My father had a good long-term care policy in the mid-90s. Then he switched to a cheaper one. The new policy only covered 90 days of rehabilitative care — the kind you need after a hip replacement or a stroke, when you’re expected to recover and go home.

When my mother was diagnosed with Parkinson’s, the policy was useless. She didn’t need 90 days of rehab. She needed years of daily help with the basics — getting dressed, eating, bathing, moving safely through the house.

The doctors said she might live another 10 years. She lived 20.

The plans our family had built around that policy — the assumption that insurance would cover a significant portion of her care — collapsed. We found a way. But it took everything we had, financially and otherwise.

If you’re in your 40s, 50s, or 60s, this probably isn’t something you want to think about. It feels morbid. It feels far away. And then suddenly it’s not — and the costs are staggering.

The Costs Nobody Talks About

This is what long-term care actually costs today.

A semi-private room in a nursing home runs roughly $315 per day in many markets. That’s roughly $115,000 per year. A private room runs closer to $350 per day — roughly $128,000 per year. In high-cost areas like the Northeast or California, you’re looking at $140,000 to $180,000 annually.

Assisted living averages roughly $6,200 per month nationally, or about $75,000 per year. Memory care units, for dementia and Alzheimer’s patients, typically add another $1,000 to $2,500 per month on top of that.

Home health aides cost $30 to $50 per hour depending on where you live. Twenty hours a week runs $2,600 to $4,300 per month. Forty hours a week — which sounds like a lot until you realize it’s just daytime coverage — runs $5,200 to $8,600 per month. And if you need 24/7 care at home through an agency, which is what many people actually need? That’s $22,000 to $36,000 per month. $260,000 to $430,000 per year.

Do the math on a typical nursing home stay. Three years at $115,000 per year is $345,000. Five years is $575,000. And that’s at today’s prices.

A single long-term care event can drain a lifetime of savings in three to five years. Most people don’t discover this until they’re in crisis.

The Medicare Gap

Here’s the misconception that devastates families: most people assume Medicare covers nursing home care.

It doesn’t. At least not the way they think.

Medicare covers skilled nursing care — the kind that requires medical professionals, like IV medication after surgery or physical therapy after a hospital stay. And even that coverage is limited. Days 1 through 20 are fully covered. Days 21 through 100 require a copay of roughly $200 per day. After day 100, Medicare pays nothing.

What Medicare does not cover is custodial care — help with what are called Activities of Daily Living: bathing, dressing, eating, toileting, moving around. This is the care most people actually need as they age. And Medicare doesn’t pay for it.

The distinction matters. If you need a nurse to change a wound dressing after surgery, that’s skilled nursing — Medicare covers it, temporarily. If you need someone to help you get out of bed and make breakfast because you can’t do it yourself anymore, that’s custodial care — Medicare doesn’t cover it at all.

This gap is what bankrupts families.

Who Needs Long-Term Care?

The statistics are sobering. Someone turning 65 today has roughly a 70% chance of needing some form of long-term care in their remaining years. The average nursing home stay is two and a half to three years.

Averages hide extremes.

My mother lived 20 years with Parkinson’s — not the 10 the doctors predicted. Some people need a few months of rehab and go home. Others need a decade of daily assistance.

What triggers the need for long-term care? Dementia and Alzheimer’s are the leading causes. Stroke. Parkinson’s. Falls leading to hip fractures. Heart disease. Or simply the general frailty that comes with advanced age.

This isn’t just about nursing homes. It’s about needing help with daily life — and that help is expensive whether it happens at home, in assisted living, or in a nursing facility.

The LTC Insurance Question

Should you buy long-term care insurance? It depends on what you have — and what you’re trying to protect.

Here’s a rough framework — and I want to be honest that even the sweet spot is expensive, which is part of why people procrastinate.

If your liquid, investable assets are $3 million or more, you can probably self-insure. You have the resources to absorb a $400,000 to $500,000 event without derailing your retirement or leaving your spouse with nothing.

If your liquid assets are between $1 million and $3 million, insurance likely makes sense. You have assets worth protecting, but not enough to easily absorb a major long-term care event. This is the range where the math most clearly favors coverage — and where the premiums, while real, are still manageable relative to what you’re protecting.

A note on home equity: if a significant portion of your net worth is in your house, that changes the calculation. Equity doesn’t pay for care without selling or borrowing against the property. A couple in their late 50s with a paid-down home worth $700,000 and $400,000 in retirement savings may look like they’re approaching the self-insure threshold on paper — but they’re not. The home can’t write a check to a nursing facility. If most of your wealth is illiquid, that’s actually a stronger argument for insurance, not a reason to conclude you don’t need it.

If your liquid assets are under $500,000, your focus should probably be on Medicaid planning rather than LTC insurance. The premiums may not be the best use of limited resources, and Medicaid will ultimately be the backstop.

The premium reality varies by insurer, health status, and benefit structure, but here are typical ranges. For a policy with a three-year benefit period and a $180 per day benefit, buying in your 50s might cost $2,400 per year for a base policy, or $3,900 with a 3% inflation rider. Buying in your 60s: $4,500 base, $7,000 with inflation protection. Buying in your 70s: $8,500 base, $12,000 with inflation protection.

Over a lifetime, that’s roughly $84,000 to $136,000 in total premiums if you buy in your 50s. $112,000 to $175,000 if you buy in your 60s.

What do you get for that? A base benefit of $200,000 to $225,000 over the three-year cap. With an inflation rider, that grows to $400,000 to $500,000 by the time you’re in your 80s.

The question to ask yourself: if there’s a $300,000 to $500,000 health event in my future, how am I handling it?

Timing matters. Buy too late and you may not qualify — there’s health screening involved. Buy too early and you pay premiums for decades before you might need the coverage. The sweet spot is typically mid-50s to early 60s, while you’re still healthy enough to qualify.

One warning: premiums can increase after you buy. This has happened across the industry over the past two decades. Budget for potential increases.

The Planning Conversation

If you have aging parents, there are questions worth asking. Do they have any long-term care insurance? What does their policy actually cover? Many people don’t know the details of their own coverage until they need it — and by then it’s too late to change anything. Have they thought about what happens if they can’t live independently? Do they have a relationship with an elder law attorney?

If you’re in your 50s or 60s thinking about yourself, the questions are similar but more urgent. If I need care for three to five years, how does that get paid for? Would my spouse be financially secure if I depleted our savings on my care? Am I healthy enough to qualify for LTC insurance now? What’s my plan if I wait and become uninsurable?

What Most People Get Wrong

Before the list — the most common thing people get wrong isn’t a calculation mistake. It’s reading an article like this one, nodding along, and then not doing anything. The reason usually isn’t confusion. It’s that nothing bad has happened yet, the premiums feel like a real cost today for a theoretical benefit decades away, and the whole topic is uncomfortable enough that it’s easy to set aside. That’s understandable. It’s also exactly how families end up making catastrophic decisions under pressure — because the planning window closed while they were still getting around to it.

The first mistake is assuming Medicare covers it. It doesn’t. This is the most expensive misconception in retirement planning.

The second mistake is assuming they’ll never need it. The odds say otherwise. Seven out of ten people turning 65 will need some form of long-term care.

The third mistake is assuming family will handle it. Even when family wants to help, the physical, emotional, and logistical demands are overwhelming. When we were caring for my mother, we needed 24-hour coverage. Medicaid awarded 16 hours of home care. Even paying premium rates, we couldn’t reliably find caregivers to fill the gap. The agency said they had an award but couldn’t fill positions — that was on us. My mother’s siblings filled emergency shifts. It wasn’t sustainable.

This isn’t just a financial decision. It becomes a family decision — who provides care, who pays, and how long it’s sustainable.

The fourth mistake is waiting too long to plan. By the time you need long-term care, you can’t buy insurance for it. The planning has to happen years or decades earlier.

The fifth mistake is not understanding what good nursing homes require. The best facilities have waitlists. When my mother needed placement, the first option was whoever had an open bed — not where anyone would want their parent. It took five weeks to find a better place. Planning ahead means having options.

The Bottom Line

This isn’t a fun topic. Nobody wants to think about needing help to get dressed, or eat, or go to the bathroom. But the costs are real, and they can destroy decades of careful saving in just a few years.

The question isn’t whether this happens. It’s whether you’re prepared when it does.

This week, ask yourself one question: if I needed $300,000 of care over the next five years, where would it come from? If you can’t self-insure, at least consider LTC insurance — but look at it and the costs carefully. For the majority of people, the answer for chronic health issues will be Medicaid, which I talk more about in the next two articles.

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We haven’t been through the college send-off yet, but we’re starting to think about the search with Ben, who’s 15. Finn is 11. So this is on my mind — not as something we’ve completed, but as something we’re actively preparing for.

Sending a kid to college is emotional. It’s also logistically complex. There’s a lot of financial stuff that needs to happen in the next 6-8 weeks, and most parents are figuring it out as they go.

This isn’t hard. It just needs to happen on time.

Most parents fall into what I call the College Timeline Trap — they don’t realize that timing matters more than difficulty. The tasks themselves are straightforward. Missing the deadlines is what costs you.

1. FAFSA for Next Year — File Early

You just finished the FAFSA nightmare for this year. But if your kid is going to need financial aid next year — and the year after, and the year after that — you need to file again. And the timeline is earlier than you might think.

The 2026-2027 FAFSA opened in late September 2025, ahead of the typical October 1 launch. Going forward, expect FAFSA to open around October 1 each year.

The federal deadline is technically June 30, 2027, but that’s misleading. Many states and colleges have priority deadlines in November, December, or early spring. If you wait until spring, you may miss out on aid that’s already been allocated. State and federal financial aid is often distributed on a first-come, first-served basis.

Put “File FAFSA” on your October calendar. Have your prior-year tax return ready. Don’t wait.

2. 529 Withdrawals — How to Actually Get the Money Out

You’ve been saving in a 529. Now you need to use it. This is where people make expensive mistakes.

What counts as a qualified expense: tuition and fees, books and supplies required for enrollment, room and board if enrolled at least half-time (up to the school’s published cost of attendance), computers and software and internet access if used primarily for school, and equipment required for coursework.

What does not count: transportation and travel costs, health insurance in most cases, college application or testing fees, extracurricular activity fees, and room and board if enrolled less than half-time.

The timing matters. Withdrawals need to happen in the same calendar year as the expense. You can either pay the school directly from the 529, or reimburse yourself after paying. If you reimburse yourself, keep documentation that the expense was qualified.

The penalty for mistakes: if you withdraw for non-qualified expenses, you pay income tax plus a 10% penalty on the earnings portion. That’s why keeping receipts matters.

A note on ownership, because this trips people up. Parent-owned 529s reduce aid eligibility by a maximum of 5.64% of the asset value. Student-owned 529s are assessed at a higher 20% rate. Grandparent-owned 529s are not reported on the FAFSA, and distributions from grandparent-owned 529s no longer count as student income under current rules.

If a grandparent has been saving for your kid, this is good news — but make sure you understand who owns what.

3. Health Insurance — Do They Stay on Your Plan?

Under the ACA, your child can stay on your health insurance until age 26, whether or not they’re in school, whether or not they’re married, whether or not they live with you.

Roughly 59% of college students aged 18-22 are covered by a parent’s health insurance plan. Students covered under a parent’s plan consistently report better coverage quality and lower out-of-pocket costs than those on other plan types.

But there are situations where student health insurance makes sense. Your child is going to school far away and your insurance network is local. The campus health center isn’t in-network for your family plan. Your plan has high deductibles and the student plan is more comprehensive for campus-based care. Your employer charges extra for dependents and the math doesn’t work.

School plans frequently cost $700 to $1,400 per year, but they may restrict care to campus or local providers and offer limited out-of-area coverage for students who go home for summers and breaks.

The common mistake: enrolling in a school student health plan without comparing the cost and coverage against staying on a parent’s plan. Price shouldn’t be the only consideration — but neither should convenience. Look at what your child actually needs.

Check whether your insurance network covers providers near the school. Compare the cost of keeping them on your plan versus the student health insurance option.

4. Credit Cards — Should You Add Them?

Some parents add their college student as an authorized user on a credit card to help them build credit. This can work well — or it can be a disaster. It depends on the kid.

The upside: your payment history helps build their credit score. They have a card for emergencies. It can be helpful for them to build credit history early.

The downside: you’re responsible for their charges. If they overspend, you pay. If you miss a payment, their credit suffers too. And there’s no automatic monitoring of what they’re spending.

An alternative: have them get their own student credit card with a low limit, maybe $500 to $1,000. They build their own credit history and learn to manage it themselves. The downside is that student cards often have higher interest rates.

The real risk: I know someone who had their first bankruptcy right out of college because they got card after card. They couldn’t manage the credit and it snowballed.

Decide your approach and have the conversation about expectations before they leave.

5. Private Student Loans — Don’t Cosign If You Can Avoid It

Federal student loans don’t require a cosigner. They have borrower protections, income-driven repayment options, and potential forgiveness programs.

Private student loans often require a parent cosigner — and that cosigner is fully responsible if the student doesn’t pay. This can affect your credit, your debt-to-income ratio, and your ability to borrow for other things.

I’ve talked many friends out of cosigning private loans. Almost all of them who didn’t listen regretted it. I know one person who cosigned for a friend who was recently out of college. During college, that friend had not managed their money well. They got into a lot of debt, couldn’t qualify for a loan, and needed one for a car. My friend signed. And... yada yada yada. They ended up losing the friendship and co-owning the debt when the friend stopped paying.

If your student has maxed out federal loans and still needs more, consider whether the school is affordable before you cosign private debt.

If private loans are on the table, understand exactly what you’re signing up for. Consider whether a different school or different plan might make more sense.

6. The Money Conversation

Before your kid leaves, have an explicit conversation about money.

How much are you providing? Monthly? Per semester? For what? What are they responsible for — books, food, fun? What’s the plan if they run out of money? Are they expected to work during school?

A conversation about money is critical. I think it starts before college — about debt, about savings, about making tradeoffs.

Ambiguity leads to conflict. Clarity leads to better outcomes.

Have the conversation. Write down what you agree to. Refer back to it when questions come up.

What Most People Get Wrong

The first mistake is waiting too long on FAFSA. The early deadlines matter for aid allocation. First-come, first-served is real.

The second mistake is withdrawing 529 money incorrectly. Taking money for non-qualified expenses triggers penalties you didn’t need to pay. Not understanding who owns the 529 can affect financial aid.

The third mistake is assuming their insurance “just works” at school. Network coverage matters, especially if the school is in a different state.

The fourth mistake is cosigning private loans without understanding the risk. You’re on the hook until it’s paid off — and refinancing to remove a cosigner is hard.

The fifth mistake is avoiding the money conversation. Kids who don’t know the budget can’t manage to it.

The Bottom Line

Sending a kid to college is a big transition — for them and for you. The financial logistics can feel overwhelming, but they’re manageable if you break them into pieces.

This week, log into your 529 and make sure you know how to withdraw the money. By August, you’ll have the financial side handled and can focus on the emotional part: watching your kid start a new chapter.

Karen and I enjoy vacations. I think my philosophy underlines something important: you should spend on vacations if that’s what you enjoy — and if you’re staying within your limits.

This doesn’t mean everyone needs a spectacular vacation every year even if they don’t have the money. It means: I like a really good vacation, therefore I’m not going to spend in other areas to make it happen. You shouldn’t feel guilty about a vacation. You just need to compensate for it.

I can’t remember a time I’ve regretted spending on travel, because we always keep it within budget, whatever that might be. Sometimes that means making choices about what we’re not going to do. But there are never regrets, because you focus on the things that are most important about the experience, not what might be tangential.

Summer is here. Everyone’s posting vacation photos. You want to take your family somewhere. But you also have credit card debt, or your emergency fund is thin, or you’re just not sure if this is a good idea.

The question isn’t “can I make the minimum payment on a vacation.” It’s “Can

I actually afford this without going backward financially?” Those are two very different questions.

Two Different Questions

Question one: “Can I make the minimum payment?”

This is what your brain asks when you’re looking at a credit card limit. If the trip costs $3,000 and your credit limit is $10,000, you can technically put it on the card. You can make the minimum payment of $60-90 per month. So you can afford it, right?

Question two: “Can I actually afford this?”

This is the real question. Can you pay for this without going into debt — or if you do put it on a card, can you pay it off within one to two months? If the answer is no, you’re not paying for a vacation. You’re financing one.

The True Cost of Financing a Vacation

Let’s do the math that nobody wants to do.

A $3,000 vacation on a credit card at roughly 22% APR — which is approximately the current average rate.

If you make minimum payments, typically 2% of the balance or $25, whichever is higher: it takes about 10 years to pay off. You pay roughly $4,200 in total, with over $1,200 going to interest. That $3,000 trip actually cost you over $4,000.

If you pay $150 per month: it takes about 2 years to pay off. You pay roughly $3,350 in total, with about $350 in interest. Still more than you planned, but much better.

If you pay $300 per month: it takes about 11 months to pay off. You pay roughly $3,175 in total, with about $175 in interest. Getting closer to the actual cost.

The point: if you can’t realistically pay it off within a few months, you’re paying a premium for the vacation. And that premium is money you could spend on something else — including your next vacation.

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The Affordability Test

Before you book, run three tests.

