This makes it difficult to transfer money to another person’s account because people don’t want to reveal their bank account number, fearing you might take their money. As a result, person-to-person transfers are typically done through third-party services such as Venmo, Zelle, PayPal, or Cash App. Both parties must use the same service. You can’t do it if you have Venmo and they have Zelle. Either you must also sign up for Zelle, or they must also sign up for Venmo.

Each third-party service has its limitations. They work for smaller transfers, but they often don’t work for larger ones. Bank of America limits Zelle transfers to $3,500 per day. If you want to transfer $5,000, you’d have to split it into two days. Many banks have even lower Zelle transfer limits than Bank of America.

Trusted Parties

Some people don’t mind sharing their bank account information with you when they know and trust you. Say you’re giving annual gifts to your adult children, or you’re paying a mom-and-pop landlord monthly. They’re willing to give you their bank account for you to deposit into. Even then, it’s not that easy to transfer money to their account.

Many banks only allow linking to accounts that you own. They require verification to confirm that you have control over the target account. It’s done traditionally by micro-deposits. Lately, many banks have moved to using instant verification services such as Plaid or Mastercard Data Connect (formerly Finicity). This requires logging into online banking at the target bank. Banks see who owns the target account in this process. They won’t allow the link when names don’t match.

Intra-Bank Transfers

Some banks support transfers between customers within the same bank. Many credit unions also have this feature. They call it member-to-member transfers. Suppose your child is attending college out of state. If both of you have accounts at the same bank or credit union, you can transfer to your child’s account internally.

It’s feasible to make this arrangement with a child. It’s difficult to do with your sister unless you happen to use the same bank.

Bill Pay or Mail a Check

You can use Bill Pay to pay an individual. The Bill Pay provider will mail a paper check. Or you can mail a check yourself. Both are subject to delivery delays and potential loss or theft. That’s not a good way.

Wire Transfers

You can also send a wire transfer, but many banks charge a fee for wires. Even if you get free wires from your bank, many banks also charge a fee for receiving a wire. Making your family member or your landlord pay a $15 fee to receive money from you isn’t that great.

Push-Only ACH

Fortunately, some banks allow linking to another person’s bank account. They don’t require ownership verification for this type of link when they disallow withdrawing money from the target account. For instance, when you link an external account to Bank of America, it asks you whether you want the account to be “only transfers to” or “for transfers to and from.”

Selecting “for transfers to and from” requires ownership verification through Plaid. Selecting “only transfers to” doesn’t. If you use Bank of America, see the detailed walkthrough in How to Link an Account to Bank of America for ACH Push.

Fidelity

I use Fidelity for my banking (see 2 Ways to Use Fidelity as a Bank Account). I can link another person’s bank account to my Fidelity account. Like Bank of America, Fidelity asks whether the account is owned by me or by someone else.

Linking a bank account you own creates a bidirectional link: you can push money to that account or pull money from it. It requires ownership verification. Linking a bank account owned by someone else creates a push-only link: you can transfer money to that account, but you can’t withdraw from it. It doesn’t require ownership verification.

Fidelity will go through a banking industry process called “prenote” to confirm that the target account is valid. A prenote requires waiting at least 3 business days before sending the first transfer. Give it about a week of setup time before you need to transfer money. Once the link is fully set up, the transfer arrives on the same business day if you request it early enough in the morning, or on the next business day if you miss the cutoff. It’s almost as fast as a wire transfer, and it’s free to receive.

You can transfer up to $100,000 per day by EFT/ACH from a Fidelity account. It’s not possible to transfer that much by Venmo or Zelle.

Fidelity’s online interface only supports ad hoc transfers to another person’s account. You can’t schedule transfers for a future date or set up recurring transfers to another person, whereas you can set up scheduled or recurring transfers to your own accounts. If you need to set up scheduled or recurring transfers to another person, call customer service to see if they can set it up on their side.

***

Venmo or Zelle works well for buying things listed on Craigslist or Facebook Marketplace, or paying a gardener or a house cleaner. They don’t work as well for transferring larger amounts to a trusted party. Having an account that supports ACH to another person’s account makes it work in that scenario. The receiving side doesn’t require any special setup. They only need to give you their routing number and account number. It’s free on both sides.

If your bank also supports ACH transfers to another person’s account, please include its name in the comments so other readers know where to go besides Fidelity and Bank of America.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Better Than Venmo and Zelle: Transfer Money with ACH/EFT appeared first on The Finance Buff.

My immediate reaction was that calculating taxes isn’t the best use of AI, because it falls under “verifiable facts” and “latest development” categories. The retirement plan contribution limits, tax brackets, the maximum deduction amounts, etc., are all verifiable facts. The IRS sets them every year, and they are what they are. Just go to the IRS website for the latest numbers, or Google. If you ask AI, it had better get the latest numbers online anyway, because AI’s training lags.

On the other hand, tax rules are complicated. After you have all the latest numbers from the IRS, you still need to apply the complex rules — what counts and what doesn’t, and which rates apply to which income. Online tax calculators usually don’t cover the current year until late in the year, and they can be either too simple or too complicated. It would be nice to have AI calculate taxes specifically for the types of income and deductions we have: not too simple with only limited inputs, and not too complicated with everything under the sun.

The Quiz

I thought I would test how well AI calculates taxes. I came up with this quiz question:

Jill, single, age 63, has these incomes in 2026:

• $30,000 from Social Security
• $10,000 from interest and pre-tax IRA withdrawals
• $37,000 from qualified dividends and long-term capital gains
• $1,000 from muni bond interest

Jill contributes $4,400 to her HSA and donates $1,500 in cash directly to charities. What’s Jill’s federal income tax for the 2026 tax year?

I designed this question carefully to cover several calculations. Slightly less than 85% of Social Security is taxable in this case. AI has to know how to calculate the exact taxable amount, and not just make a straight 85% of Social Security taxable. The gross income consists of ordinary income, tax-exempt income, and investment income taxed at preferential rates. The ordinary income component goes across two tax brackets. So does the investment income. One deduction is above-the-line, and the other is below-the-line.

I added these instructions to encourage AI to get the latest tax numbers from the IRS:

It’s important to calculate it accurately. Please use tax amounts only for 2026 and only from official IRS sources.

Initial Results

First, I ran the test case through my tax calculator in Calculator: How Much of My Social Security Benefits Is Taxable?. It gave this result:

$25,410 of your Social Security benefits is taxable, which means 15% of your benefits is tax-free.

Your 2026 federal income tax is approximately $1,640.

This is calculated from a taxable income of $50,910 (AGI $68,010 – Standard Deduction $16,100 – Senior Deduction $0 – charitable contribution deduction $1,000).

Then I sent the quiz to all four major AI chatbots: ChatGPT, Claude, Gemini, and Grok. I only used the free version in each one, with the free Thinking, Pro, or Expert mode enabled. I compared the answers to the correct result from my tax calculator.

My quiz was too hard! All four major AI models failed to give the correct answer. The $1,500 cash donation threw them off. It falls squarely in the “latest development” category. The charity donation deduction for non-itemizers is new. The AI models all have “donations are deductible only when you itemize” imprinted in their training. Claude, Gemini, and Grok all would have given the correct answer if I hadn’t included the cash donation. ChatGPT was off on how much of Social Security is taxable.

When you see AI not giving you a deduction, you can raise a question and ask it to double-check. I followed up with this statement:

I heard that cash donations are deductible for people using the standard deduction, starting in 2026, up to a limit.

I only said “I heard,” which may or may not be true. AI still has to verify. I also added this request for ChatGPT:

Another AI model calculated a different amount for how much Social Security is taxable. Please double-check your calculation to see who’s right.

Round 2

All four AI chatbots double-checked and revised their answers.

Source	Answer
My tax calculator	$1,640
ChatGPT 5.4 Thinking Mini	$1,640
Claude Sonnet 4.6 Extended	$1,640
Gemini 3 Pro	$1,411
Grok 4.20 Expert	$1,411

ChatGPT and Claude got the correct answer. Gemini and Grok mistakenly treated the cash donation deduction as above-the-line and used it to reduce the Social Security taxable amount.

I asked Gemini and Grok to clarify whether the HSA contribution and the charity donation should or shouldn’t be included in calculating the Social Security taxable amount. Gemini didn’t realize its mistake. It said both should be included. Grok refused to go further because I reached the message limit for not having an account. [A reader with a Grok account did the same chat with Grok and told me that Grok also said both should be included.]

Here are the full chat transcripts. They make an interesting read.

https://chatgpt.com/share/69bf73fb-db44-8004-9905-b77b56fbb6ce

https://claude.ai/share/ef62408a-6502-4d70-82be-6ea46a4a4cc3

https://gemini.google.com/share/795bdad9f5ad

[No sharable link for Grok because I don’t have an account.]

