Money Management

If inflation comes back in 2024, the Fed might not cut interest rates. See what this means for your decision to open a CD or a savings account. [[{“value”:”

One of the best reasons to open a certificate of deposit (CD) in 2024 is that interest rates are high and they might be about to go lower. Many financial industry experts agree that the Federal Reserve is likely to cut interest rates in 2024. The best CDs are offering annual percentage yields (APYs) of over 5.00% (as of Feb. 27, 2024). So if the Fed cuts interest rates later this year, that means now could be a good time to lock in a high yield on a certificate of deposit.

But no one knows for sure if the Fed really will cut interest rates, or how soon, or by how much. Just like knowing when is the best time to buy stocks, no one can be 100% sure that now is the best time to buy a CD.

Let’s look at a few reasons why trying to read the minds of the Federal Reserve Board is a bad move for your personal finances.

1. Inflation is not done yet

The Fed raised interest rates throughout 2022 because it was trying to drive down high inflation by reducing the supply of money and making it more expensive for people and businesses to borrow. Inflation came down during the second half of 2023 compared to the highest price increases during 2022.

But according to recent consumer price data, the Fed’s work of fighting inflation might not be done. New inflation data from January 2024 showed that consumer prices rose slightly more than expected. This could mean that inflation is not over. If consumer price data for February 2024 or March 2024 shows that inflation is rising again, or not coming down as fast as the Fed would like, the Fed might not cut interest rates anytime soon.

What does this mean for opening a CD in 2024? If you think the Fed is about to cut interest rates and you want the highest possible APY on a CD, opening a CD in February or March 2024 could be a good move. But if the Fed doesn’t cut interest rates — or it even raises interest rates in 2024 — you might miss out on better APYs.

2. The Fed might raise — not lower — interest rates in 2024

Ever since the end of 2023, most Wall Street analysts and economists have believed that the Fed will cut interest rates in 2024. But if inflation continues to climb in the spring of 2024, that could cause the Fed to raise interest rates again. Experts cited by Bloomberg on Feb. 20, 2024 said that they see a 15% to 20% chance that the next move by the Fed could be a rate increase instead of a cut.

What does this mean for opening a CD in 2024? If the Fed raises interest rates after you’ve locked up your money in a CD, you could miss out on higher APYs. Some banks offer a special type of CD called a “bump-up CD,” where you can increase your CD’s APY if interest rates go up.

However, bump-up CDs typically pay a lower APY than you could get from a standard CD. For example, Synchrony Bank offers a bump-up CD with a 24-month term and 3.90% APY (as of Feb. 27, 2024). But Synchrony’s 24-month standard CD pays 4.20% APY. Do you think interest rates will go up enough in the next two years to be worth giving up that 0.30%?

You might also consider opening a shorter-term CD. The best 3-month CDs offer 5.00% APY or higher (as of Feb. 27, 2024). This would give you more flexibility to move your money to a higher-yielding account in case the Fed hikes interest rates in the next few months.

3. High-yield savings accounts are flexible and paying great APYs

I’m not opening any CDs in 2024 no matter what the Fed does next. That’s because I’m at a point in my life where I value the flexibility of a high-yield savings account (or money market account) more than I value the slightly higher APY of a CD. I don’t want to lock up my money in a CD. If the Fed cuts interest rates in 2024 and my savings account APY goes down, I don’t care — because I need my money in a flexible, 100% accessible bank account.

And if the Fed surprises everyone by raising interest rates in 2024, I still don’t care. I’ll just keep earning that higher APY on my savings account. And I don’t have to waste time or effort trying to read the tea leaves or time the market.

What does this mean for opening a CD in 2024? Keep in mind that even the best CDs don’t pay much better APYs than the best high-yield savings accounts. For example, as of Feb. 27, 2024, the best high-yield savings account is offering 5.32% APY, and you don’t have to lock up your money for months or years. Can your CD beat that?

Bottom line

Don’t assume that CDs are the only way to grow your savings. The Fed might cut interest rates, but no one knows for sure, and economic data can be unpredictable. Unless you’re a professional bond trader, there’s not much to be gained by trying to out-guess the Fed. Make the choice that’s best for your personal finances. High-yield savings accounts are a safe, flexible option to keep your cash, with APYs that sometimes beat the best CDs.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Synchrony Financial is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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With tax season almost on our doorstep, there are moves you can make to lower your bill. See how tax-advantaged accounts could save you over $1,000 in taxes. [[{“value”:”

If you only make one tax-reducing move this year, be sure to maximize your contributions to tax-advantaged accounts. You don’t need to be a tax guru to do this. As long as you understand what tax bracket you’re in and what retirement contributions you’re making, you could slash the amount you pay to Uncle Sam.

