Money Management

If you’re hoping to find out about your desired retirement number, try multiplying your final salary by 10. Here’s how to make this technique work for you. [[{“value”:”

Deciding the amount you should save for retirement is really important. Social Security only replaces 40% of pre-retirement income and is supposed to work in conjunction with savings and pension funds to replace about 80% of your pre-retirement salary.

You’ll want to be sure you have plenty of money in your brokerage account to provide the support you need. But how can you figure out exactly what amount you will require? Here’s a pretty simple way to do that.

This simple rule of thumb will help you estimate your retirement savings amount

One of the simplest, quickest ways to estimate the amount you’ll need for retirement is to simply estimate what your final salary will be and multiply it by 10. So, if you estimate that you’ll be making $100,000 by the time you retire, then your goal should be to have about $1 million in your 401(k), IRA, or other retirement account.

Now, if you’re pretty near to retiring, it shouldn’t be too difficult to figure this out. Let’s say you’re making that $100,000 right now and are going to retire next year. You could just multiply 10 times $100,000 to arrive at your $1 million number, because it’s unlikely your salary is going to change much in the next year.

Assuming you got about 40% of $100,000 from Social Security, your benefits would give you $40,000. And your $1 million nest egg would provide an income of about $40,000 if you followed the 4% rule and took out 4% of your account balance in the first year. The 4% rule is another financial rule of thumb that says to withdraw 4% from your retirement accounts in your first year out of work and increase the amount by inflation each year.

You’d have about an $80,000 income with Social Security and your investments combined — so right around that 80% of pre-retirement income experts say you’ll require.

If you’re a long way from retirement, though, you’ll need to figure out what 10 times your future salary will be– not 10 times what you’re making now. Ideally, your earnings are likely to go up by then, and you could fall short if you base retirement savings on your current salary.

How to estimate your final salary

If you want to make sure you’re being accurate in your retirement calculations, you’ll have to estimate what your final salary will be. One way to do that is to determine how many years it is until you’ll likely retire and then assume a 3% raise each year until then (that’s the amount most employers offer workers each year).

So, say you’re 10 years away from retirement and currently making $50,000. Here’s what this could look like.

Based on this table, you would need around $652,387 to have enough for your retirement. You can work on saving that much by using the savings calculator at Investor.gov, which will tell you how much to contribute to your investment accounts based on your timeline and savings goals.

This method of figuring out how much to save for retirement is about as easy as it gets. Try it today to find your target number and see if you’re saving enough to reach it.

Where to invest $1,000 right now

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Poor credit could be an impediment to getting a mortgage. But read on to see how you might be able to overcome a lower credit score. [[{“value”:”

Most people can’t afford to buy a home outright — especially not today given how elevated home prices are. If you’re in the market for a home, there’s a good chance you’ll be seeking out a mortgage loan to finance that purchase. And if your credit score is high, there’s a good chance you’ll be approved provided you meet your lender’s income requirements.

But what if your credit score isn’t so great? Unfortunately, a lower credit score could make it difficult to qualify for a mortgage. But that doesn’t mean you’re doomed automatically. You may be able to borrow for a home even if your credit score could use work. Here are a couple of steps you can take if you’re eager to get a mortgage with poor credit.

1. Look outside a conventional mortgage

The minimum credit score for a conventional mortgage is 620. But certain loan programs allow you to borrow for a home with a lower score.

With an FHA loan, for example, you may be able to get approved with a score as low as 500. What’s more, VA lenders are sometimes flexible with credit score requirements, so if you meet the criteria for one of these loans, that may be an option, too.

Of course, if your credit score is close to 620 but not quite there, you could try waiting a few months to apply for a mortgage and boosting that number. Paying bills on time could help your score improve a lot. It also pays to review your credit report for errors. Correcting a mistake (for example, an incorrectly reported delinquency) could result in a higher score in fairly short order.

2. Make a larger down payment

Although 620 is considered the lowest acceptable credit score for a conventional home loan, mortgage lenders can ultimately set their own standards. As such, you may come across a lender that wants a credit score of 640 for the loan size you’re looking to take out.

In a situation like that, you might manage to get approved for a mortgage by making a larger down payment. The more money you put down on your home, the less risk your lender takes on.

A conversation might help as well

The reason mortgage lenders insist on the credit scores they do is because they want to protect themselves and increase their likelihood of getting repaid. As such, don’t be shocked if your home loan request is denied due to your credit being in bad shape.

Think about it this way. If you have an unreliable friend — they’re always running late and they’re constantly forgetting about obligations — you’re probably less likely to trust them with an important matter. Similarly, it’s hard for mortgage lenders to trust borrowers whose credit is poor.

However, if your poor credit stemmed from a specific situation, it doesn’t hurt to let the lenders you’re applying with know. Maybe you were out of work for a year to recover from an injury or illness, and that’s why your credit took a beating. Or maybe you had to cut your hours temporarily to care for an ailing parent, but you’ve since gone back to full-time work and are in a much better position to pay your bills on time.

In some cases, a mortgage lender might solely look at the number it sees and deny your application if your credit score is too low. But it never hurts to tell your personal story and see if it helps.

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There’s an easy way to get more money back from the IRS. Read on to learn more. [[{“value”:”

At this point, a lot of people are starting to work on their taxes. And you may be eager to submit your return early. The sooner you do, the sooner your tax refund can hit your bank account.

But when working on your taxes, you might calculate your refund and see that it’s lower than it’s been before. This could be due to several factors. For example, savings accounts started paying a lot more interest in 2023. If you earned more interest income, that could be reducing your refund amount.

Similarly, perhaps you took on a side job and earned more wages. Even if you paid taxes on your extra earnings along the way, you may have missed the mark, resulting in less money back from the IRS.

