I am a mother of two kids, and my student debt is crushing my family. Forgiving student loans will help us escape the cycle of poverty.

Chuck Schumer cancel student debt
Senate Majority Leader Chuck Schumer speaks during a press conference about student debt outside the U.S. Capitol on February 4, 2021 in Washington, DC.

  • Biden has pledged to forgive $10,000 of student loan debt, but it is not enough. 
  • After graduating college, I was hit by legal fees from my divorce which caused me to default on my loans. 
  • I went to graduate school to get a higher paying job, but now the interest on my loans is burying me. I want a better future for my kids. 
  • Emily Withnall is a freelance writer and fellow with Community Change. She lives in Missoula, Montana. 
  • This is an opinion column. The thoughts expressed are those of the author. 
  • Visit the Business section of Insider for more stories.

Money to move out was at the top of my oldest teen’s Christmas list this year. Alex is a senior in high school and should be applying to college. But due to my own crippling student loan debt, my kids’ choices are limited. For now, Alex is choosing not to attend college for the foreseeable future. This choice hurts.

I don’t have the resources to give Alex money to move out. Instead, on Christmas morning, I looked on with mortification as my kids unwrapped identical gifts, their faces shining with delight. They were excited to be receiving new sheets.

My kids have had the same old sheets covered with pastel butterflies for over twelve years. As a single parent, paying my bills and staying out of credit card debt while raising two kids is an unrelenting high-wire act. Paying for dance or Taekwondo means I don’t replace our towels and sheets very often. We eat a lot of beans and rice. College accounts and retirement funds are the stuff of fantasy.

Like many other Americans, I’m what you’d call a permalancer: I juggle part-time jobs and short-term contract gigs to keep myself afloat. In 2018, I made a grand total of $18,811 for the year. In 2019, I managed to make $22,908. Going without is my main strategy, but this approach can’t solve my student loan debt. Repaying the $81,000 I owe feels utterly impossible.

Forgiving only $10,000 isn’t enough

As a senator in 2005, President Joe Biden supported a bill that expanded the amount of loans students could borrow while simultaneously making it nearly impossible for people with enormous student loan debt to declare bankruptcy. This bill helped loan companies but contributed to what has been a mounting student loan crisis for the past 15 years. Senator Elizabeth Warren, who opposed this bill in 2005, is once again pushing Biden to reverse this legislation. So far, Biden has only pledged to forgive $10,000 of everyone’s student loans

In early February, Sen. Warren, Sen. Chuck Schumer, and Rep. Ayanna Pressly reintroduced a student loan forgiveness resolution that calls on Biden to forgive $50,000 for each federal student loan borrower through executive action. During a town hall on Tuesday night, however, President Biden claimed he lacked the authority to forgive more than $10,000 per borrower – the senators and representatives behind the proposed resolution maintain that Biden does have the authority.

As a borrower, I call on President Biden and Congress to go further. Forgiving $10,000 of my student debt doesn’t even cover the interest I’ve accrued. And while forgiving $50,000 would be a significant step in the right direction, many borrowers would still struggle under the weight of their remaining balances.

I was buried in legal fees before I could pay off my loans 

I graduated from a small college in New Mexico in 2007 with a total of $24,950 in student loan debt. The average student loan debt for an undergraduate degree in the US is $25,921, so I was happy I’d kept it under the average, while raising two children under the age of four. I got divorced six months after graduating, but soon secured a stable job that paid $26,000 a year.

When my grace period ended and I started making small payments towards my student loans, my abusive ex-husband began taking me to court. His court filings were aggressive and frequent – roughly every four months, for five years. I soon realized I would need an attorney to deal with the onslaught of litigation. 

Retaining legal counsel is costly, but with careful budgeting I managed to pay off over $60,000 in legal debt. Still, there was nothing left for student loans, and I began defaulting on them. One loan company even sued me. They stipulated that I face them in court or add thousands of dollars onto what I already owed. I was no match for a student loan company, so I took the latter option and added more debt to my debt.

In the 1960s college tuition was low enough that a student could work part-time and easily pay it off. With stagnant wages, fewer salaried jobs, and soaring costs of living, this is no longer true. Student loans make a promise they can no longer keep: if we invest in our future, we’ll reap the rewards. But this future doesn’t exist anymore. Those of us who strive to pay off our loans against all odds are often pulled under when any other financial predicaments crop up. For me, it was vexatious litigation, but for others it is medical emergencies or car trouble.

When I looked for higher-paying work, every job in my field required a master’s degree. I looked for months before deciding grad school was my ticket to financial security. When I got in, I moved myself and my kids – then six and nine years old – to Montana. I received enough aid to cover tuition, but still needed to take out more loans to cover rent and bills. In 2015, I finished graduate school owing $43,441. Despite the higher cost of living in Missoula, Montana, I was able to keep my debt under the average of $66,000 that borrowers typically accrue for a master’s degree. As a single parent, I worked as much as I could outside of classes to make this happen.

Five years later, the interest rates on my loans have snowballed and I now owe almost $81,000 – almost $13,000 more than I took out in the first place. And the numbers keep rising.

Student loan debt is tied to inequality

As reported in 2020, women hold two-thirds of student loan debt. Additionally, a 2019 study reveals that student loan debt is far greater for Black Americans: “The typical Black student borrower took out about $3,000 more in loans than their White peers; yet 20 years after starting school, the typical Black borrower owed about $17,500 more than their White peers. In that time, nearly half of White borrowers were student debt free (49 percent), while just a quarter of Black borrowers were able to pay off all of their loans (26 percent).”  

Not only would forgiving student loans keep more people housed and fed, but it would also help narrow the gender wealth gap and the racial wealth gap. 

Naysayers argue that student loan forgiveness wouldn’t be fair to people who have paid their loans off, but it’s a move that would boost the economy and benefit everyone. A 2018 report concludes that universal student debt forgiveness would increase the GDP by roughly $100 billion per year and would result in the creation of up to 1.55 million jobs per year. As the Debt Collective, a union organizing around debt forgiveness, writes, “Most people are not in debt because they live beyond their means; they are in debt because they have been denied the means to live.” This should not be a partisan issue.

While my kids received more than just sheets for Christmas, I remain troubled by their delight in a basic household item. I want more for them. I want Alex to be able to attend college, but I don’t want either of my kids to be trapped by a predatory system designed to keep them pinned down by crippling debt. Full student loan forgiveness would give families like mine more opportunities, and help my kids escape the cycle of poverty.

