocks, international stocks, domestic bonds, and short-term securities. Keep in mind there are no assets such as commodities, real estate investment trusts and international bonds to choose from. Still, you can get a decent amount of diversification if you’re not bothered by the lack of these additional choices. Keep in mind that this robo-advisor doesn’t offer tax loss harvesting.
Check out our Fidelity Go review for a full run-down of the app's features and offerings.

Webull

Best for intermediate investors
4 out of 5 Overall
Key Features
  • Commission-free trading
  • Cryptocurrency trading
  • Advanced investing tools
Webull offers several advanced stock market trading tools, including in-depth charting, watchlists, dozens of technical indicators, free options trading and more. It also offers access to 25 cryptocurrencies and plans to add more in the future. However, Webull lacks some of the in-depth educational resources offered by other investing apps. It also lacks access to mutual funds and bonds.
Webull
Account minimum
$0
Fees
None
Account types
Taxable brokerage account, Roth IRA, traditional IRA
Investment choices
Stocks, ETFs, options, cryptocurrency
Additional details
Webull is best for active traders comfortable placing their own stock and ETF trades.
While the Webull platform features a thriving user community, its traditional education resources are slim. It also lacks access to some common securities, like bonds and mutual funds.
Webull is most appealing for its advanced features, including margin accounts and options trading. In fact, Webull is one of the few online brokers to offer free options trades with no commissions or contract fees.
Other key features include real-time market quotes, full extended-hours trading and commission-free crypto trading.
Check out our Webull review for a full run-down of the app's features and offerings.

Frequently Asked Questions

What Is the Best Investment App for Beginners?
We think robo-advisors are generally the best investing apps for beginners. These companies use advanced software and algorithms to build a tailored, diversified portfolio based on your risk tolerance, time horizon and financial goals.
They keep costs low while offering robust financial planning tools that give you a better understanding of your entire financial situation.
Meanwhile, self-directed accounts are best for more advanced investors who understand the complexity and risk involved.
Which Is the Safest App to Invest Money?
Putting your money in an investment app featured on our list is just as safe as investing at a traditional brokerage firm.
Even in the unlikely event an investment app goes under, your money is still safe and insured by the Securities Investor Protection Corporation (SIPC) for up to $500,000.
These investment apps also use bank-level security features, including encryption and two-factor authentication, to protect your data and privacy.
How Do Investment Apps Work?
You can either download the company’s mobile app on your smartphone or open an account online from your desktop or laptop.
You fund your portfolio by linking a bank account and transferring money. You can make one-time lump-sum deposits to your investment account or set up recurring transfers.
Once your account is funded, you can explore your investment options, make stock and ETF trades, or let a robo-advisor manage an investment portfolio for you.

Expert Advice on Choosing the Best Investment App for You

We asked two financial experts at The Penny Hoarder what they had to say about investment apps.

What are the biggest benefits of using an investment app?

Molly Moorhead, Certified Financial Planner:

Apps bring investing and financial planning to the place where you manage so much else of your life nowadays: your phone. If you’ve put off opening an IRA or becoming more educated before investing real money, all the tools and information you need are in your hands.

Robin Hartill, Certified Financial Planner:

Many investment apps make it easier than ever for beginners to get started. Some apps will let you buy fractional shares — which allow you to invest as little as $1 in top stocks — rather than saving up hundreds or even thousands of dollars for a full share.

Others will round up your purchases and let you invest the spare change.

Another benefit is that you can get an instant snapshot of how your investments are performing.

What are the drawbacks of using an investing app?

Molly Moorhead, CFP:

If you’re inclined to check your 401(k) every day or watch how a stock you bought is doing, investment apps can exacerbate that habit.

The vast majority of us don’t need to follow the markets every day, and we definitely don’t need to buy or sell investments based on short-term movements.

We’re in it for the long haul, so don’t let whatever app you choose become a temptation to make hasty investment choices.

Robin Hartill, CFP:

If you’re prone to panicking after the stock market has a bad day, an investment app may not be the best choice.

Likewise, if you’re an impulse buyer, be careful with investment apps. Long-term investing is what builds wealth.

Also, some apps have substantial fees that may not look like a lot. But if you invested $100 in a lump sum and your app charges a $1 monthly fee, that amounts to a 12% annual investment fee.

How can I learn more about the investment choices an app offers?

Molly Moorhead, CFP:

Most apps will steer you toward stock ETFs. By purchasing shares in these funds, you’ll own small pieces of many different companies across an array of sectors.

If you’re curious, log into your investment account, find the stock symbol for the companies in the fund and check out their historical performance.

You’ll find that they likely all have ups and downs, but because your money is spread across multiple industries, no single company’s stock will hurt you much if it drops.

Robin Hartill, CFP:

Look at online reviews to see whether users are satisfied with their investment choices and whether there are any limitations.

Once you find an investment you’re interested in, do your homework.

If it’s an individual stock, you need to understand how the company makes money and why you think it can be profitable in the future.

Most people don’t need a ton of investment options. An S&P 500 index fund is one of the most surefire ways to build wealth over time.

How much money can you make with investing apps?

Molly Moorhead, CFP:

To state the obvious, it depends how much you invest.

Micro-investing apps that let you round up the change on your purchases and invest that money for you won’t make you rich.

But if you can set aside a fixed amount of money every month to automatically invest in a diversified portfolio, your money will grow over time and provide you with a nice nest egg.

Robin Hartill, CFP:

Of course, your returns depend on how much you invest and what you invest in.

But keep in mind: Past results don’t guarantee future returns. Just because people made huge returns using an app to invest in an obscure crypto or hot stock doesn’t mean you should expect the same result.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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