Money Management

Most people look forward to a long, healthy retirement. Take a look at what you’ll need to factor in to pay bills throughout retirement. 

While many financial experts say that we’ll only need around 75% of our current salaries in retirement, the truth is a bit more nuanced. How much you’ll need depends almost entirely on how you want to spend your retirement years. Are you happiest when you’re camping and playing cards with friends, or would you rather travel or even start a small business?

It’s up to you to decide how much of your current salary you would like to have in retirement and work from there. Here, we’ll show you what we mean.

Guaranteed income

The first step is to find out how much you can expect in guaranteed income each month. Guaranteed income includes Social Security payments, pension checks, and annuities. If you own rental property, your guaranteed monthly income can include any profits generated.

Let’s say you used to earn $75,000 per year. You’ve visited my Social Security, and it looks like you’ll receive $3,500 a month if you retire at age 70. You’re also expecting a $1,000 monthly pension from a former employer. That gives you a total of $4,500 in guaranteed monthly income in retirement.

Multiply that $4,500 by 12 to learn how much you’ll receive annually — $4,500 x 12 = $54,000.

You know that you already have $54,000 covered. That’s very close to 75% of your current salary, but you’ve decided that you want your salary to remain the same. In other words, you want $75,000 a year hitting your checking account.

Since $54,000 is already accounted for, that means you need to come up with $21,000 more. ($75,000 ﹣ $54,000 = $21,000)

Of course, this is just one example. The amount of money you’ll need to fill the gap between guaranteed income and your desired annual income will be unique to you.

Filling the gap

Due to the recent rise in inflation, the latest research indicates that your best bet is to withdraw 3.8% from your retirement account annually. Withdrawing 3.8% or less increases the chances that your money will last throughout your lifetime.

This illustration assumes that investments for retirement earn an average annual return of 7%. Depending on the year, investments may earn more or less. However, we’re looking for a long-term average of 7%.

Uncle Sam will still want his piece

You’ll still have to pay taxes on your income in retirement, although the majority of states do not tax Social Security or pensions. These 10 states continue to tax Social Security income, although taxation may be reduced based on age or income:

ConnecticutKansasMinnesotaMissouriMontanaNebraskaNew MexicoRhode IslandUtahVermont

Be sure to factor in taxes when you’re deciding how you’re going to fund your dream retirement.

Medical expenses

The Center for Retirement Research at Boston College found that 12% of the median retiree’s income went toward covering medical expenses. These expenses include Medicare premiums, prescription drugs, doctor visits, over-the-counter medications, and dental care. While Medicare does pay some healthcare expenses, it does not cover all medical care.

According to the 2022 Fidelity Retiree Health Care Cost Estimate, a single person who retires at age 65 this year may need $157,500 saved to cover health care expenses for the rest of their lives. If they live another 25 years, that averages around $525 per month.

If you’re beginning to think you might want to raise the amount of money you’ll have coming in each month, the best way to accomplish that goal is to increase your investment contributions, make sure your emergency savings account is fully funded, and keep your debts low.

For many, the very thought of retiring brings them pleasure. And while it may end up being the best time of their life, a lot of financial planning goes into getting there.

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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.Dana George has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Ready to get your holiday shopping done? Don’t miss out on early holiday sales. Here are three retailers with early deals for you to shop now. 

It’s officially November, so now is the time to shift into holiday planning mode. If you have yet to complete your holiday shopping, you’ll be happy to know that many retailers already have big holiday sales. Shopping for gifts during sales events is an excellent way to keep more money in your checking account. Find out which stores have early holiday sales happening now.

1. Target

Target is one retailer known for offering big discounts on Black Friday. But you don’t have to wait until Black Friday to get a great deal as you fill your cart with holiday shopping essentials. Leading up to Black Friday, the popular store will have weekly deals of up to 50% off.

