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Why You Need a Separate Bank Account for Your Side Job

Ridesharing, turning a home into a bed-and-breakfast, posting how-to videos, selling one’s art — these are easy to do today through the likes of Uber, Lyft, YouTube, Etsy, Airbnb and other online platforms that have created the “gig economy.”

Signing up is easy, but handling all the financial responsibilities can get challenging come tax season.

That’s why keeping personal and business finances apart is a must. Here’s why:

A separate bank account makes tax time easier

One of the first things to do when taking up a side job is to open a separate bank account specifically for it. Small businesses and sole proprietors often do this via a business checking account. With something that’s a little more freelance, you could simply open another standard checking account. The point is to create a system to track business and personal expenses separately.

There are many advantages to keeping your business and personal finances separate, but the most important one is that it helps simplify your tax-filing process.

Let’s explore the benefits of keeping a separate bank account:

  • It’s easier to track business expenses and deductions. An Etsy shop owner, for example, can monitor and deduct postage, shipping, materials, mileage for trips to the store and more. Keeping business-related expenses in one place makes it easier to visualize whether more money is being spent than is being earned.
  • You’re better prepared for an audit. In the event of an audit, a separate bank account provides clear evidence of your income and expenses.
  • It provides a solid foundation for your bookkeeping system. The IRS suggests reconciling your checking account every month to make sure that bank statements and record-keeping systems match. This is easier to do when you’re not sorting through your own personal expenses as well, and it can minimize human error.

Danielle Bruflodt of Madison, Wisconsin, started her Etsy shop, Thyme is Honey, as a side job five years ago. Today, she is self-employed with many businesses, and she uses separate bank accounts and software to stay organized.

“I’m horrible with numbers, so to be honest, having separate banking just makes everything so much easier,” Bruflodt says. “It becomes a pretty simple process of what is going in and what is going out. It’s also easier for me to see expenses for each business.”

» MORE: The difference between personal and business checking

Common mistakes in the gig economy

Opening a separate bank account for business needs is the ideal first step. A recent study by the Kogod Tax Center at American University suggests that there’s a bigger problem. The study found that 36% of people employed through online platforms in 2015 don’t understand the kind of records of business income and expenses that are needed for tax purposes.

“Usually, in the first year, people don’t realize what they need to do,” says Caroline Bruckner, author of the study and managing director at the Washington, D.C., university’s Kogod School of Business. “But after they go file their taxes, the next year they figure it out and start filing correctly.”

Veronica Smith doesn’t keep a separate account for her YouTube channel, VeroHoy, but she is still ahead of the curve. The Chino Hills, California, resident and her spouse rely on accounting software to track business income and expenses for their three enterprises: her Spanish-language YouTube channel and his real estate and web-based businesses.

Time Warner Cable salesman Jeremy Miller of Cincinnati drives for Uber in his spare time. For him, a spreadsheet is enough to track his mileage, income and hours.

Find a system that works for you, and stay on top of it from the beginning.

» MORE: What Uber, Lyft drivers need to know about ridesharing insurance

It’s never too late to start

Bruckner suggests creating a plan before starting a business through a “gig economy” platform. Figure out how much time you might spend and how much money you could earn, and research the tools that will help you keep track of business finances.

And, if you’re already running a business without a separate account or a record-keeping strategy in place, it’s never too late to get started.

Melissa Lambarena is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @LissaLambarena.

How Bank Employees Can Pose a Security Risk to Your Money

Encryption, biometrics, bulletproof windows, armored cars and thick-walled safes are all ways that banks and credit unions protect your money and personal information online and at your branch. But sometimes the threat comes from the inside.

In Lynchburg, Virginia, the manager of a credit union embezzled funds from and defrauded her institution over 14 years. She and the head teller took out loans in members’ names, transferred money and wrote checks on members’ accounts, covering up their actions by changing bank statements or just not sending them out. All told, the two caused $12 million in losses, according to authorities, and are now serving time in prison.

