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Many people consider relocating when they retire to reduce their cost of living and make their savings last longer. When weighing the pros and cons of moving to another state, it’s important to consider the total tax burden there, including state and local taxes on retirement income, property tax, even sales tax. Some areas with a lower tax burden have a higher overall cost of living, which can cancel out any savings.

Below we look at the best states to retire in for taxes and how to tell if moving will be worth it.

Most Tax-Friendly States for Retirement

A number of states exempt Social Security income from state taxes. A smaller number offer a tax break on other retirement income, such as IRAs and 401(k) plans, private pensions, interest, dividends, and capital gains.

These are the 10 tax-friendly states for retirees, according to Kiplinger:

1.    Mississippi

2.    Tennessee

3.    Wyoming

4.    Nevada

5.    Florida

6.    South Dakota

7.    Iowa

8.    Pennsylvania

9.    Alaska

10.    Texas

But before you complete that change of address card, you’ll want to look at the bigger picture.


💡 Quick Tip: How much your home is worth impacts your property taxes, homeowners insurance, and net worth. Online tools can help you easily estimate home value whenever you need it.

Factors to Consider When Choosing the Best State to Retire In

When choosing where to retire, it’s wise to first consider issues like safety, access to healthcare, distance to friends and family, or living near other people of retirement age.

Make a list of features that are important to you in a retirement locale, and consider whether any of them could indirectly impact your cost of living, such as being close to friends and family.

Then look at the total cost of living in an area: housing, food, transportation, cultural activities, and other expenses. These retirement expenses generally have a bigger impact on one’s lifestyle than taxes.

Finally, to determine whether a state is tax-friendly for retirees, look at the following:

Does the State Tax Social Security?

Generally, Social Security income is subject to federal tax. But some states also tax Social Security above a certain income threshold, while other states offer tax exemptions for individuals in lower tax brackets.

The states that tax some or all Social Security benefits are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.

Does the State Tax Pensions?

Many states tax income from pensions, but 14 states do not. These states are: Alabama, Alaska, Florida, Hawaii, Illinois, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington and Wyoming.

And these 13 states do not tax income from 401(k) plans: Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax.

Recommended: Tax-Friendly States That Don’t Tax Pensions or Social Security Income

Other Taxes That Affect Retirees

When choosing the best state for you to retire in, it’s a good idea to look into sales tax and property taxes too. States that don’t charge sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon. On the other hand, New Hampshire has very high property taxes, reducing the benefit of no sales tax.

Recommended: When to Start Saving for Retirement

States to Avoid When Retiring

Choosing the best state to retire in sometimes means making compromises. If safety and healthcare access are top priorities, for instance, you may not get your ideal weather. But for many retirees, a high cost of living is a deal-breaker.

Here are the 10 states with the highest annual cost of living, according to a 2023 analysis conducted by GOBankingRates:

1.    Hawaii: $124,486

2.    Massachusetts: $100,325

3.    California: $92,829

4.    New York: $90,821

5.    Alaska: $83,995

6.    Maryland: $83,058

7.    Oregon: $81,786

8.    Vermont: $77,904

9.    Connecticut: $77,235

10.    New Hampshire: $76,766

Recommended: Avoid These 12 Retirement Mistakes

The Best States to Retire in 2024

As noted above, the best state to retire in will depend on an individual or couple’s budget, lifestyle, and values. But recent trends may help point you in the right direction.

These are the top 10 states that retirees are moving to, according to United Van Lines’ annual National Movers Study:

1.    Wyoming

2.    Delaware

3.    South Carolina

4.    Florida

5.    Maine

6.    Arizona

7.    New Mexico

8.    South Dakota

9.    West Virginia

10.    Alabama

If cost of living is your sole concern, the following are the 10 least expensive states, according to Bankrate:

1.    West Virginia

2.    Mississippi

3.    Iowa

4.    Alabama

5.    Missouri

6.    Oklahoma

7.    Indiana

8.    Kansas

9.    Wyoming

10.    Arkansas

States with the Lowest Tax Burden

An area’s total tax burden is the sum of all property taxes, sales taxes, excise taxes (which affect the price of goods), and individual income taxes. Below are the states with the lowest total tax burden for retirees.

States With the Most Millionaires

One way to measure the overall desirability of an area is the number of millionaires who live there. After all, millionaires can afford to live in states that have high-quality healthcare, nice weather, and diverse cultural offerings. These are not the cheapest states in terms of cost of living or taxes, but their popularity may help non-millionaires reevaluate their must-haves vs. nice-to-haves.

