Money Management

If you have $10,000 in cash, today’s high interest rate environment gives you plenty of options. Here are four to consider. 

In the year my dad was born (1950!), $10,000 would have been more than enough to buy a house in his home state of Ohio, then flaunting a median home value of $8,304. Imagine that for a moment. Then shake your head back into reality, because $10,000 is hardly enough for a down payment on a home today — despite that most of us feel it takes about as much work to earn and save it.

Nonetheless, $10,000 is still a pretty big chunk of change. I don’t know if people still hide money under mattresses — did they ever? — but ruling that out as the absolute worst place to put money, you still have plenty of bank accounts to choose from. Nearly all are safe and FDIC insured. But quite a few are paying at such high interest rates, even the firmest skeptic of capitalism couldn’t help but think, “you know, that’s not a bad idea.”

Here are four great places to park $10,000 right now.

1. High-yield savings account

High-yield savings accounts top the list of my favorite bank accounts in 2023.

FDIC insured? Check.

Easy access to cash? Check.

High annual percentage yield? You bet.

Indeed, with a $10,000 deposit, you could earn between $475 and $525 annually on today’s top-paying savings accounts. That’s money making money risk free. Better still if you can find an account that has no monthly maintenance fees, no opening minimum deposits, and an ATM card that lets you withdraw cash.

One caveat: These accounts have variable rates. It could be the case that your account’s APY is reduced within a 12-month period, which would make your actual APY lower than the one advertised. This might happen if the Federal Reserve decided to cut the federal funds rate. No one can predict what the Fed will do next, but it’s something to consider.

2. Certificate of deposit (CD)

For those who have savings they won’t need for the near term, perhaps no savings product presents more opportunity than today’s top-paying CDs. These days, it’s not uncommon to find banks and credit unions offering short-term CDs with rates at 5.50% — though the real gems of these are starting to peak above that.

I’d consider this option over a high-yield savings account only if you’re certain you won’t need your CD deposit for however long your term lasts, as you’ll be penalized for removing your funds early. CD rates are fixed for the length of your term. Even if interest rates in general started to decline, your CD provider would be contractually obligated to pay at the agreed-upon APY.

3. Money market account (MMA)

Money market accounts are a fun alternative to other bank accounts, like checking and savings. Like the ones mentioned so far, the best money market accounts are paying depositors at APYs above 5%.

Most money market accounts make it easy to withdraw cash directly with check writing or debit cards. This makes them more attractive than online savings accounts, which don’t frequently offer these withdrawal options.

4. IRA account

The accounts mentioned above are great for short-term savings goals, like building an emergency fund or savings for a down payment. They’re not, however, perfect solutions for long-term goals, like saving for retirement.

If saving for retirement is important to you, you could open an IRA. These accounts have contribution limits ($6,500 for individuals under 50 or $7,500 if you’re older than 50 in 2023), but also come with major tax advantages. For example, a traditional IRA gives you a tax break now by letting you defer paying taxes on contributions, ideally when you’re in a lower tax bracket. Meanwhile, Roth IRAs let you grow money tax free and won’t require you to pay taxes when you withdraw it.

Depending on your bank, you might be able to open the accounts mentioned above under the tax shelter of an IRA. But you can also invest in stocks and funds. Better yet, you won’t owe taxes on capital gains or interest.

Of course, you could play around with some combination of the four accounts mentioned above. The point, however, is to invest $10,000 in a way that helps you grow your money. Be mindful of the terms on each account, but don’t hesitate to take advantage of high APYs while they last.

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Layoffs made the news earlier in the year. Read on to see how concerned workers should be at this point. 

It’s fair to say that 2023 started off on a rocky note from a layoff perspective. In early January, Amazon announced plans to slash headcount. Microsoft did the same a few weeks later. In fact, there was a stretch in early 2023 when it was basically impossible to read the news without hearing that a given company was making plans to reduce the size of its staff.

But thankfully, downsizing activity seems to have slowed down — or at least it’s not making headlines as frequently. And that raises the question — should workers today still be worried about losing their jobs?

The answer is, it depends.

The economy is in good shape — but that’s not the whole story

One reason to not be so worried about layoffs at this point is that the U.S. economy is in pretty solid shape. Economists are no longer predicting a near-term recession. And the unemployment rate is only 3.8%, signifying a strong labor market.

But just because the broad economy doesn’t seem susceptible to layoffs doesn’t mean your specific job isn’t at risk. A big reason so many layoffs made the news in early 2023 is that tech companies in particular were zealous with hiring during the pandemic and then realized they’d reached the point of being overstaffed. So if you work in that industry and were hired during that boom, it could still very much pay to be cautious.

