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Miami Herald
20-06-2025
- Business
- Miami Herald
What's the difference between earned wage access and a loan? How to know which is right for you
What's the difference between earned wage access and a loan? How to know which is right for you When you're hit with a surprise cost like a car repair or medical bill, waiting for payday can be challenging. But sometimes, you don't have to. Enter earned wage access (EWA), which goes by numerous nicknames - on-demand pay, daily pay, instant pay, same-day pay, instant payroll, and accrued wage access among them - and allows you to snag the money you've earned early. Some companies offer EWA as a company perk, but there are also third-party services that bring it directly to consumers. With roughly a quarter of households living paycheck-to-paycheck according to a Bank of America report published last year, it's no surprise that some people are flocking to EWA services that can help them cover the cost of groceries, utilities and more. The Consumer Financial Protection Bureau (CFPB) found that the market for earned wage products is growing, with the share of workers using the products at least once a month jumping from 41% in 2021 to nearly 50% in 2022. But it's important to fully understand how these services work before you take the leap. Consumer banking platform Current explains. What is earned wage access? Earned wage access programs allow workers to pocket a portion or all of their paycheck outside their typical payroll cycle. The exact process will vary by program, but here's an example: Say you are usually paid out for your work weekly or bi-weekly. Instead of having to wait until the next day for your money to hit your bank account, you can request to have some of the money come through now (or within a few days, depending on the service) and see the remainder of the paycheck on payday. Employer-sponsored services require that your employer offer EWA as a benefit, and will use your payroll records to track your earnings and pay out the remainder of your payment on time. Companies that offer EWA - including Uber, Walmart, and McDonald's - often have hourly workers. Direct-to-consumer products determine your EWA limit by analyzing your earnings history. How is earned wage access different from a loan? While loans are a way to borrow money and pay it back with interest over a set period of time - from a few months to years - EWA is early access to money you have already earned without having to pay interest. When you use an EWA you're tapping money that is yours, but just doing so before payday. The funds you get early are then excluded from your paycheck. If you're looking for extra funds to help cover a big expense, like a car repair, "it's probably best to go the loan route," says Ben Loughery, a certified financial planner and founder of Lock Wealth Management. EWA will typically have maximums for how much you can access at once, like $500. When you borrow money via a personal loan, you'll owe the lender an annual percentage rate (APR) - and those can take a chunk out of your wallet. As of June 11, the average personal loan interest rate was 12.65%, according to Bankrate. The rates can be especially steep for payday loans: Typical two-week payday loans with a $15 fee for every $100 borrowed come out to an APR of almost 400%, the CFPB points out. Plus, if you don't pay back the loan as promised, your credit score can take a hit. That's not a concern with EWA. Should you choose earned wage access or a loan? In an ideal world, you have an emergency fund available for when surprise costs arise, and you're managing your cash flow in such a way that you don't need to turn to a loan or EWA, explains Catherine Valega, financial advisor and founder of Green Bee Advisory. But that's not always the case. "If you have access to earned wage access, it is much better than a payday loan," Valega says. She adds that because many people are more familiar with payday loans, they tend to seek those out first and "shoot themselves in the foot" because they then face high interest rates that take a huge chunk out of the money that should hit their accounts. "With earned interest rates, there's a fee, not an interest rate, and you've completed the work so you have earned that money … I would absolutely start there first." Loughery says to take caution, especially if you're not good with managing your cash flow. You shouldn't rely on EWA as a long-term fix. "But if you are in a bind, it could be a great solution," he adds. How to find an earned wage access product If your employer offers EWA, there's likely already a service for you to select. But if you're going the third-party route, assess the following features: Fees. Some services charge subscription fees, fees for accessing your money and/or a fee for accessing your money instantly. Some even ask for an optional tip. Ideally, you'll want to go with a service that provides low or no fees for accessing your money early - it's money you've already earned, after all. Fund timing: How long will you have to wait for your money? In most cases, you'll see the money hit your account within a few business days. But if you need the money instantly and there's a high fee for receiving the money at a moment's notice, you may want to look elsewhere. Deposit limit: The amount of your paycheck you can tap early will vary by service. One may allow you to gain access to half your paycheck early, while another could offer to send you just a portion of your daily earnings or set a daily dollar amount limit. Before you choose to go with a EWA service, make sure you will actually be able to get what you need if you're in a tight spot. This story was produced by Current and reviewed and distributed by Stacker. © Stacker Media, LLC.