The frequency of crimes like this is unclear, as they’re often lumped together with others under the label of “identity theft” in crime data. However, the Federal Deposit Insurance Corp. reports that in past years, insiders accounted for more than half of all bank fraud and embezzlement cases.

Bank employees work around and have easy access to a lot of money. Insider threats can result when they experience financial difficulties, says Doug Johnson, senior vice president at the American Bankers Association. With a median annual wage of $26,410, nearly one-third of all bank tellers in the U.S. receive public assistance of some kind.

» MORE: How to prevent identity theft

How banks try to prevent in-house crime

Banks conduct background checks and pull credit reports when considering a new hire, Johnson says. They also have their own systems in place to safeguard against these types of schemes.

“As an industry, we share information with each other when employees are let go or fired because of activity. We have the authority to do that under the Patriot Act,” he says.

Still, an investigation by the New York attorney general’s Criminal Enforcement and Financial Crimes Bureau found flaws in processes at some of New York’s big banks. Among them: tellers who were granted unlimited access to customer account information, banks that did not conduct regular employee audits and a lack of communication regarding tellers who fell under suspicion.

How insider theft still happens

Weaknesses or breakdowns in the system can give bank tellers access to personally identifiable information — dates of birth, account numbers, driver’s license numbers and Social Security numbers.

“What we’ve seen is they tend to sell that information to rings involved in obtaining fake, personally identifiable information documents, like driver’s licenses with a conspirator’s photo,” says Thomas Reitz, a senior FBI agent with the Complex Fraud Squad in Orange County, California. The rings use these details to create the fraudulent documents needed to impersonate customers and withdraw money directly, with fake IDs or through fraudulently obtained debit cards.

In 2015, a New Rochelle, New York, man pleaded guilty to conspiracy and bank fraud that resulted in $481,856 in losses. The scheme recruited bank employees and other individuals, allegedly homeless people and drug addicts, who posed as account holders with forged New York driver’s licenses and withdrawal slips.

Reitz says that requiring debit cards to have a photo could significantly deter such schemes.

» MORE: NerdWallet’s best credit unions » MORE: NerdWallet’s best national banks

How to protect your bank accounts

You can’t control whom your bank or credit union hires, but you can take steps to make it harder for criminals to discover your personal and financial information. Protect yourself and your accounts by changing your privacy settings on social media. Thieves can go there to study everything from your date of birth to the names of your spouse, your kids and your pets in an effort to figure out passwords and gain access.

Dormant or low-activity accounts are easy targets for insiders because of the outdated contact information, Reitz says. Monitor and update your information, or you’ll be hard to reach when there’s a questionable transaction.

» MORE: How to make online banking more secure

What to do if you’re a victim

If you believe you’ve been a victim of such a scheme, notify your bank and submit a complaint to the FBI. Save all paperwork relating to the alleged scheme: canceled checks, cash receipts, bank statements — anything that may be helpful to the case.

The amount of time it takes to get your lost money back will vary depending on the bank, customer history and the case.

And the next time you call your bank with a general question, avoid giving your personal details unless it’s necessary. Most bank employees are trustworthy, but you don’t want to hand an all-access pass to someone who’s not.

Melissa Lambarena is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @LissaLambarena.

Long-Term Care Benefits for Veterans

By Eric Jorgensen

Learn more about Eric at NerdWallet’s Ask an Advisor.

Veterans have access to health and long-term care benefits that can have a significant impact on their family’s finances. The Department of Veterans Affairs will pay for certain long-term care services for disabled and low-income veterans. With help covering long-term care costs, many veterans and their families can focus on other important aspects of their financial planning.

There are many options for veterans to take advantage of as they age and require care, but often veterans don’t even know they may be eligible. Here’s a look at the various benefits available:

VA health care system

Those who served in the active military — except for those dishonorably discharged — or who were in the Reserves or the National Guard and served their full period of duty are eligible to enroll in the VA’s health care system. Enrollment is free, although treatments may require a copay, depending on the veteran’s financial position. Additionally, veterans who enroll establish eligibility for future long-term care services even if they use a different primary health insurance provider in the meantime.