The cash test: could you pay for this in cash, or from your checking and savings, without depleting your emergency fund below one month of expenses? If yes, you can afford it. If no, you’re financing it, and you should know the true cost.

The payoff test: if you put it on a card, can you realistically pay it off within 60-90 days based on your current budget? If yes, go ahead, earn the points, pay it off. If no, you’re financing it.

The trade-off test: is the trade-off clear and answered? In other words, are you saying “we’re going to have the big vacation now” while actually knowing how it’s going to come out — or are you leaving that question unanswered and hoping it works out later?

Being sure on what you’re trading off means you know it’s something you can live with.

When It Is Okay to Spend Money on Experiences

I’m not going to tell you never to take a vacation. Life is short. Experiences matter. There are times when spending money on a trip makes sense.

You have a solid financial foundation. Emergency fund in place. Retirement contributions on track. No high-interest debt, or a clear payoff plan. In this case, spending on experiences is part of enjoying the life you’re building.

It’s a milestone moment. Your kid’s last summer before college. A big anniversary. A once-in-a-lifetime opportunity. Some experiences have a time limit.

You’re booking within your means. A $1,500 trip you can pay off in 60 days is very different from a $5,000 trip you’ll be paying off for 3 years.

You’ve compensated for it. If you’re cutting spending in other areas to make this happen, you’ve already done the work. That’s conscious decision-making — like someone I know who anticipated a bonus and put part of the vacation on a card for 30 days because the money would come in, just not in time for the trip. They accepted a small interest cost and paid it off. That’s a sensible trade-off.

The Permission to Enjoy

It’s okay to have a great vacation — even the kind you see on social media. The question is: is it actually once-in-a-lifetime, and are you shifting resources around accordingly?

It’s not about feeling guilty. It’s about making honest decisions about what’s most important to you.

And sometimes life happens. You take the vacation, and then something unexpected comes up — a funeral, a medical bill, a car repair. That expense wasn’t in the plan. It’s not worth regretting the vacation because of it.

I want you to leave this feeling empowered to make choices, not shamed. You can have the vacation — but then you need to cut something else.

Alternatives to the Trip You Can’t Afford

If the math doesn’t work for the vacation you’re dreaming of, you have options.

Scale it down. Can you do a shorter trip? A closer destination? A different time of year when it’s cheaper?

Delay and save. Start putting $200 per month into a vacation fund now. By next summer, you’ll have $2,400 saved and can take the trip without debt.

Do something different. A local staycation or day trips can create memories without the price tag. This isn’t as exciting, but it also doesn’t come with 3 years of payments.

What Most People Get Wrong

The first mistake is confusing “I can make the payment” with “I can afford it.” These are not the same thing.

The second mistake is ignoring the interest. That vacation costs what it costs plus whatever interest you pay. If you’re paying 22% APR for 2 years, add 25% or more to the sticker price.

The third mistake is leaving the trade-off unanswered. Saying “we’ll pay for it later” without knowing how it actually comes out.

The fourth mistake is not planning ahead. If you want to travel next summer, start saving now. The best vacations are the ones you don’t have to pay off afterward.

The Bottom Line

I’m not here to tell you not to take a vacation. I’m here to help you figure out if this particular vacation makes sense for your financial situation right now.

Before you book anything, run the cash test. Do the math. Be honest with yourself. And if the numbers don’t work, that’s okay — start saving now, and next year’s trip will be even better because you’ll know you can actually afford it.

That experience shaped how I think about money. Credit lines can disappear. Relationships can change. But cash in hand when you need it is what matters most.

If you’re in your 40s or 50s and you’ve never built an emergency fund — or you have “some savings” but aren’t sure if it’s enough — this post is for you. And if you feel like you’re too far behind to start now, I have some research that might change your mind.

The Number That Surprised Me

Research from Vanguard and others suggests something counterintuitive: having even a modest emergency fund is one of the strongest predictors of financial well-being — often more impactful than income or total assets.

Why? Because most unexpected expenses fall in the $1,000–$2,000 range. Having that amount on hand means you can handle most financial shocks without borrowing, without raiding retirement accounts, and without the spiral of stress that follows.

There’s another finding worth mentioning: people with emergency savings report spending significantly less time worrying about money. The mental load is lighter. The low-grade anxiety that follows you everywhere — the background hum of “what if something happens” — gets quieter.

And the benefits extend beyond peace of mind. Financial stress is strongly linked to reduced focus at work. People without emergency savings contribute less to their 401(k)s and take more early withdrawals. The emergency fund isn’t just protecting you from emergencies — it’s protecting your retirement savings too.

You Probably Have More Than You Think

Here’s what most people miss: the question isn’t just “how much cash do I have in a savings account?” It’s: what could I access within two weeks, without major penalties, without derailing my other goals, and without significant tax consequences?

That includes high-yield savings accounts (the obvious answer), money market accounts, and — this surprises people — your Roth IRA contributions. You can withdraw what you contributed to a Roth IRA at any time, tax-free and penalty-free. Not the earnings, just the contributions. If you’ve put $30,000 into a Roth over the years, that’s $30,000 in emergency reserves you may not have been counting.

What probably shouldn’t count: stocks in a brokerage account (if you lose your job because the economy is down, your stocks are probably down too), CDs with early withdrawal penalties (defeats the purpose), or a home equity line of credit (you’re putting your house at risk).

The principle is simple: liquidity plus stability equals emergency fund. If you can get to it fast and it won’t have lost value when you need it, it counts.

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The Tiered Approach

Instead of one overwhelming number, think of emergency savings in tiers.

The first tier is $1,000. This handles the most common emergencies — car repairs, home repairs, medical copays. A broken water heater. An unexpected trip to the mechanic. Among people who’ve had a $1,000+ financial emergency in the past six months, the most common causes were car repairs, home repairs, and medical bills. A thousand dollars handles a lot.

Even $20 per week gets you to $1,000 in a year.

The second tier is $1,500. This covers the typical unexpected expense and gives you breathing room beyond the bare minimum. It’s the point where most single emergencies stop being crises.

The third tier is one month of essential expenses. Not your full monthly spending — just the essentials: housing, utilities, food, transportation, minimum debt payments. If your essential expenses are $4,000 per month, that’s your target.

The fourth tier is three months of essential expenses. This is the traditional “emergency fund” — enough to cover a job loss or extended medical issue while you figure out next steps.

The fifth tier is six months of essential expenses. If your job is unstable, your industry is volatile, or you’re the sole earner, this is worth building toward.

Don’t skip tier one because tier five feels impossible. Each tier reduces stress. Each tier buys you time. Each tier is a win.

Why This Is Different at 50

In your 40s and 50s, you’re often squeezed from every direction. Mortgage payments. Kids who may still need help. Aging parents who may need support. Trying to catch up on retirement savings. There’s less margin for error — and mistakes are more expensive when recovery time is shorter.

You also have more realistic awareness of what can go wrong. At 30, job loss feels abstract. At 50, you’ve probably seen it happen to peers. Medical issues become more common. You know that life doesn’t always go according to plan.

And job searches take longer. Older workers tend to experience longer periods of unemployment — often significantly longer than younger workers. A six-month emergency fund at 30 might be conservative. At 55, it might be barely adequate.

Where to Keep It

A high-yield savings account is the obvious choice. Many are currently paying around 4–5% APY, they’re liquid, FDIC-insured, and have no penalties. Money market accounts work too, sometimes with check-writing privileges.

I-bonds are good for longer-term emergency reserves, but there’s a one-year lockup period — not ideal for your first $1,500.

A Roth IRA is an underrated option. If you’re building toward retirement anyway, your Roth contributions can serve double duty as your emergency backstop. You can always withdraw what you put in.

What to avoid: keeping large emergency funds in regular checking accounts (too easy to spend, earns nothing) or invested in stocks (too volatile when you need stability most).

What People Get Wrong

The first mistake is ignoring it because the big number feels impossible. The $1,000 milestone matters. The $1,500 milestone matters even more. Don’t let perfect be the enemy of good.

The second mistake is keeping it in checking. It earns nothing. It’s too easy to spend. Move it somewhere that pays interest and requires an extra step to access.

The third mistake is not counting your accessible assets. You may have more liquidity than you think. A Roth IRA with $15,000 in contributions is $15,000 in emergency reserves.

The fourth mistake is losing track of what you have. If you have old 401(k)s or accounts scattered around, make sure beneficiaries are updated and you know how to access them. Old accounts can become invisible — and that’s a nightmare for whoever has to find them later.

The fifth mistake is touching it for non-emergencies. Define what counts as an emergency before you need it. A vacation is not an emergency. A sale is not an emergency. A broken furnace in January is an emergency.

If You’ve Had to Raid It

If you’ve already dipped into your emergency fund — or never had one to begin with — here’s the priority order for building or rebuilding:

First, emergency fund. Even a small buffer prevents the next shock from cascading into something worse.

Second, get the employer 401(k) match. Don’t leave free money on the table.

Third, pay down high-interest debt — anything above 10–15% interest.

Fourth, additional retirement contributions — after the emergency fund is stable.

The Real Point

You can do this.

Start with $1,000. Then $1,500. Then one month of essential expenses. Each milestone reduces your stress and increases your security.

You don’t have to solve this in two weeks. What matters is that you start building — and that you don’t stop. Every amount you save, no matter the size, is reduced risk for you and your family.

In midlife, you’ve seen enough of life to know that things go wrong. The question isn’t whether something will happen — it’s whether you’ll have options when it does.

This week, move $100 into a separate savings account. That’s how this starts.

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I’ve found most people buy insurance reactively—a friend dies and suddenly they want life insurance, they buy a house and get homeowners insurance, their employer offers benefits and they check a box. Then they never think about it again.

The result is a patchwork of policies that don’t fit together. Overinsured on some things, dangerously underinsured on others. Paying for coverage they don’t need while leaving real gaps that could devastate their family.

This post is the wake-up call. Not to sell you anything—I don’t sell insurance—but to get you to actually open your policies and ask: do I have what I need? And this is just a landscape- my plan is to go more deeply into each of the plans in future posts.

The fix is simple but uncomfortable

At least once a year—ideally during open enrollment or when something changes (new job, new house, new kid)—actually look at what you have. Ask three questions: What does this cover? What doesn’t it cover? Is it enough?

Life insurance

Who needs it: anyone whose death would create a financial burden for someone else. If you have a spouse, kids, or anyone who depends on your income, you need life insurance.

How much: a common rule of thumb is 10-12x your annual income, but what really matters is what your family would need to maintain their life without you—mortgage, living expenses, childcare, education costs.

What type: for most people, term life insurance is the answer. You buy coverage for a set period (20-30 years), and if you die during that period, your beneficiaries get the payout. Straightforward and affordable.

Whole life insurance is more complicated. It combines insurance with a savings/investment component, which sounds appealing. But premiums are much higher, the “investment” often underperforms simpler alternatives after fees and commissions, and it’s easy to buy more than you need. Insurance agents love to sell whole life because many times the commissions are higher. For most people, you’re better off buying term and investing the difference yourself.

Whole life coverage can also let you down when you need it. A couple of years ago I was talking with a widow. She and her husband thought they were covered if he passed away. However, she discovered the whole life policy was worth far less than they’d both assumed. At the edge of retirement she thought the policy would bring her over the finish line, instead she had to keep working years longer than they’d planned.

Even if your kids are grown, you still need enough to cover final expenses. The average funeral runs $8,000 to $12,000. If you don’t have at least that much in coverage or savings earmarked for it, you’re leaving your family with a burden, not a gift.

What to check: Do you know whether your policy is term or whole? What’s the death benefit? When does it expire? If you can’t answer these, open the policy.

Disability insurance

Who needs it: anyone who earns income. Your ability to work is your most valuable asset, especially in your 40s and 50s.

This is the most underappreciated coverage. People assume Social Security disability will cover them—the average SSDI payment in 2026 is about $1,630 per month. Try living on that. They assume their employer’s disability insurance is enough without knowing what it actually pays or how it’s taxed.

What most people don’t realize: employer-provided disability is often 60% of your salary, but if your employer pays the premiums pre-tax, that means the benefits are taxable. So that 60% becomes more like 40-45% after taxes. Most employer plans also have caps—if you’re a higher earner, you may only be covered for a fraction of your income. And if you leave your job or go self-employed, you lose coverage entirely.

After my divorce, I took a job with a small consultancy. I didn’t think to ask about disability coverage. In the past I always worked for large firms and just “assumed” it was there. A friend pointed out the gap. Result - I panicked and bought a mediocre policy because I didn’t know better.

What to check: What percentage does your employer plan pay? Are benefits taxable? Is there a cap? Calculate what you’d actually receive after taxes—if it doesn’t cover essentials, consider supplemental coverage.

Homeowners and renters insurance

Who needs it: anyone who owns a home or rents and has belongings worth protecting.

The problem: people tend to be overinsured on some perils (like fire) and dangerously underinsured on others (like flooding or hurricane damage). Standard homeowners policies often exclude flood—you need a separate policy.

What to check: Does your policy cover replacement cost or actual cash value? (Replacement cost is better.) What’s excluded—flood, earthquake, wind? Is your coverage enough to actually rebuild at today’s construction costs?

A note on claims: think carefully before filing small claims. I know someone in a storm-prone state who filed several claims for damage just above the deductible. The company dropped them, and they had a hard time finding new coverage. Sometimes it’s better to pay out of pocket and save your insurance relationship for catastrophic stuff. But I’ve also regretted not going through insurance on small fender-benders when complications arose later. No perfect answer—just think it through.

Auto insurance

Who needs it: anyone who drives.

What most people miss: liability limits. The minimum required by your state is almost certainly not enough. If you cause an accident and damages exceed your liability coverage, you’re personally on the hook. That can mean losing savings, your home, or future earnings.

What to do: increase your liability limits. The cost difference between minimum coverage and $100K/$300K or higher is often surprisingly small.

Umbrella insurance

What it is: extra liability coverage that kicks in when your homeowners or auto limits are exhausted.

Who needs it: anyone with significant assets to protect. If you own a home, have retirement savings, or could have wages garnished in a lawsuit, you have something to lose.

The math: a $1 million umbrella policy typically costs $150-$350 per year, with each additional million adding about $75-$150. That’s remarkably cheap protection against a catastrophic lawsuit.

What to check: Do you have umbrella coverage at all? Does it require underlying liability limits you don’t currently carry? (Most policies require minimum auto and home liability limits before they’ll cover you.)

For people with real assets, this makes sense. For the typical family still building their foundation, it’s worth considering but not the first priority.

Long-term care insurance

What it is: coverage for extended care—nursing homes, assisted living, home health aides—when you can no longer take care of yourself.

The reality: someone turning 65 today has about a 70% chance of needing some form of long-term care. The nationwide average annual cost for a semi-private nursing home room now exceeds $110,000—and runs much higher in expensive states.

The challenge: long-term care insurance is expensive and has gotten more so. Premiums can increase after you buy. And if you wait too long, you may not qualify due to health issues.

Options include traditional long-term care insurance, hybrid policies combining life insurance with LTC benefits, self-insuring if you have enough assets, and Medicaid planning using irrevocable trusts (complicated and not a simple flip of a switch).

When to think about it: your 50s and early 60s, while you’re still healthy enough to qualify.

Lesson learned - my father had a good long-term care policy in the mid-90s, but switched to a cheaper one that only covered short-term rehabilitative care—90 days max. When my mother’s Parkinson’s diagnosis came, that policy was useless. She lived 20 years with the disease, not the 10 the doctors predicted. The costs of miscalculating were enormous.

We’ll go deeper on long-term care in a future post. For now: start thinking about it.

What most people get wrong

Assuming employer coverage is enough. It often isn’t—especially for disability and life. Know the details, do the math, supplement if needed.

Setting and forgetting. Your needs change when income changes, when you have kids, when you buy a house, when kids leave. Review annually.

Not understanding tax treatment. If your employer pays disability premiums pre-tax, benefits are taxed. That 60% replacement becomes a lot less.

Buying insurance as an investment. Insurance is for protection. If someone is selling you on “cash value” or “returns,” be skeptical. Buy insurance for insurance. Invest separately.

Not knowing when to file a claim. Small claims can raise rates or get you dropped. Sometimes better to pay out of pocket—but not always.

A note on business insurance

If you have a side business or home-based business, your homeowners policy probably doesn’t cover business activities. Your umbrella probably doesn’t either. Business liability is separate. Don’t assume you’re covered—check, and if you’re running a real business, get proper business insurance.

The bottom line

Insurance isn’t exciting. But it protects you from the things that could derail your financial life—death, disability, lawsuits, catastrophic loss.

The problem isn’t that you don’t have insurance. It’s that you probably haven’t looked closely enough to know if what you have is what you need.

Open your policies. Read them. Do the math. Close the gaps.

This is general guidance, not legal or financial advice. Rules and coverage vary by state and policy.

You might also like:

• “The Estate Plan You Need Today” — life insurance proceeds and beneficiary designations

• “Do you Actually Need a Trust” - Yes, you do!

If you’ve built up some financial runway (see Part 1) and started working your network (see Part 2), you have options. For some people, a layoff turns out to be the push they needed to try something different.

The gig work path—consulting, freelancing, contract work—is increasingly viable. But it’s not for everyone, and how you approach it matters.

Three types of people (know which one you are)

I see three types of people who take on gig work after a layoff. The approach that works depends entirely on which type you are.