Impressions

I don’t think we can draw definitive conclusions based on only one test. I call these impressions.

1. Whether AI can calculate taxes correctly depends on the complexity. Three out of the four major AI chatbots would’ve given the correct answer in one go if the question didn’t include the new and tricky charity donation deduction. The explicit request to retrieve the latest information from official IRS sources and turning on the Thinking/Pro/Expert mode probably helped in improving accuracy.

2. AI works better when you make it a conversation. Don’t stop and say it’s useless when you spot some errors in the initial answer. Help the tool help you. Both ChatGPT and Claude reached the correct answer in Round 2 after I asked them to double-check.

3. It takes little effort to send the same question to two or more AI models. You don’t need to know which AI is correct when you get different answers. You can tell one AI that another AI said something different. It’ll re-examine.

4. AI was wrong because human sources were wrong. Gemini and Grok treated the donation deduction as above-the-line because many human sources incorrectly called it above-the-line. If you Googled, you would encounter those incorrect sources too. ChatGPT and Claude used more reliable sources and correctly identified the difference between above-the-line and not requiring itemizing deductions.

5. An online tax calculator is faster and more accurate if you know which one to use. That’s a big “if.” Only saying “Don’t use AI because it’s often wrong” doesn’t say where you will find more reliable sources.

As much as I’d like to see everyone use my tax calculator, let’s face it: 99.99% of people don’t know that I exist. They have little chance of finding the few sources that do it accurately because Google doesn’t rank tax calculators by timeliness or thoroughness.

Here’s a small challenge for you:

Pretend you’re not familiar with tax calculations. Find another way to answer the quiz question. Don’t say “I have a spreadsheet,” or “I use the super-duper Case Study Spreadsheet or Excel1040.” 99.99% of people don’t have those. Please tell me in the comments section how you could do it otherwise.

Short of finding the good sources, the results from AI aren’t that bad (see #1).

6. AI’s general approach was correct even when it was wrong in some nuances. All four AI chatbots followed these correct steps:

• Calculate how much of Social Security is taxable
• Calculate AGI
• Calculate taxable income
• Separate ordinary income and preferential investment income, and know how they stack
• Apply different tax brackets

This general approach is “common knowledge of an insider.” You can learn the steps from AI if you’re not familiar with tax calculations. That’s more valuable than just having a final number. When I saw that ChatGPT didn’t include details of some interim steps, I asked it to show its work. ChatGPT explained the details faster and better than I could (read the transcript).

An online tax calculator gives you a number but doesn’t explain the steps. AI is a better tool in teaching you how to fish than giving you a fish.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Which AI Calculates Taxes Correctly? appeared first on The Finance Buff.

The experiences I’m sharing below were all with the free version of ChatGPT. I used ChatGPT only because it came out first. There are at least four major AI chatbots now. I believe another AI would’ve done just as well. I’m currently experimenting with other AI models to see which one I like better for which tasks.

AI Detected Mysterious Power Usage

I bought a house without an agent last December, but I didn’t move in right away. The first month’s electricity bill came and showed that an empty house used more electricity than the house I lived in. I asked AI what could have caused such high usage. It gave me some likely causes and a method to find the culprit: turn off breakers one at a time and watch for large drops in consumption at the electric meter.

AI could read the handwriting on the breaker panel to tell me which breaker is more suspicious than another. It taught me how to read the current load from the electric meter to see whether the mysterious power consumption was on the breaker I just turned off.

Sure enough, I found it. The previous owner had ice-melting roof cables running 24/7 without any switch or sensor. My electricity usage dropped by 15 kWh per day after I unplugged the de-icing cables.

AI Reconfigured Water Heater Recirculation

Next came the natural gas bill. It also showed high usage while I had already set the thermostat to 60 when the house was unoccupied. I asked AI again. It quickly zeroed in on the water heater after it asked me about the gas appliances in the house. It turned out that the recirculation setting in the tankless water heater was set to “always on.”

Turning off recirculation would lower the natural gas bill, but it also would make me wait longer for hot water. I asked AI for a compromise. It said my water heater model supports an on-demand mode using wired push buttons (like doorbell buttons) to activate recirculation as needed. Wiring requires too much work. I asked AI for a wireless solution. It told me to make this:

A 12V power adapter powers a Shelly 1 smart switch, stored in a plastic project box, with a hole drilled on two sides to attach cable glands. Wireless motion sensors in the kitchen and bathrooms trigger the smart switch, which activates recirculation. I had never heard of any of these components before, except for the power adapter.

I sent AI this diagram of the control board from the water heater’s instruction manual to ask whether I could skip the 12V power adapter and use the 12V contact in the SIGNAL 1 terminal on the control board. It read the diagram and gave me good reasons why it could work, but it was safer to use an external power adapter and connect the switch to the SIGNAL 2 terminal.

AI’s solution worked. On-demand activation reduced natural gas consumption by 100 cubic feet per day versus running recirculation 24/7.

AI Dimmed Exterior Lights

I gave AI another problem that bugged me. My exterior lights on the sides of the garage door were too bright. I couldn’t simply change the bulbs because the lights don’t have bulbs. They use integrated LEDs. They were controlled by a dusk-to-dawn photocell. I couldn’t put them on a dimmer because there was no switch for them inside the house.

AI told me to look for a junction box where I could place a dimmer. I couldn’t find the junction box it wanted, but I found a switch for a porch light that was also downstream of the photocell. I asked AI whether I could merge the garage lights onto that switch. It gave me a cautious “maybe,” with a list of conditions to check behind the switch cover.

I took the cover plate off and sent a photo to AI. It read the wires and confirmed that moving the wires would comply with the National Electrical Code.

Long story short, AI guided me in rewiring the lights at the switch and installing a smart dimmer. Those exterior lights by the garage door aren’t too bright anymore.

AI Knows More Than the Average Person

All of the above may be too basic for some of you, but it was all new to me. I didn’t know what neutral wires looked like before I engaged with AI. I don’t think the average person could have helped me as much as AI. I could have asked an electrician, but AI is free and available 24/7.

AI also answered many questions in vastly different fields. It explained to me why two ducks flew in and out daily with a group of wild geese, and the geese weren’t hostile toward the ducks, because they were clearly different species. It also explained why the heads of mallard ducks look green, but the feathers are actually black or charcoal when you look at them on a table.

An electrician can help me with wiring, but I don’t think the average electrician knows about ducks. AI knows more than the average person because it represents the aggregate knowledge of the Internet.

AI Is Better Than Google

Google was a technology breakthrough in the early 2000s. Google made it much easier to find information on the Internet. Most readers of this blog found me directly or indirectly through Google. I’m grateful to Google for connecting all of us, but the user experience of AI is much better than that of the traditional Google search.

You Google something and find a source. The source may be addressing something related, but not necessarily exactly what you’re looking for. It may require some background knowledge that you don’t have. You Google again and find another source. The two sources may supplement each other, but also contradict. Sometimes you can leave a comment to ask for clarification. The author may or may not reply. I can’t possibly keep up if every reader of this blog asks me a clarifying question. I’m sure many people reading my posts left with unanswered questions.

The user experience with AI is much better. You can ask AI in long paragraphs and give more context. You can upload photos to explain and clarify. AI tailors the answer to your question and context. You can ask follow-up questions. AI remembers the conversation. You can pick up where you left off from days before.

The solutions to my problems in this post all happened over several days. AI pointed me in a direction. I went there and reported back what I found. It then gave me the next steps. It was like having an on-call consultant. I don’t think I could have achieved the same results as easily with traditional Google searches.

Google knows this. Google prominently features its Gemini AI when you use Google Search now. It has to do it to stay relevant.

Ask Follow-Up Questions

You get more out of AI when you keep asking follow-up questions. The more you ask, the more specific the answers will be to your exact needs and constraints.

AI didn’t come up with the entire solution to my water heater recirculation problem in one go. The conversion started with what was burning so much natural gas. After I turned off recirculation, the next question was why that setting was enabled and how I could still get the benefits without running it 24/7.

AI brought up wired buttons. I asked for a wireless alternative. AI gave me the smart switch. When I asked how I would power it, AI said to tap into 110V AC power. I read the switch’s manual, which said it could also use 12V DC. I asked AI whether 12V DC would be a better way. AI said “Yes!” although it didn’t give me this better way when I first asked.

I then asked how to tell which wire from the 12V adapter is positive and which is negative. AI said it’s easier if I use a barrel tip adapter. I asked where to put the switch and the wires. AI told me about the project box and the cable glands.