Does It Make Financial Sense to Relocate in Retirement?

For workers who already live in a state with moderate taxes, near family, and have a lifestyle they enjoy and can afford, there may not be any compelling reason to move. But for those looking to make a change or lower their retirement expenses, it may make financial sense to relocate.

Just remember that housing, food, transportation, and other expenses usually have a bigger impact on one’s retirement lifestyle than taxes.

Pros and Cons of Relocating for Tax Benefits

Lower taxes alone may not be enough to motivate someone to pick up and move house. Other factors should also support the decision.

Pros of Relocating for Tax Benefits

•   Potentially lower cost of living

•   Discovering a community of like-minded retirees

•   Possibly ticking off other boxes on your list

Cons of Relocating for Tax Benefits

•   Other living costs may cancel out the tax benefits

•   Moving costs are high, and the stress can be tough

•   Need to find another home in a seller’s market

💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

The Takeaway

The best state to retire in for tax purposes depends on an individual’s budget, lifestyle, and values. Some states with lower taxes for retirees can have higher housing and transportation costs, canceling out any tax benefit. A financial advisor can help you decide if saving on taxes is worth the expense and trouble of relocating.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What are the 3 states that don’t tax retirement income?

Nine states don’t tax retirement plan income because they have no state income taxes at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Illinois, Iowa, Mississippi and Pennsylvania don’t tax distributions from 401(k) plans, IRAs, or pensions. Alabama and Hawaii don’t tax pensions, but do tax distributions from 401(k) plans and IRAs.

Which state is the best state to live in for tax purposes?

Alaska has the lowest overall tax rates.

Which states do not tax your 401k when you retire?

Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax 401(k) plans when you retire.

Photo credit: iStock/Jeremy Poland

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL1023002

While the National Retail Federation is expecting record spending this Halloween of nearly $103 per person, revelers might be planning to focus more on Halloween savings this year. Inflation is scarier than ghosts.

Luckily, creativity is one of the hallmarks of this spooky season, and savings are easy to achieve. Here are 31 ways to do it.

Get Creative with Costumes

Costumes may be the best part of Halloween. You can “be” anyone or anything for one night. But costumes don’t have to be expensive. In fact, with a little creativity you can have a great costume for almost nothing.

1. Rent, Don’t Buy

Sites like Halloweencostumes.com and Costume.com rent theater-level costume styles for a fraction of the purchase price.


💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

2. Make Your Own

Extend Halloween fun by making your own costume. The internet is full of innovative ideas — homemade costumes that turn the wearer into jellyfish or fairies, or that create illusions, like someone sitting on a flying carpet.

3. Hit the Thrift Store

Thrift stores and surplus stores can not only provide the materials for a costume, they can also give you ideas: buy a wedding dress and become a ghostly bride or purchase a lab coat and become a mad scientist. You also might spot great savings on fall fashions while you’re at it.

4. Swap Costumes with Friends

Swapping costumes with friends is a great way to save money. And your outfit from last year may be someone’s dream costume for this Halloween.

5. Look For Sales

You can shop online at Halloween retailers and regular discount stores that sell costumes. Some may have sales to boost early purchases, or to clear out inventory as Halloween gets closer.

Decorate on a Budget

You would think pumpkins would be a super cheap decoration, but that’s not always the case. There are, however, some easy ways to haunt your house magnificently and take advantage of Halloween savings at the same time.

6. Become a Prop Master

There are lots of videos online explaining how to make everything from real-looking spider webs to authentic tombstones and creepy candles. Want to be eco-friendly? You can substitute toxic chemicals and unsustainable materials like Styrofoam with more sustainable materials.

7. Repurpose Last Year’s Decorations

Rework the decorations you used last year to create a whole new look. Give that mummy a hat, or have the witch you made last year hide behind a bush this time. If you’re crafty, a bit of paint or touch of glue can give your decor a whole new look.

8. Hit Garage Sales

Check out local garage sales and estate sales for decorations other people are ready to discard. You can often find some cool vintage treasures!

9. Trade Decorations with Friends

Tired of your old skeleton? You can switch it for a pal’s ghoul or light-up graveyard. You can offer up your old decorations on social media or just have everyone gather and trade like Halloween market.

10. Try the Discount Stores

Super discount stores often have great decorations for almost nothing. Dollar stores, surplus stores, Spirit Halloween stores, and others can provide garlands, Jack o’ Lanterns, skeletons — you name it.