Type 1: trying it out to see if you could make a life of it. If this is you, you need to give it a real shot. That might mean taking on a longer contract than feels comfortable—six months or a year—so you have a genuine opportunity to see if this works. You’re not dabbling. You’re testing a potential new path.

Type 2: just doing it until you find a full-time job. If this is you, keep your commitments short. Only take on gigs you know you can complete before you might need to start a new job. Don’t overcommit your time—you need hours available for your job search. And whatever you do, don’t take a six-month contract and then leave after two weeks when a job offer comes in. Nothing burns bridges faster.

Type 3: not sure which one you are. This is the hardest position. People in this category tend to stumble into the work half-heartedly. Since they’re half in and half out, they don’t get traction in either direction—not in their job search, and not in making gig work sustainable. I’ve never seen this end well.

Be honest with yourself about which type you are. It will determine everything about how you approach this.

What gig work actually looks like

This isn’t just “consulting” in the McKinsey sense. It’s any way of monetizing your skills on a project or part-time basis:

• Project-based consulting: a company needs something done—a system implemented, a strategy developed, a problem solved—and hires you to do it.

• Fractional roles: you work part-time for one or more companies as a fractional CFO, CMO, COO, and so on.

• Freelance services: editing, design, writing, bookkeeping, marketing—whatever your skill set.

• Contract work: filling a specific role on a temporary basis.

• Advisory or board work: advising companies in your area of expertise for a monthly retainer.

The key is that you’re selling expertise and outcomes, not just hours.

How to get started

Start with your network. Your first clients will almost certainly come from people you already know. Reach out to former colleagues, bosses, vendors, clients. Let them know what you’re doing and what kinds of problems you can solve.

Be specific about what you offer. “I do consulting” is vague. “I help mid-size companies implement their CRM system” is clear. “I edit academic manuscripts for publication” is actionable.

Start before you’re ready. You don’t need a website, business cards, or an LLC to take your first project. You can formalize later.

Set a rate and be willing to negotiate. A common starting point: take your previous hourly rate and add 30-50% to account for taxes, benefits, unpaid admin time, and gaps between projects. But early on, you may take less to build relationships.

The boring basics (don’t skip)

Set aside 25–35% of every payment for taxes. Make quarterly estimated payments if your income is significant. Track income and expenses from day one. Get a simple contract template that covers scope, timeline, and payment terms.

None of this requires perfection—just consistency. The people who get in trouble are the ones who spend everything and then owe $15,000 in April.

My own path

I was working for a boutique consultancy during the Great Recession. The firm was getting pounded, and I was trying to figure out how to get ahead of a potential layoff or the company folding.

I started asking people what value I produced. One person—who I found to be very wise even before they said this—told me the problem wasn’t the recession or anything else. The problem was that I had grown into my own style of consulting and needed to pursue it.

My wife Karen and I had always tried to live a life where we could survive on one income if we had to—so we’d never be extraordinarily stressed if one of us lost a job. We decided to give it a year to see how I did on my own.

The rest is history. Seventeen years later, I love consulting and working from home. It’s not for everybody. But I also think there are certain people it totally fits—and a layoff can be the silver lining that gives you the chance to try it out, when it might be much harder to try while you’re working full-time.

If you try it, protect the option

One more thing: if gig work starts to become real recurring income, consider forming an LLC. (See our earlier post on what an LLC actually is and when you need one.)

Even if you eventually go back to a W-2 job, having a small business structure in place gives you options. You can take on occasional projects on the side. You can build something slowly. You can test whether this path might work for you long-term without betting everything on it.

The layoff gave you the push. The gig work gave you the experience. The company structure gives you the option to do it again whenever you want.

The bottom line

A layoff can feel like losing your identity. But it can also be the beginning of something different—if you’re open to it.

Not everyone should become a consultant or freelancer. But if you have expertise, a network, and some financial runway, it’s worth considering. Know which type of person you are. Approach it accordingly. And if it works, you might find you don’t want to go back.

You might also like:

• Parts 1 & 2 of this layoff series

• “Why Everyone Should Have a Side Business” — the case for having one

• “What Is an LLC, Really?” — when you need one

• “SEP-IRA” — retirement savings for the self-employed

Whether you know it’s coming or not, getting laid off is a hit in the gut. Fear takes over quickly. On the financial side, people usually lose at least a week or two just trying to come to grips with it. That’s human.

But there are things that have to be done—and part of that is dusting yourself off and preparing for the search.

The other thing to remember: don’t get the mindset that you have no value. It’s hard not to take it personally, but most of the time it’s a financial decision made in a conference room by people who never saw you work.

Let’s talk about the elephant in the room

Age discrimination is real. It’s illegal. It happens anyway.

I've watched this play out firsthand. Résumés with graduation dates get screened differently than ones without. AI-powered applicant tracking systems use years of experience as a proxy for age before a human ever sees your application. And hiring managers — even well-meaning ones — sometimes let assumptions about energy, adaptability, or salary expectations color how they read an older candidate. None of this is fair. All of it is real.

This isn’t to discourage you. It’s to explain why the job search might feel harder—and why your strategy needs to be different.

The good news: you have leverage that younger candidates don’t. Experience. Judgment. The ability to handle problems you’ve seen before. A network built over decades. The key is using that leverage strategically.

Why networking matters more than job boards at this stage

Here’s the uncomfortable truth: up to 70% of jobs are filled through connections and internal referrals—before they’re ever posted publicly. I recently looked at everyone I know over 45 who has had a job transition in the past year. Every single one got their new role through networking. Not one came from a cold application.

I’ve advised hundreds of people on job searches, and I always say the same thing: do it through networking. Job boards aren’t useless, but they can become a distraction—even an excuse.

Early in my career, I went through a job search where I checked the job sites every day and the newspaper every Sunday. Looking back, I realized it gave me comfort but sapped my energy from doing the things that actually worked: getting out there, talking to people, and networking.

Here's where to start: go back to the people who've actually seen you work. Former colleagues, clients, bosses, vendors. Don't ask them for a job. Ask them something more useful: as I think about what I bring to my next role, what would you say is my value?

This does three things.

First, it reminds you that you have value at a time when you may have doubts.

Second, it clarifies what your value actually is. I know someone who did this exercise and discovered that what she thought was 80% of her value was actually the smaller piece. The thing she considered 20% of what she delivered? That’s what people truly valued. It completely changed how she described herself and what she could offer.

Third, it puts you in people’s minds. When you ask someone what they appreciate about your work, it brings you into their ready memory. When they hear about a position that might fit you, they’ll think of you—because you just reminded them what they like about you.

Job boards should be 20-30% of your effort, not 100%—the rest should go to conversations with real people.

Résumé and LinkedIn considerations

On work history: showing only the last 10-15 years is reasonable. Recruiters care most about recent experience anyway. But don’t hide your seniority—your experience is a selling point, not a liability.

On being “overqualified”: this is often code for “we think you’ll leave” or “we think you want too much money.” Address it head-on: “I understand this role might seem like a step back on paper. Here’s why I’m genuinely interested...”

On graduation dates: some states (for example, Colorado) restrict employers from asking for graduation dates on initial applications. But many applicant tracking systems flag incomplete applications. There’s no perfect answer—you may need to include them to get past the ATS, then address age concerns in the interview.

On LinkedIn: keep it current. Use a professional photo. Engage with your network—comment thoughtfully on posts, share your expertise. The “Open to Work” banner is a judgment call, but what matters more is staying visible.

The emotional toll—and how to manage it

Nearly half of job seekers say the search negatively impacts their mental health. Unemployment itself is linked to higher rates of depression. The combination of rejection, uncertainty, and financial stress is genuinely hard.

This isn’t weakness. It’s normal.

What helps: don’t let the job search consume you. Treat it like a job—set hours, take breaks. Four to five focused hours is more sustainable than ten burned-out hours.

Create a routine. Unemployment removes structure. Build your own.

Stay connected. Isolation makes everything worse. Talk to friends, family, other job seekers.

Pace yourself. Better to do fewer interviews well than many interviews badly.

Take breaks. If you’re feeling burned out, take a day off. You’ll come back sharper.

If you’re struggling persistently—feeling hopeless, unable to function—talk to a professional. There’s no shame in getting help during a hard time.

Should you take a pay cut?

This depends entirely on your situation.

My take: only take a pay cut if you’re going to leverage it in some way.

During the Great Recession, the firm I was working for asked everyone to take a 20% pay cut. I was the only one hitting my sales and client numbers, so I used that as leverage: if I’m getting paid 20% less, I should work 20% less. I negotiated to take Fridays off. That time gave me the space to set up Civitas Strategies—which became my path forward.

Consider a pay cut if the role offers something valuable beyond salary (learning, flexibility, a foot in a new industry), if you’d rather work than not work for financial or emotional reasons, or if you can leverage it into something else (more time, better title, different responsibilities).

Be cautious if the cut creates genuine financial strain, if you’d be resentful and unable to perform well, or if it’s a desperation move that doesn’t serve your longer-term trajectory.

The gig work bridge (brief—more in Part 3)

One option many midlife professionals don’t consider: you don’t have to find another W-2 job immediately.

Consulting, freelancing, or part-time gig work can generate income while you search, keep your skills sharp, and sometimes turn into something bigger.

This isn’t for everyone. But for some people, a layoff turns out to be the push they needed to try something different. If the search drags, the bridge matters—here’s how.

The bottom line

Looking for work after 40 is different. The timeline may be longer. The path may be less linear. The emotional toll is real.

But you also have things that younger workers don’t: experience, judgment, a network, and clarity about what you actually want.

Don’t take it personally. Dust yourself off. Start with the people who know your value.

You’ve rebuilt before. You’ll do it again.

You might also like:

• Part 1: “You Just Got Laid Off—The Financial Checklist”

• “Start a Side Business” — the case for having one

  Subscribe now

The first 72 hours after a layoff are disorienting. Most people either freeze or make reactive decisions they later regret.

This post is a steady hand. Here’s what to do right now, what can wait, and what not to do.

First, breathe. Then, don’t sign anything yet

The moment you get the news, your brain goes into survival mode. Everything feels urgent. But very little actually needs to happen in the next 24 hours.

Don’t sign the severance agreement immediately. If you’re 40 or older, federal law (OWBPA) requires that you be given at least 21 days to review any agreement that asks you to waive age-discrimination claims—45 days in group layoff situations. Most severance agreements include such waivers, so this protection applies to most people. Even after you sign, you have 7 days to revoke your acceptance. Take the time.

Read the agreement carefully. Look for non-compete clauses (how long, how broad?), non-disparagement clauses (what can you say publicly?), what you’re giving up (usually the right to sue), and what you’re getting (how much, how long, what benefits?).

If anything seems off, consult an employment attorney. Many offer free consultations for severance review.

Yes, you can negotiate severance

Most people don’t know this: severance is negotiable. Employers expect some back-and-forth. They’ve built flexibility into their initial offers.

I worked with a senior manager at a nonprofit who was asked to separate due to performance issues. She came back with reasonable asks: acknowledged the organization’s tight finances, but made the case that she’d done good work before the recent challenges, and as someone well over 40, would need more time to find the next thing. She asked for an additional 90 days of pay. She got it. Not adversarial—just honest and reasonable.

What’s negotiable: the amount (standard is 1-2 weeks per year of service, but you can ask for more), COBRA coverage (ask them to pay your health insurance premiums for a period), termination date (ask to move it to the first of next month so you get another full month of benefits), unvested equity or bonuses (if you’re close to a vesting date, ask if they can extend your official end date), outplacement services (some companies will pay for career coaching or resume help), a letter of recommendation (get it in writing now, while they feel accommodating), and non-compete terms (ask for shorter duration or narrower scope).

How to approach it: stay professional. Make your case clearly. Don’t threaten—but don’t be afraid to ask.

Health insurance: COBRA vs. ACA Marketplace

This is one of the first decisions you’ll need to make.

Someone I knew got laid off about 10 years ago. Group layoff, they thought they were prepared. As soon as COBRA hit, their entire budget went out the window. They ended up having to dip into retirement savings—with penalties—just to keep healthcare. They hadn’t understood how expensive COBRA would be.

COBRA lets you keep your exact same health plan. You pay the full premium (your share plus what your employer was paying) plus a 2% administrative fee. This can be very expensive—often $600–$2,000 per month for family coverage. It makes sense if you’re mid-treatment, have expensive prescriptions with your current doctors, or have already hit your deductible for the year.

If your employer is subsidizing COBRA as part of severance, check whether you must elect immediately to receive that subsidy.

The ACA Marketplace is the alternative. Losing job-based coverage triggers a Special Enrollment Period—you don’t have to wait for open enrollment. Subsidies are based on income, so if your income just dropped significantly, you may qualify for substantial help. You may need to switch doctors or deal with different networks. But it’s often much cheaper than COBRA, especially with subsidies.

Here’s the key insight: you have 60 days to decide on COBRA, and you can elect it retroactively. So you can wait, shop the marketplace, and only elect COBRA if you need it for a gap or a medical event during that window. If you incur medical expenses during that period and then elect COBRA, those expenses will be covered once you pay the back premiums. Retroactive coverage only works if you elect in time and pay all back premiums—so you may need cash flow to front medical bills briefly.

One more thing: if you have an HSA or FSA, check the rules immediately. FSAs can have use-it-or-lose-it deadlines, and the type of coverage you choose can affect your HSA eligibility going forward.

Run the numbers before you decide. Don’t just default to COBRA because it’s familiar.

File for unemployment immediately

No shame in this. You paid into the system. It’s there for exactly this moment.

File as soon as you can—ideally that week. Many states have a one-week “waiting week” before benefits are paid, and processing times vary. The sooner you file, the sooner you get paid.

What to know: benefits are based on your recent earnings. In most states, regular benefits last up to 26 weeks, though some—like Florida and North Carolina as of this writing—offer significantly fewer. You’ll need to certify weekly that you’re looking for work. Benefits are taxable income—you can elect to have taxes withheld. You can generally collect both severance and unemployment, though rules vary by state.

Your 401(k)—what not to do

The single most common mistake: cashing out your 401(k).

I made this mistake myself. Late 20s, working for a contractor that went bankrupt. Another company took over the contract, so technically I wasn’t unemployed—but the transition was treated like a layoff. I didn’t look closely at the 401(k) rollover paperwork. Rushed through it, hit the wrong button on the company website. Before I knew it, the money was in my checking account. Taxed. Penalized. It wasn’t a huge amount, but it set me back years of savings progress. All because I was rushing.

Studies suggest roughly one-third to 40% of workers who leave jobs cash out their retirement savings—rates are even higher for younger workers and those with smaller balances. Do not do this. If you’re under 59½, you’ll pay income tax on the full amount plus a 10% penalty. On a $100,000 balance, you could lose $30,000 or more.

Your options, from best to worst: leave it where it is (if allowed and fees are reasonable), roll it to your new employer’s plan (once you have one), roll it to an IRA (more investment choices, potentially lower fees), or cash it out (almost never the right choice).

If you do roll it over, use a direct rollover (trustee-to-trustee transfer). If they send you a check made out to you, they’re required to withhold 20% for taxes, and you only have 60 days to deposit it into a retirement account or face penalties.

Special note: if you leave your job in or after the year you turn 55, you can withdraw from that employer’s 401(k) without the 10% penalty (but you still pay income tax). This is the “Rule of 55”—it only applies to the plan you’re leaving, not to old 401(k)s or IRAs. If you roll it over to an IRA, you lose this option.

Assets you can tap if needed (last resort)

If things get truly tight, here are options—in rough order from least to most costly.

Roth IRA contributions: you can withdraw your contributions (not earnings) at any time, tax- and penalty-free. The money you put in is already-taxed money, so it’s yours. This is a last resort, but it’s there.

401(k) hardship withdrawal: some plans allow this for specific situations (medical expenses, preventing eviction). You’ll pay taxes and possibly penalties.

401(k) loan: if your plan allows loans after separation, you can borrow against it—but some plans require repayment quickly after separation, and if you don’t pay it back in time, the loan becomes a taxable distribution.

Home equity: if you own a home, you may have access to a HELOC. But be careful about taking on debt secured by your house during a period of uncertainty.

The goal is to avoid tapping retirement savings if at all possible. But if you need to, know the options and their costs.

Emergency budget mode

Get honest about your runway.

Calculate your essential monthly expenses: housing (rent/mortgage), utilities, food (realistic, not aspirational), health insurance, transportation, minimum debt payments, childcare if applicable.

Calculate your resources: severance (how many months does it cover?), savings, unemployment benefits, any other income.

Divide resources by monthly expenses. That’s your runway in months.

If it’s tight, start making adjustments now—not when you’re desperate. But be thoughtful about what you cut. Not everything “discretionary” is worth eliminating. I’ve seen people consider canceling a streaming service that costs $200 per year—money that won’t make or break them—while it’s the one thing that brings them genuine joy during a hard time. Find something else to cut instead. The goal is to extend your runway without making the situation feel worse than it has to.

Bills — what to pay first, what can wait

If you’re stretched thin, the rule is simple: prioritize by consequence.

Pay mortgage or rent first — losing your housing is catastrophic, and most lenders have hardship programs if you call early. Keep health insurance premiums current. Keep the car payment if you need the car to work.