A full solution only emerged after these rounds of questions.

Don’t Dismiss AI for Inaccuracies

Some people dismiss AI, saying it’s just a probability-based text generator, and it can’t be trusted because it’s often wrong. Indeed, AI isn’t always accurate. The average Google search result or even the average professional in their field isn’t always accurate either. Someone was told by their accountant that only people over 65 who are receiving Social Security are eligible for the $6,000 senior deduction, which is false.

Looking up verifiable facts isn’t the best use of AI. AI is best at giving you the common knowledge of an insider. The less you know about a subject, the more you should use AI, because it fills your knowledge gap quickly. You don’t need 100% accuracy when the gap is so huge. A total market index fund or a 60/40 allocation is common knowledge for seasoned investors. We can debate whether they are the best, but they make a good baseline for people unfamiliar with investing.

Are AI’s solutions to my electricity usage, water heater, and lighting problems the best? Maybe not, but I only needed working solutions, not necessarily the best solutions. AI got me there quickly.

Dismissing AI only because it’s not always accurate is short-sighted and throwing the baby out with the bathwater.

AI for Finance, Investing, and Taxes

Many questions in finance, investing, and taxes don’t have definitive answers. The “best” move requires knowing the future.

AI doesn’t know the latest development. When the 2025 Trump tax law was still being crafted, AI’s answers were often wrong (so were many media reports). Again, asking AI about verifiable facts isn’t the best use of AI. AI does a better job of explaining things and applying knowledge to specific situations.

I asked AI this fairly complicated question from the Bogleheads forum about Traditional versus Roth contributions for a self-employed person and the interplay with ACA health insurance. Here are the answers from ChatGPT and Claude:

https://chatgpt.com/share/69b1cc1c-b69c-8004-b118-6eb8b2ea32b0

https://claude.ai/share/7f1e5c63-e00b-44f2-8f3b-e23bbfb7405c

I posted the question verbatim to AI before any human answered it on the forum. AI couldn’t have cheated. If I rate how I would answer the question myself at 100, I would rate AI’s answers at 90+. Those were only AI’s initial answers. The answers will improve with more follow-up questions. I’m sorry to say that the first two replies from humans on the forum weren’t as good as AI’s answers. The discussion would be more productive if humans used AI’s answers as a baseline and built upon them.

Next time you have a question, start with AI. Use AI less for verifiable facts and not for the latest development, but more for how to apply knowledge to your specific situation. The less you know about a subject, the more AI will help. It gives you a good baseline. Keep asking follow-up questions. The more you ask, the better the answers will be. Supplement the good baseline from AI with human sources when necessary, but start with AI.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post AI Gives Better Answers Than Google appeared first on The Finance Buff.

Net Worth

The total net worth represents all financial resources available at a point in time. We break it down into two categories: liquid investments (“paper assets”) and real estate. The value for real estate is net of any mortgage balances. We include home equity in total net worth because it is an available financial resource. We love our home, but when necessary, we can sell and buy a less expensive home or use the proceeds to fund assisted living. We use the historical purchase cost as the value for real estate. You can also use the property tax assessment value or a reasonable estimate.

We further break down liquid investments between taxable investments and retirement accounts. You can add a third category to break out Traditional versus Roth accounts if you’d like.

We get these values from Fidelity’s Full View, which aggregates both Fidelity and non-Fidelity accounts. I updated my post Fidelity Full View + Analysis: Track Your Portfolio Across All Accounts with Fidelity’s latest user interface, also known as the New Full View. The New Full View doesn’t have all the features of the Old Full View, but it still works for our purpose.

We round to the two most significant digits in these numbers. $1.3 million or $250k is good enough. It’s not necessary to go more granular.

Investment Allocation

Next, we look at the investment portfolio’s asset allocation at the highest level: stocks versus fixed income, and U.S. stocks versus international stocks. This tells us how it changed from the previous year and whether we need to rebalance.

We get these numbers from Fidelity’s Analysis feature, which I described in the second half of Fidelity Full View + Analysis: Track Your Portfolio Across All Accounts. Analysis examines the investment holdings from all accounts in Full View. You can use other tools or a spreadsheet.

Income

This is our tax return boiled down to its simplest form. What are the major sources of income? How much do we pay in taxes? How much is it as a percentage of our total income?

We get the income numbers from Microsoft Money, which was discontinued many years ago but still runs in Windows 11. Any other income and expense tracking software works as well. Taxes for the prior year are from the actual federal and state tax returns. Taxes for the year that just ended are estimated.

Again, use no more than two most significant digits, as in $25k, not $24,736.

Expenses

Now we come to the expenses side. We include property taxes but not income taxes as expenses. Income taxes are largely a function of income. The quickest way to lower taxes is to lower income. Income and taxes are already covered in the previous section.

We keep income and expenses in only three or four major categories. Fewer categories present a clearer view without distraction from too many details. The expenses data also come from Microsoft Money. Again, many other income and expense tracking software work too.

Baseline Retirement Projections

We run a baseline projection in Fidelity’s retirement calculator. I updated my post, Fidelity Retirement Planning Tool: High-Level Model, Not Tactical, with Fidelity’s latest user interface. The retirement calculator uses accounts in Full View assigned to the retirement goal.

The baseline assumptions include our best guesses for income, expenses, and major events. The retirement calculator projects a trajectory of the investment portfolio when market returns are significantly below average or merely below average. I look at the projected values in today’s dollars at major age milestones. Comparing with projections from last year tells us whether we’re off track.

Projections by definition are educated guesses. Anything beyond the single most significant digit in the numbers is meaningless.

Pessimistic Retirement Projections

We run the projections again in my wife’s account with a more pessimistic set of assumptions: lower income, higher expenses, and unexpected events. We do it in two accounts because Fidelity’s retirement calculator doesn’t allow saving two scenarios in one account.

The pessimistic assumptions serve as a stress test for the future outlook. What if our best guesses are off significantly? We want our plan to survive these adverse conditions. Running these projections revealed the two fundamental drivers of financial success in retirement.

Summary

Finally, we summarize the previous sections. This recaps the previous year and guides the current year.

We intentionally keep the annual financial review short and simple because we believe it’s most useful to have a big picture. We use Fidelity’s tools and Microsoft Money as data sources, but you can also populate the review with data from other sources.

If you find this format helpful, you can download the template from Google Drive. It’s set as view-only. Please use File -> Download to download it in PowerPoint or ODP format and modify it as desired.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post A Simple Annual Financial Review Template appeared first on The Finance Buff.

Before the Settlement

It used to be that a home seller agreed to pay a commission to a real estate agent to sell a home, and the seller’s agent advertised on the home listing that they were willing to share their commission (typically 50:50) with any agent who brought a buyer. The commission rate was usually 6% of the home’s price (5% in some expensive areas).

If a buyer didn’t use an agent, the listing agent wouldn’t share anything. This created an incentive for buyers to use an agent in the same way as credit card rewards created an incentive to use credit cards. When the price was the same whether you used an agent, you might as well use one and get whatever little benefits that may exist.

After the Settlement

The class action settlement required that a buyer and the buyer’s agent sign a written agreement to establish the commission upfront before touring a home. The agreement typically says that the buyer is obligated to pay the commission unless another party covers it. As a result, most sellers lower the seller’s agent’s commission to 3% and anticipate that a buyer will ask for another 3% to cover the commission to the buyer’s agent.

It’s business as usual on the surface. The seller still builds an expected 6% commission into the price. The seller’s agent still receives 3% and the buyer’s agent still gets another 3%. Some consumer advocates were hoping that the NAR settlement would change the landscape in residential real estate and lower commissions. That hasn’t happened for the most part. Redfin reported that the average buyer’s agent commission has risen slightly since the new NAR rules went into effect.

Real estate agents don’t lower their commissions to compete for business from buyers because most buyers don’t choose an agent by price. Buying a home is a big decision, and most buyers want a “good” agent or the “best” agent. The industry sows FUD to make buyers suspect that only unknowledgeable or inexperienced agents are willing to discount their commission, and that not using a “good” agent or the “best” agent will only cost them in other ways more than the difference in commissions.

However, the incentive for a buyer to use an agent is weakened after the rules changed. If a buyer doesn’t use an agent, the buyer can offer a lower price and still make it appealing to the seller.

I did just that. I bought a home without an agent, from out of state, over a video walkthrough by FaceTime. I paid less and still beat competing offers.

Agent’s Roles for the Buyer

Before you consider going alone without a buyer’s agent when you buy a home next time, you should understand the roles of a buyer’s agent and be prepared to fill those roles in another way.