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Bonds can be taxable or tax-free – here’s your guide to the different types and calculating what’s due on them

Bonds are divided into two classes: taxable and tax-exempt. While their capital gains are always taxable, the interest they earn may not be.

All investments generate income in one way or another – sometimes as you hold them, sometimes only when you sell them for a profit. And that investment income tends to be taxable.

Bonds are no exception. But as an asset class, they’re a particularly diverse group. And so is the way they’re taxed. Some bonds are fully taxable, some partially taxable, and some not at all. 

And because they generate income in a few different ways, their tax rates vary too. 

Let’s examine bonds and taxes in more detail.

How are bonds taxed?

Bonds and bond funds generate two different types of income: interest and capital gains


Bonds are a type of debt instrument. When you buy a bond, you’re loaning money to the government or company that issued it; in return, that entity pays you interest. Most bonds pay a fixed, predetermined rate of interest over their lifespan. 

That interest income may be taxable or tax-free (more on the types of bonds that generate tax-free income later). For the most part, if the interest is taxable, you pay income taxes on that interest in the year it’s received. 

The rate you’ll pay on bond interest is the same rate you pay on your ordinary income, such as wages or income from self-employment. There are seven tax brackets, ranging from 10% to 37%. So if you’re in the 37% tax bracket, you’ll pay a 37% federal income tax rate on your bond interest.

Capital gains

If you buy a bond when it’s first issued and hold it until maturity – the full length of its lifespan – you generally won’t recognize a capital gain or loss. The money you get back is considered a return of your principal – what you originally invested in it.

However, after they’re issued, bonds often trade on financial exchanges, just like stocks. If you sell them before their maturity date on the secondary market, the bonds can generate capital gains and losses, depending on how its current price compares to your original cost. Bond funds can also generate capital gains and losses as the fund manager buys and sells securities within the fund.

So, the profit you make from selling a bond is considered a capital gain. Capital gains are taxed at different rates depending on whether they’re short-term or long-term.

Short-term capital gains apply if you hold the bond for one year (365 days) or less. Then the gain is taxed at your ordinary income tax rates.

Long-term capital gains apply if you hold the bond for more than one year. Then you can benefit from reduced tax rates, ranging from 0% to 20%, depending on your filing status and total taxable income for the year.

capital gains

Are all bonds taxed?

Bonds are divided into two classes: taxable and tax-exempt. 

A bond’s tax-exempt status applies only to the bond’s interest income. Any capital gains generated from selling a bond or bond fund before its maturity date is taxable, regardless of the type of bond. 

Taxable bonds

The interest income from taxable bonds is subject to federal, state (and local, if applicable) income taxes.

Taxable bonds include:

  • Corporate bonds
  • Mortgage-backed securities
  • Global bond funds
  • Diversified bond funds

Tax-exempt bonds

Municipal bonds, aka munis, are the main type of tax-exempt bonds. 

Munis are issued by states, counties, cities, and other government agencies to fund major capital projects, such as building schools, hospitals, highways, and other public buildings.

Interest income from muni bonds is generally not subject to federal income taxes. It can also be exempt from state or local income taxes if your home state or city issues the bond. Interest income from muni bonds issued by another state or city is taxable on your state or local income tax return. 

Fast fact: Muni bonds exempt from federal, state, and local taxes are known as “triple tax exempt.”

US Treasuries, bonds issued by the US Dept. of the Treasury, and savings bonds are also tax-exempt – to a degree. If you own them, you owe federal income tax on them. However, they are generally free from state and local income taxes. 

How can I avoid paying taxes on bonds?

Here are a few strategies for avoiding – or at least reducing – the taxes you pay on bonds.

  • Hold the bond in a tax-advantaged account. When you invest in bonds within a Roth IRA or Roth 401(k), the returns are tax-free, as long as you follow the withdrawal rules. Bond income and profits from sales earned within a traditional IRA or 401(k) are tax-deferred, meaning you don’t pay taxes until you withdraw the money in retirement.
  • Use savings bonds for educational purposes. Consider using Series EE or Series I savings bonds to save for education. When you redeem the bond, the interest paid is tax-exempt as long as you use the money to pay for qualified higher education expenses and meet other qualifications
  • Hold bonds until maturity. Holding a bond until maturity, instead of selling it early on the secondary market can help you avoid paying taxes on capital gains. However, you still owe tax on any taxable interest generated by the bond while you owned it.

The financial takeaway

Minimizing the tax consequences of bonds comes down to investing in tax-exempt bonds, such as muni bonds and US Treasuries, and using tax-advantaged accounts where your money can grow on a tax-free or tax-deferred basis.

If you invest in bonds outside of tax-advantaged accounts, you’ll receive a Form 1099 from the bank or brokerage holding your investments around January 31 of each year. Hold on to these forms, as you’ll need them to report bond interest and capital gains on your tax return. The IRS also gets a copy of those 1099s.

 If you miss reporting any income, they’ll be sure to let you know.

Related Coverage in Investing:

A corporate bond provides companies with cash and investors with income – here’s how to evaluate the risks and rewards

Fixed-income investing is a strategy that focuses on low-risk investments paying a reliable return

Bonds vs. CDs: The key differences and how to decide which income-producing option is better for you

What are junk bonds? A risky yet high-yield investment that can bring rewards if you’re willing to take the chance

How to buy treasury bonds, one of the safest ways to invest for income

Read the original article on Business Insider

Investment income is taxed in a variety of ways – here’s how to estimate what you’ll owe and tips to minimize it

investment income
Your investment income may be taxed as ordinary income, at certain special rates, or not at all, depending on the type of investment it is and the sort of investment account it’s in.

  • Investment income can be taxed as ordinary income or at special rates, depending on the type it is. 
  • Capital gains and some dividends receive preferential tax rates. Interest and annuity payouts are taxed as ordinary income. 
  • All investments earn income tax-free while they remain in tax-advantaged accounts.
  • Visit Business Insider’s Investing Reference library for more stories.

You probably know that you have to pay taxes on just about all your income. But while the taxes on your work income is fairly straightforward – based on your tax bracket, and often automatically withheld from your paycheck – the tax on investment income can be more complex. 

Not all investment income is taxed equally.

In fact, your investments are taxed at different rates, depending on the type of investment you have. Some investments are tax-exempt, some are taxed at the same rates as your ordinary income, and some benefit from preferential tax rates.

When you owe the tax can also vary. Some taxes are due only when you sell the investment at a profit. Other taxes are due when your investment pays you a distribution. 