Although the armed forces do a good job helping those with traumatic injuries access their benefits, many veterans still leave the service without taking advantage of the health system. If you’re a veteran or have a family member who is, make sure to find out about all benefit options available to you.

Veteran-Directed Home and Community Based Services

Enrollment in the VA health care system also grants access to the Veteran-Directed Home and Community Based Services program, which provides veterans with a flexible budget to purchase long-term care services. These could include a geriatric evaluation to determine needs and create a care plan, adult day health care, respite care, skilled home health care and more. There is no age limit; all enrolled veterans are eligible if a physician determines there is a need and the service is available in their location.

Unlike many traditional long-term care insurance policies, this program does not cover room and board in residential care settings such as assisted living or an adult family home, a licensed home that provides care for a small number of residents. Veterans will need to rely on Medicaid, which covers long-term care for low-income individuals, family resources or their own savings, investments or insurance to fund these options.

Veterans Pension

The Veterans Pension benefit is a tax-free, monthly payment for low-income veterans. Your family income must be below the limit set by Congress — $12,868 annually in 2016 for veterans with no dependents. If you’re eligible, your payment amount is the difference between your income and the yearly limit. However, you may be able to deduct from your income certain medical expenses and some forms of income, like Supplemental Security Income.

To be eligible, veterans must have served at least 90 days of active duty — or at least 24 months if they entered active duty after Sept. 7, 1980 — with one day during a wartime period. The veteran must also meet at least one of the following criteria:

  • Age 65 or older.
  • Totally and permanently disabled.
  • A patient in a nursing home receiving skilled nursing care.
  • Receiving Social Security Disability Insurance or SSI.

The veterans pension is not the same as a military pension, for those who served long enough, or VA disability compensation, for veterans who have a service-connected disability that meets certain requirements.

Veterans can’t receive both VA disability compensation and the veterans pension; they will receive the higher of the two benefits. And if you’re getting a military pension, you’ll likely exceed the modified income limits and not be eligible for a veterans pension. Receiving a veterans pension may also make you ineligible for Medicaid.

Aid & Attendance and Housebound allowance program

Veterans who are eligible for the veterans pension may also qualify for an aid and attendance allowance in addition to the pension, increasing their monthly benefit amount. In 2016, the adjusted-income limit is $21,446, and it follows the same dollar-for-dollar reduction as the veterans pension.

In addition to meeting the requirements for a veterans pension, a veteran will need to meet at least one of the following requirements:

  • Needs assistance with one of the six activities of daily living: personal hygiene, dressing, eating, using the toilet, mobility and grooming.
  • Is bedridden.
  • Is blind.
  • Is a patient with mental incapacity in a nursing home.

Another benefit, the housebound allowance, is payable to veterans who are confined to their home because of a significant, permanent disability. This will also increase the base veterans pension payment, but by a lesser amount. In 2016, the benefit for a single veteran without dependents is $15,725 annually.

Veterans can apply for one or the other of these two programs, not both.

Community Living Centers

VA Community Living Centers, formerly called nursing homes, provide 24-hour skilled nursing care, restorative care, access to social workers and geriatric evaluation and management. Some may also provide recovery care for mental health, special care for mental incapacity like dementia, and respite and hospice care. The services offered vary, so veterans should contact the facility near them — there are 132 nationwide — to find out what’s available.

To be eligible to use a VA Community Living Center, you must be enrolled in the VA health care system and be medically and psychiatrically stable. Eligibility and the cost of care are based on your service status, clinical need, disability and finances. If your health declines after you move into a VA Community Living Center, you may be eligible for continuing care if the facility is equipped for it.

Armed Forces Retirement Homes

Another option for veterans is independent of the VA. There are two Armed Forces Retirement Homes, one in Gulfport, Mississippi, and one in Washington, D.C., that offer a full scope of care from independent living to long-term care. However, you must be capable of independent living to move in. You do not need to be enrolled in the VA health care system for eligibility as these are run by a separate federal agency.