Personal Shopper

A buyer’s agent acts as a personal shopper for the buyer, especially when the buyer isn’t familiar with the area. When I bought my first home with an agent before the Internet age, I didn’t know which homes were for sale. Only agents had access to listings. She drove me in the back of her Mercedes from one house to another.

The Internet replaced this role. When I worked with an agent before the NAR settlement, the agent never brought to my attention any listing I didn’t already know from my saved searches on Zillow and Redfin. Instead, I pointed out to her which listings I was interested in and asked her to set up showings.

Education

A buyer’s agent educates a buyer on the legal terminology in the buying process. What’s an offer? What’s a counteroffer? What’s earnest money, and when does it become non-refundable? Which contingencies do you need in a contract, and what happens when the deadline passes? Who pays for what title insurance? What’s an ALTA settlement statement, and how do you read it?

You must educate yourself on these things when you don’t use a buyer’s agent. They’re not that difficult to learn. AI can help.

Resource Recommendations

Real estate agents have contacts for everything. If you need a loan, they refer you to a loan officer or a mortgage broker to get you approved. After you go under contract, they call in an inspector. If the home needs repairs, they have contractor contacts for estimates or to perform the repairs before you move in.

These resources are only referrals. The agent doesn’t cover the cost. You still have to pay each service provider. Keep in mind that an agent’s referrals are optimized for responsiveness, not quality or price. If a picky inspector finds a lot of problems with a home and scares off buyers, that inspector won’t get repeat referrals next time. Time is of the essence in a real estate transaction. The goal of an agent is to keep the deal moving toward closing without delay.

When you go without an agent, you should gather these resources yourself ahead of time. You can find service providers on Google Reviews. Line up contacts to call when you need a loan, an inspection, insurance, a repair estimate, and so on.

Opinion for Quality and Value

Buyers often ask their agent whether a home they’re interested in is “good” or how much their offer price should be. They want their agent to help them avoid a bad purchase or overpaying.

It’s wishful thinking. The best you can hope for is that an agent won’t push you to buy or overpay. It’s against an agent’s economic interest to stop you when you’re already inclined to buy a home, because they only get paid when you move forward. The higher your offer price, the more likely the seller will accept it. It doesn’t matter to the agent which house you buy or how much you pay, as long as you buy one, the sooner the better.

You must make your own judgement. Hire an appraiser to assess a home’s fair value when you’re seriously considering making an offer. Lenders order an appraisal for their own protection when you apply for a loan. Nothing stops you from appraising the property before making an offer. The opinion from a trained, neutral third-party appraiser is much more reliable than the opinion from an agent with a conflict of interest.

An appraiser I used charges $400 for a “desktop appraisal.” The appraiser finds recent comparable sales in the area and adjusts for various factors to calculate an appraised value. It doesn’t require a site visit, and the seller won’t know that you did an appraisal. The price for an appraisal is small potatoes when it guides you to how much you should offer for the property. When you save 3% from a buyer’s agent’s commission, you can afford to pay for a pre-offer appraisal.

Negotiator

Many agents say they’ll help you negotiate the best deal. That’s dubious. Bargaining hard to risk losing a deal is bad for business.

When I made an offer through an agent at one time, the seller countered it by another $30,000. My buyer’s agent said the seller’s counteroffer was “a really generous offer and an excellent value for the home.” She cited market trends, how the property was extremely well cared for, and said that the yard was a big bonus. When I decided to back off for other reasons, the seller came back with an offer that was $25,000 below my original offer.

Going with the agent’s recommendation would’ve cost me $55,000 right there. An agent’s incentive lies in moving toward a transaction, not away from it. It’s wishful thinking to count on an agent to negotiate a good deal for you.

Door Opener

You can go to open houses without an agent. If a listed home doesn’t hold an open house, you need someone to open the door and let you tour the home. A buyer’s agent performs this role. They have apps for requesting a showing time and receiving a code for the key box.

You’ll have to go through the seller’s agent when you don’t use a buyer’s agent. Industry practice doesn’t allow a buyer to tour a home unaccompanied. The seller’s agent can’t just give you a code and let you into the home alone. The agent has to go there him- or herself or send someone from the office.

Sellers’ agents don’t like the additional work because they perceive unrepresented buyers as unserious tire kickers. Tire kickers with a buyer’s agent at least only waste their own agent’s time. You’ll need to convince the seller’s agent that showing the home to you is worth their time and effort. Understanding the roles of a buyer’s agent for the seller and the seller’s agent will help you do that.

Agent’s Roles for the Seller

Why did sellers’ agents share their commission with a buyer’s agent before the NAR settlement? Why do sellers still agree to pay a commission to a buyer’s agent after the NAR settlement when they’re not required to do so?

A buyer’s agent helps the seller sell their home. That’s why the seller is paying a commission.

Qualify Buyers

Buyers’ agents only work with qualified buyers. If a buyer doesn’t qualify to buy a $1 million home, there’s no point for the agent to show $1 million homes to the buyer. When I worked with an agent before, the first order of business was sending me to her lender contact to size me up with a mortgage pre-approval. Sellers know that every buyer a buyer’s agent brings to the home is at least in the realm of buying it.

When you don’t use a buyer’s agent, you must show the seller’s agent that you’re qualified. Obtain a loan pre-approval or proof of funds up front. Offer to send it when you first contact the seller’s agent. The seller’s agent wants to sell the home and earn the commission. They’ll be more motivated when they see you’re a qualified buyer.

Persuade Buyers

The offer-and-counteroffer example I mentioned above illustrates that a buyer’s agent plays an important role in persuading the buyer to purchase the home. A buyer may be skeptical if the same justifications come from the seller’s agent, but they’re more trusting when they hear good things about the home from their own agent, who they think is on their side.

Both the seller’s agent and the buyer’s agent are helping the seller sell the home. Paying a commission to a buyer’s agent is like the seller planting a mole by the buyer’s side. The buyer’s agent is officially the Selling Agent in industry lingo. Let that sink in: a buyer’s agent is the Selling Agent for the seller.

When you don’t use a buyer’s agent, you need to show the seller’s agent that you don’t need much persuasion. You can know so much about a home these days without setting foot in it. Show that you’ve done your homework, you’re ready to make an offer, and seeing the home is only the last step.

Offer to use the seller’s agent to process paperwork if you decide to make an offer. Many agents give sellers a discount if they do both sides of the transaction. A typical arrangement in my area is that the seller pays a 3% commission to list the home, with another 3% reserved for the buyer’s agent. If the listing agent represents both the buyer and the seller, the seller pays 4% instead of a total of 6%. The prospect of earning another 1% motivates the seller’s agent to show the home to you.

Putting Everything in Action

My wife and I wanted to buy a home. We drove around based on current and past home listings to get familiar with the area. We went to open houses.

We narrowed it down to a few specific neighborhoods and floor plans — how large, how many stories, and which rooms we want on the main floor. We set up custom searches with filters on Redfin to notify us of new listings in a hand-drawn area on the map. I established contact with an appraiser and an inspector in advance.

When Redfin emailed us new listings, we checked the website of the local MLS, which had more detailed information than Redfin. The MLS website gave a breakdown by each floor, for example:

• Floor 1: 1,534 sq. ft.
• Floor 2: 1,014 sq. ft.
• Total: 2,548 sq. ft.
• Lot Size: 0.17 Acres

• 3 Total Bedrooms
  • Floor 1: 1
  • Floor 2: 2
• 3 Total Bathrooms
  • Floor 1: 2 Full
  • Floor 2: 1 Full
• Other Rooms:
  • Floor 1: 1 Living Room; 1 Kitchen; 1 Laundry Room;
  • Floor 2: 1 Family Room;

These data points, Google Maps, and the listing photos gave us a good idea of what the listed home was like. We didn’t bother asking to see a home unless it met all our specific requirements. If a home checked all the boxes, we looked up the county’s property tax assessment value using the APN from Redfin. The property tax assessment value served as a sanity check in case the listing price was wildly inflated.

It took some time for a home that met all our criteria to come on the market. It was listed on a Monday morning while we were traveling out of state. I sent this text message to the seller’s agent right away:

Hi [name], I’m interested in your listing at [address]. The photos look great. We’ve been to that neighborhood. We’re pretty sure we’ll make an offer if everything checks out. The only thing is we’re out of town until Sunday. Can we schedule a showing for next Monday? We’re not working with an agent. We can send proof of funds.

The agent replied and offered to do a video showing over FaceTime on Tuesday morning. The video walkthrough confirmed that the home had everything we were looking for. I texted the appraiser and ordered a desktop appraisal.

