Money Management

It wasn’t that long ago that a 7% APY on a CD sounded like a pie in the sky. Read on to find out which credit union is offering this deal here. 

If we were playing Jeopardy last year and I were to say, “I’m going to earn above 7% on my savings next year in this investment,” you might answer “what is an ETF” or “what is an I bond.” Imagine your own surprise if I were to reveal the answer as a certificate of deposit (CD), one with a 7.19% APY.

This is perhaps not so surprising given the high rate environment we find ourselves in. The Federal Reserve’s relentless charge against inflation has left it pulling the same lever, albeit with a few more notches on the dial than most of us were expecting. Since CD rates tend to move with the federal funds rate, the raising of the one has elevated the APY on the other, leaving us with CDs paying out generously.

Take the 7-month CD from Alpena Alcona Area Credit Union. With a 7.19% APY, this offer is the highest I’ve seen. But as with most credit unions, this CD comes with some major restrictions — and may not pay as much money on your savings as you might think.

You must have ties with Michigan to be eligible

Before you get too excited, let’s start with the first criteria. To be eligible for this CD, you must live, work, attend school, worship, or own property in the state of Michigan. This will make you eligible to join the Alpena Alcona Area Credit Union, which is required before opening this account. Alternatively, if you have immediate family members who are a part of the credit union, you could be eligible to join.

This isn’t totally unusual. Many credit unions boasting unbelievable APYs are advertising them for residents of specific states (like the Landmark Credit Union’s 7.5% APY on a checking account). But even if you do live in Michigan, there are still some restrictions you should be aware of.

The CD has a maximum deposit

The Alpena Alcona Area Credit Union CD requires $500 to open your account. But it also has a buzz-killing $7,000 maximum deposit. For anyone who has more than $7,000 to invest in CDs, this maximum will likely bring the offer back down to earth.

Still, it’s not a bad deal. In fact, it could make for a solid rung in a CD ladder. Say you have $20,000 to invest in CDs. You could deposit $5,000 in a 6-month CD, $7,000 in the 7-month CD, and the rest in a long-term CD or two. Your overall APY would be lower than 7.19%. But it will be higher than if you didn’t have the 7.19% at all.

It is important, however, to realize this is how credit unions and banks draw depositors in. They make big offers with small fine print. It’s all too easy to skip over the tiny font at the bottom. But taking a moment to read the terms and conditions upfront will help you avoid disappointment later.

Don’t worry — other great CDs are still on the table

Non-residents of Michigan, take heart — you still have plenty of great CDs to choose from. They may not earn 7.19% on your savings, but you could still lock in an incredible APY. Take a look at today’s top-paying CDs to get an idea of how much you can earn. And keep your eye out for credit unions in your state or city — you never know when that 7% CD will be coming to a bank near you.

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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.The Motley Fool has a disclosure policy.

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Price matching can help ensure you always get the lowest price. But Costco shoppers have to use other methods. Find out why. 

One of the best ways my phone helps my finances is by letting me comparison shop on the spot. See an in-store sale on something, but not sure if it’s a deal? Boom, I can look up three other retailers in about a minute and compare prices.

But what happens when the price somewhere else is actually lower? Rather than schlep out to another store, sometimes I see if I can simply get a price match from where I am.

Unfortunately, if I happen to be at Costco, I already know the answer: Nope. Costco doesn’t price match any competitors, ever. And there’s no deep secret as to why; no, it all boils down to, “Our prices are already low enough.”

“We’re already competitive enough, thanks”

Alright, sure, that’s not exactly how it’s said on the website. Costco words it in a much more, you know, our-PR-people-wrote-this sort of way:

“Please rest assured that your satisfaction is our top priority — that’s why we’re always working to bring you brand-name items at the lowest possible prices. However, because we already offer competitive prices at the point of purchase, we do not price match with other retailers.”

But the point is the same. Costco already has pretty low prices. Moreover, it already has a very loyal membership base. Together, these two things mean Costco doesn’t need to price match to keep its customers — so why would it?

What to do when you see a better price

If your bank account won’t rest without that lower price, it makes sense to look for other options. But without a price match option, you’re limited mostly to a return-and-rebuy strategy. On the plus side, Costco has an excellent return policy that allows you to return most items for any reason, including finding it at a lower price elsewhere.

Certain items have stricter requirements. Electronics, for instance, need to be returned within 90 days. But that’s actually longer than a lot of price match policies, so it should be plenty of time to know you got the best deal.

Does Costco price match itself?

Now, all this is not to say that Costco never price matches anything. You can actually get Costco to price match itself if prices drop on something you’ve recently purchased.

The specific wording goes:

“For members other than resellers, only purchases made within 30 days prior to a change in price and within applicable promotional item limits, are eligible for a price adjustment.”

Granted, there are a bunch of limitations. For instance, you can’t get a price match for Costco warehouse prices on Costco.com purchases. But it can be a handy tool if you make a big purchase, such as an appliance or electronic equipment, that then goes on sale the next week.

All in all, Costco’s warehouse prices are often low enough that a price match would be of only limited value anyway. And with the power of your phone in your pocket, you can actually do your comparison shopping before you buy, making it less likely you’ll miss out on a deal elsewhere.

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

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Unexpected situations while traveling can result in extra travel expenses. This strategy can help you prepare for unexpected travel costs before they occur. 

Travel doesn’t always go as planned. Even if you’re a good planner who is well organized, sometimes the unexpected happens. I recently took a two-week trip around Europe and had an incredible time. But I did experience a hiccup at the start of my adventure.

I found myself needing to pay for an additional $400 travel expense. The good news is I was prepared to cover the expense. Find out how I handled the extra cost with minimal stress and discover what you can do to prepare yourself for unexpected expenses like this.

