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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.

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.

Car or No Car on Campus? It’ll Cost You Either Way

With another school year starting, you may be considering bringing a car to campus. It would make it convenient to get to your off-campus job or internship, and it would be nice to have for those late-night Taco Bell and fro-yo runs.

Of course, you’ll have to pay for parking, insurance and gas if you have a car. And without one, you’ll need to budget for the alternatives: buses, trains, cabs and ridesharing apps.

So before you decide whether to buy a campus parking pass or leave your car at home, compare the costs of each option.

The costs of having a car on campus

First things first: Check with your school’s transportation office for details about the campus parking policies. Some schools, including Syracuse University and the University of Miami, don’t allow freshmen to bring cars.

If you get the go-ahead to bring a vehicle, here are some costs to prepare yourself for:

  • Parking fees: Many colleges require students to have a pass in order to park on campus. The passes can cost hundreds of dollars per semester, depending on your school and the location of your designated lot. On top of that, there can be replacement fees if you lose your pass, plus parking tickets, which you’re bound to get at least once.
  • Insurance: Generally, if you’re bringing your car to a school more than 100 miles from home, you need to notify your insurer. And if you’re bringing your car to an out-of-state school, you may need to adjust your insurance policy because auto insurance requirements vary by state. Depending on where you’re heading, the price of your policy could go up or down. You could end up saving money by switching to a new insurer, so compare car insurance quotes to make sure you’re getting the best deal.
  • Gas: Your gas costs will depend on how much you use your car. To offset them a bit, ask your friends to pitch in a few bucks if you find that you’re becoming the go-to driver in the group.
The costs of not having a car on campus

Leaving your car at home is not without its costs. Here are some expenses to expect:

  • Public transportation passes, cab fares and ridesharing apps: If a bus or subway is a convenient way to get around your campus or college town, look into prices for a monthly or annual pass. You may get lucky — students at the University of Michigan, for example, can ride city buses for free. And for a safe ride home after a night out, call a cab or book an Uber. If you plan to rely on this option regularly, budget for it; ridesharing apps especially can get pricey during peak hours.
  • Insurance: Even if you don’t bring a car to college, your parents will need to keep insurance on it. They may be able to get a discount on the policy since you won’t be driving regularly. Ask your insurer whether it offers a “student-away-at-school” discount. Companies including Liberty Mutual, State Farm and Travelers do.
  • Transportation home: Depending on how far you live from campus, you’ll need to figure out a way to get home for weekend visits and holiday breaks. Whether that’s chipping in $20 bucks for gas to catch a ride with a friend or booking a plane ticket, don’t forget to account for this cost when you’re doing the math.

Take 10 minutes to sit down, open your phone’s calculator app and do a rough calculation of what it would cost you to bring your car to college or leave it at home. There’s no wrong answer, as long as you make an informed decision.

Teddy Nykiel is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @teddynykiel. This article was written by NerdWallet and was originally published by USA Today College.

Mortgage Rates Today, Friday, Aug. 19: Movement but No Trend

Thirty-year fixed mortgage rates are lower Friday, while 15-year fixed mortgages moved higher and 5/1 ARM rates were unchanged, according to a NerdWallet survey of mortgage rates published by national lenders this morning.

Some lenders were aggressively repricing their loan terms, but there was no trend evident. While one lender was marking up its rates, another was discounting. And so continues the meandering mortgage rate market.

Mortgage rate forecast for the remainder of 2016

Mortgage rates have been so low for so long that there seems to be little in the way of continued improvement in the housing market. One potential barrier: the wobbling U.S. economy. In spite of lackluster data in the second quarter, Fannie Mae chief economist Doug Duncan looks for rising personal incomes and an upbeat hiring trend through the end of 2016. That could help trigger resurgent economic growth.

“We expect homebuyers will benefit from improving job and wage growth, more favorable lending standards, and continued low mortgage rates through the rest of the year, with the 30-year fixed-rate mortgage rate projected to average 3.4% during the fourth quarter,” Duncan said in Fannie Mae’s August 2016 Economic and Housing Outlook.

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. 19, 2016

(Change from 8/18)

30-year fixed: 3.60% APR (-0.02)

15-year fixed: 3.05% APR (+0.02)

5/1 ARM: 3.49% 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.

How to Piece Together the Perfect Bank

People go onto social media to complain about a whole host of things: their partner, their sports team, their lunch. Add to that their banks.

Twitter and Reddit brim with colorful, and often unprintable, complaints about high fees, lousy rates and terrible customer service. While some of these people go on to switch banks, most resign themselves to believing this is just how it is.

But what if this weren’t just how it is? What would it take for customers to instead praise the places that hold their money?

Meet the perfect bank No-nonsense accounts

Some institutions bombard you with options in what can seem like one big ploy to distract you from the fact that none are especially good. Not so at the perfect bank, which is, above all else, efficient.