Contribute to tax-advantaged accounts

Tax-advantaged accounts can be a great way to lower your tax bill. Let’s say you’re a 45-year-old single taxpayer who does not pay into a company retirement plan. If you earn $60,000, you’d be in the 22% tax bracket. By putting $6,500 into a tax-deferred account such as a traditional individual retirement account (IRA), you could cut your 2023 tax bill by $1,430.

The good news is that, unlike other ways to cut your taxes, you can do this right up until the April 15 tax deadline. Here are some common tax-advantaged accounts to consider.

1. Traditional and Roth IRA accounts

IRA contributions are a popular way to reduce your tax liability. There are several different types, but the most common are traditional and Roth IRAs.

Here’s how they work:

Traditional IRA: Payments to a traditional IRA can reduce your taxable income now. You will pay taxes on the money when you take it out in your old age. Check out our best IRA accounts.Roth IRA: A Roth IRA won’t reduce your tax bill today, but could lower your taxes later in life. You contribute after-tax dollars and then withdraw money tax-free once you’ve retired. Check out our best Roth IRA accounts.

The biggest downside to IRA contributions versus putting money into a brokerage account is that you can’t easily get at those funds until you’re 59 1/2. There are also limits on how much you can put into IRAs. The total contribution you can make to your traditional and Roth IRAs combined is $6,500 for the 2023 tax year, or $7,500 for those over age 50.

Actionable takeaway

Use an IRA calculator, tax software, or a financial advisor to work out how much you might contribute to an IRA and which account type makes the most sense for you. It’s also worth finding out if you qualify for the saver’s credit.

The saver’s credit could be worth $1,000 ($2,000 for married couples)

If you earn less than $36,500 as a single filer or $73,000 as a married couple in 2023, you could earn a tax credit by making retirement contributions. The credit amount depends on how much you put into retirement accounts and how much you earn.

While the tax reductions mentioned above reduce the income you pay tax on, a tax credit directly reduces your tax bill. So if you owed $5,000 in taxes and qualified for a $1,000 credit, your bill would shrink to $4,000. It is a non-refundable credit, so it won’t take your bill below zero.

2. Health savings account (HSA)

If you have a high-deductible health plan, you may be able to reduce your tax bill by putting money into your HSA. You can invest the money in it, and there are no rules that say you have to use it within a certain timeframe.

There are three tax advantages to HSA contributions:

You won’t pay taxes on the money you contribute.You won’t pay taxes on any interest or returns you earn.You won’t pay taxes when you take the money out, as long as you use it for medical expenses.

HSAs aren’t for everybody. For starters, you need to have an HSA-eligible health plan. These come with high deductibles, which can translate to lower monthly premiums. The idea is that you put money into an HSA so you can pay higher upfront costs when needed.

This type of account may not make sense if you regularly visit the doctor or need medical care. If you’re enrolled in Medicare or covered by a spouse’s medical plan, you won’t qualify for an HSA.

Actionable takeaway

Find out whether you’re eligible to make HSA contributions and whether this type of health insurance might make sense for you. You can open an HSA with many banks and stock brokers. If your health insurance comes through work, talk to your HR department.

The maximum individual contribution to an HSA for the 2023 tax year is $3,850. The family coverage maximum is $7,750.

Understanding 401(k)s

If your company offers a 401(k) plan, it does reduce your tax bill, but it isn’t the same as, say, an IRA. The money is taken out of your paycheck directly so you can’t use contributions to reduce your tax bill now. The contribution limits are much higher, and some employers will match what you put in.

You can have an IRA and a 401(k). But if you or your spouse are contributing to a work 401(k), you may not be able to claim the full IRA tax deduction. For example, a single filer who has a work retirement plan and earns more than $73,000 would only get a partial IRA tax deduction on the 2023 tax year.

Bottom line

With a bit of planning, there are lots of ways to reduce your tax bill, leaving you more money for other financial goals. But with tax season just around the corner, your options are more limited. Find out if maxing out your tax-advantaged contributions today could dramatically lower your 2023 tax bill.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Getting auto insurance quotes may seem straightforward, but there’s more to it than many people think. Here’s what drivers should know. [[{“value”:”

Shopping around for auto insurance can save the average driver anywhere from 15% to 40% on premium costs, which is a lot of extra money motorists can keep in their bank accounts.

The good news is, it’s possible to get multiple quotes for auto insurance on the internet to see which policies are most affordable. But while it’s absolutely doable for everyone to do this — and it’s important for everyone to take this step — there’s a little more to it than many people think.

As a financial writer, I get dozens of auto insurance quotes every year for my job. During this process, I’ve learned a lot about making it easier to shop around for affordable insurance. These simple tips can help streamline the process and get more accurate insurance quotes to make the best coverage choices.