11. Scan Thrift Stores

A thrift store is like a treasure hunt inside a shopping trip. You never know what you’ll find at a thrift shop but you’re sure to find inspiration for decorations!

12. Don’t Forget the Lighting

Lighting changes everything. Put a green or purple bulb in a lamp and a basic room is automatically made spooky, especially if you’re lighting something from below.

13. Make Creepy Shadows

With nothing more than some paper and scissors you can make scary silhouettes for the windows: a werewolf looking in, or a dagger-wielding murderer, for example. Put in front of a flashlight, they can even create some large, scary shadows for a spooky wall.

14. Scary Music Makes Ambiance

The most ordinary scene can feel terrifying when you add scary music. You can look online for options from classical pieces like Dance Macabre to soundtracks from horror movies complete with howling winds, distant church bells, and crows calling. There are even spooky tracks available on streaming services like Spotify.

15. Look for Pumpkin Deals

Most Jack O’ Lantern pumpkins cost less than $10, but if you need more than just one, the pumpkin costs can mount quickly. Some retailers have special offers on pumpkins that can really squash your spending. One way to potentially spot good deals online is to follow retailers on social media.

16. Grow Your Own

It’s too late this year, but you can grow your own pumpkins next year. You may be able to grow other decorations to use for fall, like corn husks and twisted tree branches that can later be made into haunted forests and witches’ brooms.

17. Shop in November

Everything Halloween related goes on deep discount the day after Halloween to make room for the upcoming holidays. Many people take advantage of these closeout sales to save money while also stocking up on decor for the following year. Don’t forget about websites — there are often good deals to be found online.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

Low-Cost Ways to Celebrate Halloween

Haunted houses and ghost tours can cost as much as $50 per person, but there are a lot of ways to celebrate Halloween without spending a scary amount of money. Try hosting your own party, where you can save on food by shopping the sales, using coupons, and having potlucks.

18. Look for Coupons

Coupon sites offer discounts on haunted houses and other spooky activities. Just make sure you read the fine print. Some coupons may require you to visit during the week or might only be valid for specific shows.

19. Show a Scary Movie

Hold a movie marathon where your friends and family create the lineup by bringing their favorite scary films. Or tune in the Halloween classics on television. Serve popcorn and inexpensive Halloween candy. And if someone has a projector, you can show it outside and make it that much spookier.

20. Host a Costume Contest

Consider inviting the kids to dress up and compete to create the scariest, funniest, and even most creative costumes using items they already have at home. The prizes don’t need to be expensive, just something from a dollar store.

21. Carve Jack-O’-Lanterns

Have friends bring their own pumpkins and have a jack-o’-lantern carving party. You can even roast the seeds and serve them as a snack.

22. Host a Scary Makeup Party

Have a get-together where you paint your faces with inexpensive makeup to look like werewolves, vampires, and banshees. Watch some online tutorials for inspiration as you get into the Halloween spirit.

23. Tell Ghost Stories

This is a great activity to do in the dark, maybe even around a fire with some s’mores. Have everyone come with a ghost story to share.

24. Have a Seance

Also great to do in the dark near a glowing fire: Use a Ouija board or other tools to speak to the departed. It’s extra fun if one or two people hide out and make ghost noises.

25. Have a Haunted House

You needn’t put on a big production. Simple things can bring a lot of spooky fun like hanging old pictures and telling ghost stories about them while leading participants around darkened rooms. Play scary recordings and have someone hiding behind a few corners to jump out.

26. Check Out Local Haunts

Do you have a house, an old church or another place in town that’s known to be haunted? How about a neighborhood that really goes to town on the decorations? If so, Halloween is the perfect night to go visit.

27. Check Out Local Free Events

Look for local churches, malls, or schools that are putting on free Halloween parties or fall festivals for the community. Consider it ready-made fun.

Save on Treats

Halloween just isn’t Halloween without the candy. But you don’t have to spend a fortune to keep you and your trick-or-treaters happy.

28. Buy in Bulk

Get giant bags of candy from club stores like Costco or Sam’s Club. They can provide you with enough candy for the whole neighborhood — and a party at home.

29. Visit Low-Cost Retailers

Low-cost retailers like Walmart and Target often have special large bags of candy that may be on display in the holiday aisle rather than the regular candy aisle. If you can’t find it, ask for help.

30. Use Coupons

You can look for retailer coupons that give you a few dollars off your candy purchase, or even offer a buy one get one free deal.

31. Focus on the Fun

On Halloween, people are ready to be tricked, to be scared, and to believe the illusions that give them a little thrill of mystery. Instead of worrying about impressing others, focus on having good experiences and creating lasting memories.