Commissioned officers are not eligible unless they served at least 50% of their military service as an enlisted member, warrant officer or limited duty officer. Veterans are generally eligible if they meet one or more of these criteria:

  • Have served at least 20 years and are 60 or older.
  • Are unable to earn a livelihood due to a service-connected disability.
  • Served in a combat zone or received hostile-fire pay and are unable to earn a livelihood due to injuries, disease or disability.
  • Are female veterans who served prior to 1948 with “compelling personal circumstances.”

These homes are not free. Fees are computed annually based on a percentage of the veteran’s total income. The percentage increases with the level of care but is capped so it won’t exceed a certain amount per month. If veterans meet the criteria, these could be a great option prior to needing long-term care services. The home will provide care as residents develop a need and, with capped fees, they may remain more affordable than other facilities.

Many options

These benefits are meant to ensure that veterans get the care they need regardless of their financial status. Helping veterans apply for the benefits they are entitled to lessens the financial stress on the whole family. Families caring for aging veterans may be able to cut expenses and redirect that money into savings for themselves, for things like retirement, college funding or other goals. Beyond that, they have the added security of knowing their parents or grandparents are being cared for.

Families may find additional help, for free, through approved veterans service organizations such as the Veterans of Foreign WarsDisabled American Veterans or the American Legion. A complete directory of veterans service organizations is available on the VA’s website.

Eric Jorgensen is a fee-only financial planner with MainStreet Financial Planning in Odenton, Maryland, and Washington, D.C.

Finding Your ‘Magic Number’ for College Savings

By Mark Struthers

Learn more about Mark on NerdWallet’s Ask An Advisor

Many new parents want to pay for their child’s college education, but it’s hard to know how much money they’ll need 18 or 19 years in the future. The type of college your child goes to, education inflation and many other variables affect how much you need to save.

But don’t let perfect be the enemy of good. With some thoughtful planning, you can come up with a reasonable estimate of your “magic number” for college savings. Following are some important considerations as you start planning:

  • Type of school: The cost of attendance varies greatly depending on whether it’s a two- or four-year, public or private school. Costs ranged from around $11,000 to about $44,000 (including room and board) per year in 2015, according to a recent survey from the College Board.
  • Room and board: Room and board, which accounts for a large portion of the cost of attendance, is one area where you can save money. Having your child live at home for the first year or two may help you save enough to pay for a year’s worth of tuition.
  • Inflation: According to the College Board’s recent study, prices increased by about 3% from the 2014-2015 school year to the 2015-2016 school year. But there is no guarantee this rate of inflation will stay the same. It’s best to err on the side of caution and choose a relatively high rate of inflation — say, 5% — as you calculate how much money you’ll need to save.
  • Price actually paid: Many students don’t pay full price because of institutional and federal grants and tax benefits. The College Board found that for a four-year public university with a list price of $19,550 for the 2015-2016 school year, the average in-state student actually paid only $14,120. Private university students also saw a significant discount from a list price of $43,920 to $26,400. Though it’s difficult to know exactly what discount your student can count on, planning on a 20% to 25% discount is often reasonable. (To maximize the potential for grants and financial aid, you may need to do additional planning regarding your income and how assets are held, since some accounts are treated more favorably than others when applying for aid.)
  • Your child’s contribution: Many parents believe that their children should help pay for school through work or student loans. On the bright side, this can motivate and engage the child. However, if you decide to have your child contribute with student loans, make sure he or she is aware of the risk and burden involved in taking on debt. Graduating with too much student debt can limit your child’s ability to move to a new city or take jobs for the experience.
  • Family contributions: Some grandparents agree to pay for some or all of their grandchildren’s education expenses. This is an incredible burden lifted and makes planning easier for these families. But not all families have this luxury. Most fiscally conservative parents will not count on the help of family unless that help is just a couple of years away. Talk to your family to find out whether this is something they are interested in or able to do. If they are, you’ll want to do some additional legwork to make sure the grandparents’ contributions are as tax- and aid-efficient as possible.
Magic number example

To see how all these factors affect college planning, consider this example. The Johnstons want to plan for college for their new baby, and they already have a school in mind. The estimated in-state cost of attendance for 2016-2017 at the University of Minnesota is about $26,482 in total per year. They decide to cover tuition for four years, but plan for a 25% discount to the listed price and to have the child be responsible for room and board, plus books and other personal expenses (around $12,200 of the $26,482). If necessary, their child can live at home to reduce costs.