And finally, where you hold the investments matters. If the asset is in a tax-deferred account, such as an IRA, 401(k), or 529 plan, you won’t owe taxes on the earnings until you withdraw money from the account – or, depending on the type of account, ever.

See what we mean by complex? Never fear – here’s everything you need to know about the taxes on investment income, and the tax rates on different investments. 

What is investment income?

Investment income comes in four basic forms:

  • Interest income derives from the Interest earned on funds deposited in a savings or money market account, or invested in certificates of deposit, bonds or bond funds. It also applies to interest on loans you make to others.
  • Capital gains. Capital gains come from selling an investment at a profit. When you sell an investment for less than you paid for it, it creates a capital loss, which can offset capital gains.
  • Dividend income. If you own stocks, mutual funds, exchange-traded funds (ETFs), or money market funds, you may receive dividends when the board of directors of the company or fund managers decides to distribute the excess cash on hand to reward their investors.
  • Annuity payments. When you purchase an annuity, a contract with an insurance company, you pay over a lump sum. The insurance company invests your money, and converts it into a series of periodic payments. A portion of these payments can be taxable.

How is investment income taxed?

With so many variables, how can you estimate the tax bite on your investments? Here are the tax rates for different types of investment income.

Interest income

For the most part, interest income is taxed as your ordinary income tax rate – the same rate you pay on your wages or self-employment earnings. Those rates range from 10% to 37%, based on the current (2021) tax brackets. 

Some interest income is tax-exempt, though. Interest from municipal bonds is generally tax-free on your federal return; when you buy muni bonds issued by your own state, the interest is exempt from your state income tax as well.

Another exception is granted US Treasury bonds, bills, and notes, as well as US savings bonds. They are exempt from state and local taxes, though not federal taxes. 

Capital gains

The tax rate you’ll pay on capital gains depends on how long you owned the investment before selling it.

You have a short-term capital gain if you own the asset for one year (365 days) or less before selling it. Short-term capital gains are taxed at the same rate as your ordinary income.

You have a long-term capital gain if you hold on to the investment for more than one year before selling it. Long-term gains are taxed at preferential rates, ranging from 0% to 20%, depending on your total taxable income.

Capital gains are not taxable while the funds remain within a tax-advantaged IRA, 401(k), HSA, or 529 plan.

capital gains

Dividend income

The rate you pay on dividends from stock shares or stock funds depends on whether the dividend is qualified or unqualified. 

Qualified dividends are taxed at the same rates as long-term capital gains. Unqualified dividends are taxed at the same rates as ordinary income.

To count as qualified, you must have owned the dividend-producing investment for more than 60 days during the 121-day period that started 60 days before the security’s ex-dividend date. The ex-dividend date is the date after the dividend’s record date, which is the cut-off date the company uses to determine which shareholders are eligible to receive a declared dividend.

Annuity payments

The taxation of annuity payments is a little more complex. While you may earn interest, dividends, and capital gains within your annuity, you don’t owe any taxes on this income until you actually start receiving your annuity payouts. You only have tax due on the sums you receive each year.

What you owe also depends on whether you purchased the annuity with pre-tax or after-tax dollars. If you purchase an annuity with pre-tax dollars (by rolling over money from your 401(k) or IRA), payments from the annuity are fully taxable.

But if you purchase an annuity with after-tax dollars – that is, you didn’t use retirement account money, you only pay taxes on the earnings portion of your withdrawal. The rest is considered a return of principal (the original lump sum you paid into the annuity). 

 When you receive your 1099-R from your insurance company showing your annuity payouts for the year, it will indicate the total taxable amount of your annuity income.

Whether you pay tax on 100% of the annuity payments or only the earnings portion of your withdrawal, all annuity payments are taxed at the ordinary-income rate.

How do I avoid taxes on investment income?

Most investment income is taxable, but there are a few strategies for avoiding – or at least minimizing – the taxes you pay on investment returns. 

  • Stay in a low tax bracket. Single taxpayers with taxable income of $40,400 or less in 2021 qualify for a 0% tax rate on qualified dividends and capital gains. That income limit doubles for married couples filing jointly. If you can take advantage of tax deductions that will keep your taxable income below that amount, you may be able to avoid paying taxes on a significant portion of your investment income.
  • Hold on to your investments. Hanging on to stocks and other investments can help ensure you take advantage of preferential rates for qualified dividends and long-term capital gains.
  • Invest in tax-advantaged accounts. Interest, dividends, capital gains – almost all forms of investment income are shielded from annual taxes while they remain in one of these accounts. With a traditional IRA or 401(k), the money is only taxable once you withdraw funds from the account. Money earned in a Roth IRA is never taxable, as long as you meet the withdrawal requirements. Interest income from a health savings account (HSA) or 529 plan is not taxable as long as you use the money to pay for qualified medical or educational expenses, respectively.
  • Harvest tax losses. Tax loss harvesting involves selling investments that are down in order to offset gains from other investments. If you have investments in your portfolio that have poor prospects for future growth, it could be worth it to sell them at a loss in order to lower your overall capital gains. Many robo-advisors and financial advisors will take care of harvesting for you, trying to net out the winners and the losers.

The financial takeaway

A few tax-exempt assets aside, investment income is taxable. And it’s taxed in two basic ways: at ordinary income rates or at a lower preferential rate, generally known as the capital gains rate.

All assets accrue income tax-free while they remain in tax-advantaged accounts.

While it’s never a good idea to make investment decisions based solely on the tax implications, it is wise to consider the tax consequences of any investment moves you make. Taxes might not be the only reason you choose one investment over another, but tax breaks can be a bonus on any well-thought-out investment strategy.

Related Coverage in Investing:

Dividends are taxed in different ways – here’s how to figure what you owe on your stocks’ payouts

Interest income from your investments is taxable – here’s how to calculate what you owe and ways to lower it

Bitcoin taxes: Understanding the rules and how to report cryptocurrency on your return

Capital gains are the profits you make from selling your investments, and they can be taxed at lower rates

A variable annuity can provide you with more retirement income since its payouts rise with the stock market

Read the original article on Business Insider

Dividends are taxed in different ways – here’s how to figure what you owe on your stocks’ payouts

Dividend income is taxable, but the rate varies, depending on how long you’ve owned the stock shares that pay the dividends.

