Money Management

Should you aim to be mortgage-free by retirement? Maybe not. Read on to see why. [[{“value”:”

If you’re nearing retirement without having paid off your mortgage, you’re not alone. The number of homeowners aged 65 and over with housing debt doubled between 1989 and 2019, from 21% to 42%, according to the Joint Center for Housing Studies at Harvard University.

For many years, financial experts recommended that older Americans do their best to pay off their mortgages before entering retirement. And the logic was simple. Once you retire, you may see your income decline. So it’s best to shed all possible debts and expenses, including monthly mortgage payments, ahead of that period.

But while the old convention used to be to try to pay off a mortgage ahead of retirement, these days, that may not be advice you want to take. Here’s why.

It could pay to carry a mortgage if your rate is really low

In 2020 and 2021, mortgage lenders slashed rates in response to the economic crisis spurred by the pandemic. Not only did new home buyers get to lock in low rates at that time, but many existing homeowners refinanced their mortgages to take advantage of low-cost borrowing opportunities as well.

If you refinanced your mortgage a few years ago, you may now be paying under 3% for your mortgage, since rates like that were available at the time. And if so, it could pay to carry your mortgage into retirement, even though that means having another monthly bill to keep up with.

Right now, many high-yield savings accounts are paying upward of 4%. So if your mortgage is costing you 2.75%, it makes sense to keep more cash in the bank and keep paying that loan.

Even if savings account rates fall, if your mortgage payments are affordable to you, it could pay to continue carrying that loan in retirement. Once your career ends, it’s important to leave yourself with liquid cash in case of an emergency or an extended market downturn (a period when you’d want the option to leave your investment portfolio intact).

So let’s say you owe $80,000 on your mortgage. Rather than empty your savings account to pay off that balance, you might as well leave yourself with access to that cash if your home loan isn’t costing you a lot. And remember, any interest you continue to pay on your mortgage is tax-deductible if you itemize on your tax returns.

Advice that needs an update for some people

If you’re carrying a mortgage with a higher interest rate attached to it and have the ability to pay it off prior to retirement, then you may want to do so. But if you’re sitting on a rate of under 3%, then frankly, it could pay to just hold onto that loan and stick to your current repayment schedule.

That said, for some people, the idea of owing money on a mortgage in retirement can be stressful. So even if you have a low rate on your home loan, if keeping it will cause you to lose sleep and you’re able to pay it off, you may want to do so. Otherwise, know that you’re not necessarily blowing up your retirement finances by continuing to pay off your home.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

“}]] Read More 

Costco investors just got a huge update on the store’s finances. Is a membership fee hike in the works? Read on to find out. [[{“value”:”

For many consumers, Costco is synonymous with value. Joining Costco can be a smart financial decision because the savings you get to enjoy can more than make up for the membership fee you’re charged.

Right now, the cost of a basic Costco membership is $60 a year. For an Executive membership, the yearly fee is $120. However, with an Executive membership, you’ll also enjoy 2% cash back on your Costco purchases.

The last time Costco raised its membership fees was 2017. Back then, the cost of a basic membership rose from $55 to $60, while the cost of an Executive membership rose from $110 to $120.

Since it’s been a really long time since Costco last raised fees, many of its customers have been bracing for a fee hike. But during the company’s most recent earnings call, CFO Richard Galanti had some pretty encouraging comments.

A Costco fee hike may not happen in 2024

During recent Costco earnings calls, the question of membership fee hikes has come up repeatedly. During the most recent call, Galanti gave the same answer he’s given in the recent past: “It’s when, not if, still.”

That said, Galanti confirmed that the company has no concrete plans to raise membership fees. It intends to raise them eventually, but there was no indication given that a fee hike is in the works for 2024.

In fact, in the context of fee hikes, Galanti also said, “I don’t think it would be done simply because, hey, things have slowed down a little bit, let’s do it now. We like the fact that we’re performing well. We like the fact that all — most all metrics are going in the right direction in our business right now. We’ve got plenty of runway left.”

Could new management mean higher fees?