Here are a few deals you can shop through Nov. 4:

Get up to $100 off select Apple iPadsSave $100 on Beats Solo3 Bluetooth Wireless HeadphonesSave up to 40% off small appliances

If you plan to shop at Target this holiday season, don’t forget to sign up for the Target Circle rewards program. It’s free to join, and you can earn rewards and get extra discounts when you shop. Plus, there are a few little-known perks of a Target Circle rewards membership that could make it even more worthwhile for you.

2. Best Buy

Best Buy is another store that could help you keep your holiday spending in check. The retailer has early Black Friday deals available now, and you can shop them in-store and online. If you have a tech-lover on your shopping list, you may want to shop here.

Here are a few of the best early deals that are available at the time of writing:

Save $750 on an LG 48″ Class A2 Series OLED 4K UHD Smart TVGet $130 off a pair of Sony WH-XB910N Wireless Noise Canceling HeadphonesSave $120 on the Ninja Foodi 6-in-1 10-qt. XL 2-Basket Air FryerGet a $200 discount on the KitchenAid 5.5 qt. Bowl-Lift Stand Mixer

3. Ulta

Ulta is another store that wants to help you save money as you shop for holiday gifts. The beauty retailer will have weekly sales on popular skincare and makeup brands throughout November. If you prefer to shop online, Ulta offers free standard shipping on orders of $35 or more.

Here are a few deals that you can shop through Nov. 4:

Get 30% off Tarte Shape Tape concealersSave 30% on Smashbox Always Sharp eyelinerGet 40% off select Morphe brush setsSave 30% off Laura Mercier full-size primers

Earn rewards as you shop

As you do your holiday shopping, keep your personal finances in mind. You don’t want to overspend beyond your means and put yourself in a difficult financial situation. If you struggle with overspending, set a budget and make a shopping list to keep yourself on track. It’s also worthwhile to review sales fliers before you start shopping, so you can score the best deals.

If you plan to use credit cards to pay for your purchases, make sure you only charge what you can afford in order to stay out of credit card debt. You won’t be charged interest if you pay your credit card bill off in full every month. Using rewards credit cards is an excellent way to earn cash back or points as you shop. Check out our list of the best cash back credit cards to learn more.

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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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Best Buy, and Target. The Motley Fool has a disclosure policy.

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Starting to save at a young age can yield impressive results. Read on to learn more. 

For many kindergarten-aged kids, the only savings they have is a small collection of coins or bills stuffed into a piggy bank. But opening a savings account for your child when they’re young is one of the best things you can do for them. And if you’re not so convinced, here’s a story that might change your mind.

When kids are given a savings boost early on

In 2011, a San Francisco program targeting low-income families put $50 deposits into 600 children’s bank accounts. Now, 12 years later, members of that cohort have an average savings balance of $1,422, which is about 28 times that initial deposit, reports the Wall Street Journal.

Dubbed the Kindergarten to College Program, San Francisco’s initiative now gives $50 in savings to every student enrolled in its school districts and has 52,000 active enrollees with a total balance of $15 million. Of that, $10 million came from deposits made by students and their families.

The program has a dual purpose: to teach smart financial habits and serve as a start to college savings. And so far, it’s been replicated in 39 states due to its success.

Why it’s so important to help your kids save from a young age

Kindergarten-aged children are obviously too young to hold down any sort of job or take responsibility for their finances. That’s where you, as a parent, come in.

Those dollar bills your kids get from the Tooth Fairy? Your kids might enjoy stuffing them in a drawer and busting them out to go to the ice cream shop or candy store. But a much better thing to do for your children is to open a savings account for them and encourage them to keep their money in the bank.

There’s apt to come a point in time when your children become financially independent. And having a savings account to tap as an emergency fund could make that transition much easier.

Meanwhile, saving money in the bank at a young age will give your kids the opportunity to earn some interest on their deposits. Over time, that interest can add up, albeit modestly.

These days, some savings accounts are paying very generously, but the rates we’re seeing at present are not the norm. A better bet is to assume that your child’s bank account might earn an average of 2% interest over time.