  • Dividends from stocks or funds are taxable income, whether you receive them or reinvest them.
  • Qualified dividends are taxed at lower capital gains rates; unqualified dividends as ordinary income.
  • Putting dividend-paying stocks in tax-advantaged accounts can help you avoid or delay the taxes due.
  • Visit Business Insider’s Investing Reference library for more stories.

When you invest in a company by purchasing individual stocks, mutual funds, or exchange-traded funds (ETFs), you may be rewarded with dividends. A dividend is a per-share portion of the company’s profits that gets distributed regularly to its stockholders – sort of like a quarterly bonus. 

Like most other types of investment income, the IRS deems dividends to be taxable. However, not all dividends are treated – or taxed – equally. 

Here’s everything you need to know about paying taxes on dividends.

How are dividends taxed?

A variety of unearned or passive income (as opposed to income from your work or job), dividends are subject to both federal and state taxes. For tax purposes, dividends are classified as either qualified or unqualified, depending on how long you hold the underlying shares in a US corporation or a qualifying foreign corporation.

What’s the difference? Qualified dividends meet a special holding period. That means you owned the stock issuing them for at least 60 days during the 121-day period that started 60 days before the ex-dividend date. The ex-dividend date is the day after the cut-off date (aka the “record date”) the company uses to determine which shareholders are eligible to receive the dividend.

Yeah, that definition is pretty confusing. So here’s a real-life example, sort of a timeline. 

  • Say you purchased 100 shares of IBM stock on March 1, 2020.
  • On April 28, IBM’s board of directors announced a dividend of $1.63 per share to stockholders of record.
  • They set the record date as May 8, 2020. So the ex-dividend date was May 9, 2020.
  • Since you purchased the shares more than 60 days prior to the ex-dividend date (May 9, 2020), the $163 in dividends your shares earned you are qualified. On the other hand, if you’d purchased shares on April 1, you would have owned the stock for fewer than 60 days, and the dividends would be unqualified.

How much tax do you pay on dividends?

Why do dividends being qualified or unqualified matter? Because it affects the amount of tax you pay on them. 

Unqualified dividends are taxed at your ordinary income tax rate – the same rate that applies to your wages or self-employment income. So, if you fall into the 32% tax bracket, you’ll pay a 32% tax rate on all your unqualified dividends, also known as ordinary dividends.

Qualified dividends get preferential treatment. You pay the same tax rate on qualified dividends as you do on long-term capital gains. Depending on your tax bracket, this rate can be a lot lower than your ordinary income rate.

The exact rate you pay depends on your filing status and total taxable income for the year.

capital gains 06
Capital gains tax rates.

Returning to the IBM example above, let’s assume you fall into the 32% tax bracket for ordinary income and the 15% tax bracket for long-term capital gains.

If your IBM dividends are unqualified, you’ll pay roughly $52 in taxes on your $163 of dividends. But if those dividends are eligible for qualified tax treatment, you’ll pay only $24 in taxes.

How can you avoid paying taxes on dividends?

There are a few legitimate strategies for avoiding or at least minimizing the taxes you pay on dividend income.

  • Stay in a lower tax bracket. Single taxpayers with taxable income of $40,000 or less in 2020 ($40,400 or less for 2021) qualify for the 0% tax rate on qualified dividends. Those income limits are doubled for married couples filing jointly. If you can take advantage of tax deductions that reduce your income below those amounts, you can avoid paying taxes on qualified dividends, though not unqualified dividends.
  • Invest in tax-exempt accounts. Invest in stocks, mutual funds, and EFTs within a Roth IRA or Roth 401(k). Any dividends earned in these accounts are tax-free, as long as you obey the withdrawal rules.
  • Invest in educationoriented accounts. When you invest within a 529 plan or Coverdell education savings account, all dividends earned in the account are tax-free, as long as withdrawals are used for qualified education expenses.
  • Invest in tax-deferred accounts. Traditional IRAs and 401(k)s are tax-deferred, meaning you don’t pay taxes on earnings until you withdraw the money in retirement.
  • Don’t churn. Try not to sell stocks within the 60-day holding period, so any dividends will be qualified for the low capital gains rates. 
  • Invest in companies that don’t pay dividends. Young, rapidly growing companies often reinvest all profits to fuel growth rather than paying dividends to shareholders. You won’t earn any quarterly income from their stock, true. But if the firm flourishes and its stock price rises, you can sell your shares at a gain and pay long-term capital gains rates on the profits as long as you owned the stock for more than a year.

Keep in mind: You can’t avoid taxes by reinvesting your dividends. Dividends are taxable income whether they’re received into your account or invested back into the company.

The financial takeaway

Dividend stocks can be a good way to build wealth and supplement your income, so don’t let worries over taxes keep you from investing in dividend-paying stocks. 

Still, by knowing how dividends are taxed, you can do some planning to ensure you pay as little to the IRS as possible. 

Qualified dividends benefit from being taxed at lower capital gains tax rates. And you may be able to lower the tax bite even more if you keep the high-dividend-payers in tax-advantaged accounts.

Related Coverage in Investing:

What are the best college-savings investments? 5 ways to grow your money for the ever-higher costs of higher education

Dividend yield is a key way to evaluate a company and the regular payouts from its stock

Capital gains tax rates: How to calculate them and tips on how to minimize what you owe

How to invest in dividend stocks, a low-risk source of investment income

Interest income from your investments is taxable – here’s how to calculate what you owe and ways to lower it

Read the original article on Business Insider

Interest income from your investments is taxable – here’s how to calculate what you owe and ways to lower it

interest income1
Most interest income earned by your savings and investments counts as taxable income. It’s taxed at the same rate as your regular income.

Paying income taxes is a fact of life. And when the IRS says income, it means all the money you make – both earned, from your work, and unearned, from your investments. That includes interest income – money generated by bank or brokerage accounts, and from certain assets, like bonds or mutual funds.

A few exceptions aside, most investment interest is taxable income. You’re required to report it on your return and give the government a cut of it.

 So it helps to know a little more about how interest income impacts your tax bill.

What is interest income?

Most types of interest income are subject to both federal and state taxes. This includes the interest you earn on or from:

Is any interest income tax-free?

Only one major type of asset generates non-taxable interest income: municipal bonds (“munis” for short) and private activity bonds. These are issued by states, counties, cities, and other government agencies to fund major capital projects, such as building public hospitals and schools, highways, power plants, and other civic buildings. 

All munis, along with municipal bond funds, are exempt from federal taxes. If the bond is issued by your home state, the interest income it provides is also free from state and local income taxes. 