The appraisal came back at a value higher than the listing price, but it was still lower than the county’s assessed value for property tax. The market price in my area is typically higher than the county’s assessment. I knew that the listing price was intentionally set low to attract more interest and encourage bidding.

I downloaded the real estate purchase contract form from my state Division of Real Estate’s website. I made an offer at the appraised value, with a stipulation that the seller would credit 2% of the purchase price to the buyer at closing. This made it easily comparable to other offers that would ask for 3% to cover a buyer’s agent’s commission. I attached proof of funds.

My formally written offer, which was above the listing price right out of the gate, with full terms and proof of funds, indicated to the seller that I was a serious buyer and I knew the value of the home. The seller also received several competing offers. The prospect of earning a 4% commission instead of 3% motivated the seller’s agent to advocate on my behalf. The seller accepted my offer on Friday after a round of “best and final offers.” It took only four days from listing to contract, before we returned from our travel and physically toured the home. We couldn’t have pulled it off if we weren’t well prepared.

Here’s how my offer came down against the next highest bid (I indexed the purchase price to $500,000 to make the math easier):

The competing buyer and their agent lost because they were weighed down by the 3% commission to the buyer’s agent. With a 3% headroom to play with, my offer basically split it three ways among the seller, the seller’s agent, and me. The seller received $4,700 more in net proceeds. The seller’s agent earned $5,200 more in commissions. I paid $4,700 less. Win-win-win.

If the seller didn’t receive competing offers, I wouldn’t have offered the extra 1% to the seller, and I would’ve saved even more.

I sent in my inspector after we went under contract. The inspection report came back without major issues. We closed on the purchase.

***

The real estate industry class action settlement created opportunities for prepared buyers to purchase a home without a buyer’s agent. The seller, the seller’s agent, and the buyer all benefit when there’s one less mouth to feed.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post How I Bought a Home Without an Agent After the NAR Settlement appeared first on The Finance Buff.

I bought the 5-year MYGA because it was paying significantly more than a 5-year CD from a bank or credit union at that time. The MYGA paid 3% a year. The best 5-year CD was paying 1.5%. This MYGA had reached its 5-year guarantee period last month. I ended it and pulled the money back to my Fidelity account.

The insurance company kept all its promises. Everything worked exactly as advertised. The MYGA was illiquid, with a prohibitive penalty if you withdraw more than 10% of the balance each year, but I knew that going in. The insurance company was a little slow in processing paperwork, but it was nothing compared to the slow manual processing at TreausryDirect, which can take from six weeks to ten months.

In terms of investment returns, the MYGA did better in these five years than a short-term bond fund, a total bond market fund, a 5-year Treasury, and the best 5-year CD. It trailed a 5-year TIPS by only a hair. I Bonds did better, but they had low purchase limits.

However, I would put my experience with MYGA in the “winning the battle but losing the war” category. That’s why I’m not renewing it or buying another MYGA.

The war is against inflation. Inflation averaged 4.5% a year in the last five years. Because you pay taxes on the gross return, if your tax rate is 25%, you’d have to earn 6% a year to keep pace with inflation. Viewed through this lens, all bond investments lost to inflation in the last five years. The Vanguard Total Bond Market Index Fund had a negative 5-year return before inflation.

Bond Substitutes

Burton Malkiel is the author of the famous book A Random Walk Down Wall Street. He was making rounds in the podcast circle in the summer of 2020 to promote the 12th edition of that book. Mr. Malkiel called the low-interest-rate environment at that time “financial repression.” He suggested lowering the allocation to bonds and investing in preferred stocks and high-dividend stocks as “bond substitutes.”

Burton Malkiel’s suggestion for investing in “bond substitutes” was controversial at that time. Some commentators went so far as to say it was stupid. Now we see the results after five years.

Preferred stocks didn’t do well, but high-dividend stocks did. Investing 50:50 in preferred stocks and high-dividend stocks outpaced inflation both before tax and after tax. Bond substitutes won the war.

The Forest and The Trees

My excursion to MYGA shows that we tend to pay more attention to things that can be analyzed with greater certainty, while neglecting things that are more uncertain but have a more significant impact. I often see people asking questions along these lines:

Which money market fund should I use?

Buy I Bonds in April or May?

Should I invest in Fidelity’s S&P 500 fund (FXAIX) or Vanguard’s S&P 500 ETF (VOO). What about Fidelity’s Zero fund?

TIPS ladder or TIPS fund?

Each question is complicated in its own way if you look at it under a microscope. There’s a powerful spreadsheet that sends you an email alert when it’s time to switch from one money market fund to another. These decisions make a difference, but they easily fall into the “winning the battle but losing the war” category. Before diving into the best place to park your cash, consider whether you should park that much cash in the first place. Then you will avoid a dilemma like this:

Saved up 1 million for a house we are no longer buying, now investing it into the market

The big-picture decisions don’t have an easy answer, but they make a much larger difference when you get them right.

How much to invest in stocks, bonds, cash, real estate, Bitcoin, or gold?

U.S stocks versus international?

Value stocks or growth stocks?

Developed international countries or emerging markets?

Burton Malkiel got the “bond substitutes” right. However, his other suggestions in the same podcast episode for increasing allocation to international stocks and increasing allocation to emerging market stocks within international stocks didn’t pan out. His arguments sounded convincing, and they still do today, but the markets just didn’t accept them.

U.S. stocks outperformed international stocks, and developed market stocks outperformed emerging market stocks, both by a substantial margin. How much you invested in US stocks versus international stocks, and in developed international countries versus emerging markets, made a huge difference in the last five years. This is why VTSAX-and-chill was an easy sell.

Maybe it will take more time for those other suggestions from Burton Malkiel to have the last laugh. Maybe they won’t ever catch up. Either way, don’t lose sight of the forest when you examine the trees.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Real Life Experience with a Deferred Fixed Annuity (MYGA) appeared first on The Finance Buff.

Separate Tax Returns and K-1s

If the business is set up as a partnership, an S-Corp, or an LLC that chooses to be taxed as an S-Corp, it must file a separate tax return and issue a Schedule K-1 to the owner(s). An irrevocable trust or an estate must also file a tax return for itself and issue a Schedule K-1 to the beneficiaries. The owner or the beneficiary then includes income and deductions from these K-1s on their personal tax return.

Some tax software products marketed to consumers have a “Home and Business” or “Self-Employed” edition, but the “business” or “self-employed” component only refers to Schedule C. These consumer tax software will accept K-1s issued by a business, a trust, or an estate as inputs, but they don’t produce the tax return for an irrevocable trust or an estate, a partnership, an S-Corp, or the associated K-1s.

You’d have to buy a separate product if you need to file Form 1041 for a trust or an estate, Form 1065 for a partnership, or Form 1120-S for an S-Corp. Software that generates these tax returns is more expensive than software for personal tax returns. TurboTax Business sells for $134 on Black Friday (the list price is $190). TaxAct Business sells for $140 to $165. These business tax software products are completely separate from the regular TurboTax or TaxAct. They don’t include personal tax returns.

H&R Block is an exception. Its Premium & Business edition can do both personal tax returns and business or trust/estate tax returns. You can buy it for as low as $50 when it’s on sale at Amazon, Newegg, or Walmart. Considering that H&R Block’s Deluxe + State edition, which only does personal returns, sells for $30 when it’s on sale, you only pay $20 extra for the business program. Even if you use something else for your personal return, paying $50 only to use the business portion of the software is still a lot less expensive than the alternatives.

This post isn’t sponsored by H&R Block or anyone else. I’m only writing as a user of this software since 2018.

Two Apps in One Package

H&R Block Premium & Business installs two distinct apps on the computer: H&R Block Premium and H&R Block Business. H&R Block Premium is the normal software for personal tax returns. It supposedly includes more features than the Deluxe + State edition, but I don’t see much difference. H&R Block Business is the software for business and trust/estate returns. It’s a separate app developed by ATX for H&R Block. ATX, owned by Wolters Kluwer, makes professional tax software for CPAs and tax preparers.

These two apps don’t interact with each other directly. You would take the K-1s produced by H&R Block Business and input them into H&R Block Premium or another software you use for your personal tax return.

H&R Block Business works, but because ATX primarily makes software for tax professionals who know what they’re doing, the software doesn’t include much handholding. There’s an interview, as in typical personal tax software, but there isn’t much explanation if you don’t understand the question. It feels like you’re just filling out tax forms one part at a time.

If you have a simple return or you can reference a prior-year return done elsewhere, the software does its job. You can e-file the federal 1041, 1065, or 1120-S, as well as the state return for a handful of states, or you can print and mail. If you need to create both a business return and a trust return, the same software can do both. I don’t see any limit on how many returns you can generate in H&R Block Business.