Miami Herald
26-04-2025
- Business
- Miami Herald
These 9 states tax retirees' Social Security the most
Are you searching for the most tax-friendly state to retire in? The ideal location largely depends on your sources of retirement income, net worth, and other tax-related considerations. Some states offer better advantages if most of your income comes from Social Security benefits. In contrast, others may favor those relying on retirement account withdrawals, pensions, or investment income. Related: Tony Robbins makes major statement on 401(k)s, IRAs "These are nuances that retirees genuinely need and often don't think about," says Ben Loughery, certified financial planner with Locke Wealth Management. "This is what separates retirement financial planning from good to great." In this multi-part series, we'll explore which states offer the best and worst tax advantages depending on sources of retirement income. In part one, we'll focus on which states offer the least tax advantages for retirees whose income comes mostly from Social Security benefits. In reality, roughly 40% of men and women receive 50% or more of their income from Social Security, making Social Security taxation a critical consideration when deciding where to live your golden years. If the bulk of your retirement income comes from Social Security, there's good news: 41 states don't tax Social Security benefits at all. And this widespread exemption reflects a common policy decision across the country not to tax this crucial income source for seniors, which on average equals roughly 40% of income for all Social Security beneficiaries. As of 2025, nine states impose some form of taxation on Social Security benefits, making them potentially the worst states to retire in if you're collecting Social Security income. That said, most have exemptions based on age, income thresholds, or other factors. For example, you'll wind up with a tax bill in these states if you don't meet the requirement for a tax break. Related: Social Security's COLA change will impact payments in 2025 Colorado: It is fully deductible for those 65+. Beginning in 2025, residents age 55-64 are exempt from taxation of Social Security benefits if their adjusted gross income (AGI) is below $75,000 (single) or $95,000 (joint), with a smaller $20,000 deduction for those exceeding these limits. Earn more than that, and you'll have to pay. Connecticut: Benefits are exempt if AGI is below $75,000 (single/married filing separately) or $100,000 (joint/head of household). Above these thresholds, up to 25% of benefits may be taxed. Minnesota: Taxes federally taxable benefits but offers a subtraction that fully exempts benefits for many, with exemption phasing out above specific AGI thresholds ($108,320 married filing jointly; $84,490 single/head of household, and $54,160 married filing separately). The Minnesota House of Representatives is trying to pass bill HF5. This bill exempts all Social Security benefits from the state's income tax. Read also Unlimited Social Security subtraction permission. Montana: Taxes federally taxable benefits with a small $5,500 subtraction from federal taxable income for those 65+ ($11,000 for joint filers), introduced in 2024 and indexed for inflation starting in 2025. Montana has a bill in the state legislature, specifically House Bill 148, that aims to repeal the state tax on Social Security benefits, according to BillTrack50. The bill would remove Social Security benefits from the definition of "Montana source income," effectively exempting them from state income tax, as reported by BillTrack50. Also, the Montana age 65 and older deduction is $5,660 in 2025 (double if married filing jointly). New Mexico: Benefits are exempt for single filers with AGI up to $100,000 and joint filers with AGI up to $150,000, with AGI limits not adjusted for inflation. Rhode Island: Benefits are exempt for those at full retirement age whose AGI in 2024 is below $104,200 (most filers) or $130,250 (joint). Utah: Benefits not taxable if AGI is $90,000 or less, recently increased from $75,000 in 2025 for married taxpayers filing jointly). The Social Security Benefits Tax Credit was expanded with increased income thresholds for credit phaseout: $45,000 for married filing separately (previously $37,500), $54,000 for single filers (previously $45,000), and $90,000 for head of household and joint filers (previously $75,000). Governor Cox has proposed completely eliminating state taxation of benefits in the FY2026 budget. Vermont: Benefits are fully exempt below AGI thresholds ($50,000 single/MFS, $65,000 joint) with partial exemption phasing out above those levels up to $60,000 (single) or $75,000 (joint). The governor's FY2026 budget proposes increased eligibility for Social Security income tax exemption, among other tax relief measures. West Virginia: Currently phasing