Fast fact: Municipal bonds free of federal, state, and local taxes are dubbed “triple-tax-exempt” bonds. 

You also get a bit of a break on US Treasuries and savings bonds. You pay federal income tax on them, but they’re exempt from state and local income taxes. 

What’s the tax rate on interest income?

Interest income doesn’t have a special tax rate the way profits on your investments, aka long-term capital gains, do. You pay taxes on the interest as if it were ordinary income – that is, at the same rate as your other income, such as wages or self-employment earnings. 

So, if you’re in the 24% tax bracket, you’ll also pay a 24% rate on your interest income.

For the 2020 and 2021 tax years, there are seven tax brackets: 

2020 Tax Brackets (tax returns filed in 2021)

Tax Rate Single Head of Household Married Filing Jointly Married Filing Separately
10% Up to $9,875 Up to $14,100 Up to $19,750 Up to $9,875
12% $9,876 – $40,125 $14,101 – $53,700 $19,751 – $80,250 $9,876 – $40,125
22% $40,126 – $85,525 $53,701 – $85,500 $80,251 – $171,050 $40,126 – $85,525
24% $85,526 – $163,300 $85,501 – $163,300 $171,051 – $326,600 $85,526 – $163,300
32% $163,301 – $207,350 $163,301 – $207,350 $326,601 – $414,700 $163,301 – $207,350
35% $207,351 – $518,400 $207,351 – $518,400 $414,701 – $622,050 $207,351 – $311,025
37% $518,401 and up $518,401 and up $622,051 and up $311,026 and up

2021 Tax Brackets (tax returns filed in 2022)

Tax Rate Single Head of Household Married Filing Jointly Married Filing Separately
10% Up to $9,950 Up to $14,200 Up to $19,900 Up to $9,950
12% $9,951 – $40,525 $14,201 – $54,200 $19,901 – $81,050 $9,951 – $40,525
22% $40,526 – $86,375 $54,201 – $86,350 $81,051 – $172,750 $40,526 – $86,375
24% $86,376 – $164,925 $86,351 – $164,900 $172,751 – $329,850 $86,376 – $164,925
32% $164,926 – $209,425 $164,901 – $209,400 $329,851 – $418,850 $164,926 – $209,425
35% $209,426 – $523,600 $209,401 – $523,600 $418,851 – $628,300 $209,426 – $314,150
37% $523,601 and up $523,601 and up $628,301 and up $314,151 and up

Interest income can also be subject to another tax called the Net Investment Income Tax (NIIT). The NIIT is a 3.8% tax on the lesser of:

  • Your net investment income, which is generally all of your investment income (including interest, dividends, capital gains, distributions from annuities, income from passive activities, rents, and royalties) minus investment expenses, or
  • The amount of your modified adjusted gross income that exceeds $200,000 for singles/heads of household, $250,000 for married couples filing jointly, and $125,000 for married couples filing separately.

How do I report interest income on my tax return?

Around January 31 of each year, you should receive Form 1099-INT from any bank, brokerage firm, or other sources of interest income showing the interest your investments earned in the prior year. 

In most cases, it’s easy to take the numbers from Form 1099-INT and transfer them to the appropriate place on your tax preparation software or tax return. The figures to focus on are in boxes 1, 3, and 8.

Boxes 1 and 3 of Form 1099-INT show regular taxable interest income and taxable interest from US Savings Bonds and Treasury Bonds. Box 8 shows tax-exempt interest. 

Where is taxable interest income reported on the tax return?

If you received more than $1,500 of taxable interest or dividends during the year, you report all of that interest and dividend income on Schedule B attached to your Form 1040. If your earnings didn’t reach that threshold, you don’t need to fill out Schedule B. Instead, you just report tax-exempt interest and taxable interest on lines 2a and 2b of your Form 1040.

Your 1099-INT forms should have all the info you need. They may not be complete, though. Banks and brokerage firms are only required to send you a form if they paid you more than $10 in interest during the year. So if you earned $5 in interest from a savings account, it’s still taxable – you just might not get a 1099-INT.

So, it’s a good idea to keep track of it yourself, too – because you’re required to report all interest income on your return, no matter how small. If you have lots of accounts in various places, it could add up.

Is there any way to avoid taxes on interest income?

It’s hard to avoid paying taxes on your interest income, but there are a few strategies to try, especially with assets that generate a lot of income. 

  • Keep assets in tax-exempt accounts, such as a Roth IRA or a Roth 401(k). No matter what the investment, you never owe taxes on anything earned in such accounts, as long as you obey the withdrawal rules. 
  • Keep assets in education-oriented accounts, like 529 plans and Coverdell education savings accounts. All earnings in these accounts are tax-free, as long as they’re used for academic expenses.
  • Invest assets in tax-deferred accounts, such as a traditional IRA or 401(k) to put off paying taxes until you withdraw the money in retirement, and you’re presumably in a lower tax bracket.
  • Invest in municipal bonds issued in your home state to qualify for the triple-tax-exempt treatment. 
  • Invest in US Treasuries to avoid state income taxes, especially useful if you live in a highly taxed locality. 

The financial takeaway

No matter the source, most interest earned by your savings and investments counts as taxable income. It’s taxed at the same rate as ordinary income – based on your regular tax bracket for the year. 

Avoiding interest income tax boils down to seeking out certain exempt assets – mainly municipal bonds and US Treasuries – and using tax-advantaged accounts, in which money earns tax-free or at least tax-deferred. 

The financial institutions holding your accounts send annual statements of your interest income called Form 1099. So keep track of these, and report all of your investment income. The IRS gets copies of all of your 1099s, so they’ll know quickly if you leave anything out. 

Related Coverage in Investing:

Where to invest when interest rates are low – 6 fixed-rate vehicles that offer the best returns

Investment income is money earned by your financial assets or accounts, and understanding how it works can help maximize your profits

How to take advantage of low interest rates – the best financial moves for investors and borrowers

Understanding the way compound interest works is key to building wealth or avoiding crushing debt. Here’s how to make it work for you

Fixed-income investing is a strategy that focuses on low-risk investments paying a reliable return

Read the original article on Business Insider

7 signs you’re rich, even if it doesn’t feel like it

business woman
  • “Rich” doesn’t necessarily mean owning a huge mansion or taking luxury vacations.
  • You’re wealthy if you can afford to save money every month and are on track to retire when you want to.
  • Another sign you’re wealthy is being able to make choices based on what you want, not just your financial needs.
  • Visit Personal Finance Insider’s homepage for more stories.