The Takeaway

Halloween is about the kind of fear that gives you goosebumps, not sleepless nights. With today’s inflation, and a need to stretch dollars further than before, it might be a lot less scary, in a good way, to focus on your savings goals this year.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

Photo credit: iStock/Talaj

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL1023001

A preferred provider organization (PPO) is a type of health care plan that offers lower out-of-pocket costs to members who use doctors and other providers who are part of the plan’s network.

These preferred providers have signed onto the network at a lower negotiated rate than they might charge outside of the network.

PPOs also offer members the flexibility to see providers outside of the plan’s network, although they will most likely pay more in out-of-pocket costs to do so.

To learn more about PPOs, and how this type of plan compares to other health insurance options, read on.

How Does PPO Insurance Work?

When you join a PPO health plan, you’re joining a managed care network that includes primary care doctors, specialists, hospitals, labs, and other healthcare professionals. PPO networks tend to be large and geographically diverse.

If you see a preferred provider, you will likely pay a copay, or you might be responsible for a coinsurance payment (after you meet the plan’s deductible).

While you are free to see any health care provider whether or not they are in the PPO network, if you see a provider outside of the network, you may pay significantly more in out-of-pocket costs. In return for flexibility, large networks, and low in-network cost sharing, PPO plans typically charge higher premiums than many other types of plans.

PPOs are a common, and often a popular, choice for employer-sponsored health insurance.

Recommended: Common Health Insurance Terms & Definitions

What Are the Costs of Going Out of the PPO’s Network?

If you see a provider who is not part of the plan’s network, you will likely be expected to bear more of the cost. PPOs typically use what’s called a “usual, customary and reasonable” (UCR) fee schedule for out-of-network services.

Insurers calculate UCR fees based on what doctors in the area are charging for the same service you were provided.

If your doctor charges more than what your insurance company determines to be usual, customary, and reasonable, you most likely will be charged for the difference between the amount charged for the service and the amount covered by your insurer.

Depending on where you live and the service you received, this difference could be significant. It may also come as a surprise to policyholders who assume their medical costs will be covered and don’t fully understand the distinction between in-network and out-of-network providers.

A good way to avoid surprise charges with a PPO (or any health plan) is to talk to your provider and your insurer before you receive treatment about the total cost and what will be covered.


💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

How PPOs Compare to Other Types of Health Care Plans

PPO plans are most often compared with health maintenance organizations (HMOs), another common type of managed care health plan.

HMOs typically offer lower premiums and out-of-pocket costs than PPOs in exchange for less flexibility.

Unlike a PPO, HMO members typically must choose a primary care physician from the plan’s network of providers. Care from providers out of the HMO network is generally not covered, except in the case of an emergency.

Also unlike a PPO, an HMO’s network of providers is usually confined to a specific local geographic area.

Another key difference between these two types of plans: HMO members typically must first see their primary care doctor to get a referral to a specialist. With PPOs, referrals are not usually required.

PPOs are also often compared to point of service (POS) plans.

POS plans are generally a cross between an HMO and a PPO. As with a PPO, POS members generally pay less for care from network providers, but may also go out of network if they desire (and potentially pay more).

Like an HMO, POS plans require a referral from your primary care doctor to see a specialist.

PPOs (as well as HMOs and POS plans) are very different from high deductible health plans, or HDHPs.

HDHPs charge a high deductible (what you would have to pay for health care costs before insurance coverage kicks in).

This means that you would need to pay for all of your doctor visits and other medical services out of pocket until you meet this high deductible. In return for higher deductibles, these plans usually charge lower premiums than other insurance plans.

You can combine a HDHP with a tax-advantaged health savings account (HSA). Money saved in an HSA can be used to pay for qualified medical expenses.

HDHPs are generally best for relatively healthy people who don’t see doctors frequently or anticipate high medical costs for the coming year.

Recommended: Beginner’s Guide to Health Insurance

What Are the Pros and Cons of PPO Insurance?

As with all health insurance options, PPOs have both advantages and disadvantages. Here are a few to consider.

Advantages of PPOs

•   Flexibility. PPO members typically do not have to see a primary care physician for referrals to other health care providers, and they may see any doctor they choose (though they may pay more for out-of-network providers).

•   Lower costs for in-network care. Out-of-pocket costs, such as copays and coinsurance, for care from in-network providers can be lower than some other types of plans.