Here’s how the Johnstons arrive at their magic number:

  • They determine the portion they’ll cover per year, or $26,482 – $12,200 = $14,282.
  • Plan on a 25% discount to the list price, or $14,282 x 0.75 = $10,711.50.
  • For four years, that’s $10,711.50 x 4 = $42,850 (rounded up).
  • Then they adjust today’s cost for possible inflation at 5% over 19 years, or $42,850 x (1+0.05)19 = $108,280.

With a 7% rate of return on their college savings (a reasonable assumption based on historic Standard & Poor’s 500 index returns and a 70% to 80% equity portfolio), it will require saving $228 per month to reach their goal of $108,280 in 19 years. For a middle-class family like the Johnstons, it is difficult, but doable.

If the Johnstons waited to start saving, they would have to save significantly more each month. For instance, assume that they have only 10 years to save for college. Instead of $228 per month, they would need to save $625 per month, assuming the same costs and returns. This is a lofty goal for anyone. And in fact, they may need to save even more than that. As they get closer to the start of school, they will most likely have to reduce risk in their portfolio and, as a result, reduce their potential return.

Be flexible

Of course, the Johnstons also realize that they will have to review their plan every so often and make adjustments as needed. If baby Johnston wants to go to the top engineering school in the country, it will most likely cost more, and living at home won’t be an option.

Planning for college savings must be an ongoing process, and talking with your spouse and/or an advisor early on can be invaluable. To come up with your magic number, you’ll need to do some research to determine what numbers to start with, but don’t fixate too much on one particular school or number. Plan for your best guess, but be flexible.

Unless you have unlimited resources for college, you should set up a reasonable plan for savings, make periodic adjustments as necessary and make the most of what you have.

 Mark Struthers, CFA, CFP, is a fee-only planner with Sona Financial in Chanhassen, Minnesota.

This article also appears on Nasdaq.

Mortgage Rates Today, Tuesday, Aug. 23: Swimming in a Narrow Lane

Thirty-year and 15-year fixed mortgages rates, as well as 5/1 ARM home loan rates, are all unchanged Tuesday, according to a NerdWallet survey of mortgage rates published by national lenders this morning.

Some lenders made minor adjustments to their pricing early today, but the net result left average rates untouched.

The average rate on 5/1 ARMs is back to where it was on May 27, according to the NerdWallet Mortgage Rate Index. Adjustable rates fell 0.20 in June, then gradually climbed back to their current level, where they have been holding steady for two weeks.

The only catalyst for interest rate movement this week could be comments made by Federal Reserve Chair Janet Yellen on Friday. That’s when Yellen is scheduled to address the Federal Reserve Bank of Kansas City’s annual Economic Policy Symposium in Jackson Hole, Wyoming. If Yellen offers a firm clue as to when the Fed will make its next move in short-term interest rates, mortgage rates could be affected.

The NerdWallet Mortgage Rate Index compiles annual percentage rates — lender interest rates plus fees, the most accurate way for consumers to compare rates. Here are today’s average rates for the most popular loan terms:

Mortgage Rates: Aug. 23, 2016

(Change from 8/22)

30-year fixed: 3.61% APR (NC)

15-year fixed: 3.05% APR (NC)

5/1 ARM: 3.50% APR (NC)

Homeowners looking to lower their mortgage rate can shop for refinance lenders here.

NerdWallet daily mortgage rates are an average of the published APR with the lowest points for each loan term offered by a sampling of major national lenders. Annual percentage rate quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.

Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @halmbundrick.

Target issuing refunds for fake Egyptian cotton sheets

Have you bought Egyptian cotton sheets from Target in the past two years? If so, you may be eligible for a refund.