“Rich” is relative.

Maybe you think it means being in the top 1% of earners in some of the wealthiest cities in the US. Maybe it means being able to buy a flashy mansion or spend your life flitting from luxury vacation to luxury vacation.

But former investment banker Kristin Addis told Insider she feels richer earning about 40% of her previous six-figure salary while she travels the world. Nick and Dariece Swift, who also left their jobs to make a fraction of their former income, said they’re happier earning less. The self-made millionaire stars of “West Texas Investor’s Club” say their relationships are more valuable than the money they earn.

Ultimately, “rich” can be just as subjective as “happy” – it’s different for everyone. However, there are a few universal indications of wealth, no matter how you view it.

1. You can save money

“Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep,” writes Robert Kiyosaki in “Rich Dad Poor Dad.”

At the end of the day, money does not solve financial problems – in fact, it often exacerbates them. Consider the lottery winners who lost it all within a few years, or the professional athletes who made millions in their 20s and wound up broke.

“Money often makes obvious our tragic human flaws, putting a spotlight on what we don’t know,” says Kiyosaki. “That is why, all too often, a person who comes into a sudden windfall of cash – let’s say an inheritance, a pay raise, or lottery winnings – soon returns to the same financial mess, if not worse, than the mess they were in before.” 

If you can hold on to a portion of the money you earn, you’re in good shape.

2. You can live comfortably below your means

Living below your means is one of the major tenets of responsible money management: spending less than you earn, however much that may be.

Self-made billionaire Anthony Hsieh told Insider that learning to live within his means was a lesson he learned from his parents, who immigrated to the US from Taiwan.

The habit “has helped me quite a bit and that’s one of the reasons I’ve survived and flourished in consumer lending for 30 years,” he said. “My career spans four different economic and housing cycles and I’m still sitting at the table as a key executive in consumer lending. I think part of that is my discipline of making certain that the company and myself don’t overspend.”

Living within your means might not sound like a big deal if you’re already doing it, but not everyone can manage. A 2019 report released by GOBankingRates found that a third of Americans surveyed are living paycheck to paycheck.

3. You will eventually be able to pay for the things you really want 

If you can go out and buy a yacht in cash today, most people would agree that you’re rich. However, if you can go out and buy that same yacht five years from now after setting a savings goal and socking away money on a monthly or annual basis, guess what? You’re probably still rich.

Survey after survey turns up the same dispiriting result: Americans aren’t saving all that much. The same GOBankingRates survey reported that 45% of respondents had no household savings, and an estimated 40 million households have no retirement savings whatsoever.

Which brings us to our next point …

4. You’re going to be able to afford to retire as planned

Retirement is expensive. Experts say that to live lavishly in retirement, you need to replace about 70%-80% of your current income (although that number is disputed). Even if you’ve downsized, and maybe even relocated to an area with a low cost of living, retirement is still a prolonged period of supporting yourself on little or no income. 

Traditionally, “retirement age” is 65, but that’s changing as more Americans find they’re unable to float 20-plus years of living without a paycheck. Data from a 2019 Bureau of Labor Statistics report found that nearly 20% of Americans age 65 and older are still working.

If you can afford to retire when you want to, it’s a luxury.

5. You aren’t motivated purely by money

One common thread you’ll find among self-made millionaires and those who study them is that “rich people” tend to focus on something other than the dollar signs: They’re solving a problem, or following a passion, or striving to build their business as much as possible.

That, right there, is a luxury. If you can’t make ends meet, you can bet you’ll be focusing on the dollar signs over the intellectual fulfillment of your job.

This doesn’t mean you can’t be happy to earn a sizable paycheck or you can’t be excited to watch your investments grow, but money isn’t your chief motivator or source of joy. If you have the luxury to focus on something other than the money, you’re in a good place.

6. You view money as an ally

“Most people have a dysfunctional, adversarial relationship with money,” writes self-made millionaire Steve Siebold. “After all, we are taught that money is scarce – hard to earn and harder to keep. If you want to start attracting money, stop seeing it as your enemy and think of it as one of your greatest allies.”

The reason wealthy people earn more wealth is because they’re not afraid to admit that money can solve most problems, Siebold says: “[The middle class] sees money as a never-ending necessary evil that must be endured as part of life. The world class sees money as the great liberator, and with enough of it, they are able to purchase financial peace of mind.”

If you aren’t scared of money – if you view it as an ally, and a tool that can help you achieve what you want in life – you’re ahead of the game.

7. You aren’t stuck

“What I have realized over time is that in many ways, money spells freedom,” self-made millionaire and NastyGal founder Sophia Amoruso wrote in her book, “#GIRLBOSS.” She continued:

“If you learn to control your finances, you won’t find yourself stuck in jobs, places, or relationships that you hate just because you can’t afford to go elsewhere. … Being in a good spot financially can open up so many doors. Being in a bad spot can slam them in your face.”

Kathleen Elkins contributed reporting.

Related Content Module: More Personal Finance Coverage

Read the original article on Business Insider

How to take advantage of low interest rates – the best financial moves for investors and borrowers

low rates
There are ways to benefit when interest rates are low, from saving money on loans and credit card balances to seeking out income-generating investment and savings vehicles.

  • Low interest rates impact finances in different ways: good for borrowers, tough on savers and income investors.
  • Ways to take advantage of low interest rates include refinancing loans, selling bonds, and buying property.
  •  CDs, corporate bonds, and REITs offer the best investment income options when interest rates are low. 
  • Visit Business Insider’s Investing Reference library for more stories.

Interest rates have been at historic lows for years…and they just keep falling. In the US, the federal funds rate – the benchmark on which other rates are based – is near 0% in 2021, and the Federal Reserve has declared that it plans to keep it there until at least 2023. 

Why are interest rates so low? The Fed adjusts interest rates as part of its mandate to oversee the nation’s money supply, the amount of cash and easily obtainable funds circulating throughout the US. Reducing interest rates is part of what’s called an expansionary monetary policy, and the Fed does it to combat economic slowdowns or recessions, which mean business cutbacks and closures, and job losses. 

The theory is that low interest rates stimulate the economy, encouraging companies and consumers to borrow, spend, and expand. For example, in the wake of the Great Recession, the Fed lowered the federal funds rate in 2008, and it stayed near zero until 2015. 

The Fed is currently depressing interest rates to keep the economy pumping despite the dragging effect of the ongoing COVID-19 pandemic.