Now, it’s easy to make the argument that a smaller tax refund isn’t such a bad thing. If anything, it means the IRS got to hang onto less of your money during the year. But if you’d rather avoid a reduced tax refund next year, then there’s one key step it pays to take.

Max out your retirement account — or get as close as you can

Saving money in an IRA or 401(k) could set you up with more income for your retirement. But just as importantly, funding a traditional IRA or 401(k) plan this year could shield more of your 2024 income from taxes.

There’s a limit to how much money you can put into an IRA or 401(k), and that changes from year to year. In 2024, here are the limits you need to know:

$7,000 for an IRA if you’re under age 50$8,000 for an IRA if you’re 50 or older$23,000 for a 401(k) plan if you’re under 50$30,500 for a 401(k) plan if you’re 50 or older

If you have a 401(k) plan through your employer, you may be entitled to a match. The good news is that employer matching dollars don’t count toward your annual 401(k) contribution limit, since they’re not coming out of your pocket. With an IRA, there are no employer matches, so this isn’t something you’ll have to think about.

You should also know that if you put money into a Roth IRA or 401(k) this year, you’ll still enjoy some tax benefits, like tax-free investment gains and eventual tax-free withdrawals. But contributions to a Roth retirement plan will not shield your 2024 income from taxes. So keep that in mind when choosing an account.

How much more of a tax refund might you get?

The more money you’re able to put into a traditional IRA or 401(k), up to the aforementioned limits, the more money you might get back from the IRS in refund form next year. Let’s say you’re 40 and max out your IRA at $7,000 this year. If you’re in the 22% tax bracket, it means you’re saving $1,540 in taxes for 2024.

This doesn’t automatically mean your refund is guaranteed to rise by $1,540. There are so many different factors that go into calculating your final tax bill and associated refund.

But all told, funding a traditional IRA or 401(k) to the best of your ability could lead to a better refund situation next year. It’s worth examining your spending and finding ways to fund one of these accounts as generously as you can.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

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A financial review can help you track goals progress and catch fraudulent activities on your accounts. Find out what else will make it worth your time. [[{“value”:”

If you’re the type of person who loves a good resolution, there’s one goal that can do wonders for your financial health: scheduling a weekly financial review session. It can help you stay on top of your money, make sure you’re progressing on your goals, and adjust as your needs change.

But if you’ve never done one before, you may not know where to start or how much time to allot to a weekly session. Here’s a quick breakdown of the steps every financial review should take, plus a bonus tip to save you time later on.

1. Review your bank account balances (five to 10 minutes)

Knowing the amount of cash you keep in your various bank accounts in a given week can help you figure out how much you can (or need to) transfer to other accounts to avoid overdrafts as well as spot discrepancies like a missed payment or overdue invoice.

If there’s time, be sure to scan through your various transactions to make sure nothing on there is incorrect, late, or fraudulent. That way, you’ll be more likely to catch those issues early and can notify your bank as soon as possible.

2. Check your progress on your goals (five to 15 minutes)

Whether you’re trying to save for specific goals, pay off debt, or both, it’s important to check in on your progress regularly. That way, you’ll actually see the progress you’re making, rather than feeling as if you’re just throwing money at the wall. This is especially true for those who are paying or transferring money on a weekly basis.

Depending on the number of accounts you need to check, this may take less or more time to accomplish. Jotting down your balances or creating a visual representation of your progress is another good way to make that progress more tangible and help you stick to your goals.

3. Note significant departures from your budget (10 minutes)

Many people think of a budget as a static thing. But sometimes it’s important to make adjustments to accommodate for the unexpected. Maybe your pipes froze and you had to call a plumber, or perhaps you changed insurers and decided to pay monthly instead of annually. These changes can be significant for how you’ll spend money going forward. So it’s important to recognize them when they happen and plan accordingly.

4. Pay your previous week’s credit card purchases (five to 10 minutes)

Credit cards can be useful tools, but for many people, it’s all too easy to carry a balance. By paying your cards weekly instead of monthly, you can not only avoid the potential sticker shock of paying for your full monthly expenses at once, but you can also ensure that you’re paying more attention to how you’re spending. Plus, you get to avoid having to pay interest. For example, if you were to carry a $2,000 balance on a card with a 20.99% interest rate, you’d end up paying almost $200 in interest over the course of a year.

If you have multiple cards and start carrying even a small balance on them, it can easily lead to taking on more and more high-interest debt over time. Using this method can help you avoid that issue.

Three more steps to save time in future financial reviews

The above steps are vital for your reviews from week to week. But there are key steps that you should take beforehand to make those sessions even more effective. Here are the three you should focus on.

Make a budget: Your budget will guide how you view things from your goals progress to your spending habits, so it’s vital that it reflects your values. Start with non-negotiables, like your rent and other fixed bills, then you can use your remaining expected monthly income to dictate how to spend the rest of your money.Create a bills calendar: This should include every monthly bill you get, from your cellphone bill to the gas bill to rent, as well as context about which account that money comes out of and, if applicable, the payment amount. Ideally, you’d look beyond your regular monthly bills to include ones that are due quarterly and annually, too.Set up automatic transfers: If you know how much you want to transfer to your various savings accounts and you have a relatively stable source of income, it’s a good idea to set up automatic transfers to those accounts. If possible, try to aim for the day after your paycheck hits your account. That way, you won’t have to worry about either falling behind on saving money or incurring overdraft fees. Once you’ve set these up, you can add them to your bills calendar for future reference.

A weekly financial review is only as useful as you make it. By taking the time to provide the context you need and knowing exactly what you’re looking for, you’ll be better prepared to assess your finances and adjust course as needed.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has nearly tripled the market.*

They just revealed what they believe are the 10 best stocks for investors to buy right now…

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*Stock Advisor returns as of February 6, 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.

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