According to Bloomberg, Target said Friday that 750,000 pillowcases and sheets from Welspun India Ltd. were labeled as Egyptian cotton but actually made from another material. The bedding, sold from August 2014 to July 2016 under the brand Fieldcrest, has been pulled from store shelves. 

The affected products include Fieldcrest 500 thread count Satin-Stitch Damask Egyptian cotton sheets and 500 thread count Geo Pattern Egyptian cotton sheets, according to Target's website.

>> Read more trending stories

“We have informed Welspun that, due to this conduct, we are in the process of terminating our relationship with them,” Target spokeswoman Molly Snyder told Bloomberg. “We value the trust that our guests place in us. The Target team will continue to work closely with all vendors to help ensure that the products we offer to our guests meet or exceed their expectations.”

Welspun said it is conducting an audit into the matter. 

“The error is on our side, so we have to take responsibility for it," said Rajesh Mandawewala, Welspun's managing director.

To request a refund, use this form on Target's website and select "Egyptian cotton sheets."

Parents thrilled to have coffee, food truck in school car line

Most parents know the minutiae of being in a school car line. There aren’t many ways to improve the experience, but one North Carolina family is doing its best to help out with a coffee food truck.

Leigh Fickling told TODAY Parents that she was initially confused when she saw a food truck near the back of the car line at her kids’ North Carolina-area school.

"We all know that car lines are places of order and regulation -- don't get out of line, don't cut in line, keep your eyes ahead and maintain order -- could it be? A food truck?" she told the site via email. 

>> Read more trending stories  

TODAY Parents reported the truck was created by Gabriel and Heather Rael, who moved to the North Carolina area from New Mexico five years ago. The Raels said they wanted to engage with the community in some way with a side job. That desire turned into the Caffe Ole truck.

"My husband was waiting in line recently to pick up our daughter and seeing all the cars just sitting there," Rael told TODAY Parents. "He thought it would be nice to be able to get out of his car and get something to drink. He also remembered when I was a teacher, and I always wanted a place where I could get a good cup of coffee, so hence the coffee truck at the school."

Rael said the reaction has been positive since the truck rolled in at the school, allowing parents to grab a cup of Joe before or after they enter the line.

Fickling said the truck has "forever changed" the morning line wait.

"The first day I ordered coffee, I got to the school about 10 minutes before the law and order of the car line began. I pulled right up to the cute, little truck and proudly marched over, debit card in hand," she told TODAY Parents.

Read more at TODAY Parents.

Say what???? Coffee food truck in the carline. This may be the best thing ever. (And love supporting a TES family!)Posted by Leigh Davis Fickling on Wednesday, August 17, 2016

3 Things That Matter More Than a Bank’s Savings Rate

Looking past a bank’s savings rates might seem like a rookie mistake, at least until you take a step back and see that most rates are close to 0%. You’re just being pragmatic — the real misstep would be holding out hope for something significantly better.

Although good rates do exist at a handful of banks and credit unions, you should instead focus on services that can help you better manage your savings. In the long run, these features can do just as much good for your wallet.

1. Accounts with no monthly fee

There are certain things — your bus pass, a Netflix subscription — that may justify their monthly costs. A savings account is not one of them.

This is especially true if its rates are barely above zero, and if it doesn’t offer other perks. High-end savings accounts, the ones that boast about their interest rates, often come with monthly fees as high as $12. But even these rates are generally so low that fees will likely end up canceling out any interest earned. At that point, even the most conventional of savers might consider stashing their money under their mattresses. (For the record, we advise against this.)

If you have a checking account at a bank that charges fees on its savings products, you should branch out. Keeping your checking and savings accounts at two different institutions can work out well in this regard: Transferring cash between the two accounts isn’t quite as easy, making it just a little bit harder to casually dip into your savings.

Many of the best savings accounts don’t charge monthly fees, and a few also offer rates as high as 1%. That’s where you can start your search if you’re looking for a new account.

2. Accounts that make it easier to hit your goals

Your savings shouldn’t slosh around in the same pool. If everything is kept all together, it’s hard to prioritize and focus on the many things you’re saving for. Subaccounts can help.