I’ve used H&R Block Business for several years. Here are some notes for new users:

Windows Only

H&R Block Premium for personal tax returns normally has both a Windows version and a Mac version. However, because H&R Block Business only works on Windows, the Premium & Business bundle only has a Windows version. You need a Windows machine to use H&R Block Business.

ARM Processor Not Supported

Furthermore, H&R Block Business 2025 doesn’t run on a machine with an ARM processor, because it uses RavenDB, which doesn’t work on Windows ARM64. This means you can’t run it in an ARM-based Windows virtual machine on a Mac with Apple Silicon. The 2024 and earlier versions didn’t have this limitation.

Most Windows PCs don’t use an ARM processor, but if yours does, you need to find a different computer to run H&R Block Business 2025.

Run as Administrator

H&R Block Business 2025 requires running as an administrator on Windows 11. Again, the 2024 and earlier versions didn’t require it. If you get an error launching H&R Block Business 2025 as a standard user, right-click on the shortcut and select “Run as Administrator.”

Backup Return

H&R Block Business keeps your tax return data in a local database. When you’re done with a return, you should create a backup by exporting the data to a file. The exported backup file can be read only by the software for the same tax year. For instance, you export a backup file myreturn.atx25Export with the 2025 software. This backup file can only be read by the 2025 software.

This YouTube video shows how to export a backup and restore from a backup:

Save the Installer

When you install H&R Block Business 2026 on the same computer next year, it can find the 2025 data in the local database and import it for 2026. It doesn’t use the exported backup file. However, if you switch to a new computer and install the 2026 software, it can’t import from the 2025 backup file. You need to install the 2025 software as well on the new computer and restore from the 2025 backup file. Then the 2026 software will find the 2025 data to import.

Therefore, don’t delete the original installer after you install the software. You’ll need it again if you switch computers. Save the installer and the activation code together with the exported backup for each year.

Form Release Dates

As with personal tax software, some tax forms become available only later in the tax season. ATX updates this web page with the estimated release date for each form:

https://taxcut.atxinc.com/taxcutformsstatus.aspx

Bookmark it and check when everything you need will be available.

***

H&R Block Business isn’t as user-friendly as tax software for personal tax returns, but it’s professional-grade in terms of its capabilities. Tax professionals can charge well over $1,000 for business and trust tax returns. It’s worth trying DIY with inexpensive software if you have a simple return or there are no major changes from last year. There’s a learning curve for anything new, but you’ll have a sense of accomplishment when you finish.

Security Issue in the 2025 Version

Computer security researcher Yifan Lu discovered a security issue in the 2025 version of the H&R Block Business program. If a computer with H&R Block Business 2025 installed connects to a network with a malicious setup to take advantage of the security vulnerability, the attacker can intercept your otherwise secure connections to other sites.

To reduce your risk of falling victim to this vulnerability, follow these steps to delete the root certificate installed by H&R Block Business 2025:

1. Press the Windows Key + R to open the Run dialog.
2. Type certlm.msc and press Enter. (Click “Yes” if prompted by User Account Control).
3. In the left-hand pane, expand Trusted Root Certification Authorities and click on the Certificates folder.
4. In the middle pane, locate WK ATX ServerHost 2024.
5. Right-click the certificate, select Delete, and confirm the deletion.

Source: https://hrbackdoor.yifanlu.com (If you get a security warning from your browser when you click on this link, that means your computer isn’t affected. The issue only affects Windows machines because H&R Block Business only runs on Windows.)

If you must use H&R Block Business 2025 before deleting that certificate, keep the affected computer at home. Do not connect it to other networks. After you’re done using H&R Block Business 2025, delete the root certificate by following the steps above.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Software for Business and Trust Tax Returns: 1041, 1065, 1120-S appeared first on The Finance Buff.

Rightly or wrongly, people blame bond funds for this loss. They think they would’ve avoided the loss if they had a bond ladder, because every bond in the ladder would pay out in full at maturity. While a bond ladder is better in some cases, and not a magic bullet in other cases (see Two Types of Bond Ladder: When to Replace a Bond Fund or ETF), it’s difficult to fight the perception that a bond ladder is safer than bond funds. Psychological comfort is important. If it makes you feel better to have a ladder and avoid bond funds, then make one.

How difficult it is to implement a ladder depends on the types of bonds you invest in. It’s easier to do it with Treasuries and brokered CDs. It’s more difficult to do it with corporate bonds or munis. ETF providers have created products to help with this endeavor.

Treasuries

You can buy Treasuries at major brokers such as Vanguard, Fidelity, and Charles Schwab with no fee. New-issue Treasuries come in these maturities:

See How To Buy Treasury Bills & Notes Without Fee at Online Brokers. While there’s no 4-year Treasury or 6-year Treasury as a new issue, you can fill in the missing rungs by buying on the secondary market. See How to Buy Treasury Bills & Notes On the Secondary Market.

If you don’t want to mess with individual Treasuries, iShares offers iBonds Term Treasury ETFs to help you build a ladder. Please don’t confuse these with I Bonds from TreasuryDirect. Each of these Term Treasury ETFs holds Treasuries maturing in one specific year. For example, iShares iBonds Dec 2028 Term Treasury ETF (IBTI) holds Treasuries that will mature between January 2028 and November 2028. This ETF will liquidate in December 2028 and pay out in cash.

Instead of buying one Treasury for each year, you would buy one different ETF for each year. iShares has one of these ETFs each year from the current year through the next 10 years. You would buy the 2026 ETF for 2026, the 2027 ETF for 2027, the 2028 ETF for 2028, and so on. They’ll put out new ETFs as each ETF liquidates at the end of its life.

iShares charges a 0.07% expense ratio for these Term Treasury ETFs. Treasuries trade in $1,000 increments. These iShares Term Treasury ETFs are about $25 per share. You can get more granular and buy in smaller amounts when you build and add to your ladder with these ETFs. The ETFs also make tax reporting easier than individual Treasuries when you hold them in a taxable account.

TIPS

TIPS are a special type of Treasuries. You can buy them in the same way as you buy regular Treasuries, except that there are fewer new issues. You must buy most of them on the secondary market when you want a TIPS ladder. There are no TIPS maturing between 2036 and 2039, but this gap will be filled in the next few years.

The website TIPSLadder.com tells you which TIPS to buy and how many to buy when you enter the desired size and length of your ladder.

iShares also offers iBonds Term TIPS ETFs. Similar to the Term Treasury ETFs, each Term TIPS ETF holds TIPS that will mature in one specific year. For example, iShares iBonds Oct 2028 Term TIPS ETF (IBIE) holds six TIPS that will mature between January 2028 and October 2028. It will liquidate and pay out in cash in October 2028. iShares has one of these ETFs each year from the current year through the next 10 years. You would buy these 10 different ETFs if you want a 10-year ladder. The expense ratio is 0.1%.

It may be more convenient to buy these Term TIPS ETFs. They also make tax reporting easier than individual TIPS when you hold them in a taxable account.

CDs

It’s more difficult to build a ladder with direct CDs. You’d have to open accounts with multiple banks to get the best rates for each maturity. It’s easier to buy brokered CDs in a brokerage account, but watch out for callable CDs. The rates on non-callable CDs aren’t that much better than Treasuries, and CDs don’t have state and local tax exemptions. See Buying CD in a Brokerage Account vs Bank CD or Treasury.

Corporate Bonds

The yields on investment-grade corporate bonds are higher than yields on Treasuries of comparable maturities because corporate bonds have a higher risk. There are no state or local tax exemptions on corporate bonds in a taxable account.

It’s better to use ETFs when you want a corporate bond ladder because it’s difficult to diversify in individual corporate bonds.

iShares offers iBonds Term Corporate ETFs. Invesco offers BulletShares Corporate Bond ETFs. They work similarly to the Treasury and TIPS counterparts. Each ETF holds hundreds of bonds from different corporations, all maturing in the designated year. Both iShares and Invesco have one of these ETFs each year from the current year through the next 10 years. Each ETF will liquidate and pay out in cash in December of the designated year. You would buy 10 ETFs if you want a 10-year ladder. Both the iShares series and the Invesco series charge a 0.1% expense ratio.

Vanguard launched a series of corporate bond ETFs that work similarly to the iShares and Invesco ETFs in March 2026. The expense ratio on these ETFs is 0.08%.