Everything else is negotiable. Credit card companies have hardship programs most people don’t know to ask for. Federal student loans have income-driven repayment and deferment options — apply for them, don’t just stop paying. Medical bills are almost always negotiable and rarely worth paying at full price before you call.

The key: call early. Most creditors would rather work with you than send you to collections. The call feels hard. Make it anyway.

The bottom line

Getting laid off is not a reflection of your worth. Companies make business decisions. Good people get cut all the time.

Right now, your job is triage. Take care of the immediate financial mechanics. Create some breathing room. Don’t make big decisions while you’re in shock.

You now have financial oxygen. Next: the search. We’ll cover that in Part 2.

One note before you get there: the 401(k) decision and the COBRA decision are the two where people most often make expensive mistakes under stress. If you’re uncertain about either one, talk to someone before you act.

You might also like:

• “What You Actually Owe” — the debt audit

• “How to Think About Debt” - a useful framework for considering debt.

  Subscribe now

I have a friend who’s been doing consulting for years. Started as one project, grew into a second income stream that now equals about half what he makes at his day job. He’s still running it as a sole proprietorship. No structural liability protection for something that’s become a major income source for his family.

He’s not alone. Hardly a week goes by where I don’t talk to a small business owner who says “I have an LLC” like it’s the end of the conversation — like it’s a get-out-of-jail-free card. But when I ask follow-up questions, they don’t know how it’s being taxed, what it’s protecting them from, or what they need to do to keep that protection in place.

This post is for both groups: the people who should have formed one a long time ago, and the people who have one but don’t really understand what they have.

What an LLC actually is

An LLC — a Limited Liability Company — is a creature of your state. You form it by filing paperwork with your state government, usually the Secretary of State. It creates a legal entity separate from you. Liability protection rules vary by state, which is why local legal advice matters.

But here’s what most people miss: the IRS doesn’t recognize “LLC” as a tax category. Once you have an LLC, you still need to tell the IRS how you want it taxed. That’s a separate decision.

So when someone tells me “I have an LLC,” they’ve only given me half the picture. The LLC is the state-level structure. The tax classification is the federal piece. You need both to understand what you actually have.

The federal tax classifications

Once you have an LLC, here are your options for how the IRS treats it.

If you’re a single-member LLC and don’t elect otherwise, you’re taxed as a “disregarded entity” — essentially a sole proprietorship. Your income flows to Schedule C. You pay self-employment tax: 12.4% Social Security up to the annual wage base (adjusted each year), plus 2.9% Medicare on all net earnings. That’s 15.3% total on most of your profit.

If your LLC has two or more owners and you don’t elect otherwise, it’s taxed as a partnership by default. The LLC files an informational return (Form 1065), each partner gets a K-1, and profits pass through to your personal returns.

If you want to be taxed as an S-Corporation, you have to elect that status by filing Form 2553 with the IRS. For calendar-year businesses, the deadline is generally March 15 of the year you want the election effective (adjusted if that date falls on a weekend or holiday). If you miss that deadline, late election relief is often available under Rev. Proc. 2013-30 for up to three years and 75 days.

With an S-Corp election, you pay yourself a reasonable salary — subject to payroll taxes — and then take remaining profits as distributions, which aren’t subject to self-employment tax. That’s where the savings come from. You’ll need to run payroll, which adds some complexity. But payroll services are cheap now, and the tax savings can add up fast.

One important caveat: the IRS requires S-Corp owners to pay themselves a “reasonable salary.” If you artificially keep your salary low to avoid payroll taxes, the IRS can reclassify distributions as wages and assess back taxes and penalties.

Conventional wisdom says the S-Corp election makes sense once you’re earning $50,000–$60,000 in net profit. I think it’s worth looking at earlier — even $15,000–$20,000 in some cases, depending on your situation. The math isn’t complicated: run the numbers on your expected profit, estimate the self-employment tax savings, and compare that to the cost of payroll service and additional bookkeeping.

Finally, there’s the C-Corporation election. The corporation pays taxes at the corporate level, then shareholders pay taxes again on dividends. This “double taxation” doesn’t make sense for most small businesses unless you’re planning to raise outside investment or sell the company.

The key insight is that your LLC can grow with you. You can start simple, taxed as a sole prop, and elect S-Corp treatment later when it makes sense. If you revoke S-Corp status, you generally must wait five years before re-electing it without IRS consent.

My own example: Romano Associates

I recently started another company — a small consultancy focused primarily on pro bono work, with occasional paid projects. I formed an LLC because I wanted the liability protection. But simplicity mattered more than tax optimization at this stage. So I kept it as a single-member LLC taxed as a disregarded entity.

Sometimes simple is the right answer. The LLC can provide liability protection — if maintained properly. And if the paid work grows, I can change the election later.

What an LLC gets you

It can provide liability protection — if you maintain the separation properly. If someone sues your LLC or your LLC can’t pay its debts, your personal assets — house, car, savings — are generally protected. The LLC is a separate legal “person.”

It gives you credibility with some clients and vendors who take you more seriously if you’re operating as an LLC rather than just “John Smith, consultant.”

It gives you flexibility. You can change how you’re taxed as your business evolves.

And it gives you succession options. It’s generally cleaner to transfer ownership interests in an LLC than to unwind and sell a sole proprietorship. This is a bigger deal than most people realize — we’ll cover it in a future post.

What an LLC doesn’t get you

It doesn’t automatically save you taxes. Forming an LLC alone does not reduce self-employment tax. You have to make an election — like S-Corp — to get tax advantages beyond what you’d have as a sole proprietor.

It generally won’t protect you from liability for your own professional negligence or misconduct. If you personally do something wrong — fraud, malpractice, negligence in your professional work — the LLC won’t shield you from the consequences.

It doesn’t protect you if you sign personal guarantees. If you personally guarantee a lease or loan, you’re on the hook regardless of the LLC.

And it doesn’t protect you if you don’t maintain the separation. This is the big one.

The big mistake: piercing the veil

The liability protection only works if you treat the LLC as a separate entity. This is called “maintaining the corporate veil.” If you don’t, a court can “pierce the veil” and come after your personal assets anyway.

How do people screw this up? The most common way is commingling funds. Everything goes into one checking account — personal and business mixed together. Or worse: business income goes into the LLC’s account, but then personal expenses come out of it regularly.

Other ways: not keeping basic records, no operating agreement, no separation between you and the business on paper. Or starting the LLC with essentially no money in it and running everything through personal accounts.

The rule is simple: if you have an LLC, you need a separate business bank account. Business money stays in business. Personal money stays personal. It’s not complicated, but you have to actually do it.

When do you need one?

You probably don’t need an LLC if your side income is under $5,000–$10,000 a year, you’re doing something low-risk like selling jewelry on Etsy, or you’re just testing an idea and not sure it’s going anywhere.

You should probably form an LLC if your side business is becoming a real income source, you have meaningful liability exposure (clients could sue you, you’re doing professional services, you own rental property), or you want the flexibility to elect S-Corp treatment later.

LLCs are relatively inexpensive in most states. Filing fees range from about $35 to $500 depending on your state — Massachusetts is unfortunately at the high end with a $500 filing fee and $500 annual report. But even at the expensive end, compared to the protection you get, it’s usually worth it.

A note on rental properties: I had a client with two small rental properties — not getting rich on them, but they’re a key part of his income. Both were under one LLC. Sometimes it makes sense to have separate LLCs so they’re firewalled from each other. A little harder on the bookkeeping, but cheap insurance. And remember: an LLC is not a substitute for liability insurance. The structure helps, but insurance is what actually writes the check if something goes wrong.

The bottom line

An LLC is not a destination. It’s a starting point.

It doesn’t automatically protect you. It doesn’t automatically save you taxes. But if you understand what it is, maintain it properly, and make the right elections as your business grows, it’s one of the most flexible and useful tools a small business owner has.

And if all you know is “I have an LLC” — it’s time to learn the rest.

You might also like:

• “Why Everyone Should Have a Side Business” — the case for having one

• “How to Hire Your Kids” — where LLC structure matters

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Most people who aren’t investing don’t have a motivation problem. They have a clarity problem. They’ve heard “buy index funds” a hundred times, but nobody told them which ones or how to actually do it.

I’ve seen this play out. A woman sitting on $25,000 in cash — not a huge sum, but it was her retirement savings. She wasn’t ignorant or careless. She just didn’t know which fund to pick, so she picked none. I’ve seen people with their entire retirement in one stock — Apple, Tesla, Amazon — because it’s a name they hear in the news. They think they’re investing smart because they recognize the company. But one company can drop 40% in a year — and it may take years to recover. An index fund spreads that risk across hundreds or thousands of companies. They’re not dumb — they just went with what they knew. Nobody explained that index funds reduce single-company risk and make investing dramatically simpler.

For most people, this post is enough.

What an index fund actually is

An index fund isn’t an asset class — it’s a method of investing. It tracks a defined index instead of trying to beat it. Your job is just to understand what you’re tracking.

There are four buckets you need to know.

U.S. Total Stock Market funds hold thousands of U.S. companies in one fund — a bet on the long-term productivity of the American economy, not any single company.

International Stock funds hold companies outside the U.S. Less about upside, more about not being 100% dependent on one country.

Bond funds typically have lower long-term returns and smaller swings than stocks. Their job isn’t to maximize growth — it’s to reduce volatility and provide stability, especially as retirement approaches. They can still decline in certain markets, just usually not as dramatically as stocks.

Target-Date funds are a pre-mixed bundle that adjusts automatically over time. Choosing one isn’t lazy — it’s a deliberate tradeoff of simplicity over customization.

The Vanguard glide path

If you want to know what the biggest fund company in the world thinks is a reasonable allocation by age, here it is.

Vanguard’s Target Retirement funds stay close to 90% stocks through about age 40, then gradually reduce stock exposure over time — reaching roughly 50% stocks at retirement and about 30% stocks by your early 70s.

Within the stock portion, they allocate roughly 60% to U.S. and 40% to international, reflecting global market weight. Within bonds, the majority is U.S., with a smaller international allocation.

This is more aggressive than the old “age in bonds” rule. Vanguard keeps you in stocks longer because retirements last longer now. You can adjust based on your own risk tolerance, but if you’re stuck, this is a reasonable starting point.

Examples of funds in each category

I’m not recommending specific funds — that depends on your situation. But here are examples so you know what to look for.

For U.S. Total Stock Market: Vanguard offers VTI (ETF) or VTSAX (mutual fund). Fidelity offers FSKAX or FZROX (zero fee). Schwab offers SWTSX.

For International Stock: Vanguard offers VXUS (ETF) or VTIAX (mutual fund). Fidelity offers FTIHX or FZILX (zero fee). Schwab offers SWISX.

For U.S. Bonds: Vanguard offers BND (ETF) or VBTLX (mutual fund). Fidelity offers FXNAX. Schwab offers SCHZ.

For Target-Date funds (example: retiring around 2035): Vanguard offers VTTHX. Fidelity offers FFTHX. Schwab offers SWYHX.

Within each category, these funds are broadly similar in what they do. Picking one and moving forward matters more than picking the perfect one.

If you’re building this mix yourself instead of using a target-date fund, rebalance once per year. Don’t overthink it.

If you’re in a 401(k)

Your choices are limited to what your employer offers. That’s okay.

Look for anything with “S&P 500,” “Total Market,” or “Total Stock” in the name. Check the expense ratio — it should be under 0.20%, ideally under 0.10%. If those aren’t available, a target-date fund matching your retirement decade is a solid default.

Don’t let the perfect be the enemy of the good. A 401(k) with a decent S&P 500 fund and an employer match beats a brokerage account you never fund.

ETF vs. mutual fund

You’ll see both options when you search for index funds. Here’s the only thing most people need to know.

What’s the same: both can track the exact same index, both have low fees, and both get you the same investment exposure.

What’s different: ETFs trade like stocks anytime the market is open; mutual funds trade once per day. ETFs let you buy one share at a time (often $50–300); mutual funds sometimes require $1,000–3,000 to start. ETFs are often slightly more tax-efficient in taxable accounts, though the difference is minor in retirement accounts. 401(k)s often only offer mutual funds.

If you’re investing in a 401(k) or IRA, pick whichever is available with the lowest expense ratio. If you’re in a taxable brokerage account and have a choice, ETFs have a slight edge. But this is a tiebreaker, not a dealbreaker.

Expense ratio: the one number that matters

The expense ratio is the annual fee the fund charges, expressed as a percentage. It comes out quietly every year. It compounds against you.

Under 0.10% is excellent. Between 0.10% and 0.20% is fine. Over 0.30%, pause and ask why.

To find it, Google “[fund name] expense ratio” or check the fund company’s website.

Why it matters more in midlife: at 45–65, your balances are larger. A 0.50% difference on $300,000 is $1,500 per year staying in your account instead of going to fund managers.

Fees are one of the few variables you can control. Take that win.

Three mistakes to avoid

The first is overlapping funds. An S&P 500 fund plus a Total Market fund equals mostly the same companies. If two funds move almost exactly the same way, you probably only need one.

The second is chasing “smart” indexes. Low volatility, smart beta, factor tilts, thematic funds — these aren’t scams, but they reintroduce complexity that index investing was designed to remove. The more adjectives in the fund name, the more you should slow down.

The third is trading instead of holding. Index funds work best as long-term investments. If you’re buying and selling based on headlines, you’re doing it wrong.

The bottom line

Simplicity is a feature, not a compromise.

A two- or three-fund portfolio is not unsophisticated. Many professionals invest exactly this way. Complexity doesn’t protect you from uncertainty — discipline does.

The biggest risk to your portfolio usually isn’t the fund you pick — it’s abandoning the plan during volatility.

If your portfolio lets you sleep, stay invested, and focus on the rest of your life, it’s doing its job.

You might also like:

• “Invest Like Warren Buffett” — the philosophical case for index funds

• “SEP-IRA” — where self-employed people can hold these funds

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Before you can help your aging parents financially — or step in during a crisis — you need to know where everything is. This is the financial equivalent of an audit: getting your arms around what exists. Most families avoid this conversation because it forces everyone to confront mortality, dependency, and the possibility that things aren’t as “handled” as anyone claims.

But avoiding it doesn’t make the problems go away. It just makes them yours to solve, alone, in a crisis.

Quick note before we dive in: laws and benefits vary by state. This is practical planning guidance, not legal advice.

My dad died at 59

He’d had a heart attack in his early 40s, but he seemed fine for years after that. Then he got pneumonia, developed complications, and was gone. There was no chronic illness leading up to it, no diagnosis that triggered a big conversation, no time to prepare. It was sudden.

Anytime we’d talked about their future, my dad would say that whoever lived longer got the other’s pension, that they had insurance, and that he had long-term care insurance. That was it. “Everything’s taken care of. Don’t worry about it.”

When he died, I discovered that “handled” and “accessible” weren’t the same thing.

My mom was deeply upset — and far less involved in the finances than I’d assumed. I didn’t even know basic things, like where they banked. Everything was on paper, in cardboard boxes in the basement — decades of paystubs going back to 1963, but none of it organized. There was no guide, no list of accounts or insurance policies. Just boxes of noise with occasional important documents buried inside. If there had been a fire or a flood, everything would have been gone.

People can go before you anticipate. Death can be sudden. You don’t always have time to prepare or have the conversation when a diagnosis forces it.

Then came the second lesson

Within a year of my dad’s death, my mom was diagnosed with Parkinson’s disease. The prognosis was 10 more years of degenerative decline. She lived 18. Even when you think you know the timeline, you may not — and that has financial implications.

My mom was functional for years and wanted to stay in her home as long as possible. That became the lever for the conversation.

I had to teach myself what would be required if she eventually needed Medicaid help paying for long-term care. In our case, that meant learning about Medicaid planning tools — including an irrevocable trust — and the state’s “look-back” rules, which are often five years but can vary. California, for example, uses 30 months. This is one place where an elder-law attorney is worth the money.

The resistance was constant. “I’ll be OK.” Changing the subject. “We’ll talk about it later.” Sometimes it was more direct: “You shouldn’t have to worry about these things. I’ll figure it out.”

It took years to get the full picture.

The turning point came when she started forgetting to pay some bills and asked me to help. That built trust — within three months, she was more comfortable letting me handle things. But it was hard for her. I’m her son. She felt like her job was to protect me, not for me to take care of her.

The long-term care disaster

When I finally got a copy of the long-term care policy, I discovered the truth. My dad had purchased a real long-term care insurance policy in the mid-1990s. Then in the late 1990s, his union offered a plan that seemed just as good but much less expensive. He dropped the real policy and took the union plan.

The union plan turned out to be an emergency care plan — meant for temporary rehab after something like a hip replacement, not long-term residential care. It only covered a couple of months, and not very well.

My mom was going to need Medicaid eventually, which meant we had to position her for that. She had no savings to speak of, so we had to build a war chest from scratch.

Throughout this time, there was a real give-and-take with my mom — what she felt she needed to not let me know because she didn’t want to lose her independence, versus the realization that she just didn’t have the information or wherewithal to navigate the decisions that had to be made.

Why families avoid this

If you’re dreading this conversation, you’re not alone. There are three reasons most families put it off.

The first is that mortality is terrifying. To talk about what happens after you’re gone means confronting the fact that you’re mortal. We all know we’re going to die. We don’t know when or how. Being conscious of that is deeply unsettling. Talking about “where the money is” implies that at some point, you won’t be here.