It offers a checking account, a savings account and a range of certificates of deposit. The checking account bears interest, and the savings account comes with an annual percentage yield of 1%, on par with what a few of the top high-yield online savings accounts offer.

No or low fees

What the perfect bank doesn’t have is as important as what it does have. It doesn’t hit you with a monthly maintenance fee, and it keeps other fees minimal. If you pay out-of-network fees at other banks’ ATMs, the perfect bank covers these up to $20 per month.

If you overdraw your account, instead of a flat — and hair-raisingly high — fee of around $34, the perfect bank charges you 10% interest on the overdrawn amount. So if you go over your balance by $100, and it takes you a week to bring your account out of the red, you’ll owe less than 25 cents in fees.

Excellent tools

The perfect bank listens to its customers. It keeps an eye on industry trends. It knows, for instance, that nearly half of all mobile phone owners with a bank account used mobile banking in 2015, up from 33% two years before. And it acts on that intel — its tech tools are top-of-the-line. It offers an app with mobile check deposit and a daily cap upward of $20,000, and its bill pay and money transfer features are free and easy to use.

The bank’s website doesn’t leave you with more questions — it actually answers them. It clearly describes its accounts and their accompanying fees in language that is clear and conversational. It still won’t make for the most enthralling reading, but at least it won’t leave you banging your head on your desk. You’ll find an informative FAQ page, as well as a live-chat service with wait times that rarely exceed a minute or two.

Familiar trappings

The perfect bank also offers a variety of loans and mortgages, and customers who have multiple accounts qualify for premium rates. When faced with thorny issues, you can visit one of its many branches.

Doesn’t that all sound grand? Alas …

Why one perfect bank doesn’t exist …

The perfect bank may be many things, but what it is not is realistic. Keeping the lights on at branches is expensive, and that can take a serious bite out of a bank’s margins. That’s partly why savings rates at most national banks are so low.

If a bank does offer exceptional rates, chances are it won’t have branches, a deal breaker for certain consumers. Or it may not have especially helpful online tools, which will send tech-savvy customers looking elsewhere. The list goes on. No matter how well a bank performs in one area, chances are it drops the ball somewhere else.

… but how you can build your own

The aforementioned accounts, services, rates and fees weren’t dreamed up and concocted in a laboratory by some financial Frankenstein; they exist at a few of the best banks and best credit unions in the country. Piecing together your own version of the perfect bank is totally doable.

You could, for instance, sign up for a high-yield online savings account while keeping a checking account at a brick-and-mortar institution that provides in-person assistance. Or, if you’ve repeatedly overdrawn your account, you could seek out a bank with low fees and pair it with one that has great tools to help you monitor your spending.

It’s up to you to determine which of these features is most appealing, but knowing that they’re available is a good start, and taking advantage of them will almost definitely make you a happier customer. Who knows, you might even get the urge to tweet about it.

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

How to Unlock Your Phone

Many smartphones purchased from U.S. wireless carriers come locked onto that carrier’s network. If you’re trying to move to a new carrier, and you want to use your current phone rather than buy a new one, you’ll have to unlock that phone before activating it on a competitor’s network.

If you’re with one of the four largest U.S. carriers — Verizon, AT&T, Sprint or T-Mobile — unlocking your phone to enable it to work on any network should be relatively simple.

Last year, all four companies agreed to unlock a carrier-subsidized phone if the customer has fulfilled the requirements of the accompanying contract or installment plan. The companies are required to notify users when their devices are eligible for unlocking.

So if you bought your phone from the carrier at full price without any subsidy, you can unlock it one year after the phone’s initial activation on the network. If you bought a subsidized phone on a two-year contract, and that contract is up for renewal, you can unlock the phone. If you paid for your phone on an installment plan and completed paying for that plan, you can unlock the device.

In all cases, your account must be in good standing, which means there should not be any outstanding bills or illegal usage. The four companies agreed to unlock phones of former customers as well.

If you meet these criteria, you can call your carrier to get your phone unlocked. We’ve listed the numbers for the major carriers below.

Keep in mind that even if your phone is unlocked, there’s no guarantee it will work on another carrier’s network. Check with the other company first to make sure that your phone is compatible with its network.

» MORE: Best cell phone plans

Is my phone already unlocked?

People sometimes search online to find a way to check if their phone already is unlocked. Some websites may charge a fee or ask for personal information to tell you whether your phone is unlocked. Don’t fall for it.

There’s one free, surefire way to know if your phone is unlocked — it’s a minor hassle and should take a few minutes.

Borrow a phone from a friend whose wireless carrier is different from yours. Pop out your SIM card and then put your friend’s SIM card into your phone. If your phone gets service, that means it’s already unlocked. If not, move onto the next section.