Munis

It’s the same story with municipal bonds. It’s better to use ETFs when you want a muni bond ladder because it’s difficult to diversify in individual muni bonds.

iShares offers iBonds Term Muni Bond ETFs. Invesco offers BulletShares Municipal Bond ETFs. Each ETF holds over 1,000 muni bonds from different municipalities, all maturing in the designated year. iShares has an ETF each year from the current year through the next 6 years. Invesco has one each year from the current year through the next 10 years. Each ETF will liquidate and pay out in cash in December of the designated year. Both the iShares series and the Invesco series charge a 0.18% expense ratio.

Because muni bond yields are lower than taxable bond yields, the 0.18% expense ratio takes a bigger bite out of the muni bond yields than the more reasonable 0.07% and 0.10% expense ratios on the Treasury, TIPS, and corporate bond ETFs. If I were to build a bond ladder with these ETFs, I would first consider doing one with Treasury, TIPS, or corporate bond ETFs in a pre-tax account.

Rolling Ladder ETFs

iShares also offers four ladder ETFs that invest in the Term ETFs as a rolling ladder. It has one ETF for Treasury (LDRT), one for TIPS (LDRI), one for investment-grade corporate bonds (LDRC), and one for high-yield (junk) bonds (LDRH). For example, LDRT invests 1/5 of its assets in each of the 2026 through 2030 Term Treasury ETFs. When the 2026 ETF liquidates and pays out, it will put the money in the 2031 ETF and keep it going.

These rolling ladder ETFs aren’t that interesting. You might as well invest in a normal bond mutual fund or ETFs that invest in bonds with a target range of maturities. The market has realized this as well. The rolling ladder ETF LDRT has $21 million in assets. The regular short-term Treasury ETF SHY is 1,000 times larger with $24 billion in assets.

Distributing Ladder ETFs

Northern Trust offers an interesting product called distributing ladder ETFs. Instead of buying 10 ETFs for a 10-year ladder, you just buy one ETF, which holds a ladder inside the ETF and distributes the principal when the bond matures.

For example, Northern Trust 2035 Inflation-Linked Distributing Ladder ETF (TIPB) holds 10 TIPS, one maturing each year from 2026 through 2035. It distributes the interest earned on these TIPS, plus the principal from each TIPS as it matures. It’s a 10-year TIPS ladder managed for you in one ETF. Northern Trust currently has four of these TIPS distributing ladder ETFs running through 2030, 2035, 2045, and 2055. The expense ratio is 0.1%.

These TIPS distributing ladder ETFs have a great design, but the market hasn’t recognized them yet because they only started in August 2025. Each ETF only has about $5 million in assets as of mid-November 2025. I hope they will get more traction in the marketplace; otherwise, they run the risk of not surviving the ETF market competition.

***

A ladder is helpful when you want to spend a preset amount on a preset schedule. Although I don’t hold a ladder because I don’t need to spend a preset amount on a preset schedule, some find a ladder psychologically beneficial, even if it doesn’t make much financial difference.

You can buy individual Treasuries and TIPS when you want a Treasury or TIPS ladder. The iShares iBonds Term Treasury and Term TIPS ETFs offer convenience at a reasonable price. It’ll be easier still if the Northern Trust distributing ladder ETFs become more popular. Building a ladder with the iShares, Invesco, and Vanguard ETFs makes more sense when you want a corporate or a muni bond ladder because the ETFs provide diversification.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post Building a Bond Ladder with Individual Bonds and ETFs appeared first on The Finance Buff.

Reader Charlie brought up this exact scenario. Both Charlie and his wife have ACA health insurance now. After Charlie becomes eligible for Medicare next year, his 58-year-old wife will continue on the ACA plan. Now, when they switch from covering both of them on the ACA plan to covering just one person, how will their ACA health insurance premiums change?

Will their premiums drop 50%, because they will cover just one person instead of two? Or actually more than 50%, because the person coming off the plan, Charlie, is older and more expensive to insure?

Will their premiums stay the same, because ACA premiums are tied to income, and their income won’t change?

Will their premiums actually increase, or drop, but by less than half, because if it isn’t weird and counterintuitive, it wouldn’t make an interesting subject for a blog post?

The answer is — all of the above, depending on whether they receive a subsidy and what plan they have.

We’re not talking about premium increases from the insurance company or changes to the premium tax credit from changes in income. Just changing the number of people covered by an ACA health plan will have weird and unexpected effects.

No Subsidy

The ACA premium subsidy cliff is scheduled to return in 2026. The recent government shutdown didn’t push it out. You won’t receive any premium subsidy if your income is above 400% of the Federal Poverty Level (FPL), which is $84,600 in 2026 for a two-person household in the lower 48 states.

It’s more intuitive when you don’t qualify for a premium subsidy. When you pay the full price, insuring two people sure costs more than insuring just one person. When the older spouse starts Medicare, your ACA health insurance premiums will drop by half. Because it usually costs more to insure an older person, it’ll fall by slightly more than half.

Subsidy – 2nd Lowest Cost Silver Plan

If your income qualifies you for a subsidy, the subsidy is calculated from the premiums for the Second Lowest Cost Silver Plan (SLCSP) in your area. If it happens to be the plan you choose, you will be asked to pay a set percentage of your household income for that plan. The government will pay the remainder with a premium subsidy. See ACA Health Insurance Premium Tax Credit Percentages.

The amount you’re expected to pay toward a second lowest cost Silver plan goes by the household size and household income. It doesn’t matter how many people in the household are on the policy. When one person goes on Medicare, your household size doesn’t change. Nor does your household income. Therefore, you’re still expected to pay the same amount.

Suppose your household income is just below the maximum that qualifies for the premium tax credit for a two-person household, and you choose the second lowest cost Silver plan in your area. Your net premiums after the subsidy will be the same whether you cover both of you or only one person. The only difference is that the premium subsidy becomes smaller when the total premiums before the subsidy drop by half.

After the older spouse starts Medicare, you will also have to pay for Medicare Part B and Part D, and possibly a Medicare Supplement policy. Your total spending on health insurance will increase. But, because the deductible and co-pay on Medicare are lower than those on an ACA plan, your total healthcare spending may decrease. And because you will still receive a subsidy when you cover just one person, albeit a smaller subsidy than when you cover two people, a subsidy is still a subsidy. You’re better off with a subsidy and not seeing a premium drop than if you must pay the full price.

Subsidy – More Expensive Plan

When you qualify for a premium subsidy and you choose a more expensive plan than the second lowest cost Silver plan in your area, you pay 100% of the price difference in addition to your normal net premium. The formula for your net premiums is:

Income * Applicable Percentage + (full price for your selected plan – full price for the Second Lowest Cost Silver Plan)

When one person goes off the ACA plan, the price difference also drops by half. Your premiums after the subsidy will go down by the decrease in the price difference.

Suppose you choose a Gold plan, and it’s more expensive than the second lowest cost Silver plan by $500 per month for two people. You pay 100% of this $500 price difference. The price difference may become $240 per month when you cover just one person. Therefore you save $260 per month when the older spouse starts Medicare.

Subsidy – Less Expensive Plan

The opposite happens when you choose a less expensive plan. You receive 100% of the price difference as your cost savings to reduce your normal net premiums. Your net premiums after the subsidy are:

Income * Applicable Percentage – (full price for the Second Lowest Cost Silver Plan – full price for your selected plan)

When one person goes off the ACA plan, your cost savings drop by half. Your premiums after the subsidy will go up by the decrease in the price difference.

Suppose you choose a Bronze plan, and it’s less expensive than the second lowest cost Silver plan by $400 per month for two people. You receive 100% of this $400 price difference. The price difference may become $180 per month when you cover just one person. Therefore you lose $220 per month in cost savings when the older spouse starts Medicare, and your net premiums will rise by $220 per month.

You pay more to cover one person in a less expensive plan than to cover two people. Such is the punishment for choosing a less expensive plan.

Effect on HSA Contributions

All Bronze ACA plans are eligible for HSA contributions starting in 2026. When you choose a Bronze plan, you go from family coverage to single coverage for HSA after one spouse starts Medicare, and you’ll have a lower HSA contribution limit. Because HSA contributions lower your Modified Adjusted Gross Income (MAGI) for ACA health insurance, your MAGI will increase when you contribute less to the HSA. A higher MAGI means a lower subsidy, or possibly losing the subsidy altogether when your MAGI goes over the 400% FPL cliff.

***

Here’s a summary of all the scenarios:

Charlie and his wife qualify for a premium subsidy, and they want a Bronze plan. Their net ACA plan premiums will go up substantially when Charlie starts Medicare. It’s counterintuitive, but that’s how it works.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post ACA Health Plan Premiums When One Spouse Starts Medicare appeared first on The Finance Buff.