The second is that parents want to stay parents. The implication of this conversation is that you can no longer take care of yourself — that you’re going to need help from a person you used to take care of. That’s a painful role reversal.

The third is embarrassment. Many parents don’t know 100% if they have everything together. If you’re very wealthy, you probably have advisors who helped you set things up. If you’re not, you’re likely worried that you don’t have it all figured out — and you don’t want to admit that to your child.

The result is that parents assure the child that everything’s “handled.” Sometimes it is. Often it isn’t. And even when it is, the child has no idea where anything is or what it means.

How to start the conversation

Don’t make it about death. Make it about their vision.

“If you want to stay in your home as long as possible, then there are things I’m going to have to do to help. So let’s talk about what you have and what we need to plan for.”

“If you want to leave the house to the grandkids, or make sure your funeral isn’t a burden on anyone, we need to know what’s in place.”

Help them see that avoiding it creates the problem they’re trying to prevent. They don’t want to be a burden — but avoiding the conversation makes them a burden. They want to protect you — but leaving you in the dark means you’ll be scrambling during the worst moment of your life.

The best opening line I’ve found is this: “My spouse and I have been working on getting our own estate in order. Here’s a packet with our passwords and accounts in case you ever need it. Should we do the same with you? Would that be helpful?”

This normalizes it. You’re not demanding information — you’re offering a mutual exchange. It won’t all come out in one conversation, but it opens the door.

What you need to find out

Here’s the list. You don’t need to get it all at once, but this is what you’re working toward. The goal isn’t control — it’s that someone else can find what matters in 30 minutes.

On money and accounts: Where are the bank accounts — checking, savings, CDs? Where are the investment and retirement accounts — 401(k), IRA, brokerage, pension? What debts exist — mortgage, car loan, credit cards, medical debt? What income sources exist — Social Security, pension, annuity, rental income?

On legal documents: Is there a will? Where is it? Is there a trust — revocable or irrevocable? Is there a durable financial power of attorney and a separate healthcare proxy? Where are they, and who is named? Is there a healthcare directive or living will? Most families need two separate authorities: a durable financial power of attorney lets someone manage money and sign on your behalf if you can’t, and a healthcare proxy lets someone make medical decisions if you can’t communicate. The names and forms vary by state, but the separation of roles is the key idea.

On where originals are kept: Safe deposit box? Fireproof safe at home? Attorney’s office? Who has the key or combination? If you can’t access the documents in a crisis, knowing they exist doesn’t help.

On beneficiaries and titles: Who is named as beneficiary on retirement accounts and life insurance? How is the house titled? Beneficiary designations often override what’s in the will — and mistakes here can create expensive problems.

On insurance: What health insurance do they have — Medicare, Medigap, Medicare Advantage, employer retiree coverage? (You generally can’t have Medigap and Medicare Advantage at the same time — Medigap supplements Original Medicare.) Is there long-term care insurance? Get a copy of the actual policy — don’t take their word for what it covers. Is there life insurance? Who are the beneficiaries?

On benefits: Are they receiving Social Security? How much? If they were in a union or government job, what retirement and health benefits are they entitled to?

When I took over my mom’s finances, I called each of their unions and had a conversation about all the benefits they were entitled to. I found things nobody knew about — including prescription reimbursements and other expenses that had been eating away at her money for years. They could’ve been using them the whole time.

On passwords and access: Don’t email a list of passwords. Use a password manager with an emergency-access feature, or keep a printed “how to access” sheet in a locked, known location. Include phone and computer unlock info — because without the device, you may be stuck. At one point, we had a loved one whose computer password we didn’t know. It took days to figure it out. And this wasn’t even about death — it was about them being incapacitated and needing to access information to help them.

On medical access: Consider a HIPAA authorization — a signed form that lets doctors share medical information with you even before a healthcare proxy kicks in. Without it, providers may refuse to talk to you.

On advisors: Do they have an attorney, CPA, financial advisor, or insurance agent? Get names and contact information. These people may know things the family doesn’t.

On funeral and end-of-life wishes: What do they want — burial or cremation? Religious service? Have they prepaid anything? Where do they want to be buried? It sounds morbid, but this often gets shoved into the last days or weeks of life when everyone is grieving and overwhelmed. Knowing it in advance takes pressure off.

It’s rarely one conversation

The ideal is one big conversation to get the ball rolling, with follow-up action items that you manage — because the parent will likely avoid them.

The reality is that it’s more like assembling a puzzle one piece at a time. You may hear a snippet here, learn something there, and slowly piece it together as you build trust.

Take notes as you learn each piece. If you hear something in passing, write it down. You may be pulling it all together over months or years until they’re comfortable enough to share more — or until you have no choice but to step in.

Get siblings involved

Even if one sibling is more involved than the others, everyone needs to know what’s happening.

The involved sibling could die or become incapacitated themselves. The uninvolved sibling may suddenly need to step up. Not keeping everyone informed creates confusion, resentment, and conflict later. When a parent dies, siblings who weren’t in the loop often feel blindsided or suspicious — and that’s when families fracture.

It’s critical to have siblings involved. Typically one sibling is more involved than the other, which makes it harder — you have to keep the other sibling up-to-date. But it staves off a lot of confusion and disappointment later.

This isn’t just about death

Incapacity can happen suddenly — a stroke, a bad fall, a heart attack, dementia that progresses faster than expected. In those cases, your parent is still alive but can’t help you find anything. You may be trying to get power of attorney in place while trying to access accounts and make decisions. If you don’t know where anything is, you’re doing it blind.

And you may need to contribute financially. As much as my mom had two pensions, Karen and I still needed to put a fair amount of money into her life as she got more and more sick. The healthcare system, health insurance, Medicare, Medicaid — they don’t cover everything you think they do when it comes to having a reasonable quality of life.

The mistakes to avoid

Taking their word for it. “Everything’s handled” is not an answer. You need to see the documents.

Assuming you have time. Death and incapacity can be sudden. Don’t wait for a diagnosis.

Not getting a copy of the long-term care policy. My dad thought he had good coverage. He didn’t. Read the actual policy.

Forgetting about union and employer benefits. Retirees often don’t know everything they’re entitled to. Call and ask.

Not knowing where originals are kept. A will in a safe deposit box you can’t access is useless in a crisis.

Skipping the beneficiary check. Outdated beneficiary designations on retirement accounts and life insurance can override everything else.

Leaving siblings out of the loop. Even if they’re less involved, they need to know what’s happening.

If your parents are already gone

If you learned this the hard way — scrambling after a death, piecing together a mess — then today’s the day to turn around and make it right for your kids.

Or if you don’t have kids, think about your nieces, nephews, or whoever is going to be the person managing things for you when you get sick or when you die. Make sure those things are taken care of. Don’t continue the problem.

You might also like:

• “Estate Planning Basics” — the five documents everyone needs, and how to get them in place

• “Do You Actually Need a Trust?” — when the math works, and when it doesn’t

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It wasn’t fine. Her balance had grown by over $1,000 since August. None of those months counted toward forgiveness. And the plan she’d been counting on was officially dead.

If you have federal student loans — or someone in your family does — here’s what just happened and what to do about it.

What Happened

On March 10, 2026, a federal appeals court officially ended the SAVE plan, the most affordable income-driven repayment option ever created. Nearly 8 million borrowers were enrolled at its peak; more than 6.5 million were still in forbearance as of late last year. Most have been sitting in administrative forbearance since mid-2024, meaning no payments required and no action needed.

That sounds like a relief. It’s actually a trap.

Why “Doing Nothing” Is Costing You Money

Here’s what most borrowers don’t realize: your loans started accruing interest again on August 1, 2025. Every month since then, your balance has been growing — and none of those months count toward loan forgiveness.

Let’s make this real. Say you have $35,000 in federal loans at 5.5% interest. That’s roughly $160 per month in interest accruing while you’re in forbearance. From August 2025 through March 2026, that’s about $1,280 added to your balance. By July 2026, when the replacement plan launches, you’ll have added nearly $2,000 to what you owe — with zero progress toward forgiveness.

If you’re pursuing Public Service Loan Forgiveness, every month in this limbo is a month that doesn’t count toward your 120 qualifying payments. Two years of forbearance means two years added to your timeline.

Doing nothing feels safe. It’s the most expensive choice you can make right now.

What to Do This Week

Switch to Income-Based Repayment (IBR). This is the one income-driven plan that survives all the changes coming in 2026 and beyond. Congress eliminated the old “partial financial hardship” requirement last July, and the Department of Education’s systems caught up late last year — so more people now qualify than ever before.

Here’s how to switch: Go to StudentAid.gov/idr and start a new application. When it asks which plan you want, select IBR specifically. Your payments will restart, but every payment counts toward forgiveness. Your prior qualifying months from before the SAVE forbearance carry over.

If you’re close to PSLF forgiveness, there’s an option worth knowing about. The PSLF Buyback program lets you pay for months lost during forbearance — but only if you already have 120 months of qualifying public service employment and buying back those months would complete your required payments. That’s a narrow group, but if it’s you, it’s worth filing. There’s a significant backlog (processing is taking 6 to 12 months), so continue making regular payments while you wait.

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If you have Parent PLUS loans, this is urgent. Parent PLUS loans are not eligible for the new Repayment Assistance Plan launching in July. The only income-driven path for Parent PLUS borrowers involves consolidating into a Direct Consolidation Loan first, which then makes you eligible for Income-Contingent Repayment — and from there, potentially IBR.

Here’s the catch: that consolidation must be completed by July 1, 2026. After that date, new Parent PLUS borrowers lose access to income-driven repayment entirely. Consolidation takes four to six weeks to process. If you need this option, don’t wait until June.

What’s Coming Next

The Repayment Assistance Plan (RAP) launches no later than July 1, 2026. It’s simpler than the old alphabet soup of repayment plans, but it’s also less generous. Payments are based on 1–10% of your adjusted gross income, with a $10 minimum. Forgiveness comes after 30 years instead of the 20–25 years under older plans.

If you’re already on IBR and don’t take out any new loans after July 2026, you can stay on IBR. You’re not forced into RAP. But if you borrow again after that date, all your loans — old and new — must go under RAP or the standard plan.

One more thing that flew under the radar: IDR forgiveness is generally taxable again. The temporary federal exemption from the American Rescue Plan expired December 31, 2025. Loan forgiveness through income-driven repayment in 2026 or later will generally count as taxable income at the federal level. Public Service Loan Forgiveness remains tax-free, but if you’re on the 20- or 30-year IDR path, start planning for the potential tax bill.

The One Thing to Do Today

Go to StudentAid.gov/idr and switch to IBR. It takes about 15 minutes. Don’t wait for the government to send you a letter — by the time that arrives, you’ll have lost more months and added more interest.

If this post isn’t for you, forward it to someone it is. Your adult kid. Your niece finishing grad school. The colleague who mentioned their student loans in passing. This is the kind of information that doesn’t reach people until it’s too late.

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I was almost 30 when the math finally hit me. I’d been contributing to my 401(k) for a few years — not as much as I should have, but something. Then I ran the numbers on what my balance would look like at 65 if I’d started at 22 versus 30.

Eight years. That’s all I’d missed. But those eight years cost me hundreds of thousands of dollars in projected retirement wealth.

I remember staring at the spreadsheet, sick to my stomach. Not because I’d done anything wrong — I was saving, I was trying. But because I finally understood what compound interest actually meant. Not as a concept from a textbook. As real money I was leaving on the table.

I never waited again.

If I could teach you one thing about money, it would be this: Your biggest asset isn’t your salary. It isn’t your house. It isn’t your 401(k) balance. It’s time.

Everything else I write about — retirement accounts, index funds, employer matches, debt payoff — is just mechanics. The engine underneath all of it is compound interest. And compound interest needs time.

The tale of three savers

Meet Sarah, Michael, and Jennifer. They all invest in the same thing, earn the same 7% average annual return, and contribute the same $500 per month. Same monthly amount. Same investments. Same return. Only one difference: when they started.

Sarah starts at 25 and contributes until 65 — that’s 40 years. Michael starts at 35 — that’s 30 years. Jennifer starts at 45 — that’s 20 years.

Here’s what happens: Sarah contributes $240,000 total and ends up with $1,310,000. Michael contributes $180,000 and ends up with $610,000. Jennifer contributes $120,000 and ends up with $260,000.

Read that again.

Sarah contributed $60,000 more than Michael — but she has $700,000 more at retirement. Michael contributed $60,000 more than Jennifer — but he has $350,000 more. Sarah has five times what Jennifer has, even though she only contributed twice as much.

This is compound interest. And it changes everything.

What is compound interest, actually?

Simple interest means you earn money only on what you originally invested. Put in $1,000, earn 7%, you get $70. Every year, you earn $70.

Compound interest means you earn money on your original investment AND on all the interest you’ve already earned. Put in $1,000, earn 7%, you now have $1,070. Next year, you earn 7% on $1,070 — that’s $75. The year after, you earn 7% on $1,145. And so on.

It doesn’t sound like much at first. The difference between $70 and $75 is pocket change. But give it time, and the numbers get absurd.

Here’s $10,000 invested once at 7% annual return, left alone: After 10 years, it’s worth $19,700. After 20 years, $38,700. After 30 years, $76,100. After 40 years, $149,700.

You didn’t add a penny after the first $10,000. Almost $140,000 appeared from compound growth alone. That’s not magic. That’s math. And it only works if you give it time.

(A note on that 7%: this is a commonly used estimate for long-term stock market returns after adjusting for inflation. Your actual returns will vary year to year, but over decades, it’s a reasonable planning assumption.)

The Rule of 72

Want a quick way to estimate how long it takes your money to double? Divide 72 by your expected return.

At 7%: 72 ÷ 7 = about 10 years to double. At 10%: about 7 years. At 3%: 24 years — which is why savings accounts don’t build wealth.

So at 7%, after 10 years your money doubles. After 20, it doubles again (now 4x). After 30, again (8x). After 40, again (16x).

This is why Sarah ends up with so much more than Jennifer. Sarah got four doublings. Jennifer only got two.

“But I’m not 25 anymore.” I know what you’re thinking. Great, I missed the boat. Thanks for making me feel terrible.

That’s not the point.

The point is: today is the youngest you’ll ever be.

If you’re 45 and start now, you’ll have 20 years of compound growth before 65. If you wait until 50, you’ll have 15. If you wait until 55, you’ll have 10. Every year you wait costs you a doubling.

Here’s what happens if you’re 50 today and start investing $500/month at 7%: Start at 50, you’ll have $158,000 at 65. Wait until 52, $127,000. Wait until 55, $87,000. Wait until 57, $64,000.

Waiting from 50 to 55 costs you $71,000. Waiting from 50 to 57 costs you $94,000.

That’s the price of “I’ll get to it later.”

The flip side: compound interest working against you

Everything I just showed you? It works in reverse when you’re in debt.

When you owe money at 20% interest — a typical credit card rate — compound interest is growing what you owe, not what you own.

Let’s say you have $10,000 in credit card debt at 20% APR and you pay $200 per month. After one year, you’ve paid $2,400 — but you still owe about $9,500. After five years, you’ve paid $12,000 and still owe over $6,600. It takes over 9 years to pay it off completely, and you’ll have paid nearly $22,000 total — more than double what you borrowed.

Here’s what makes it worse: during those 9 years, if you’d been investing that $200/month at 7% instead of paying off debt, you’d have over $30,000.

The total swing between being in debt versus investing? Over $40,000. That’s the real cost of carrying high-interest debt. It’s not just what you pay in interest — it’s what you’re not building while you’re paying it.

Credit card companies love compound interest. They’re using the same math against you that you should be using for yourself. This is why I talk so much about debt. Every dollar you’re paying in interest is a dollar that could be compounding for you instead of against you.

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What this means for your kids and grandkids

If you have children or grandchildren in their teens or twenties, you have an opportunity that’s hard to overstate.

A 22-year-old who invests $200/month until 65 — that’s 43 years — at 7% will have about $655,000. Their total contributions? About $103,000. The other $552,000 came from compound interest alone.

If you can help a young person understand this — or better yet, help them get started — you’re giving them a gift worth hundreds of thousands of dollars.

Open a Roth IRA for them. Match their contributions. Show them this math. It might be the most valuable thing you ever do for their financial future. I wrote about Custodial Roth IRAs for exactly this reason — check that post if you have kids or grandkids with earned income.

Why this is my starting point

Almost everything I write about comes back to compound interest. 401(k) employer match? Free money that compounds for decades. Index funds? A simple way to capture market returns and let them compound. Paying off debt? Stopping the compounding that’s working against you. SEP-IRAs and HSAs? Tax-advantaged ways to let more money compound. Social Security timing? Delaying lets a different kind of growth work in your favor.

The tactics change. The underlying principle doesn’t. Time plus consistent investing plus patience equals wealth. It’s not exciting. It’s not sexy. But it’s true.

The action step

If you’re not investing yet, start today. Even $100/month. The amount matters less than starting the clock.

If you’re already investing, increase it. Even 1% more of your income. Future you will thank present you.

If you have kids or grandkids, show them this post. Have the conversation. Help them start if you can.

If you’re carrying high-interest debt, recognize that you’re on the wrong side of this equation. Make a plan to flip it.

The math doesn’t care about your excuses. It doesn’t care that you meant to start earlier. It doesn’t care that life got in the way.