1. You’ll have to provide a lot of information

The first thing to know is that getting accurate auto insurance quotes requires motorists to provide a lot of information. Insurers need to know certain key details to offer accurate pricing.

Generally, most insurance companies will ask about:

AddressMarital statusThe driving history of anyone who will be on the policy — including details about when they got their license and if they have been involved in an accident or gotten a speeding ticketVehicles that will be on the policyCurrent insurerPreferred coverage options

It’s helpful to gather this information before beginning the process of comparison shopping. That way, it will make it faster and easier to provide it to potential insurers.

Taking a look at a current insurance policy can also make it easier to determine what amount of coverage to buy. However, when shopping around, it’s worth thinking about whether purchasing more or less protection might make sense. (Check out this guide to determine the right amount of insurance to buy, as this can change over time).

2. Having a VIN makes the process a lot faster

Whenever I’ve gotten insurance quotes for my job, I’ve been shocked at the amount of detailed information the companies need about the car. It goes beyond just make and model — insurers also want to know about specific safety features the car has.

Most insurers allow drivers to enter the vehicle identification number (VIN), rather than inputting all of these details manually. With the VIN, the insurer can figure out everything it needs to know about what the car comes with, so drivers don’t have to attempt to remember if they got the upgraded anti-theft package or not.

The VIN can be found in the vehicle (it’s often stamped on the engine, on a sticker on the driver’s side door, or stamped close to the dashboard). It can also be found on a current insurance card or on the car’s title and registration.

Having it ready will streamline the process of getting quotes, so find it before shopping around.

3. Quotes can vary a lot from day to day and week to week

Finally, the last thing I’ve noticed is that quotes vary a lot over a short period. I’ve gotten quotes from the same auto insurer with the same information just a few weeks apart and premiums have been off by as much as $40 or $50. So, it’s important to shop around for coverage very close to the time of buying a policy to get an accurate estimate.

Ideally, these tips can help make shopping for insurance easier, as taking the time to compare prices can provide significant savings — and it doesn’t even have to be a hassle for those who put this advice into practice.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Sam’s Club Plus comes with free shipping. Learn why this perk helped me save a lot of money. [[{“value”:”

Sam’s Club offers two different membership tiers. The Club membership costs $50 annually and the Plus membership costs $110 annually. The Plus membership comes with lots of added perks including 2% cash back on qualifying purchases (up to a maximum of $500 annually) as well as early shopping and extra pharmacy savings.

Not too long ago, we upgraded our Club membership to a Plus one to score a better deal on eyeglasses. But, this upgrade also came with another major benefit — and it’s one that’s made a big impact in making saving money even easier.

Here’s what it is.

The Plus membership at Sam’s Club has saved me a fortune

When I upgraded to the Plus membership, one of the perks that I was most excited about is that I now get access to free shipping on most online orders. That wasn’t the case before.

As the Sam’s website indicates, regular Club members get no-cost delivery only on items with a special “Free Shipping” badge. But, Plus members get free shipping on pretty much everything they buy, with no order minimums either. I’ve been able to order everything from paper towels to cereal to televisions and more — and have everything sent directly to my door.

This is a huge benefit because, unlike Costco, Sam’s Club sells items at the same price whether they are purchased online or in-store. So I don’t hesitate to order pretty much everything online now.

Why is free shipping from Sam’s Club such a good thing?

Shopping online and getting everything shipped for free has an obvious benefit of course, I don’t have to pay to get products sent to my door. But there are actually a few specific ways this feature has saved me money, beyond just not having to pay for shipping.

It’s more convenient to order from Sam’s so I can take better advantage of the available deals. When I had to drive to the club before, sometimes I’d just end up purchasing things from Amazon or while I was already at the grocery store, even if I knew they were cheaper at Sam’s. I’m not tempted to do that anymore since I can just log onto the website and have the items sent to me.I don’t have to visit the club in person so I’m not tempted by impulse buys. It’s hard to resist throwing a few extra items into my cart in the store, but this isn’t an issue online when I can just search for exactly what I want to buy.I don’t have to pay for gas money to drive to Sam’s. I’ve cut down on my visits to the warehouse club, which is about a 15-minute drive from my house, so I’m spending less on the gas to get there.

For these reasons, upgrading to the Plus membership was worth it to me. I’ve noticed that since upgrading to the Plus membership, my credit card bills for groceries and household items have consistently been around $20 to $30 per month lower compared to what they were before — and that adds up over time.

If you’re on the fence about becoming a Plus member, think about whether the free shipping could also come with other money-saving benefits for you. Those benefits, plus the cash back and other special perks you get, may be enough to more than justify the added costs.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Costco Wholesale. The Motley Fool has a disclosure policy.

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