While Galanti made it clear that Costco doesn’t have any firm plans to raise membership fees, he’s also just about to step down as CFO after a 40-year Costco career. His replacement, Gary Millerchip, may decide to take a different approach to Costco fee hikes and implement one sooner rather than later.

That said, CFOs don’t tend to act in a bubble. Costco’s absent fee hikes in recent years haven’t been Galanti’s decision alone. So there’s no reason to jump to the conclusion that Costco fees will rise as soon as a new CFO comes aboard.

However, Costco execs have been very transparent that a fee hike is coming eventually. So at that point, you may need to ask yourself whether it’s worth keeping your membership.

To figure it out, there’s probably only one question you need to answer: “Am I getting good value out of my membership now?”

If the answer is “yes,” then chances are, a Costco membership will continue to make financial sense even if it costs $5 or $10 more (these are the increases we’re likely to see based on past increases). So while you may not love the idea of paying more for Costco access, if fees go up, try to remind yourself that the amount of savings you reap via your membership can more than compensate for the extra sum you’re looking at paying.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Gala. The Motley Fool has a disclosure policy.

“}]] Read More 

If you’re going to be heading out on a summer trip, it may be worth storing your vacation savings in a CD. Find out why. [[{“value”:”

The average American aims to take three vacations a year, with their average vacation budget coming in at $2,743 per trip (according to data from Go City). That’s a lot of money to spend, and it often makes sense to stick money in your savings account throughout the year in order to be able to cover those costs.

If you’re planning an epic vacation this summer, ideally you’re well on your way to saving up enough to cover the costs. And if you are, there’s an unexpected place you may want to put your travel funds.

Could this be the right place for your vacation savings?

If you have money set aside for your upcoming summer vacation, you probably have it in a basic savings account or maybe even a high-yield savings account. The national average savings account rate is just 0.46%, but high-yield accounts can pay upward of 5% right now, so they aren’t a bad place to put your vacation funds until you need the money.

There could be a better option though. Rather than just leaving your money in savings, you may want to buy a 3-month certificate of deposit instead.

Most CDs are FDIC insured like savings accounts are, so you won’t be putting your money at risk if you use your vacation fund to buy one. And you can easily find CDs at a huge number of banks and other financial institutions and buy in without any investing knowledge at all.

Now, CDs require you to commit to leaving your funds invested to avoid penalties — but there are a variety of different term lengths (often ranging from three months to five years) available. So you don’t have to make a huge time commitment.

Since summer vacation is coming up pretty soon, you’ll most likely want to choose a 3-month CD, which would enable you to withdraw your vacation fund right around the time summer is getting underway.

Why is a CD an ideal choice for your summer travel fund?

A CD can make good sense for your travel funds for a few key reasons.

First, CDs generally tend to offer even higher yields than the best savings accounts. So you can earn a little bit of extra money over the coming months compared with if you have your cash in savings. Once you buy your 3-month CD, your rate is also locked in and guaranteed for the duration, while savings accounts have variable rates. You won’t have to worry about earning less interest than you thought you’d get (which could be an issue if savings account rates fall).

Perhaps even more importantly, though, since CDs require you to lock up your money, buying one should help to ensure you don’t tap your vacation fund ahead of schedule. The fact you’d face a penalty for taking out the money can serve as an added deterrent, so you aren’t tempted to withdraw it to cover today’s expenses instead of saving it for your upcoming vacation as you planned.

Since CDs offer all these benefits, it’s worth considering whether you should buy a 3-month certificate of deposit with your vacation savings. Doing so may be just the ticket to ensuring you have the funds you need for a truly memorable summer vacation experience.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

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.

“}]] Read More 

Before you buy an electric vehicle, make sure you can qualify for EV tax credits. These three great tools make it easy to calculate EV tax credits. [[{“value”:”

Are you in the market to buy a car in 2024? Buying an electric vehicle could be a good way to cut your costs of car ownership — especially if you qualify for EV tax credits. Understanding the rules and limits of EV tax credits can help you save money.

Fortunately, there are a few good tools to calculate EV tax credits. Let’s look at a few of the best resources.