We’re assuming that you’re not working when you’re considering claiming Social Security at 62. Otherwise, the Social Security earnings test may apply, which defeats the purpose of claiming at 62. When you’re not eligible for Medicare yet, you’ll most likely buy health insurance from the ACA marketplace unless you have retiree health insurance or you’re covered through your spouse.

ACA Premium Subsidy, Cliff or Ramp?

How does claiming Social Security affect the ACA health insurance premiums? It depends on your household income. I had this chart in my post The ACA Premium Subsidy Cliff After the 2025 Trump Tax Law:

The federal government shut down due to disagreements in how ACA health insurance premiums will be structured in 2026 and beyond. The blue line in the chart represents the law in effect in 2025. As your household income increases, your ACA health insurance premiums also increase on a ramp. The orange line represents what will happen in 2026 and beyond if Congress doesn’t pass a new law to stop it. The ACA health insurance premiums will be higher at all income levels, and then suddenly jump up a cliff when your household income exceeds 400% of the Federal Poverty Level (FPL), which is $62,600 for a single-person household, and $84,600 for a two-person household, in 2026.

The first question is whether there will be a cliff.

Suppose there is a cliff (the orange line), and your household income is already over the cliff before claiming Social Security (the flat part of the orange line). In that case, you’re already paying the full price without any premium tax credit. Receiving additional income from Social Security won’t affect your ACA health insurance premiums.

Suppose there’s no cliff (the blue line), or suppose there’s a cliff, but your household income will still be below 400% of FPL after claiming Social Security (the left part of the orange line). In that case, every $100 of incremental income from Social Security will increase your ACA health insurance premiums by $10 – $20.

If there’s a cliff (the orange line), and claiming Social Security will push your household income from below the 400% of FPL cliff to above it, your ACA health insurance premiums will jump a lot. That’ll make it not worth claiming Social Security at 62.

Replacing or Increasing Income?

Note that the table above says “incremental income.” Incremental income is the difference in income between not claiming Social Security and claiming Social Security, on an apples-to-apples basis. What would you do otherwise if you don’t claim Social Security? The incremental income isn’t necessarily 100% of the Social Security benefits you’ll receive. The incremental income can be zero or negative if receiving Social Security will only replace other income.

Where does your household income come from if you don’t claim Social Security?

Case 1. Suppose you would withdraw from a pre-tax account, such as a Traditional IRA, to cover living expenses if you don’t claim Social Security. A $20,000 withdrawal counts as $20,000 of income for ACA health insurance. You don’t need to withdraw as much to cover living expenses if you claim Social Security. $20,000 in Social Security benefits also counts as $20,000 of income for ACA health insurance. Your income stays the same when you replace the same amount of withdrawals from a pre-tax account with Social Security.

The IRS taxes at most 85% of Social Security benefits, while many states don’t tax Social Security. In contrast, pre-tax account withdrawals are fully taxable by the IRS and most states. When you receive $20,000 in Social Security benefits, it can replace maybe $22,000 in pre-tax account withdrawals to cover the same amount of living expenses.

Your incremental income will be negative, and your ACA health insurance premiums will decrease if you replace a larger amount in pre-tax withdrawals with Social Security benefits.

Case 2. Suppose you would sell appreciated investments in a taxable account to cover living expenses if you don’t claim Social Security. Only the capital gains portion counts as income for ACA health insurance. Suppose your investments comprise 30% as cost basis and 70% as capital gains. $14,000 from selling $20,000 worth of investments counts as your income for ACA health insurance.

You don’t need to sell much to cover living expenses if you claim Social Security. $20,000 in Social Security benefits counts as $20,000 in your income for ACA health insurance. Replacing investment sales with Social Security will increase your income for ACA health insurance, but by only 30% of the Social Security benefits in this example.

Case 3. Suppose your current household income comes from a pension, rental income, interest and dividends, and other income that can’t be stopped after claiming Social Security. In this case, 100% of the Social Security benefits will be incremental income.

Cost-Sharing Reductions

At the low end of the income spectrum, ACA health insurance also includes something called Cost-Sharing Reductions (CSR). CSR lowers the deductible, co-pays, and the out-of-pocket maximum only when you buy a Silver plan.

There are three tiers in CSR. The income to qualify for the three tiers caps out at 150%, 200%, and 250% of FPL. Here are the maximum incomes that qualify for CSR in 2026:

Many people choose to forego CSR even when their income qualifies, because they’re healthy and a Bronze plan is less expensive than a Silver plan.

How claiming Social Security at 62 affects your eligibility for CSR again depends on the “incremental income” from claiming Social Security. If the incremental income is zero or negative, it will have no effect, or it will make it easier for you to qualify for CSR or a better tier of CSR. If the incremental income is positive, and you qualify for CSR before claiming Social Security, it can disqualify you from CSR or drop you to a worse tier.

How Many Years on ACA Health Insurance?

Claiming Social Security at 62 versus claiming at 65 when you qualify for Medicare will potentially affect your ACA health insurance premiums for 3 years. If you have a younger spouse who’s also on ACA health insurance, claiming early could affect your ACA health insurance premiums until the younger spouse is also 65. The more years you’ll use ACA health insurance, the more impact there may be from claiming Social Security at 62.

Compare with Delaying Social Security

I ran a test case in Open Social Security for a married couple, both born in 1964 (will be 62 in 2026). One spouse has a Primary Insurance Amount of $2,000 per month, and the other has $3,000 per month. The recommendation from Open Social Security is for the lower-earning spouse to claim at 62 and for the higher-earning spouse to wait until 70.

If the lower-earning spouse waits until 65, this couple would still receive 98.7% of the maximum present value from Social Security. The difference in the total present value is $9,470 over their lifetime. See more on how to use Open Social Security in When to Claim Social Security: How Much Does It Matter, Anyway?

Suppose their incremental income from claiming Social Security falls into the “partial” category, and the effect on their ACA health insurance premium isn’t a big jump, but 10-20% of the incremental income. Then they need to balance the increase in ACA health insurance premiums against the loss in the present value of Social Security benefits if the lower-earning spouse waits until age 65.

$2,000 per month at Full Retirement Age translates to $16,900 per year when the benefits are claimed early at age 62. Suppose receiving $16,900 in Social Security benefits brings 30% of the benefits as incremental income, and it increases their ACA health insurance premiums by 15% of the incremental income. The increase in the ACA health insurance premiums for 3 years is:

$16,900 * 30% * 15% * 3 = $2,282

That’s much less than the $9,470 loss of total present value from delaying claiming until age 65. The lower-earning spouse should claim at 62 despite the increase in ACA health insurance premiums.

On the other hand, if 100% of the $16,900 in Social Security benefits will be incremental income, and it’ll push their income over a cliff, which will increase their ACA health insurance premiums by $2,000 a month, then clearly they should hold off claiming Social Security until they no longer use ACA health insurance.

It All Depends

Claiming Social Security at 62 doesn’t necessarily increase your income for ACA health insurance. In some cases, it can decrease your income and lower your premiums. If it does increase your income, the incremental income isn’t necessarily 100% of the Social Security benefits. It can be only a small percentage of the benefits. The premium increase from the incremental income can be less than the loss in the total present value of Social Security benefits if you choose to delay claiming until 65. Don’t be afraid to claim Social Security at 62 only because it may raise your ACA health insurance premiums.

In some other cases, claiming Social Security at 62 will increase your income by a large percentage of the benefits, which will push it over a cliff and raise your ACA health insurance premiums by a huge amount, possibly more than the Social Security benefits received.

It all depends on whether there’s a cliff, and if so, where your household income is relative to the cliff before and after claiming Social Security. A ramp is much easier to deal with than a cliff.

You should calculate your incremental income based on the income composition before claiming Social Security. Wait to see how the cliff situation will be resolved. Then calculate the effect on your ACA health insurance premiums and compare with delaying Social Security.

Manage Risk

Finally, laws can change, and your financial situation can change. If you think it’s too risky and you want to avoid any complications, it’s OK to delay claiming Social Security until you no longer use ACA health insurance.

It comes down to “What if I’m wrong?” What if you think you’ll go over a cliff, but you don’t? You delay claiming and unnecessarily lose 1.3% of your Social Security benefits in my example. What if you think you’re safely under the cliff, and you’re suddenly over? You pay a huge amount in ACA health insurance premiums. Losing 1.3% of the lifetime Social Security benefits may be a small price to pay for the peace of mind that your ACA health insurance premiums won’t blow up in your face. See Use Pascal’s Wager When You’re Not Sure About Tax Rules.

Learn the Nuts and Bolts

I put everything I use to manage my money in a book. My Financial Toolbox guides you to a clear course of action. Read Reviews

The post How Does Claiming Social Security Affect ACA Health Insurance? appeared first on The Finance Buff.