How do I unlock my phone?

Each carrier requires a phone call or a visit to its webpage to start the unlocking process. When you call, ask the customer service person to “network unlock” the phone for you.

Here are some numbers and websites to get you started. Read the full policies for details:

Verizon: Call 800-711-8300. Newer 4G LTE Verizon phones come with an already unlocked SIM card slot. Older Verizon phones that operate only on Verizon’s CDMA network may not be compatible with other networks, even if they’re unlocked. (Verizon’s unlocking policy.)

AT&T: You can start the process of unlocking your device on this webpage. (AT&T’s unlocking policy.)

Sprint: Call 888-211-4727 or start a webchat. Sprint’s network operates on CDMA technology, so even if its phones are unlocked, they may not work on other networks. But you might be able to move the phone to one of Sprint’s MVNOs — or mobile virtual network operators — such as Boost Mobile or Virgin Mobile. (Sprint’s unlocking policy.)

T-Mobile: Call 877-746-0909 or start a webchat. (T-Mobile’s unlocking policy.)

Boost Mobile: Call 888-BOOST-4U (888-266-7848). Boost’s network uses CDMA technology, which is not easily compatible with other networks. Even if your Boost phone is unlocked, you might not be able to take it to another carrier. (Boost’s unlocking policy.)

Cricket Wireless: Call 800-274-2538 or start a webchat. Cricket will unlock your phone six months after it’s activated. (Cricket’s unlocking policy.)

MetroPCS: Call 888-863-8768. MetroPCS will unlock your phone 90 days after its initial activation. (MetroPCS’s unlocking policy.)

U.S. Cellular: 3G phones can be unlocked by calling 888-944-9400; 4G LTE models may already be unlocked or need to be unlocked at a U.S. Cellular store. (U.S. Cellular’s unlocking policy.)

Virgin Mobile: Call 888-322-1122. Virgin operates on a CDMA network like Boost, so Virgin device’s may not be compatible with other networks. (Virgin’s unlocking policy.)

Even if your carrier isn’t listed here, the steps to get your phone unlocked generally are the same: Call the company, go to its website or visit a store. Unlocking your phone is key before moving to another carrier — and you might also get more money for an unlocked phone if you’re trying to sell it.

Stephen Layton is a staff writer at NerdWallet, a personal finance website. Email:

U.S. Olympians Face a Tax Bill for Their Medals

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Many of the country’s best athletes have given the United States big wins at this year’s Olympics, and the United States is going to give them something right back: a tax bill.

That’s right — winning an Olympic medal comes with a tax bill. The U.S. Olympic Committee pays athletes $25,000 for winning gold, $15,000 for silver and $10,000 for bronze; winners in the Paralympics get $5,000 for gold, $3,000 for silver and $2,000 for bronze.

In the eyes of the IRS, those winnings are taxable income. However, because the United States has a progressive tax system that taxes higher income at higher rates, the size of that Olympics tax bill depends on how much the athlete already makes.

Crunching the numbers

There are seven federal income tax brackets: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Single filers with a taxable income of $32,000, for example, landed in the 15% tax bracket; they paid just 10% on the portion of their income that falls into the lowest bracket — up to $9,225 — then 15% on income above that amount.

Thanks to big-time endorsement deals, some athletes are in really high tax brackets. Someone like gymnast Aly Raisman, for example, who won gold in London in 2012 and again this year in Rio, reportedly has signed endorsement deals over the years with Poland Spring, Ralph Lauren, Pandora Jewelry and Reebok. Someone like her could be all the way up in the 39.6% bracket, depending on how big the deals were, and in that case, a gold medal could generate a $9,900 tax bill.

But if an athlete has a regular job — and many do — he or she may only be in the 25% tax bracket, for example, and that could mean $6,250 in taxes for bringing home gold. Of course, none of this includes state income taxes.

In certain circumstances, athletes can deduct their costs for coaches, travel, equipment and other expenses, which could offset their taxable Olympic winnings. Nonetheless, those medal winnings still become part of the athlete’s income calculations when it comes time to tally federal and state taxes.

Looking ahead

Some states have moved to change their rules. In 2014, Indiana exempted Olympic winnings from state income tax, and California’s legislature is considering a similar course.

Legislation was introduced in Congress in 2012 and 2014 to stop the IRS from taxing Olympic wins at the federal level, but those efforts failed.

Last month, the Senate relit the tax-exemption torch by passing the United States Appreciation for Olympians and Paralympians Act, which would exempt Team USA members from federal taxation on their Olympic wins. The question now is whether the House will take the torch and run with it.

Until then, there may be another reason some U.S. athletes are crying on the medal podium at Rio: They’re doing the math.

Tina Orem is a staff writer at NerdWallet, a personal finance website. Email:

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