1. IRS website (understand the rules and income limits)

Not everyone is eligible for EV tax credits. There are limits based on which electric vehicle you buy and your income. So before you go car shopping, start with the IRS website to make sure your income is within the accepted range to get EV tax credits (which the IRS calls “Clean Vehicle Tax Credits”).

To qualify for an electric vehicle tax credit, your income has to be below a certain amount. And that amount is different based on whether you’re buying a new EV or a used EV.

According to the IRS website on Clean Vehicle Tax Credits, here are the income limits for people to qualify for EV tax credits.

New EVs (tax credit up to $7,500)

To qualify for the new electric vehicle tax credit, your modified adjusted gross income (AGI) must be $150,000 or less for single filers, or $300,000 or less for married couples filing jointly. Unless you’re a pretty high earner, you likely won’t have to worry about missing out on EV tax credits because of your income.

Used EVs (tax credit up to $4,000)

Income limits for the used EV tax credit are significantly lower. To qualify for a tax credit of 30% of the sale price (up to $4,000) on a pre-owned EV, your modified AGI must be $75,000 or less for single filers, or $150,000 for married couples filing jointly.

What if you buy an EV in 2024 and get an EV tax credit at the car dealership, but your 2024 income ends up being too high to qualify for the tax credits? In that case, you may have to repay the IRS when you file taxes next year. If your income is close to the limit to qualify, use tax planning strategies to maximize your tax deductions in 2024, so you can keep that EV tax credit money.

2. FuelEconomy.gov

Once you know the income limits for EV tax credits, go to another helpful federal government website: FuelEconomy.gov. This site has a good explanation of which electric vehicles (and plug-in hybrid electric vehicles, or PHEVs) qualify for EV tax credits in 2024.

Here are the specific instructions for how to use FuelEconomy.gov to get EV tax credit information, depending on whether you’re shopping for a new or used EV.

How to find tax credits for new EVs

Go to this page on FuelEconomy.gov: Federal Tax Credits for Plug-in Electric and Fuel Cell Electric Vehicles Purchased in 2023 or AfterScroll down to the section that says “Search for Eligible Vehicles,” and click the dropdown menu to choose your vehicle delivery date (presumably 2024, unless you are traveling back in time.)This search tool will show you a complete listing of electric vehicle makes and models that are eligible for up to $7,500 of new EV tax credits.You can click a button to search for all-electric vehicles (EVs) or plug-in hybrid electric vehicles (PHEVs), which can also qualify for EV tax credits.

How to find tax credits for used EVs

Go to this page on FuelEconomy.gov: Federal Tax Credits for Pre-owned Plug-in Electric and Fuel Cell VehiclesScroll down to the section that says “Filter table by…” and choose the year, make, and/or model that you want to search for. To get a used EV tax credit, the pre-owned EV must be at least two years older than the current year (so that means model year 2022 or older, for car buyers in 2024).You can search for all-electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), or even fuel cell vehicles (FCVs).This page also has a used EV tax credit calculator, where you can enter the sale price of your desired vehicle and see how much tax credit you’d get. Used EVs must have a sale price of $25,000 or less to qualify for the tax credit.

Both of these helpful tools on FuelEconomy.gov should give you a clear understanding of which vehicles qualify for what amounts of EV tax credit. This will help you start car shopping with confidence.

3. Cars.com (or other car-shopping websites)

Have you zeroed in on the EV of your dreams? Are you certain that it will qualify for EV tax credits, based on FuelEconomy.gov? If so, it’s time to start shopping for cars. Cars.com is a helpful resource to quickly search for new or used vehicles in your immediate area, nearby region, or nationwide.

For example, I used Cars.com to quickly find several used Volkswagen ID.4 Pro electric vehicles, priced at $25,000 or less, that would qualify for pre-owned EV tax credits of up to $4,000. This could be a great time to get a $4,000 discount on a used EV that still has good mileage left on its battery warranty.

Bottom line

Before you buy an electric vehicle, check for EV car insurance company price quotes. Car insurance for EVs can be more expensive than gas-powered cars. But if you can handle the cost of insurance, and you’re prepared to charge your EV at home or nearby charging stations, EV tax credits can reduce your cost of car ownership.

Our best car insurance companies for 2024

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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.

“}]] Read More