But it will reward you — generously — if you start now and stay consistent.

Your biggest asset is time. Use it.

You might also like:

• “Invest Like Warren Buffett” — why index funds are how most people should invest

• “The Custodial Roth IRA” — how to give your kids or grandkids a massive head start

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I approach taxes like a game. I always want to play by the rules — I don’t want to cheat — but I’m competitive and I like to win. And in this case, winning equals paying what you owe — no more and no less. I like to know all the rules so I can win fairly.

Because I use less common but fully legitimate tax moves, there have been times where my returns required additional steps and scrutiny — which is appropriate given what I was doing. The problem is that those additional steps mean waiting for a human at the IRS to review them. And over the past few years, there have been fewer and fewer people doing that work.

So I’ve had to learn how to navigate the system. Not the easy part — filing your return, getting your refund, moving on with your life. The hard part. The part where something goes sideways and you need someone at the IRS to actually look at it.

Here’s everything I’ve learned.

First, don’t panic

If you get a letter from the IRS, your first instinct will be fear. That’s normal. But most IRS letters are not audits. True audits are rare — the vast majority of notices are automated. Something didn’t match. A document was missing. A number looked off. The IRS relies on matching systems — if your W-2 or 1099 income doesn’t match what you reported, their system flags it automatically and sends you a notice.

Not every letter is equal. Some notices are purely informational. Others are bills. A few require action fast. Your job when you open the envelope is to figure out which one you have, read it carefully, and note the deadline. The worst thing you can do is ignore it. Silence doesn’t make it go away — it makes it worse. Respond by the date they give you, and most of the time, it’s a non-event.

And even if you do get audited — which very few people do — it’s almost certainly not what you’re imagining. In FY2024, about 78% of IRS examinations were handled by correspondence — meaning mail and document requests — while about 22% were field exams, which often take place at an IRS office or through your representative, not necessarily at your home. For most households, an audit means paperwork, not a doorstep drama.

This happened to us. We installed solar panels and took the tax credit. A few months later, we got a letter asking us to verify the installation — basically prove we’d actually done it and what we paid. I put together a package of documentation from our solar installer — receipts, the contract, proof of payment — and mailed it in. A few weeks later, we got another letter: all clear. No one came to the house. No harassing phone calls. No dramatic confrontation. Just paperwork in, paperwork out.

A quick note on scams

During tax season — especially when you’re anxious about a letter — scammers are counting on you to react without thinking. Here’s a simple filter: the IRS generally starts with a letter sent through the mail. They don’t initiate contact by email or social media, and unsolicited texts are a red flag. If you’re ever unsure whether a notice is real, log into your IRS Online Account directly — don’t click links in texts or emails — and call the published IRS number yourself.

Start online: IRS.gov/account

Before you pick up the phone, check whether your answer is already available online. The IRS online portal lets you check the status of your return and refund using the “Where’s My Refund?” tool, view your tax records and transcripts, track amended returns, make payments, and get answers to common questions. It’s available 24/7 with no hold times. For straightforward questions — where’s my refund, did my payment go through, what does this notice mean — start here.

How to actually get a human on the phone

Sometimes you need to talk to a person. Here’s how I do it.

The numbers are 1-800-829-1040 for personal tax issues and 1-800-829-4933 for business tax issues. Both lines are open Monday through Friday, 7:00 AM to 7:00 PM your local time. A tip on the business line: the representatives there tend to be less busy, they’re well-versed on what you need, and they’re used to working with small business people who don’t have a lot of time. If your question touches anything business-related, try that number first.

When you call matters more than you’d think. The best days are Tuesday, Wednesday, and Thursday. Mondays have a backlog of callers from the weekend. Fridays tend to have fewer workers on the lines. The best time is early morning — when I’m doing it, I start calling at 6:58 a.m. local time, two minutes before the lines open. The worst time is 10:00 AM to 3:00 PM, when call volume peaks and overlaps with lunch coverage gaps. And January through April is always the hardest stretch to get through.

Before you call, have three things ready: your Adjusted Gross Income from last year’s return — that’s Line 11 on Form 1040, and they use it to verify your identity. All documents related to your specific issue. And your questions written out. Once you get through, you’re going to want to be able to very clearly state what you need so they can look into it. This is not the time to try to remember.

Your secret weapon: the Taxpayer Advocate Service

The Taxpayer Advocate Service is an independent organization within the IRS that helps people resolve problems they can’t fix through normal channels. I’ve used them, and they’re excellent.

When to use TAS: your issue is causing financial hardship, you’ve tried to resolve it through normal IRS channels and hit a wall, or something has been sitting unresolved for an unreasonable amount of time. They assign you a single advocate who stays with your case, and the service is free.

My experience? They’re proactive, they communicate well, and they sometimes find issues you didn’t even know about. As embarrassing as it is to admit, one year they actually found an additional refund from one of my companies that had never been processed. I wasn’t even calling about it. I didn’t realize the money was owed to me. That tells you how thorough they can be.

Fair warning: TAS has been hit by the same staffing challenges as the rest of the IRS, so you may experience longer wait times than in past years. The National Taxpayer Advocate’s 2025 Annual Report to Congress specifically flagged high request volumes. But the service still exists and still works. You can reach them at taxpayeradvocate.irs.gov or by calling 877-777-4778. You can also download Form 911 to submit your case.

The tool nobody knows about: your congressional office

This is the one that surprises people. Every member of Congress has a caseworker — often several — who handles constituent issues with federal agencies, including the IRS. They contact the IRS on your behalf and can often move things along faster than you can on your own. This is standard constituent service, not a favor. It’s literally what they’re there for.

I’ve used this. I had a refund that got flagged — it was eventually approved, there was nothing wrong — but in between getting flagged and approved, it got gummed up in the system. Getting somebody to actually look at it was the hard part. I used an online form to contact my congressman’s office. They were very responsive — they have a caseworker who handles exactly these kinds of issues and interacts with the IRS directly. It was resolved within a couple of weeks.

To find yours, go to house.gov and enter your zip code. Most offices have an online form specifically for federal agency issues. You don’t need to be politically connected or know anyone personally. You just need to live in their district.

Using AI for tax questions

This might sound unconventional, but I’d recommend using Claude or ChatGPT for tax questions. Fact-check it like you would anything else, but increasingly these tools are getting better and better. At the very least, they can help you understand and interpret IRS guidance, which can be dense.

Good uses: understanding what an IRS notice means, interpreting tax rules in plain English, figuring out which forms you need, and getting a starting point for a question you’ll then verify with a professional or against IRS.gov. AI is a starting point, not a final answer — but it’s a powerful one that’s available at 2 AM when your anxiety about that letter is keeping you up.

A new wrinkle: refunds are going more digital

The IRS is phasing out paper refund checks as part of a broader move to electronic payments. Practically, if you file without direct deposit information, you may see delays while the IRS requests your payment details — or asks you to request a paper check as an exception. The Taxpayer Advocate Service has warned that refunds can be temporarily frozen in these situations until the IRS gets what it needs.

The cleanest move: include your bank routing and account numbers when you file. If you don’t have a bank account, prepaid debit cards with routing numbers or other electronic alternatives can work — the IRS has information at IRS.gov/refunds. Don’t let this catch you off guard. It’s a new step that could hold up your refund if you’re not prepared for it.

Why all of this matters more this year

I’m not going to get political about it, but you should know the reality. According to the National Taxpayer Advocate’s 2025 Annual Report to Congress, the IRS workforce dropped from about 102,000 employees to around 74,000 over the course of 2025 — a reduction of roughly 27%. On top of that, the new tax law changes from last summer added significant complexity that the IRS is still implementing. The report specifically warned that the IRS is simultaneously confronting workforce reductions, leadership turnover, and the implementation of extensive and complex tax law changes.

What this means for you: most people who file electronically with direct deposit information will be fine. But if something goes wrong — a flagged return, a missing document, an amended filing — it’s going to take longer to resolve than in past years. Having these tools in your back pocket before you need them is the whole point of this post.

The playbook

If something comes up with the IRS, here’s your order of operations. Start at IRS.gov/account — check whether the answer is already there. If you need to call, use the early morning strategy with your documents ready. If you hit a wall through normal channels, file with the Taxpayer Advocate Service. If things are dragging on, contact your congressional office. And don’t pay for those “tax resolution” services you see advertised on TV before trying the free options first.

You don’t need to memorize all of this. Bookmark this post. If the IRS sends you a letter or something feels off, come back and work through it step by step.

If something comes up, you have options. You’re not alone in this.

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Two trends are colliding right now—and if you’re in your 40s or 50s, you’re probably watching both.

First, layoffs. More than 1.2 million job cuts were announced in 2025—up 58% from 2024 and the highest since the pandemic. January 2026 brought 108,435 more, up 118% from January 2025. Some forecasters expect unemployment to peak around 4.5% this year, and a Harris Poll in October found that 55% of employed Americans are concerned about losing their jobs.

Second, retirement withdrawals. Vanguard reports that 4.8% of participants in Vanguard-administered plans took hardship withdrawals in 2024—up from 3.6% the year before, and more than double pre-pandemic levels. The top reasons: avoiding foreclosure or eviction, and medical bills.

These numbers are connected. When people lose income and don’t have emergency savings, they tap the only asset they have.

If you’re facing that decision—or worried you might be soon—no judgment here. Sometimes there’s no good option, just least-bad options. Let’s walk through how to think about this, what it actually costs, and if you have to do it, how to do it smartly.

The real cost of tapping retirement early

This isn’t a lecture. It’s the math.

If you take a hardship withdrawal from a traditional 401(k) before age 59½, you’ll owe income taxes plus a 10% early withdrawal penalty. In the 22% federal bracket with 5% state tax, that’s 37% gone before you see a dollar. To net $15,000, you may need to withdraw closer to $24,000.

And that $24,000 doesn’t just disappear from your account—it disappears from your future. At 7% average annual returns, $20,000 withdrawn at age 45 would have grown to roughly $75,000 by age 65.

That’s the real cost: not just what you take out, but what it would have become. A $20,000 emergency today could cost you $75,000 in retirement. That’s not a reason to lose your house—but it’s a reason to exhaust other options first.

Before you touch your 401(k): the order of operations

Work through these in order. Each does less damage than a hardship withdrawal.

1. Emergency savings. If you have cash in a savings account, use it first. That’s what it’s for.

2. Roth IRA contributions. You can withdraw your contributions—not earnings, just what you put in—at any time, tax-free and penalty-free. You’ve already paid taxes on that money. If you’ve contributed $30,000 over the years and it’s now worth $45,000, you can pull out up to $30,000 with no taxes or penalties. (Make sure you’re tracking contributions vs. earnings—your custodian can usually show this.)

3. HSA funds. If your emergency is medical and you have a Health Savings Account, use it for qualified medical expenses—including reimbursing yourself for eligible expenses you’ve already paid out of pocket.

4. Friends and family. If you have people who can help—and you can have an honest conversation about repayment—this may be less costly than tapping retirement. Not everyone has this option.

5. 401(k) loan. If you’re still employed and your plan allows it, you can borrow from your own 401(k)—typically up to 50% of your vested balance or $50,000, whichever is less. You pay yourself back with interest. No taxes or penalties as long as you repay on schedule.

The catch: if you leave your job, most plans will treat the outstanding balance as a distribution, triggering taxes and penalties. Some workarounds exist (you may be able to roll over a plan loan offset by your tax-filing deadline), but the rules are technical and timing-sensitive. Don’t rely on a 401(k) loan if layoff risk is high.

I know someone who took a 401(k) loan during the pandemic. They didn’t have emergency savings. The loan got them through until they found work, and they paid it back. It worked.

I also know someone who took a 401(k) loan for a “great investment opportunity.” They lost money on the investment, then spent years cutting their household budget to catch up on retirement contributions.

Borrowing against your retirement to bridge a real emergency can make sense. Borrowing to chase a speculative opportunity is doubling down on risk with money you can’t afford to lose.

6. The $1,000 penalty-free withdrawal. Most people don’t know this exists. As of 2024, there’s an “emergency personal expense” exception that lets you take up to $1,000 without the 10% penalty (taxes still apply). If you don’t repay or make it up through contributions, you may be blocked from another for three years. Not every plan offers it—ask your administrator.

If none of the above work, you’re into last-resort territory.

7. Hardship withdrawal. Understand what you’re giving up: taxes, penalties, and the money is gone permanently. You cannot pay it back.

8. Credit cards. High interest compounds the problem. If you’re choosing between a hardship withdrawal and credit card debt, the retirement withdrawal may actually be less damaging—depending on amounts and your ability to pay off the card. Do the math. And if you go the card route, call and ask about a temporary hardship APR reduction before you carry a balance.

Loan vs. hardship withdrawal: the critical difference

A 401(k) loan: you borrow from your account and pay yourself back with interest. No taxes or penalties if you repay on schedule. The money goes back into your account.

A hardship withdrawal: you take money out permanently. You owe income taxes on the full amount. You owe a 10% penalty if under 59½ (with some exceptions). You cannot pay it back.

If a loan is available and your employment is stable, it’s usually the better option. A hardship withdrawal is a one-way door.

What qualifies for a hardship withdrawal

The IRS requires an “immediate and heavy financial need.” Common qualifying situations may include medical expenses; costs to prevent eviction or foreclosure; costs to purchase a primary home; tuition and education fees; funeral expenses; and certain disaster-related home repairs.

Not every plan has adopted every option. Check with your HR department or plan administrator.

If you have to do it: minimize the damage

Take only what you need. Every extra dollar is taxed, penalized, and permanently removed from your future.

Understand the tax hit. The withdrawal adds to your taxable income. A large withdrawal could push you into a higher bracket. If timing allows, consider splitting across two calendar years.

Keep contributing. The old rule requiring a six-month pause after a hardship withdrawal is gone under current rules. Keep contributing—especially if your employer matches.

Recovering afterward

Don’t stop your contributions. At minimum, contribute enough to get your employer match.

Increase contributions when you’re stable. The 2026 limit is $24,500. If you’re 50 or older, you can add $8,000 more. If you’re 60-63, the “super catch-up” lets you add up to $11,250. A big withdrawal takes time to rebuild, but every year you delay makes it harder.

Build an emergency fund—even a small one. Vanguard research shows that people with just $2,000 in emergency savings are 17 percentage points less likely to take a hardship withdrawal and 43 percentage points less likely to cash out their 401(k) when they leave a job. Even $50 a month into a savings account creates a buffer.

Don’t beat yourself up. You made the best decision you could with the options you had. What matters now is what you do next.

The bottom line

“Don’t touch your retirement” is great advice—if you have emergency savings, if you haven’t been hit with a crushing expense, if you have people who can help.

That’s not most people.

For everyone else, your retirement savings is one more asset. One you want to tap toward the end of your options, not the beginning. But if you have to do it, you have to do it. That’s not failure. That’s dealing with life.

Work through the alternatives. If you must withdraw, do it smartly. Then focus on rebuilding.

You’re not behind. You’re handling what’s in front of you.

This is general guidance, not legal or tax advice. Rules vary by plan and situation.

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When I was in graduate school, I taught a class in public financial management. The most fundamental concept I emphasized—and still do when I work with organizations around their financial management—is this: working the float.

Any organization—nonprofit, government agency, business—needs to maximize the cash it has on hand. In the 90s, there were options for larger entities to park money even for 24 hours to earn interest. Even small amounts of money parked for short periods add up. It’s one of the most basic principles of sound financial management.

Here’s the irony: despite understanding this concept deeply, I didn’t start using a high-yield savings account personally until the early 2000s. I didn’t think there was an option for regular people. I assumed the only choice was CDs, and I’d use them from time to time, but it always made me anxious to have that money locked up. What if I needed it?

I only found out about high-yield savings accounts when I switched banks and the new bank mentioned it. That’s when I realized I could profit on the float—just like I’d taught others to do—without sacrificing access to my money.

If you have cash sitting in a regular savings account earning almost nothing, you’re leaving real money on the table

Not life-changing money, but real money. And it takes almost no effort to fix.

A high-yield savings account is simply a savings account that pays a significantly higher interest rate than traditional bank savings accounts. That’s it. No catch, no complexity.

The key characteristics: It’s FDIC insured up to $250,000—just as safe as any bank account. It’s liquid—you can access your money anytime without penalty. The rate is variable, meaning it changes based on Fed rates and bank competition. And it’s usually offered by online banks or brokerage houses rather than traditional brick-and-mortar banks.

Money market accounts work essentially the same way for practical purposes. They may have check-writing or debit card features, but the core benefit—higher yield plus full liquidity—is identical. I use a money market through my brokerage.

Let me show you what this looks like in real dollars

Right now, a major national bank I looked at today—early 2026—pays 0.01% APY on their standard savings account. That’s not a typo—one one-hundredth of a percent. Meanwhile, high-yield savings accounts from online banks are paying around 4% APY, with some above that.

Here’s what that difference means for your money:

If you have $5,000 sitting in a traditional savings account, you’ll earn about 50 cents in a year. In a high-yield account at 4%, you’ll earn $200. That’s $199.50 you’re just not getting.

At $10,000, the difference is about $399. At $25,000, it’s nearly $1,000. At $50,000, you’re leaving almost $2,000 on the table every year.

That’s real money for doing essentially nothing except moving your cash to a different account.