These are simply separate savings accounts kept at the same institution, and which can be earmarked for specific goals. Think of it as a digital envelope system. Some banks and credit unions let customers open as many as 20 subaccounts, and most allow automatic transfers from your checking account.

Managing these subaccounts on your smartphone or laptop will be the most convenient option, so make sure your bank has easy-to-use online and mobile banking platforms.

3. Accounts that act as an inexpensive safety net

Keeping checking and savings accounts at separate banks may make sense for some customers, but not those who frequently incur steep overdraft fees. Most places let customers link their two accounts to avoid these penalties. If you spend more cash than is in your checking account, your bank pulls funds from your savings account to cover the difference. It’s a nice service, but it doesn’t always come cheap.

Although most banks and credit unions charge a few dollars per transfer, some ask for as much as $12. That’s a lot in return for a service that’s actually meant to protect you from fees. Look elsewhere for a better deal.

Use other tools to grow your savings

You shouldn’t rely on a basic savings account to bolster your nest egg. Compound interest is valuable, but it requires a certain spark — like rates that don’t start with a 0 — in order to really do its thing.

Leave that to your 401(k) and individual retirement accounts. That’s what’s best for your wallet, and might even save you a headache the next time you look at your bank’s savings rates.

Tony Armstrong is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @tonystrongarm.

Mortgage Rates Today, Monday, Aug. 22: Lazy Rates of Summer

Thirty-year fixed mortgage rates inched higher Monday, 15-year fixed mortgages were unchanged and 5/1 ARM rates were up slightly, according to a NerdWallet survey of mortgage rates published by national lenders this morning.

There seems to be little on the economic calendar in the coming week to move interest rates substantially in either direction. The bond market has been docile, as summer glides to what appears to be a soft landing.

Mortgage rate forecast for the remainder of 2016

While there has been a gradual lift in interest rates for adjustable-rate mortgages over the period (+0.17%), fixed-rate home loans are basically where they were at the end of June, according to the NerdWallet Mortgage Rate Index.

“After a restive June, mortgage rates have spent the summer lolling about, content to wander in a tight range, and this despite signs of at least some economic improvement in the third quarter, little visible repercussion from the Brexit vote and perhaps even a growing likelihood that the Fed will make a move come September,” Keith T. Gumbinger, vice president of, wrote in an email analysis late Friday afternoon.

The NerdWallet Mortgage Rate Index compiles annual percentage rates — lender interest rates plus fees, the most accurate way for consumers to compare rates. Here are today’s average rates for the most popular loan terms:

Mortgage Rates: Aug. 22, 2016

(Change from 8/19)

30-year fixed: 3.61% APR (+0.01)

15-year fixed: 3.05% APR (NC)

5/1 ARM: 3.50% APR (+0.01)

Homeowners looking to lower their mortgage rate can shop for refinance lenders here.

NerdWallet daily mortgage rates are an average of the published APR with the lowest points for each loan term offered by a sampling of major national lenders. Annual percentage rate quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.

Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @halmbundrick.

How the Wrong Choice Could Ruin Your Spouse’s Retirement

Three key decisions about retirement benefits can help couples make their money last — or dramatically increase the chances the survivor will end up old and broke.

Widowed women are twice as likely as their male counterparts to live in poverty during retirement, according to a March study by the National Institute on Retirement Security. But anyone who outlives a mate can be vulnerable to a big drop in income and lifestyle because of shortsighted decisions about claiming benefits.

“Most people don’t quite get the math,” says Delia Fernandez, a certified financial planner in Los Alamitos, California, who primarily advises middle-class clients. “They’re so focused on getting the highest payment now.”

Fernandez remembers one husband who wanted to take early retirement and the maximum possible pension, not realizing that if he died first, his wife’s income would fall by 75%.

“It’s all about, ‘I’m getting out of this job and getting the most money because I’ve got things to do,’” Fernandez says. People don’t realize their spouses may have to live for years, or even decades, on truncated incomes.