Here’s how I ended up with an extra $400 travel expense

Travel is a big passion of mine, and I’ve traveled to many destinations around the globe. While I’ve stayed in some hotels that weren’t amazing, I have never stayed in a hotel that was not as described, to the point of being uncomfortable. Until recently, that is.

For the start of my trip, I had pre-booked four nights at a boutique four-star hotel and paid for my stay with a travel credit card before arriving. The hotel room was refundable up until 48 hours before check-in. Since I intended to stay there, I didn’t cancel the reservation.

After arriving and checking in, I quickly realized it wouldn’t be a comfortable experience. For starters, the hotel walls were thin, so I could hear other hotel guests. During the first night, I listened to other hotel guests talking and laughing well past midnight.

The bed was also uncomfortable. The sheets were very scratchy, and while the bed had four pillows, each pillow had almost no stuffing. I tried to sleep by pilling them up into a pillow tower but soon realized getting comfortable with the provided pillows would prove difficult.

The room had air conditioning, but it was hard to control the temperature, so I had to get up and make frequent adjustments. All these factors led to an uncomfortable stay, and I got almost no sleep. After two upsetting nights, I knew it would be best to leave.

I had two more nights booked there and didn’t want the lack of sleep to ruin that entire portion of my trip. I packed up all my belongings and spent a few minutes researching hotel alternatives. I found another four-star hotel with excellent reviews about a 10-minute walk away. I booked it and hoped for the best.

I’m happy to report that the second hotel was amazing. It was as advertised — maybe even nicer than advertised. The staff was terrific, and the room and bed were very comfortable. They even had a pillow menu — which, after the previous two evenings, felt like a dream.

My savings account saved the day

While having to pay an additional $400 to book another hotel stay wasn’t ideal — I quickly got over the moment of sadness while swiping my credit card at check-in. That’s because I knew I was prepared financially for a situation like this.

Throughout the year, I regularly set aside money for travel. When the time comes to take a trip, I reimburse myself for travel costs like flights and hotel stays by using the money I have set aside in my savings account.

Plus, I save for unexpected expenses. If a surprise bill or expense comes my way, I feel less upset because I have money saved. Because I follow this personal finance strategy, I already had money to cover the additional $400 surprise travel cost.

Here’s how I stay on top of my savings goals: I automate the savings process through my bank. Money is automatically transferred from my checking account to my savings account bi-weekly. Doing this ensures I don’t forget to save money regularly.

Whether you’re looking to prepare for unexpected travel costs, vet bills, or home repair expenses, following a similar saving strategy can be beneficial. If you ever find yourself with an unexpected additional expense, you’ll be glad you have the money already saved.

Don’t forget to keep your savings in a bank account that earns interest. Need a savings account? Check out our list of the best high-yield savings accounts 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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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You get a tax break when you invest in a 401(k). But here’s how the IRS makes sure it gets its cut when you’re a senior. 

When you invest for retirement, you have a few options. You can put money into a 401(k) at work, or you can put money into a retirement plan you open yourself, such as an IRA at a brokerage firm.

For many people, contributing to several different kinds of retirement accounts can make sense. But if you have a 401(k), it’s often smart to first contribute the amount needed to max out any matching funds your employer provides. This is free money that helps you grow your account balance.

As you contribute to your workplace 401(k), you’ll notice that you get a tax break for the money you’re putting in. The government wants to encourage retirement savings. In the year you make your contributions, you are not taxed on the money you’re putting into the retirement plan. This can provide significant savings. But does the IRS eventually end up getting a cut of the money? Here’s what you need to know.

Here’s when the IRS gets to tax your 401(k) funds

The IRS does eventually get to take a cut of the money you put into your 401(k). Here’s why.

When you invest in a 401(k) or a traditional IRA, the assumption is that you will take money out to fund your retirement. When you make a withdrawal or distribution of your 401(k) funds into your checking account, you are taxed on the distribution. You will pay taxes at your ordinary income tax rate.

The IRS wants to make absolutely sure it gets its cut, though. So if you don’t want to take money out of your 401(k) because you need it for retirement, the IRS forces you to make withdrawals anyway. The IRS does this by mandating you take required minimum distributions (RMDs) from your 401(k) or traditional IRA.

These distributions must start at age 72 or age of 73 if you won’t turn 72 until after Dec. 31, 2022. The IRS has tables you can use to calculate the amount you must withdraw and you have to do this or you will be hit with a penalty. This penalty used to be equal to 50% of the amount you should have taken out, but SECURE 2.0 (legislation passed in 2022) drops it to 25% or possibly 10% if you make a correction to the RMD within two years.

If you take money out of your 401(k) early before retirement, you’re also subject to a 10% tax penalty. And if you pass away, funds must be distributed to beneficiaries on a set schedule and are taxed at that time.

Make sure you’re ready for a tax bill

If you are contributing to a 401(k), it’s important to understand that you are going to have to withdraw this money as a senior and pay taxes on it then. When you estimate the money available to you in retirement, remember, you’ll be losing some of your funds to the government.

If you don’t want to find yourself hit with income tax on retirement account distributions in retirement, the other option available is to contribute to a Roth IRA or Roth 401(k) if your employer offers one. These don’t provide a tax break when you contribute, but you can make tax-free withdrawals. So if you’d prefer not to pay taxes as a senior, these accounts could be a better bet. You also don’t have to take required minimum distributions on Roth IRAs and, in the future, won’t have to take them on Roth 401(k)s either thanks to SECURE 2.0.

Consider whether your tax bracket is likely to be higher now or as a retiree so you can make an informed choice about whether to get your tax break now with a traditional account or defer it until retirement with a Roth instead.

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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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