Now, a single $50 deposit may not earn your children much interest. If you put $50 into an account at age 5, by age 18, that’ll grow to a rather unimpressive $65 if you’re only earning 2% a year. Rather, what you should try to do is open a savings account for your kids and push them to add to it as they receive cash gifts, whether from family members during the holidays or the magical fairy who rewards little ones for losing teeth.

In fact, let’s say your child is able to deposit $100 a year into their savings between ages 5 and 18. At 2% interest, you’re looking at a balance of $1,400. That’s a nice emergency fund to take to college.

Granted, in this case, most of that balance is coming from deposits, not interest. But the end result is the same — it’s a nice cushion.

The right habits are just as important as actual money

Making small deposits into a savings account for your kids during their childhood won’t necessarily make them rich. But ideally, it’ll get them into the habit of putting money into savings. And that’s just as important as them having a decent-sized balance by age 18.

One thing worth noting is that for college savings purposes, you don’t really want to stick to a regular savings account. You’re better off investing that money at what’ll hopefully be a higher return than what a bank account will pay you.

But if you have young kids with money lying around their bedrooms, have them round it up. Then take them over to a local bank and let them be a part of the process of opening an account. If you get your children excited about the idea of saving money from a young age, then chances are, they’ll continue to uphold that habit for many years to come.

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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.Maurie Backman has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Costco has some great deals available this month. Read on to learn about them. 

Costco is a great place to shop when you’re looking for an affordable way to stock up on food for your pantry and household essentials. But on top of its already low prices, Costco tends to offer limited-time discounts on select products.

This month, you’ll find a host of items on sale that could make great holiday gifts — for yourself or someone else. Here are some worth checking out that won’t put a big dent in your personal finances.

1. $7 off a two-pack of Sanders sea salt caramels

Whether you’re looking to stock up for your upcoming holiday party or need a great gift for your boss or child’s teacher, nothing says “awesome” like a mega-jar of sea salt caramels.

Right now, Costco is offering both the milk and dark chocolate varieties for $7 off a two-pack. Just be warned that if you buy a jar of these for yourself, you may have a hard time not devouring the entire thing within a few days.

2. $15 off Popcornopolis Variety Metallic Holiday 48-Count Mini Cones

Need stocking stuffers, teacher gifts, and extra snacks for winter break? Right now, Costco is offering $15 off of a variety pack of 48 mini Popcornopolis cones. Your mix of flavors will include caramel corn, kettle corn, zebra (a blend of white and regular chocolate drizzle), and cheddar cheese. These cones are also a great addition to gift baskets you may be putting together.

3. $250 off the HP Pavilion 15.6″ Touchscreen Laptop

Looking to upgrade your laptop or buy a new one for your teen, spouse, or college student this holiday season? You may want to head to Costco while the HP Pavilion 15.6″ Touchscreen Laptop is one sale for a whopping $250 off.

This model comes with an AMD Ryzen™ 7 7730U (8-Core) Processor, a full-size backlit keyboard, Windows 11, and 16 GB of memory. As is the case with most Costco laptops and other electronics, you’ll also benefit from a free second year warranty and tech support should you run into any issues.

4. $100 off the KitchenAid 11-piece 5-ply Clad Stainless Steel Cookware Set

Need to upgrade your pots and pans in time for holiday meal prep? Right now, Costco is offering an 11-piece KitchenAid set for $100 off. The dishwasher-safe set features everything from a stock pot to a frying pan to a saute pan. The set is compatible with all cooktops and is oven- and broiler-safe up to 500 degrees (350 degrees when pots are lidded).

5. $15 off a Pokémon Discoveries bundle

Have a big Pokémon fan in your life? Make this Christmas their best one ever with a Pokémon bundle. It comes with 884 total pieces to allow fans to create their own Pokémon world and includes seven Pokémon figures, including Pikachu, Charmander, and Charizard. Let your child’s imagination run wild — without having to run up as large a credit card tab, thanks to this limited-time $15 discount.

There’s plenty of savings to be had at Costco for these and other items — but don’t wait. While Costco is offering a host of deals for November, some are only going to run through roughly the first half of the month. At that point, Costco is set to introduce new deals. If the above items appeal to you, it’s really best to get moving.