These are the decisions that couples approaching retirement need to get right:

How to take retirement benefits

You may be offered a choice between taking a lump-sum distribution from your retirement plan or accepting a series of monthly checks. Theoretically it’s possible to earn more over time by investing the lump sum, but a bad market or a too-rapid withdrawal rate can undermine your returns. By contrast, the monthly checks could be guaranteed income that can last for both your lifetimes.

Couples should try to make sure that at least their basic expenses in retirement are covered by sources of income that are guaranteed, which can include Social Security, pension payouts and annuities, says Gary Koenig, vice president of financial security for AARP’s Public Policy Institute.

All 401(k) plans give savers a lump-sum payout option, and many offer the choice of taking a monthly check but the amount you get may vary depending on how your investments perform. If you want guaranteed income, you typically would have to roll your money into an IRA, then use some or all of the money to buy an immediate fixed annuity from an insurance company to create a steady income stream.

Those with traditional pensions typically are offered guaranteed monthly checks as the default option, but some pension plans may offer a lump sum. If an adviser suggests you take the lump sum and then buy an annuity, ask how that’s better than just getting the checks from the original retirement plan, says Jim Ludwick, a certified financial planner with MainStreet Financial Planning in Odenton, Maryland. “In 10 years of analyzing annuities, I’ve never seen one that was better” than what a pension plan offered its participants directly, he says. “The company payout is always more generous because it doesn’t have to make a profit.”

Which payout option to choose

If you do opt for monthly checks from a pension fund, you need to decide how big your checks will be and how long they will last.

Let’s say your pension plan would give you $3,000 a month if you opted for the single-life payout — but that payment ends when you die. A joint-and-survivor payout that drops by half after your death might start at $2,873, assuming you and your spouse are roughly the same age.

If you want the checks to stay level after you die, your initial monthly payments might shrink to $2,754. Fernandez suggests clients choose this option unless there’s a compelling reason to reduce it, such as a spouse who “has a whole bunch of money or a pension of her own and she doesn’t need the survivor option, thank you very much.”

Also, be wary of insurance schemes that suggest you opt for a single-life payout from a pension and use a part of that larger check to buy life insurance instead. This so-called pension maximization may be a plan only an insurance agent could love, so run it past a fee-only financial planner — one who doesn’t earn commissions on insurance sales — for an objective second opinion before you proceed.

When to claim Social Security

The higher earner typically should delay starting Social Security as long as possible, because that’s the benefit the survivor will get, Koenig says. (The survivor’s benefit is the larger of the two the couple receives.) Delaying is particularly important if one spouse didn’t work or didn’t earn enough to get a significant benefit, since the spousal benefit is based on what the higher earner gets.

Here’s an example to illustrate the difference. Say the higher earner would get a $2,000 monthly check at 66, the current full-retirement age. That would entitle the lower earner to a spousal benefit of $1,000 at his or her full retirement age.

If, instead, the couple applies when they first become eligible for benefits at 62, the higher earner’s check falls to $1,500 and the lower earner’s to $700. So instead of $3,000 they would get $2,200. When one dies, the other gets a survivor benefit of just $1,500, versus the $2,000 that spouse would have received had the couple waited until the higher earner turned 66.

Those who wait beyond full retirement age can increase their benefits by an additional 8% a year until their checks max out at age 70. Conversely, an early start locks in a permanently reduced check.

With all three decisions, couples should talk about the various “what if” scenarios, including what would happen to the household’s income and savings if either partner lives longer or dies sooner than expected, says Mark Struthers, a certified financial planner and certified financial analyst with Sona Financial in Minneapolis.

Struthers cautions against obsessing too much about which payout option would result in the most money, because those calculations assume we can predict what lies ahead.

“The break-even point is not really relevant,” Struthers says. “The question is, is your wife going to end up eating cat food because her income dropped 75%?”

Liz Weston is a columnist at NerdWallet, a personal finance website, and author of “Your Credit Score.” Email: Twitter: @lizweston.

This article was written by NerdWallet and was originally published by The Associated Press.

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