But what do low interest rates mean for your personal balance sheet – your investments, savings, and debts? The answer is mixed: Favorable in some ways, unfavorable in others. But overall, you can take action to take advantage of the situation.

Here’s what you need to know to make the most of low interest rates. 

How do low interest rates impact your finances?

For bank account-holders, bad news: Falling interest rates typically mean lower returns on their savings. Whether the money is stashed in a savings account, a checking account, or a money market account, the interest earned on it will decrease.

Borrowers, on the other hand, might get some relief. Folks who are paying off debt whose interest fluctuates, such as a credit card balance or a variable-rate loan, will likely see a decrease in their annual percentage rate (APR). It won’t affect their overall balance – the amount they owe – but it will result in smaller interest charges. 

Consumers who are in the market to finance a major purchase, such as a car or home, will have access to loans with more favorable rates.

As for investors, it depends on what they’re invested in. Broadly speaking, though, low interest rates are good for people who have money in the stock market. When interest rates are low, consumers have more money to spend and banks are lending more. Companies generate more revenue and are able to take out loans that can help them expand – which can cause their stock share prices to rise. 

How to benefit from low interest rates

There are several key moves you to make when interest rates are low or falling – to take advantage of “money being cheaper,” as the financial pros like to say. 

Low interest rates strategies for borrowers

  • Refinance your loans: If you have a mortgage or student loans, consider refinancing- that is, paying off your old loan by taking out a new one. This new one will have a lower interest rate, of course; ideally, it should also be a fixed-rate loan, to lock in that lower rate. You’ll need to have good credit to qualify, but if you do, you stand to save a lot of money on interest fees.
  • Consolidate your debt: If you’re juggling multiple credit card balances or personal loans, taking out a debt consolidation loan can help you get all your liabilities under control. Debt consolidation loans by combining them into one big debt – and one monthly payment. This might make repayments more manageable, particularly if you can take advantage of a lower interest rate.
  • Transfer credit card debt: Use low interest rates as an opportunity to pay off your credit card debt faster by doing a balance transfer to a credit card with a lower interest rate. You can consider a low interest credit card with a favorable ongoing interest rate or a balance transfer credit card. The latter typically offer a 0% introductory APR on balance transfers for anywhere from 12 to 21 months, so you only want to go with that option if you can pay off your balance fairly quickly – or at least, within that time frame.

Low interest rates strategies for investors

  • Buy property: If you’ve been thinking about buying a home, there’s no better time to take out a home loan than when interest rates are at historic lows. Even if you already have a house, you might want to consider investing in a second home or other property if you can lock in a good mortgage rate.
  • Use the interest savings: If you’ve got a mortgage or a car loan whose interest rate has gotten extremely low, don’t pay it off. Instead, put the extra “income” – the difference in the interest amount you’re charged on your loan – into investments. You could boost the amount you contribute to your 401(k) plan, for example. 
  • Sell bonds: Bond prices tend to go up when interest rates are low. If newly issued bonds are paying lower interest, older bonds with higher yields become more desirable. So, if you don’t need the income from your bonds, seize the chance to sell them at a profit, or “above par” as the investment pros say. 

What should you invest in when interest rates are low?

Income-oriented investors will probably find that a low-rate environment isn’t ideal, particularly if they are seeking fixed-income or fixed-interest investments. However, there are still some options when interest rates tumble. Among the better ones:

  • High-yield savings accounts: When interest rates plummet, a high-yield savings account will at least offer better returns than what you’ll get with a basic savings account at most traditional banks. While this won’t be enough to help you build wealth, it’s better than watching your savings get devalued by inflation.
  • Certificates of deposit (CDs): If you can snag a decent rate before interest rates hit rock bottom, locking it in with a CD will help your savings maintain their value against inflation. Just keep in mind that CDs tie up your funds for a certain amount of time – the higher the interest rate, the longer the period, generally – and withdrawing your money early usually results in a penalty.
  • Corporate bonds and municipal bonds: Bonds appeal to fixed-income investors because of their low volatility, and they tend to offer better yields than savings accounts and CDs. Corporate bonds – debt issued by companies – pay more interest than US government bonds (called Treasuries), admittedly at slightly higher risk, though they’re still relatively safe. Municipal bonds, which are issued by cities, counties, and states, also offer higher yields as well as some tax advantages: The interest they pay isn’t subject to federal or state taxes.
  • Real estate investment trusts (REITs): When interest rates are on the decline, REITs – publicly traded funds that own and operate commercial properties – can prove a smart investment. Low interest rates benefit real estate. If REITs borrow at lower interest rates, they can expand construction, take on more projects, refinance their current loans – all of which improves their performance, and the earnings they share with investors.

The financial takeaway

Low interest rates might not be great for savers, but they’re great for anyone paying off debt. They can also be beneficial if you’re looking to borrow, especially for major purchases like buying a house. 

As for investors, it’s a mixed bag. Interest rates near zero might not be ideal for those dependent on investment income, especially if they want low-risk vehicles that pay a steady return. But there are still plenty of ways to invest in a low-rate environment that can help you at least maintain your wealth. And some investments, such as real estate and bonds, might post better returns, or be sold for a profit.

Related Coverage in Investing:

Where to invest when interest rates are low – 6 fixed-rate vehicles that offer the best returns

REITs are a way to own real estate without becoming a landlord – here’s how they work and ways to invest

How to invest in dividend stocks, a low-risk source of investment income

Fixed-income investing is a strategy that focuses on low-risk investments paying a reliable return

The federal funds rate is an interest rate set by the US’ biggest bank – and it influences everything from CD earnings to the national economy

Read the original article on Business Insider

Borrowing from your 401(k) plan can be a fast, advantageous way to meet serious financial needs – here’s everything you need to know about 401(k) loans

401k loan
If you need funds quickly, a 401(k) loan offers several advantages over other loans or 401(k) plan withdrawals – but there are many rules to follow.

  • Borrowing from a 401(k) means withdrawing funds from your plan that you later repay with interest.
  • A 401(k) loan avoids the taxes and penalties that come with outright withdrawals.
  • Borrowing from a 401(k) has drawbacks, like the suspension of contributions and overall loss of account growth.
  • Visit Business Insider’s Investing Reference library for more stories.

Any financial expert will tell you it’s best to keep your retirement savings tucked away until, well, retirement. That certainly holds true for one of the most common ways to save for those post-career years: employer-sponsored 401(k) plans

But life can get in the way of the best investment plans. And if you have an immediate need for cash, borrowing from your 401(k) may make the most financial sense. Especially when you compare that option to other loan alternatives – or withdrawing money entirely from the plan.