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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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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I’ve been a gig worker for more than a decade. Here are three things I wish someone told me when I started. 

Many people are joining the gig economy these days, and it’s easy to see why. There are more options than ever when it comes to using your skills and resources to become your own boss and enjoy the flexibility that comes with gig employment.

I’ve been a self-employed worker for 12 years, and for a few good reasons. If I want to travel, I can do so whenever I want. If I need a day off to take my kids to doctors’ appointments, I don’t have to worry about whether I have enough PTO left.

However, being a gig worker comes with its own set of financial challenges that don’t necessarily apply to employees. Here are three things that I didn’t know when I first became self-employed (I wasn’t a Certified Financial Planner back then) that all gig workers, freelancers, and other self-employed individuals can use to make their financial lives easier and set themselves up for the future.

1. Plan for taxes throughout the year

For many W-2 employees, tax planning is something that happens for a few days toward the beginning of each year when preparing to file your tax return. But when you’re self-employed, tax planning needs to be a year-round activity.

Specifically, most self-employed workers are required to make quarterly estimated tax payments to the IRS (and their state, if applicable). But setting aside a reasonable percentage of your income every time you get paid can certainly make these more manageable. A good idea is to speak with an experienced tax professional who can help you determine the right amount to set aside.

It’s also important to know that self-employed people are required to pay more Social Security and Medicare taxes than W-2 employees are. When you’re an employee, you pay half of these taxes and your employer pays the other half. But as a gig worker or freelancer, you are the employer and the employee, so you pay both sides of these taxes; this is collectively known as the self-employment tax. In 2023, the self-employment tax rate (in addition to federal income tax) is 15.3% on all income up to a maximum of $160,200 and 2.9% on any income above that threshold.

2. Save aggressively for retirement

Unless you also have a full-time W-2 job in addition to being a gig worker, you probably don’t have access to an employer-sponsored retirement plan. But even if you do, some good news for gig workers is that you’ll have access to special types of retirement plans.

For example, a SEP-IRA allows you to save as much as 25% of your net self-employment income, up to an annual cap of $66,000 in 2023. Contributions can be tax deductible. And starting with the 2023 tax year, there’s even a Roth version of the SEP-IRA if you’d prefer tax-free income in retirement to a current tax break.

Other self-employed retirement account options are the Solo 401(k) and the SIMPLE IRA, both of which have significantly higher contribution limits than traditional IRAs or Roth IRAs.

To be sure, it may not be practical or necessary to completely max out your retirement savings as a gig worker. But many financial planners (myself included) suggest a retirement savings rate of at least 10% of income to set yourself up for a comfortable retirement.

3. Use an HSA for medical expenses

If you’re providing your own health insurance as a self-employed worker (another tax-deductible expense), and you have an annual deductible of at least $1,500 for single coverage or $3,000 for family coverage, you can contribute to a health savings account, or HSA.

Not to be confused with a flexible spending account, or FSA, an HSA is an extremely powerful financial tool for eligible individuals. It offers a rare triple tax advantage. Contributions are tax-deductible, money in the account can be invested, and any withdrawals for qualified medical expenses are completely tax-free.

The best part is that unlike an FSA, money in your HSA doesn’t have to be used by the end of the year — it can be rolled over year after year. Plus, once you turn 65, you can withdraw money for any reason, essentially treating it as a supplementary retirement account. For 2023, if you have a qualified health plan, you can contribute as much as $3,850 if you have individual coverage, or up to $7,750 if you have family coverage, with an additional $1,000 if you’re 50 or older.

These three habits can dramatically increase your financial health

When you become a gig worker or freelancer, it can seem intimidating to suddenly be responsible for your own tax withholding, retirement savings strategy, and health insurance. But as someone who has been doing it for a long time, I can tell you it becomes much easier as you get used to it.

One final suggestion I’d make is to automate as much of these processes as possible — particularly your contributions to retirement accounts and HSAs — as it can help maximize your tax breaks with minimal effort from you.

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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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