The reason most people don’t do this is simple: they don’t know it exists

Or if they’ve heard of it, they think it’s only for emergency funds. They don’t realize it should be part of their basic financial system for all kinds of cash.

Here’s the insight wealthy people figured out a long time ago: your money should always be earning something. It’s not that they’re doing anything exotic or complicated. They just have a basic system that ensures every dollar is working. Cash for short-term needs? In a money market. Cash for medium-term goals? In a high-yield account or bond fund. Long-term money? Invested.

Most regular people don’t have this system because they don’t know these options exist, they think you need a lot of money to access them, or they assume “investing” is the only way to earn on cash—and investing feels risky.

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The objection I expected to hear was “But shouldn’t I be investing that money?”

That’s not what I actually hear. The real hesitation is: “I don’t want to do a CD because I need to have the money handy, and I don’t know how else to earn something safely.”

A high-yield savings account solves exactly that problem. You don’t have to choose between CDs (locked up) and investing (risky). An HYSA gives you a guaranteed return with full liquidity.

Speaking of CDs—I would never recommend one over a high-yield savings account

What you lose in liquidity isn’t worth it. CDs lock your money for a fixed term—anywhere from three months to five years. Early withdrawal penalties can wipe out your interest gains. And current CD rates aren’t significantly higher than HYSA rates anyway—often within a quarter to half a percent.

A couple of years ago, I had cash I needed to hold for six months and didn’t want any risk. I used treasury bonds. Honestly, it wasn’t that much better in terms of the interest rate, and the lack of liquidity was very unnerving. The freedom of knowing I can access my money whenever I need it—that’s worth a slightly lower rate.

So when should you actually use a high-yield savings account?

Most people who have one only use it for their emergency fund. That’s a good start, but it’s thinking too small.

Use it for your emergency fund—three to six months of expenses, accessible but earning.

Use it for money you’re saving toward a known expense in two to five years—a home renovation, a car purchase, helping a kid with a down payment. This money shouldn’t be in the stock market because you can’t afford a 30% drop right before you need it. But it also shouldn’t be earning nothing.

Use it for cash you’ve set aside for a big purchase that’s already earmarked but not ready to spend yet.

Use it for estimated taxes if you’re self-employed or a small business owner. Your quarterly tax payments may sit for months before you send the check to the IRS. Why not earn on that money in the meantime?

Use it for transition money—holding cash while you figure out what to do with an inheritance, a bonus, or proceeds from selling investments.

Use it for flexibility—maintaining a larger cash cushion because you’re in midlife and want options. As I wrote in the Recovery Assumption piece, having accessible cash becomes more important when your timelines get shorter and your life gets less predictable.

This is a tool — not a plan

A high-yield savings account can protect you from chaos.
It can give you breathing room.
It can keep you from going into debt when life happens.

But it is not designed to build wealth.

Its job is stability — not growth.

Opening one takes about fifteen minutes

Go to the large, well-known companies. Not because I make any money from recommending them—I don’t—but because they’re easy to use, quick to set up, and you won’t have to worry about whether they’re legitimate.

Online banks like American Express, Marcus (Goldman Sachs), Ally, Capital One 360, and Discover all offer high-yield savings accounts. Brokerage houses like Fidelity, Schwab, and Vanguard offer money market funds or sweep accounts that work the same way. Many credit unions offer competitive rates too.

The process: open an account online, link your existing checking account, transfer money in. Done.

Two things to check before you sign up:

First, make sure the APY is actually high. Not all “savings accounts” are high-yield. In the current environment, you should be looking for 3.5% or higher. If a bank is advertising 0.5%, that’s not what you want.

Second, check for minimum balance requirements and fees. Some accounts require a minimum balance to earn the advertised rate or to avoid monthly fees. Look for accounts with no minimum balance and no monthly fees—American Express, Ally, Marcus, and Fidelity’s money market all fit this description.

A few mistakes to avoid:

Don’t chase the absolute highest rate. The difference between 4.00% and 4.35% is minimal on most balances. Pick a reputable institution and move on. Rate-chasing creates hassle and potential for error.

Don’t put money you’ll need this month in an HYSA. Transfers take one to two business days. Keep your immediate-need cash in checking.

Don’t ignore the minimum balance requirements if the account has them. Some accounts penalize you for falling below a threshold—make sure you understand the terms.

And don’t overthink this. The goal isn’t to optimize every last basis point. The goal is to stop leaving hundreds or thousands of dollars on the table every year for no reason.

Where does this leave you?

If you don’t have a high-yield savings account or money market, open one this week. It takes fifteen minutes.

Move your emergency fund there if it isn’t already.

Then think about what other cash you have sitting around—tax savings, upcoming big purchases, money you’re holding while you figure out what to do with it. Move that too.

Make it part of your basic system. Wealthy people don’t let money sit idle. Neither should you.

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About twenty years ago, I was having coffee with a friend. He was in his late 50s, and he was asking what stocks I thought he should invest in to accumulate as much money as quickly as possible.

I asked him why he wasn’t taking a more cautious approach.

His answer: “Isn’t that what you’re supposed to do? Aren’t you just supposed to invest in the best stocks possible and make money?”

He had no idea there were phases to investing. He didn’t know that someone in their late 50s should be thinking differently than someone in their 30s. Without that information, he would’ve been horribly exposed. If the market dropped 30%, that would’ve been a huge hit to his future—because nothing was in anything stable.

This wasn’t an argument against investing. It was an argument for sequencing. Growth matters — but only after stability exists. You can’t compound money you’re forced to pull out at the wrong time

This conversation stuck with me because it revealed something important: most financial advice assumes you have time to recover from mistakes. And nobody tells you when that assumption stops being true.

The standard advice sounds reasonable

“Stay the course.” “Don’t try to time the market.” “Time in the market beats timing the market.” “Volatility smooths out over the long run.”

And here’s the thing—that advice is correct. For a 30-year-old.

If you’re 30 and the market drops 30%, you don’t need that money for 30+ years. You keep contributing, you buy shares at lower prices, and when the market recovers, you’re ahead. The math works. Time smooths volatility. The standard playbook is built for this scenario.

But in midlife, that assumption quietly collapses

In your 40s, 50s, and 60s, you have what I call non-negotiable timelines—deadlines that don’t care about market cycles:

Your kid starts college in five years. That tuition bill is coming whether the market is up or down.

Your target retirement date is now 10-15 years away, not 30. The window for recovery is shorter.

An aging parent may need care—and you may need to help pay for it.

Your own health becomes less predictable. A diagnosis can change everything overnight.

Job security isn’t what it was. Age discrimination is real, and if you lose your job at 55, finding another one takes longer than it did at 35.

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The math changes when you have fixed deadlines

If you need money in five years and the market drops 30%, you may have to sell at a loss—or delay the goal entirely. If you lose your job and need to tap your investments to live on while you search, you’re selling low AND reducing your base for recovery. The money you pull out isn’t there to bounce back when the market does.

This is what financial planners call “sequence of returns risk.” But here’s what they don’t always tell you: it doesn’t just apply to retirement. It applies to any fixed timeline.

Let me show you how quickly this can go wrong

Say you have $500,000 invested. The market drops 30%—which has happened multiple times in recent decades—and suddenly you have $350,000. Now imagine you lose your job and need $50,000 to cover expenses while you search.

You’re not just spending $50,000. You’re selling $50,000 worth of investments at a 30% discount. When the market eventually recovers, that $50,000 isn’t there to recover with you. You’ve locked in the loss permanently.

And here’s the part people miss: job searches take longer in midlife. According to Bureau of Labor Statistics data, job seekers ages 45-54 spend an average of 32 weeks unemployed. For those 55-64, it’s about 26 weeks. For those 65 and older, it stretches to 34 weeks—the longest of any age group. AARP research shows that 64% of workers over 50 have seen or experienced age discrimination in the workplace.

In your 30s, if you lose your job, you can probably land another one relatively quickly. In your 50s, you need to be prepared for a longer search—and that means having money you can access without selling investments at a loss.

Most people are never taught that investing has phases

There’s the accumulation phase—typically your 20s through 40s. You’re building wealth. Time is on your side. You can afford volatility because you’re not touching the money for decades.

Then there’s the preservation phase—typically your 50s and early 60s. You’re protecting what you’ve built while still growing it. Risk tolerance should decrease. Resilience matters more than maximum growth.

Finally, there’s the distribution phase—retirement. You’re drawing down. Stability and income matter most.

My friend asking about aggressive stocks in his late 50s? He was in the preservation phase but investing like he was still in accumulation. That mismatch is dangerous.

I’ve seen this pattern repeatedly

I’ve worked with people in their mid-to-late 50s who kept everything in aggressive investments, hoping to “catch up quickly.” In one case, the person was doing this while also avoiding paying down high-interest debt.

I had to point out: the interest on that debt is costing more than the investments are earning—and those investment gains are unrealized. He was hemorrhaging cash and didn’t even realize it.

I know someone in their late 50s who left a stable company for a startup. The idea was: if the startup has an IPO, they’d make a lot of money. (An Initial Public Offering is when a startup begins selling stock to the public—early employees sometimes get a piece of that windfall, which is why startups can pay lower salaries but still attract talent.)

Three years later, the company went nowhere. It didn’t have great benefits, so he hadn’t been pushing his retirement savings. The gamble didn’t pay off. Now he’s three years behind and job searching—in his late 50s.

I saw this pattern growing up with my own parents. There were many times they thought they could make a bet and get out of their situation. All it meant was more cash leaving the house.

So what should you actually do differently?

The message is not “stop investing and keep everything in cash.” That’s overcorrection.

The message is: be wiser about how you leverage what you have. Think about resilience, not just returns.

Here’s what changes:

At 30, the advice is “volatility smooths out—stay aggressive.” At 50, the reality is “you may not have time to recover—build in buffers.”

At 30, you maximize growth. Higher risk, higher return. At 50, growth still matters, but so does resilience. Your money needs to actually be there when you need it.

At 30, financial advisors often say “don’t hold too much cash—it’s a drag on returns.” At 50, cash is flexibility. Cash is options. Having more liquid savings isn’t being scared—it’s being realistic about the fact that life gets more expensive and less predictable.

At 30, you might consider some high-risk, high-reward investments. At 50, unless it’s money you can genuinely afford to lose, you should prioritize stability.

At 30, taking on debt for an appreciating asset—a home, education—can make sense. At 50, be very cautious about new debt. You have less time to pay it off and rebuild savings.

Practically, this means:

Use index funds. They’re less volatile by design because they hold hundreds or thousands of companies. You don’t need to catch every market swing or pick the next big winner.

Build a larger cash buffer. Six to twelve months of expenses, not just three to six. This protects you from having to sell investments at a bad time.

Use high-yield savings accounts or money markets for money you’ll need in one to five years. You’ll earn a reasonable return—around 4% right now—without risking a 30% drop right before you need it.

Think about risk differently. The question isn’t just “how much can I make?” It’s “can I afford for this to be down 30% when I need it?”

Pay down high-interest debt. It’s a guaranteed return, it reduces your monthly cash outflow, and it increases your resilience if something goes wrong.

Consider your work timeline honestly. Can you work five more years? Ten? What if you can’t? What if your health changes? What if your company restructures?

Even if you’re doing “safer” investments—index funds combined with bonds and high-yield savings—you’re still making progress. It’s just safer progress. I always remind people to stay the course, to try to set it and forget it. The worst thing you could do is have a system that depends on you catching every change in the market. It’s virtually impossible to get ahead of it.

How does this actually feel when people realize it?

Honestly? It’s both liberating and scary.

Liberating because they don’t have to find the next big stock. They’re not searching for the next Alphabet or Anthropic. They don’t need to make a killing to be okay. There are choices they can make that are easier and less stressful.

Scary because there isn’t a silver bullet. They can catch up—but it’s going to take steady work. That’s harder than hoping for one big win that solves everything.

Here’s the empowering part:

You’re off the hook. You don’t have to find the next big investment. You don’t have to chase the “one thing” that fixes everything. The pressure to make a spectacular bet? That’s gone.

But you do have the responsibility of preservation and patience. You may need to think about trade-offs differently—because there isn’t time to say “I’ll take care of that ten years from now.”

There is still time for retirement. But it’s going to require some harder choices than you had when you were younger. The good news is those choices are clear and manageable. They just require accepting that the rules have changed.

Where does this leave you?

If you’ve been following generic financial advice without asking “was this written for someone in my situation?”—now you know to ask that question.

If you’ve been tempted to take big risks to “catch up”—consider whether you can actually afford for that bet to fail.

If you’ve been anxious about money but couldn’t articulate why the standard advice felt off—this might be what was nagging at you.

And if you’re realizing you need to think differently about your timeline, your risk tolerance, and your cash reserves—you’re not being scared. You’re being smart.

The rules changed. Now you know.

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A few years ago, I was helping a small business owner in her early 50s figure out a financial plan for her teenage son, who has a developmental disability. She’d been paying him to help out around the shop—off the books—and putting that money into a savings account in her name. She knew he’d need help down the road and wanted to set something aside for him.

But she’d also heard the horror stories. If he ever needed SSI or Medicaid, having money in his name could disqualify him. So she kept it hidden. No paper trail. No growth. No structure.

She was doing the best she could with what she knew. The problem is, there was a better way—and nobody told her about it.

There’s an account called an ABLE account that would have let her pay her son legitimately, contribute those earnings to a protected account in his name, invest the money for growth, and build for his future—all without risking his eligibility for benefits. She could have been doing this the right way for years—and building real security instead of fear.

If you’re in a similar situation—or if you have a grandchild, niece, nephew, or anyone in your life with a disability—this is the tool most families don’t know exists.

An ABLE account is a tax-advantaged savings account specifically designed for people with disabilities. Think of it like a 529 college savings plan, but instead of education expenses, the money can be used for almost anything that improves the person’s quality of life—housing, transportation, healthcare, therapy, technology, job training, even basic living expenses like food and clothing.

Here’s what makes it different from a regular savings account: the first $100,000 in an ABLE account doesn’t count toward SSI’s $2,000 asset limit. That’s not a typo. SSI beneficiaries are normally disqualified if they have more than $2,000 in countable assets—a threshold that hasn’t changed since 1989. An ABLE account lets someone save 50 times that amount without losing their benefits.

And Medicaid? An ABLE account has no balance limit for Medicaid eligibility. You can have $200,000, $300,000, even more in the account, and it won’t affect Medicaid at all.

Big news if you were told you didn’t qualify before

Until very recently, ABLE accounts were only available to people whose disability began before age 26. That ruled out millions of Americans—including veterans injured in their 30s, people with later-onset conditions, and those who developed chronic illnesses or experienced accidents in adulthood.

As of January 1, 2026, that changed. The eligibility age expanded to include anyone whose disability began before age 46. Roughly 6 million more Americans are now eligible. If you looked into this before and were told no, it’s worth checking again.

To qualify, the person with the disability—the “beneficiary”—needs to meet one of two criteria. Either they’re already receiving SSI or SSDI, which automatically qualifies them. Or they can get a disability certification signed by a licensed physician stating they have a condition with “marked and severe functional limitations” that began before age 46. No income limits. No employment restrictions. The account is always opened in the name of the person with the disability.

And here’s the part that solves a lot of family headaches: anyone can contribute to an ABLE account. Parents, grandparents, aunts, uncles, family friends, even the beneficiary themselves. This is huge for estate planning. Instead of leaving money directly to a disabled family member—which could blow up their benefits—you can leave it to their ABLE account. Problem solved.

Let me show you how the math works in practice.

Remember that business owner with the teenage son? Say she starts paying him legitimately—$500 a month through her business, or $6,000 a year. She contributes that amount to his ABLE account each year. At 7% average growth over 10 years, from age 16 to 26, that account grows to roughly $83,000. Still under the $100,000 SSI threshold. He has a real financial foundation, built over a decade, without risking a dollar of his benefits.

Compare that to what she was actually doing—cash payments off the books, money sitting in her savings account earning nothing, no legal protection, and a ticking time bomb if he ever applies for government benefits and someone asks where the money came from.

Or take the grandparent who wants to help her 12-year-old grandson with autism. She’s got $15,000 she wants to leave him. If she puts it directly in her will, that inheritance could disqualify him from SSI and Medicaid the moment he receives it. But if she contributes to his ABLE account over three years—$5,000 per year—or simply names his ABLE account as the beneficiary in her estate documents, the money is protected. It grows tax-free. It’s available for his needs. And it doesn’t touch his benefits.

Contribution Limits

For 2026, the contribution limit is $20,000 per year from all sources combined. That means if grandma contributes $15,000 and mom contributes $5,000, they’ve hit the limit—no more contributions that calendar year. If the beneficiary works and doesn’t have an employer retirement plan, they can contribute an additional amount up to their earnings or $15,650 (whichever is less). So a working adult with a disability could potentially put away up to $35,650 in a single year.

The money grows tax-free. Withdrawals for qualified disability expenses are tax-free. Contributions aren’t deductible federally, but some states offer a state tax deduction if you contribute to their ABLE program—worth checking.

What counts as a qualified disability expense?

The definition is broad: housing, rent, utilities, transportation, car payments, rideshare costs, education, tutoring, therapy, medical expenses, assistive technology, employment support, legal fees, financial management, food, clothing—essentially anything that helps maintain or improve the person’s health, independence, or quality of life. The IRS interprets this generously. If the expense benefits the beneficiary, it probably qualifies.