•   Large provider networks. PPOs usually include a large number of doctors, specialists, hospitals, labs, and other providers in their networks, spanning across cities and states. As a result, network coverage while traveling or for college student dependents can be easier to access than with more restricted plans.

Disadvantages of PPOs

•   High premiums. In return for flexibility, PPO members can expect to pay higher monthly premiums than they may find with other types of plans.

•   High out-of-pocket costs for out-of-network care. Depending on where you live, the treatment you receive, and how your insurer calculates “usual, customary, and reasonable” fees, you may find you are responsible for a large portion of the bill when you receive care outside of the PPOs network.

•   Might be more insurance than you need. If you rarely see doctors and wouldn’t mind potentially switching doctors, you may be able to save money by going with an HMO or a HDHP.

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

PPOs are a popular type of health plan because of the flexibility, ease of use, and wide range of provider choices they offer. PPO networks tend to be large and varied enough to include a patient’s existing doctors. If not, members still have the option of going out-of-network and receiving at least some coverage from a PPO. PPO members pay for this flexibility, however.

PPOs typically come with higher premiums, along with extra costs associated with out-of-network care. That can be prohibitive for many consumers.

Your employer’s benefits department or an experienced insurance agent or broker can help you compare PPOs to other types of health care plans and determine which choice is right for your health care needs and your budget.

Before choosing a plan, it can also be helpful to track your spending for a few months to see how much you are currently spending on medical care. This can help you ballpark costs for the coming year and make it easier to compare plans.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL0923001

Exchanging one currency for another is something you may need to do if you’re traveling internationally. Depending on your choice of destination, your money may go further in some countries than others if you’re able to take advantage of favorable exchange rates.

How much is a dollar worth outside of the U.S.? To answer that question, it helps to understand how exchange rates work and the various factors that influence currency values.

Types of Exchange Rates

An exchange rate is the rate at which you can exchange one currency for another. Currency exchange rates are influenced by a number of factors, including the state of the economy in a particular country, interest rates, and unemployment rates. There are generally three types of exchange rate systems that can determine the value of currency.

•   Free-floating. In a free-floating or flexible exchange rate system, currency values are determined by supply and demand. Federal governments and central banks don’t participate in the system, since it’s self-regulating. The United States is the closest example of what a free-floating exchange system looks like in action.

•   Fixed exchange. Fixed or pegged exchange rate systems rely on the government to set exchange rates between different currencies. In this system, the weaker currency is fixed, or pegged, to the stronger one. A fixed exchange encourages stability in currency values, but it can leave governments with less room to maneuver if economic disruption occurs.

•   Managed float. Managed float exchange systems combine some of the features of free-floating and fixed exchanges. In this type of arrangement, central banks play an active role in the buying and selling of foreign currencies.

Understanding currency exchange rates is important for determining the purchasing power of a dollar. A currency’s foreign exchange rate reflects its price, while its value determines how much purchasing power it holds. In other words, currency values dictate just how far your money goes.


💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

Exchange Rate Calculation

Calculating currency exchange rates is a fairly straightforward process. You’ll take the starting amount of currency that you have and divide it by the amount of currency you’d end up with if you exchanged it. Here’s what the formula looks like:

Original currency amount / Ending currency amount = Exchange rate

For example, say that you’re planning a trip to Europe and you want to know what the exchange rate is from USD to Euros. If you were to exchange $100 in U.S. currency and get 90 euros in exchange, your exchange rate would be 1.11.

$100 USD / $90 EUR = 1.11

You can also do the calculation in reverse, dividing your current currency by the exchange rate instead. That would tell you how much money you could expect to get when exchanging currency for a different one. If you’re curious about what a country’s exchange rate is while you’re traveling, that information is usually readily available at banks, airports, or currency exchange shops.

Factors That Affect Currency Value

As mentioned, currency value is how much purchasing power your money has. There are numerous factors that can influence a currency’s value and how much it fluctuates over time.

•   Inflation. Inflation refers to price increases for consumer goods and services over time. When inflation rises, purchasing power decreases. Knowing how to find the inflation rate and what’s considered normal can help with gauging currency values at a given point in time.

•   Interest rates. Governments can use interest rate policy to direct the economy and monetary policy. When a government raises rates, that can increase its currency’s value, as foreign investors may be attracted to the higher rates their money can earn on deposit at banks. Compounding interest at consistently higher rates directly correlates to the time value of money.

•   Gross domestic product (GDP). Economic indicators, including gross domestic product, can influence currency values. The stronger a country’s economy is perceived to be, the more value its currency may hold.