However, there are many rules, both from the IRS and individual employer plans, that apply to 401(k) loans. If those are not followed, you may end up paying taxes and penalties that can seriously hamper your finances. 

Understanding exactly what’s entailed in borrowing from a 401(k) is key to determining if the strategy will suit you. Let’s take a closer look.

What is a 401(k) loan?

In a 401(k) retirement plan, you make regular pre-tax contributions and the money grows tax-free. In return for those tax advantages, you must follow several IRS rules, chief among them, no withdrawals without penalties until age 59½. If you do withdraw early, you’ll be subject to a mandatory 20% federal tax withholding and in most cases a 10% tax penalty.

A 401(k) loan is basically a way you can take money from your own account without paying these taxes or penalties. You don’t get charged, because this is only a temporary withdrawal: You will be putting the money back, eventually. And you won’t be depleting your retirement savings permanently.

You will pay interest on the sum you take out, but this money goes back into the plan account. So, in effect, you are both the borrower and lender of a 401(k) loan.

IRS regulations govern 401(k) plans overall, but there is also some flexibility for employers to impose their own rules and restrictions. Most employers that provide 401(k)s plans allow 401(k) loans, says Gregg Levinson, senior consultant at Willis Towers Watson. He estimates that about a third of 401(k)(k) participants borrow from their accounts at some point (not counting the COVID-19 pandemic year of 2020).

Will my employer know if I take a 401(k) loan?

Your employer has to be informed if you plan to borrow from your 401(k) loan – the withdrawal and repayment process is set up through them. This is not to say that the whole company or your immediate boss will necessarily know. Only, perhaps, the payroll department. 

How to borrow from a 401(k) 

Your first step when considering borrowing from your 401(k) is to contact your employer benefits department or your 401(k) plan provider to get details on how your plan’s loans work (assuming, of course, they’re offered in the first place). 

Here’s what to look for in 401(k) loan rules:

  • Borrowing limits. The IRS mandates that you may borrow no more than 50% of your account value or $50,000, whichever is less. Some employers and plans will also impose a minimum loan amount, say, no less than $1,000.
  • Interest. Your interest rate is determined by your employer but must be “reasonable” and similar to the rate you’d find at a financial institution, according to IRS rules. In most cases employers charge prime plus one percentage point.
  • Repayment.  IRS rules call for full repayment of your 401(k) loan, with interest, within five years in equal payments that include principal and interest paid at least every quarter. Your own plan may follow those terms, or impose more stringent ones. Many employers use payroll deductions for repayments. Your employer may also allow for longer repayment limits, as recommended by the IRS, if you use the loan for a primary home purchase – sometimes as long as 25 years. 
  • Number of loans allowed. How many loans can you take from your 401(k) plan? Again, that depends on your employer. Most of them only allow for one at a time; you have to fully repay one sum before they’ll allow you to borrow again. So weigh carefully how much you’ll need. The IRS itself permits simultaneous loans, as long as the combined amount doesn’t exceed the general limits. 

As long as you adhere to the mandates, all should go well. But if you don’t, your loan could be considered a withdrawal, and tax payments and penalties will follow.

Is it smart to borrow from a 401(k) plan?

Compared to other financing methods, borrowing from a 401(k) plan has its advantages. On the plus side, a 401(k) loan offers:

  • No need for approval. It’s your money, so you’re getting it is automatic. No loan applications or credit checks. And borrowed 401(k) funds  do not show up on your credit report as a debt.
  • Quick access to funds. Often, you can get the money within two weeks.
  • Interest rates that are often lower than those charged by credit cards and many personal loans offered by banks
  • Benefits from the interest. You’re paying yourself to borrow, instead of a lender. Because it goes into the account, the interest is sort of a boon, not just an expense. 
  • No prepayment penalty. Unlike some consumer loans, most plans don’t charge a fee for loans repaid in full early. 

What are the downsides of borrowing from a 401(k)?

401(k)s loans have their drawbacks, too.  Downsides include:

  • Loss of tax-deferred earnings. Taking money out of your account shrinks it, obviously, and also its earning potential – especially if you take the full five years to repay the loan. The overall effect on your retirement savings will depend on how much you borrow, how long you take to pay it back, and the state of the stock market. Some plans don’t allow you to make new 401(k) contributions until the loan is repaid, further hampering the compounding ability of retirement savings.
  • Double taxation. Loan repayments and interest are made with after-tax dollars, in contrast to the dollars used for contributions. But they’re not distinguished within the account; everything goes back into the same pre-tax pot. So, when you eventually start taking regular distributions from your plan, you’ll pay income tax on that money; in effect, you’re being double-taxed on the interest. 
  • Sudden repayment. In most cases, if you leave your employer for any reason you will need to fully repay the loan usually within one to six months, depending on the plan rules and the date of your last payment. If you don’t, your former employer and the IRS will consider the loan a distribution. You’ll then owe income taxes on the amount and, if you are under age 59½, a 10% penalty. (For Roth 401(k)s, you likely won’t owe taxes but you will be on the hook for the 10% penalty.)

“People often underestimate how long they will be with an employer and find themselves in the position of having to come up with the full amount outstanding on the loan or face a large tax bill and penalties,” says Levinson.

The financial takeaway

Most financial experts agree taking a 401(k) loan should be a last resort. Employees of a certain age, who are beyond the penalty-incurring years, might find that taking a distribution might actually work better for them.

Still, borrowing from your 401(k) plan can be an option if you need funds quickly. It’s certainly a better course than an outright withdrawal, especially if you’re under 59½, which incurs penalties as well as taxes.  

Before you jump to borrow from your 401(k), it’s important to consider the pros and cons. Understanding how 401(k) loans work, the consequences of leaving your employer or losing your job before repayment and the opportunity risks involved in tapping your retirement savings early are all key considerations. 

Related coverage in Investing:

The difference between a Roth 401(k) and a traditional 401(k), and how to decide which retirement plan is right for you

The worst thing you can do with your 401(k) when you leave a job, according to a financial expert and bestselling author

A 401(k) can be the most lucrative way to save for retirement, so take advantage if you can

If you work for a nonprofit, church, or public school, a 403(b) plan is a great way to save for retirement

How to withdraw from your traditional 401(k) account early – the strategies to avoid penalties and fees

Read the original article on Business Insider