There is one catch you need to understand

When the beneficiary dies, if there’s money left in the ABLE account, Medicaid can file a claim to recover what it paid for the beneficiary’s care after the account was opened. This is called “Medicaid payback.” It’s different from a third-party special needs trust, which typically has no Medicaid payback.

This isn’t a dealbreaker—it just means you should know about it. If the beneficiary didn’t receive Medicaid while the account was open, there’s no payback. Some states have opted not to pursue Medicaid recovery from ABLE accounts at all. And after Medicaid is repaid (if anything is owed), remaining funds go to the beneficiary’s designated heirs. But it’s worth understanding that ABLE accounts don’t provide the same protection from Medicaid claims that a properly structured third-party special needs trust does.

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Opening an account is simpler than you’d think

You don’t need an attorney. Most state ABLE programs have online enrollment that takes 15-30 minutes. You’ll need the beneficiary’s Social Security number, date of birth, disability documentation, and a bank account for contributions. Typical fees are $0-50 to open, plus small annual maintenance fees.

You don’t have to use your own state’s program—most states allow out-of-state residents to open accounts. It’s worth comparing a few options, since investment menus, fees, and features vary. Virginia’s ABLEnow program and Ohio’s STABLE account are popular choices that accept residents from any state. Your home state might offer a tax deduction for contributions to its own program, so check that first.

Because these rules are complex and vary by situation, this section is about understanding how the system works—not replacing professional advice when larger sums or estate planning decisions are involved.

How does this compare to a special needs trust?

Think of ABLE accounts as the starter tool and special needs trusts as the heavy-duty solution.

An ABLE account costs nothing to set up, doesn’t require an attorney, and lets the beneficiary (or their representative) control the money directly. But it has a $20,000 annual contribution limit, and Medicaid can make a claim against it after death.

A special needs trust costs $3,000 or more to establish, requires an attorney, and puts a trustee in control of the funds—not the beneficiary. But it has no annual contribution limit, can hold much larger amounts, and a third-party special needs trust has no Medicaid payback provision.

Many families end up with both. The ABLE account handles day-to-day needs and smaller amounts. The special needs trust holds larger sums—inheritances, life insurance payouts, lawsuit settlements. They work together.

If this might fit your situation, here’s how to run the play

First, verify eligibility. The beneficiary’s disability must have begun before age 46. If they’re receiving SSI or SSDI, they automatically qualify. If not, they’ll need a disability certification from a licensed physician.

Second, research state programs. Start with your home state to see if there’s a tax deduction for contributions. Then compare fees and investment options across a few programs. The ABLE National Resource Center (ablenrc.org) has comparison tools.

Third, gather your documents. You’ll need the beneficiary’s Social Security number, date of birth, address, and disability documentation. If someone other than the beneficiary will manage the account, you’ll designate an authorized representative.

Fourth, open the account online. The process takes 15-30 minutes on most state program websites.

Fifth, set up contributions. You can make one-time deposits, set up recurring transfers, or arrange direct deposit from employment income or Social Security benefits. Anyone can contribute—just stay under the $20,000 annual limit from all sources combined.

Sixth, invest the money. Like a 529 plan, most ABLE programs offer several investment options. If you’re not sure, a target-date fund or balanced fund is a reasonable default. Don’t leave it sitting in cash.

A few mistakes to avoid along the way

Don’t assume you don’t qualify. The age limit just expanded from 26 to 46. Many people who were told no before now qualify.

Don’t exceed the annual contribution limit. It’s $20,000 total from all sources. If multiple family members are contributing, coordinate so you don’t go over.

Don’t forget the $100,000 SSI threshold. The account can hold more than $100,000, but SSI benefits suspend once you cross that line. Medicaid isn’t affected, but SSI is.

Don’t forget to designate an authorized representative if the beneficiary can’t manage the account themselves. This lets a trusted person handle contributions and withdrawals.

Don’t think ABLE replaces a special needs trust. They serve different purposes. For large sums or complex situations, you may need both.

And don’t keep this to yourself. Tell the grandparents. Tell the aunts and uncles. Anyone who might leave money to a disabled family member needs to know this account exists. It’s the difference between a gift that helps and a gift that destroys their benefits.

If this feels overwhelming, that’s normal. This system was not designed to be intuitive—it was layered over decades in response to gaps that families kept falling into.

Where does this leave you?

If you’ve been avoiding financial planning for a disabled family member because you didn’t know where to start, this is your on-ramp. An ABLE account is something you can set up yourself, this week, without an attorney.

If you’ve already got an ABLE account, make sure it’s invested—not sitting in cash. And make sure the people in your life who might want to contribute know it exists.

If you’re dealing with larger sums—an inheritance, a life insurance payout, more than $100,000—an ABLE account might not be enough on its own. That’s when a special needs trust becomes worth the investment in an attorney. I’ll walk through when and why in the next post.

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If you’re the parent of a disabled child and you haven’t started planning for their financial future, I need you to hear something first: you’re not behind. You’re not a bad parent. You’ve been doing the hardest job there is — getting through each day, managing therapies and IEPs and medical appointments, holding your family together. There wasn’t bandwidth left for anything else.

Now you’re here. That’s what matters.

But I also need to tell you something that might be hard to hear: the financial system for disabled individuals operates under completely different rules than everything else you know about money. The instincts that serve you well everywhere else — save money, build assets, put funds in your child’s name — can actually hurt them.

Once you understand why, the path forward becomes obvious.

The $2,000 cliff

Supplemental Security Income (SSI) provides monthly income to disabled individuals who have limited resources. In 2026, that federal payment is $994 per month. For many disabled adults (that is once your child is an adult and receiving SSI in their own name), SSI is the foundation that makes independent life possible — and it’s often the gateway to Medicaid, which covers medical care, therapy, and support services that private insurance won’t touch.

Here’s the problem: to qualify for SSI, your child cannot have more than $2,000 in countable assets. That’s it. Two thousand dollars.

This number hasn’t changed since 1989. If it had been adjusted for inflation, it would be roughly $5,500 today. But it wasn’t. So we’re working with a limit set when a gallon of gas cost 97 cents.

If your child’s assets exceed $2,000 — even temporarily, even by accident — they lose SSI eligibility. And losing SSI often means losing Medicaid too.

A regular savings account in your child’s name counts against this limit. So does money they inherit. So do gifts from well-meaning relatives.

The grandparent trap

Let me tell you about Sandra. Her 22-year-old son has autism and receives SSI and Medicaid. These benefits cover his basic needs and the support services that help him live semi-independently.

Sandra’s mother passes away and leaves her son $15,000 directly in her will. Grandma loved her grandchild. She wanted to help him. Nobody told her the rules.

That $15,000 inheritance pushes him over the $2,000 asset limit. His SSI benefits are suspended. His Medicaid coverage is at risk. Sandra now has to figure out how to “spend down” that money — quickly and in approved ways — to get her son back under the limit and restore his benefits.

A gift meant to help became a crisis overnight.

This happens constantly. Grandparents, aunts and uncles, family friends — they want to help, so they leave money directly to a disabled person. They don’t know that the gift can cost more than it gives.

The three-legged stool

Financial security for a disabled person rests on three legs:

Government benefits — SSI, SSDI, Medicaid — form the baseline, covering basic income and essential medical care. These are the foundation you don’t want to lose.

Protected savings — ABLE accounts, special needs trusts — allow money to be set aside without counting against benefit limits. These tools exist specifically because the $2,000 limit is so restrictive.

Family support — ongoing help from parents, siblings, and others — supplements benefits without replacing them.

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The goal isn’t to replace government benefits with personal savings. You can’t save enough to replace Medicaid coverage for someone with significant medical needs. The goal is to supplement benefits — to pay for things that improve quality of life beyond what government programs cover — without disqualifying your child from the benefits they need most.

The two tools you need to know about

There are two main ways to save money for a disabled person without affecting their benefit eligibility.

Because these rules are complex and vary by situation, this is about understanding the system — not replacing professional advice when larger sums are involved.

ABLE accounts are tax-advantaged savings accounts you can open yourself, no attorney needed. In 2026, you can contribute up to $20,000 per year, and balances up to $100,000 don’t affect SSI eligibility. (Balances above $100,000 can suspend SSI payments, though Medicaid remains protected.) The money can be used for disability-related expenses like housing, transportation, education, health care, and more.

ABLE accounts are the lowest barrier to entry. You can open one online in about 15 minutes. If you do nothing else after reading this, look into opening an ABLE account.

One important change for 2026: the eligibility age has expanded. Previously, the disability had to begin before age 26. Starting January 1, 2026, anyone whose disability began before age 46 can open an ABLE account. This opens the door for millions of people who were previously excluded.

Special needs trusts are legal arrangements that can hold unlimited assets without affecting benefits. They’re more powerful than ABLE accounts but require an attorney to set up — typically $3,000 or more. A trustee (often a family member or professional) manages the funds and makes distributions for the beneficiary’s benefit.

Special needs trusts make sense when you’re dealing with larger amounts — inheritance, life insurance proceeds, legal settlements — or when you want more control over how funds are used after you’re gone.

Many families eventually have both. But ABLE accounts are where to start.

The age-18 cliff (a preview)

There’s another transition point you need to know about, though I’ll cover it in more depth in a future post.

When your child turns 18, they become a legal adult regardless of their cognitive capability. This has several implications: you may need legal guardianship or conservatorship to continue making decisions for them. They may become eligible for SSI and Medicaid in their own name (your income is no longer “deemed” to them as it was when they were a minor). And the clock starts ticking on that $2,000 limit.

If your child is approaching 18, this transition deserves serious attention. But that’s a topic for another day.

What to do now

You don’t need to do everything at once. Paralysis is the enemy here, not imperfection. Start with what you can.

First, understand that regular savings accounts in your child’s name are a problem once they turn 18. Don’t open one thinking you’re helping.

Second, tell your extended family about the rules. Grandparents, aunts, uncles — anyone who might leave money to your child in a will — needs to know that direct gifts can backfire. They can still help, but the money needs to go into an ABLE account or special needs trust, not directly to your child.

Third, look into opening an ABLE account. It’s the simplest step with the biggest impact. You can find your state’s program at ablenrc.org.

Fourth, if you have significant assets to protect — or if you’re doing estate planning — talk to an attorney who specializes in special needs planning. This isn’t regular estate planning; you need someone who understands these specific rules.

I work with families navigating this all the time. A small business owner in her early 50s came to me because she’d been employing her 16-year-old son with a disability in her business — which is great — but she was paying him under the table and putting the money in a regular savings account because she didn’t know there was a better option. We got that fixed. Another family finally had mental space to think about the future after years of crisis mode with their 10-year-old. They just needed someone to explain where to start.

That’s what this series is for.

Coming next

In the next post, I’ll walk through ABLE accounts in detail — how to open one, how to use it, what counts as a qualified expense, and the mistakes to avoid. It’s something you can set up yourself this month, and it’s the foundation everything else builds on.

You’re not behind. You’re getting started.

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This is Part 2 of a two-part series. If you haven’t read Part 1 on the basics of 401(k)s, employer contributions, and vesting, start there.

In Part 1, we covered what a 401(k) is and why getting the full employer match is non-negotiable. Now let’s tackle the two decisions that trip people up the most: Should my contributions be pre-tax or Roth? And what should I actually invest in?

I review my 401(k) at least once a year. Not because I’m constantly tinkering — I’m not. But because these decisions aren’t one-and-done. My pre-tax vs. Roth split has changed as I’ve gotten older and moved through different tax brackets. My investment choices have evolved as I’ve learned more. The framework stays the same, but the application changes with your life.

The big choice: pre-tax vs. Roth. When you contribute to your 401(k), you have to choose: pre-tax (traditional) or Roth? Most people pick one without really understanding what they’re choosing. Here’s the core idea: Traditional is a tax break now; Roth is a tax break later.

Pre-tax (traditional) contributions go into your 401(k) before income taxes are calculated. Your taxable income goes down, so you pay less in taxes today. When you withdraw in retirement, you pay income taxes on everything — your contributions and all the growth.

Example: You earn $80,000 and contribute $10,000 pre-tax. Your taxable income is now $70,000. At a 22% bracket, you saved $2,200 in taxes this year. But when you pull that money out in retirement — say it’s grown to $40,000 — you pay income taxes on all $40,000.

Roth contributions go in after you’ve already paid income taxes. No tax break today. But when you withdraw in retirement, you pay nothing — not on your contributions, not on the growth.

Same example: You contribute $10,000 to Roth. Your taxable income stays $80,000. No tax savings now. But that $40,000 in retirement? You pay $0 in taxes.

So which is better? It depends on one question: Will you be in a higher or lower tax bracket in retirement than today?

Lower bracket in retirement → pre-tax wins. You avoid taxes at a high rate now, pay at a lower rate later. Higher bracket in retirement → Roth wins. You pay taxes at a low rate now, avoid them at a higher rate later. Same rate → roughly a wash, though some argue future tax rates could rise due to national debt and policy changes, which tilts toward Roth. Nobody knows for sure.

The stage-of-life framework. Here’s how I think about it:

In your 20s and 30s, you’re probably not at peak earnings. Your bracket is likely lower now than it will be later. Lean heavily Roth — maybe 80-100%. The money has decades to grow tax-free.

In your 40s, you’re approaching peak earnings. The pre-tax break is more valuable. Shift toward pre-tax — maybe 50/50 or 60/40 favoring pre-tax.

In your 50s and beyond, you’re at or near peak earnings with less time for tax-free growth to compound. Lean pre-tax, but keep some Roth — maybe 80/20 favoring pre-tax.

That’s what I do at 54. About 80% pre-tax, 20% Roth. I get the tax break now in a higher bracket, but I’m also building tax-free money for retirement flexibility. This split has changed over time — in my 30s, I was heavier Roth. I revisit it once a year to make sure it still fits.

Why having the right mix in retirement matters more than people realize. If ALL your retirement money is in pre-tax accounts, you could end up with a tax problem.

You retire with $1.5 million in a traditional 401(k). Every dollar you withdraw is taxable. Required minimum distributions force you to take money out. Add Social Security (partially taxable). Add any pension. Suddenly you’re not in a lower bracket — you’re in the same one, or higher.

I’m seeing this more and more. People focused on getting the tax break during working years without thinking about what happens when everything is taxable.

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The solution: have money in different “buckets.” A pre-tax bucket (traditional 401(k), traditional IRA) is taxable when you withdraw. A post-tax bucket (Roth 401(k), Roth IRA) is tax-free when you withdraw. A taxable bucket (regular brokerage account) means you pay taxes on gains, but you have flexibility.

With all three buckets, you have options. You can manage which bucket to pull from based on your income that year.

This is why I recommend some Roth even in your 50s. And Roth 401(k)s no longer have required minimum distributions — this changed with SECURE 2.0 in 2024. Your money can stay invested and grow tax-free as long as you want.

One important nuance: the employer match. Your employer’s contribution always goes into the pre-tax side, even if you’re making Roth contributions. So if you contribute $10,000 to Roth and your employer adds $5,000, you have $10,000 Roth (tax-free later) and $5,000 traditional (taxable later). You’ll have both buckets regardless — which is actually a good thing.

Where to invest: keep it simple. Your 401(k) will offer a menu of options — maybe 20 choices, maybe 200. This is where people overthink it.

Option 1: Target-date fund. Look for a fund with a year close to when you plan to retire — “2045 Fund” or similar. These automatically adjust your mix as you age: more aggressive when young, more conservative as you approach retirement. You don’t have to think about it.

Is it perfect? No. Some say fees are too high or allocations too conservative. But a target-date fund is vastly better than leaving money in a money market fund earning nothing, picking random funds you don’t understand, or not contributing because you’re paralyzed.

If you don’t know what to pick, pick the target-date fund closest to your retirement year.

Option 2: Index funds. If your 401(k) offers them, you can build a simple portfolio: S&P 500 or total stock market index, international index, bond index. Look at the expense ratio — for index funds, it should be under 0.10% ideally. If your plan charges 0.50%+, that’s high.

I wrote a whole piece on why index funds work. The short version: Warren Buffett tells regular people to buy index funds. If it’s good enough for him to recommend to his own wife, it’s good enough for me.

What NOT to do. Don’t leave it in a money market fund — some 401(k)s default to this, and your money sits earning almost nothing. This was my mistake early on. Don’t pick funds based on recent performance — last year’s winner is often this year’s disappointment. Don’t buy your employer’s stock — you’re already dependent on them for your paycheck.

My annual check-in. I review once a year: Is my contribution rate still right? Is my pre-tax/Roth split appropriate for my current bracket? Are my funds still performing reasonably with low fees?

Most years I don’t change anything. My investments are index funds and target-date funds — not much to tinker with. But I do the due diligence. Circumstances change. Fifteen minutes once a year is worth it.

The action steps. Find out how much you’re contributing. Make sure you’re getting the full match. Check whether you’re doing pre-tax or Roth — does it fit the stage-of-life framework? Look at what you’re invested in. Simplify if needed. Then review once a year.

The bottom line. Contribute enough to get the full employer match. Choose pre-tax vs. Roth based on your stage of life — younger leans Roth, older leans pre-tax, but have some of both. Invest in target-date funds or low-cost index funds. Think about your mix in retirement — different tax buckets give you flexibility.

You now have a framework. Use it.

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