•   Unemployment rates. Unemployment rates are another economic indicator that can sway currency values higher or lower. When unemployment is low, that can be a sign of a solid economy, while higher unemployment rates may suggest a weaker or weakening economy.

•   Government debt. How government debts are managed can also impact currency values. If a government is struggling to pay its financial obligations, that could cause a drop in currency values, especially if the government decides to print more money to cover its debt obligations.

•   Political climate. The political conditions of a country matter when determining currency values. Countries that are politically stable are less likely to see huge fluctuations in currency values compared to ones that are going through significant upheavals or periods of civil unrest.

Understanding what affects currency values is important if you’re saving or investing and keeping some of your assets in cash. Specifically, it matters as it relates to the store of value.

What is store of value? In simple terms, it’s an asset that holds its value well over time. Gold and other precious metals are examples of potential stores of value, as they tend to be more insulated against negative economic events that could affect what currencies are worth.

Stocks can also be potential stores of value, though it’s important to consider risk and what you’ll pay for them. Dollar-based investing can make it easier to invest in stocks in smaller increments if you’re worried about losing value. Learning how dollar-based investing works can help you to decide if it might be right for you.

Cash, meanwhile, is usually considered a poor store of value as it can quickly lose purchasing power when currency values drop. Curious about how inflation might be affecting your personal spending power? Using an hourly wage inflation calculator can give you insight into just how much your paychecks are worth over time.

Recommended: How to Calculate Stock Profit

Countries Where the US Dollar Is Strong

When the U.S. dollar is strong, it means that it’s rising in value compared to other currencies. A strong dollar can be used to buy more foreign currency. That’s a good thing if you’re traveling and want to get the most value for your dollars when exchanging for local currency.

Here are some of the countries where the U.S. dollar is strongest as of August 21, 2023.

•   Peru: 1 USD = 3.72 Peruvian sol

•   Mexico: 1 USD = 17.04 Mexican peso

•   Japan: 1 USD = 146.39 Japanese yen

•   Egypt: 1 USD = 30.90 Egyptian pound

•   Chile: 1 USD = 869.25 Chilean peso

•   Argentina: 1 USD = 350.02 Argentine peso

•   Colombia: 1 USD = 4,063.33 Colombian peso

•   Russia: 1 USD = 93.75 Russian ruble

•   Philippines: 1 USD = 56.46 Philippine peso

•   Cuba: 1 USD = 23.98 Cuban peso

From an investment perspective, holding foreign currency debts when the dollar is strong can be a positive thing. If the value of your home country’s currency increases while the debt’s currency value declines, that can increase overall net worth.

Recommended: What Is My Liquid Net Worth?

Countries Where the US Dollar Is Weak

When the U.S. dollar is weak, it means that its value is in decline in comparison to other currencies. So if you’re exchanging U.S. dollars for a stronger foreign currency you won’t have as much purchasing power.

In terms of countries where the dollar is weakest, the list generally includes any countries that use the euro. The current exchange rate from U.S. dollars to euros is 1 USD = 0.92 EUR. Countries that use the euro include:

•   Austria

•   Belgium

•   Croatia

•   Cyprus

•   Estonia

•   Finland

•   France

•   Germany

•   Greece

•   Ireland

•   Italy

•   Latvia

•   Lituania

•   Luxembourg

•   Malta

•   Netherlands

•   Portugal

•   Slovakia

•   Slovenia

•   Spain

If you’re planning to travel to any of these countries, it’s important to know the current exchange rate and what you’ll pay in currency conversion fees to trade out your dollars for euros.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

Knowing how much a dollar is worth in different locations can help you to plan your next vacation. You might also be interested in currency exchange rates if you’re interested in trading foreign currencies as part of your investment strategy. Whether you’re spending money at home or abroad, it’s important to keep track of where your cash is going.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What country is a dollar worth most?

Some of the countries where a dollar is worth the most money include Mexico, Peru, Chile, and Colombia. It’s possible to exchange dollars for local currency in these countries at favorable exchange rates.

Is the US dollar worth the most in the world?

The U.S. dollar is the world’s reserve currency and is the most widely used currency for global trade. That does not mean, however, that it’s the world’s top currency in terms of value. Other currencies may surpass the value of the U.S. dollar depending on economic conditions and the supply-demand environment in the foreign exchange market.

How much is $1 in Mexico right now?

How much is a dollar worth in pesos? It depends on which country you’re in, as several countries have their own version of the peso. If you’re specifically asking how much is a dollar worth in Mexico, $1 will get you 17.04 Mexican pesos as of August 21, 2023.