out taxation with 65% of benefits deductible in 2025. Complete elimination (100% deduction) is scheduled for 2026 regardless of income level. When evaluating where to live in retirement, focusing solely on state income tax is tempting. However, as Lisa Featherngill, national director of wealth planning at Comerica Wealth Management, emphasizes, other tax factors can significantly impact a retiree's financial well-being, especially those relying primarily on Social Security. "If the individuals are relying primarily on Social Security income for retirement, most likely they are going to be below the AGI thresholds of the states that tax Social Security income, except in Montana," she explains. "So, for those individuals, state income taxation of Social Security income should not be a primary factor." Property Taxes: Featherngill recommends paying close attention to how states handle property taxes, especially since these can be a major cost for retirees. "Some states offer a real estate tax deferral program, which reduces the real estate tax payments during lifetime and collects the deferred tax at death," she notes. Property tax rates and senior exemptions also vary widely from state to state, so it's important to do your homework. The Tax Foundation'sProperty Taxes by State and County, 2025 is a helpful resource for comparing rates and policies. Sales Taxes: In states that don't tax income, higher sales taxes are often used to generate revenue. While not mentioning specific rates, Featherngill includes sales tax among the key tax issues retirees should consider. The impact will vary depending on your personal spending habits. For a current comparison, see the Tax Foundation's 2025 State and Local Sales Tax Rates. Retirement Income Taxation: While income from Social Security may not be heavily taxed for many retirees, other forms of retirement income often are. "Approximately 20 states offer reduced tax on retirement income, such as pension income, IRA distributions and retirement plan distributions," says Featherngill. "Some states, like Pennsylvania and Mississippi, do not tax retirement income. Others offer an exclusion/deduction to offset a portion of an individual's retirement taxable income. Some states exempt pensions or government pensions from income tax. Some states qualify the exclusion based on age or AGI. Thus, it requires some research to determine how the state you are considering will tax your type of retirement income." Estate and Inheritance Taxes: Featherngill advises retirees to investigate whether a state imposes inheritance, estate, or gift taxes that differ from federal rules. "And if you're married, it's worth knowing whether both spouses are entitled to retirement income exemptions when filing jointly-rules that differ by state," she says. Additional Considerations: Besides tax-related considerations, Featherngill encourages retirees to assess the overall cost of living, climate, access to healthcare, and quality of life. For his part, Tim Bjur, a senior content management analyst at Wolters Kluwer, has also observed several notable state tax policy trends in recent years: Reducing or eliminating taxes on retirement income and Social Security benefits-or increasing income thresholds before taxes apply-particularly in Northeastern states aiming to discourage retirees from relocating to no-income-tax states like Florida and Texas. Expanding deductions for military retirement income. Reducing or eliminating sales taxes on groceries to counter inflation-related cost pressures. For retirees who rely heavily on Social Security, Bjur says it may make sense to consider relocating to a state with a more favorable tax environment. "They can consider a state that does not tax income – such as Florida or Texas – or one that specifically exempts Social Security benefits," he notes. While Kentucky and Mississippi are not yet among the nine states with no personal income tax, Bjur says they are part of a growing group using revenue-based triggers to gradually lower rates, signaling a broader shift toward potential tax elimination. Kansas, meanwhile, recently enacted a law – overriding the governor's veto – to flatten its income tax into a single 4% rate once certain revenue and budget conditions are met, underscoring ongoing efforts to reduce or eventually phase out the state's income tax. On the question of whether Social Security taxation should be a primary factor in choosing a retirement location, Featherngill had this to say: "If the individuals are relying primarily on Social Security income for retirement, most likely they are going to be below the adjusted gross income thresholds of the states that tax Social Security income, except in Montana," she says. "So, for those individuals, state income taxation of Social Security income should not be a primary factor." In future articles in this series, we'll examine the best states to retire to based on other sources of income as well as net worth. For more retirement-related news and analysis, check out Retirement Daily on TheStreet. Retirement Daily The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