Photo credit: iStock/Foremniakowski

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Finding an affordable apartment you love in the neighborhood of your choice can feel like you’ve won the lottery. But before you can call the movers, you’ll need to take the first step and go through the screening process. In most cases, this means filling out a rental application.

Rental applications are a way for landlords to determine whether or not a potential tenant will be responsible when it comes to paying the rent. In order to do so, the property owner or management company may also ask for a credit reference. This is a person, company, or document that provides details about your credit history.

There are different types of credit references, and your landlord may require more than one to ensure you’ll be a no-risk, trustworthy tenant.

What Are Credit References on a Rental Application?

Along with asking for your name, address, employment information, and past residential history on your application, a landlord will want to make sure you regularly meet your financial obligations. After all, a landlord or property manager doesn’t want to take a risk on someone who doesn’t pay their monthly rent in full and on time. This is where a credit reference comes into play.

Credit references are documents, businesses, or individuals that can verify your credit history. Similar to character references a prospective employer might request before they hire you, a credit reference refers to a person or a company with whom the applicant has had a positive financial relationship.

The credit reference provides the landlord with details about an applicant’s financial situation, such as the length of the financial dealings with the entity, the applicant’s payment record, and whether they’re in any debt.

How Does a Credit Reference on a Rental Application Work?

When you decide upon an apartment rental, the first thing you need to do is notify the landlord or property manager as soon as possible, especially if you live in a city where rental competition is stiff. If the place is still available, you’ll be asked to submit a paper or electronic rental application.

Depending on the landlord or property manager’s application process, you may be asked to provide credit references on the form. This could entail listing any current creditors’ names and contact information, detailing the amounts owed on any loans, or answering whether or not you’ve ever declared bankruptcy.

After you’ve completed the application, the landlord will typically contact the credit sources you provided. It’s best to be honest when filling in any past and present financial information on the application. If not, chances are the landlord will find out on their own during the credit reference check. Not being truthful at the start can be a glaring red flag for the landlord, increasing the likelihood they’ll reject the application.

Types of Credit References

There are several kinds of credit references a landlord may use to confirm you’re in good financial shape and will be able to afford the monthly rent. Financial agreement documents such as asset documentation, credit reports, and character reference letters are some things landlords often request.

Read on to learn about three types of credit references a landlord may require:

Credit Report

Credit reports — a credit check used by employers, lenders, and landlords to gauge how responsible a person is when it comes to managing credit and handling their financial obligations — are the most commonly used credit reference. These statements detail someone’s credit history, including their payment record, current account balances, and any outstanding debts, including those referred to a collection agency.

There are three major credit bureaus that issue credit reports. A landlord may use one or two of these credit reporting agencies or order a more comprehensive tri-merge credit report, which culls data from all three companies.

As part of their credit check, landlords may request your FICO score or, less commonly, your VantageScore. In either case, this is a three-digit number that reflects how dependable you are when it comes to paying back borrowed debt. Both companies use a 300-850 credit score range.

Landlords typically look for a score of 600 or above. Depending on whether they pull your credit score through FICO or VantageScore, where the number lands in the 600 plus range may be considered a good or fair credit score. For instance, FICO’s fair credit scores are between 580 and 669, while their good credit range is between 670 and 739. VantageScore’s fair credit scores range from 601 to 660, and good credit falls between 661 to 780.

According to the Fair Credit Reporting Act, a landlord cannot run a credit check without your prior authorization. And, if you do give permission to run a credit check, the landlord may charge you an additional fee, so be sure to check your rental application carefully.


💡 Quick Tip: Check your credit report at least once a year to ensure there are no errors that can damage your credit score.

Asset Documentation

Asset documentation gives proof of a person’s financial assets and is considered a highly effective type of credit reference. Landlords may want to know if an applicant has back-up funds for rent in case there are unseen circumstances, such as job loss.

A landlord may ask you to provide certain documents, such as several months’ worth of statements from your current checking, savings, retirement, and/or investment accounts. In order to obtain these records, you’ll need to ask the financial institutions who manage your assets to provide them to the landlord or property management company, unless you can supply them on your own.

Recommended: Do Banks Run Credit Checks for a Checking Account?

Character and Credit Reference Letters

Professional and personal references can be a great option for vetting someone’s financial reliability. While a landlord might be more interested in your credit score and asset documentation, a character reference letter may help give you an edge.

Character reference letters can come from a previous landlord, employer, faith leader, professor, or an entity you’ve previously done business with, like a utility company. Ideally, you’ll want to get a letter from any source that can speak to your reliability and conscientiousness and explain why you’d be an ideal tenant.

How Do Credit References Impact Rental Applications?

Credit references can have a significant impact on whether or not you get the apartment. If the landlord reviews your credit history and has any concerns about your income to debt ratio or low credit score, they can turn you down.

On the flip side, seeing a stellar record of paying your bills on time and verifying you’ve been a trustworthy tenant in the past can help convince a landlord you’re the right choice.

Examples of Credit References

•   Letters of reference from any former landlords stating you’ve paid your rent routinely and have had an issue-free relationship

•   A copy of your credit report

•   Checking or savings account bank statements

•   Documentation from a utility company listing a positive payment history

•   Character reference letters from personal or professional acquaintances

When You Need Credit References on an Apartment Application

Generally, landlords will want credit references when considering whether to approve an application of a first-time renter, someone who makes a lower salary, or a person who has no credit history. In such scenarios, the renter will want to consider having a guarantor or cosigner on the application.

Guarantors or cosigners are people who have good credit and can sign the lease with you. A cosigner can be a parent, family member, or friend who agrees to take legal responsibility for paying your rent if for some reason you can’t.

How Long Does It Take to Process a Rental Application?

In most cases, rental applications are approved within 24 to 72 hours. Property management companies that oversee larger complexes and have ample staff can process applications faster than a solo landlord.

It may take longer to approve an application when, for example, you’re applying with a cosigner or if you’re renting with roommates. That’s because there are more people involved, more credit references to gather, and more credit reports to pull.

Tips for Credit References

Prepare in Advance

You may not be initially required to provide credit references on your application, but that doesn’t mean a landlord won’t ask for it later. Get your ducks in a row by gathering any necessary paperwork and reaching out to anyone you may want as a character reference.

If you think you’re going to need a cosigner, start a conversation with that person so they’re not totally blindsided or asked to commit at the last minute.

Check Your Credit Report

Running and reviewing your credit report can tip you off to any errors, indicate any fraudulent activity, and provide your current credit score. You can also resolve any credit issues that might give a landlord a reason to reject your application.

According to the Consumer Financial Protection Bureau, you are entitled to request one free copy of your credit report every year from each of the three credit bureaus. You can order your free report by visiting AnnualCreditReport.com . Note that all three credit report providers are offering free weekly online credit reports until the end of 2023.

You can also sign up for credit score monitoring through SoFi and get insights on your financial health and credit.

Choose Your Character References Carefully

Make sure the people you’re asking to vouch for your dependability are those you trust, know well, and will be able to communicate clearly what makes you a good renter.

Don’t Be Afraid to Give the Landlord a Head’s Up

Sometimes a lower credit score or a record of late or missed payments may not be your fault. Certain life events can cause financial upheaval, such as being a victim of identity theft, getting laid off, or abruptly losing a roommate, leaving you responsible for the entire rent.

Writing a letter to the landlord offering an explanation for the spotty record — and attesting you’re working hard to improve your credit — may save you from being rejected outright.


💡 Quick Tip: An easy way to raise your credit score? Pay your bills on time. Setting up autopay can help you keep your account in good standing.

The Takeaway

When applying for a rental apartment or home, providing solid credit references allows a landlord or a property manager to determine your ability to pay the rent in full every month. Credit references can impact whether or not your application is approved. Knowing what types of credit references you may have to produce — and taking care to monitor your credit report and clean up any issues — can help boost your odds of landing that coveted home.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What should I put as a credit reference?

Your landlord will typically be the one to dictate what credit references they want. But if they only run a credit report, you may want to send along anything else that could bolster your financial worth, such as savings and investment account statements.

What is an example of a credit reference for an apartment application?

Examples of credit references may include your bank, previous landlords, companies whose bills you pay regularly, supervisors, or your faith leader.

How do you get a credit reference?

You may be able to obtain a credit reference by requesting a copy of your credit report, authorizing a credit check, or asking for a character reference letter.

How many credit references do you need?

It depends on the landlord. While some won’t ask for any credit references, others will require one or more. To be safe, it’s probably a good idea to plan for at least two

Can you buy a credit reference?

No. Credit references need to be earned by capably managing your money, paying your bills, and having minimal debt. While you can pay a credit repair company to go over your credit report and dispute any errors on your behalf, you still have to do the heavy lifting of diligently meeting your overall financial responsibilities.

Photo credit: iStock/FluxFactory

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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