17-02-2025
- Business
- Yahoo
I'm a Financial Advisor: This Is the Ideal Budget for a $50,000 Salary
Budgeting is important no matter how much money you make. Whether you just got a new job with a $50,000 annual salary or want to be more mindful of spending on your existing salary, Ben Loughery, certified financial planner (CFP), chartered retirement planning counselor (CRPC) and founder and financial planner at Lock Wealth Management has some advice for you. 'It is totally doable to live with this salary,' he said. 'You may just have to make a few adjustments with living below your means in certain spends.' As of May 2023, based on the most recent available data, the mean annual wage in the U.S. is $65,470 per year, according to the U.S. Bureau of Labor Statistics. You might think this could make a $50,000 annual salary hard to live on, but carefully following a budget can make all the difference. Try This: 4 Things You Must Do When Your Savings Reach $50,000 Learn More: Of course, $50,000 per year isn't the amount you'll bring home. The IRS will also take a cut, so you'll need to factor that in. In 2025, the effective tax rate on a $50,000 salary would be approximately 11.8%, which equates to a $5,914 tax liability, Loughery said. 'This is just a simplified calculation and does not account for deductions, credits or other factors that would improve their tax liability,' he said. 'There is also state tax and the Federal Insurance Contributions Act (FICA) tax to account for, as well, so this could leave us roughly $40,000 which is just over $3,300 [per] month in spending.' Ready to find out how to divide your income up each month to avoid overspending? Use the following spending blueprint created by Loughery as a guide. Budget: $500 per month No matter what your salary, saving money is important. 'Automating savings is always great, and I intentionally put savings first to pay yourself first, so you can automate that, as well,' he said. Explore More: Budget: $1,000 per month As of 2023, with the most recent available data, the median gross rent in the U.S. is $1,406 per month, according to the U.S. Census Bureau. For property owners, the median home value is $340,200. Whether you rent or own your home, Loughery said having a roommate could help make this more affordable. Budget: $500 per month Following a moderate-cost plan, the average cost of food at home for a 19-to-50-year-old male is $381 per month, according to the U.S. Department of Agriculture. This expense drops to $321.60 per month for a 19-to-50-year-old female on a moderate-cost shopping plan. Of course, you may have dependents, meaning you're not just shopping for yourself. Regardless, Loughery suggested shopping in bulk at stores like Costco to save money. Budget: $500 per month 'This includes going out for a coffee, a drink or even a workout class,' he said. You'll need to be mindful of your spending, but you can still get a lot out of $500 per month. To supplement, consider seeking out free entertainment in your local area — i.e., concerts in the park, hiking in local parks and museums offering free admission — at least on certain days. Budget: $250 per month 'Since this is the ideal budget, it would be great if you could be walkable to work and have all the other lifestyle entertainment right by you — if you are in an area that is friendly for that,' Loughery said. If you can't walk to work, consider taking public transportation to cut costs. Budget: $550 per month You can't anticipate every monthly expense, but you can make extra room in your budget. 'I like having this as our cushion in case you may need to pay a little bit more for housing or maybe there's like some one-off event that month, or even a pricier dinner,' Loughery said. Staying on budget isn't always easy, so he recommended using a budgeting app. 'I like the app Monarch, and personally use this for my own budgeting,' he said. 'It is around $8 [per] month but can quickly show how you were staying on track, and it's nice not having to put everything in excel.' No matter how you choose to budget, sticking to it is the most important part. As you can see, living comfortably on a $50,000 salary is possible if you spend wisely. More From GOBankingRates Here's the Minimum Salary Required To Be Considered Upper-Middle Class in 2025 How Much Would I Save if I Cut My Credit Card Interest to Low APR for a Year? 4 Low-Risk Ways To Build Your Savings in 2025 This article originally appeared on I'm a Financial Advisor: This Is the Ideal Budget for a $50,000 Salary Sign in to access your portfolio