Also, lingering inflation has impacted many companies and added to their operating costs. That could lead to additional downsizing in the coming year even across industries that are generally doing well.

That’s why it’s important to pay attention to happenings at your company and within your industry. This doesn’t mean you need to walk around paranoid. But pay attention to warning signs that layoffs may be imminent. If your company’s higher-ups are suddenly hesitant to green-light new projects or approve business travel when they normally would, that could be a sign that things are amiss — and that jobs will soon be on the line.

How to prepare for a layoff

It’s actually a good idea to assume that you could lose your job at any time. It’s not something you should actively worry about, but rather, prepare for financially in the form of a fully loaded emergency fund.

Socking away enough money in your savings account to cover three full months of living expenses or more could be just the thing that gets you through a layoff without wrecking your finances on a long-term basis. If you have the money put away to pay for a few months of bills in the absence of a paycheck, you’ll be less likely to land in debt if you wind up on the chopping block.

It’s also a good idea to familiarize yourself with your employer’s severance policy, if there’s an official one on the books. That might actually give you some peace of mind — assuming it’s a generous one, of course. For example, if your employee handbook states point blank that workers get one month of severance pay per year of employment, and you’ve been with your company for five years, that means you’ll have a pretty large payday coming your way in the event of a layoff.

To be clear, though, don’t just fall back on a severance package. Aim to have a fully funded emergency fund, too. You never know when you may be denied severance on a technicality, so it’s important to make sure you have enough money in the bank to get through a period of unemployment.

All told, there’s no reason to worry about layoffs in general right now. But “in general” may not help you if there’s a shake-up at your place of work. So be mindful of the signs of impending layoffs and get yourself prepared by socking away as much money in savings as you can.

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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. Maurie Backman has positions in Amazon.com and Microsoft. The Motley Fool has positions in and recommends Amazon.com and Microsoft. The Motley Fool has a disclosure policy.

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Costco members are eligible for discounts on Audi brand vehicles. Find out why it may not be as good a deal as it seems. 

The fact that my husband wants to retire one day has turned my budgeting habits upside down — and that may be a good thing. For example, I’m now much more focused on making cash purchases. I’m getting rid of existing debt and I’m paying cash for major purchases. For that reason, I have several savings accounts set up to save for long-term goals.

For example, I know that before my husband moves into his walk the dogs–work out–golf–rinse and repeat years, we need to have money put away for a new car. Even if we can make his old car last for a few years after he retires, at some point we’ll need something more reliable. I want an Audi. I tell him it will be his car, but we all know the truth.

And so, it was with interest that I read Costco is offering a limited-time special offer on new Audis. Until Oct. 31, 2023, Costco members who purchase or lease select 2023 or 2024 models can get up to $5,000 off. We may be years away from needing a new car, but at first blush, the deal seemed pretty sweet.

Maybe not so sweet

Okay, I “thought” I wanted an Audi e-tron until I checked the manufacturer’s suggested retail price (MSRP). The entry level e-tron with base-level trim carries an MSRP just shy of $72,000. Even with $5,000 off, I would need to have $68,000 put away by the time my old car buys the farm. Could I do it? Maybe, but at the expense of something else.

I checked the price of gently driven two-year old models and found one with 6,200 miles on it for just under $39,000. Given Audi’s reputation for longevity, I believe it’s a purchase I would feel good about.

The money suck that is depreciation

All vehicles lose value over time. At the five-year mark, many vehicles have lost half their value — although the Audi brand consistently ranks high in value retention. In other words, it’s less likely to depreciate at the same rate as other car brands.

Still, depreciation is an important consideration when you’re thinking about whether you want to buy a new car, even if you don’t use the vehicle for business. Does it make financial sense for you to get $5,000 off a car that, according to CarEdge, will lose $5,428 in value after one year, and $11,462 after two? Or, would you be better off buying a low-mileage Audi that’s already two years old and allowing someone else to eat that depreciation?

Add this to the reasons I plan to buy a low-mileage used Audi: EnginePatrol.com estimates that the Audi e-tron will last around 300,000 to 400,000 miles. Even if I buy a two (or three) year old model, it’s likely to be around for a while.

For some people, there’s nothing quite like buying a brand new car, and I get that. If money is no object and you’re in the market for a car, the Costco deal may be just what you’re looking for. However, if it’s the new car smell you’re interested in, there are some remarkable new car air fresheners on the market that won’t deplete your personal finances.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Americans are living longer, yet many don’t have enough money saved for retirement. Find out how to help get your retirement savings back on track. 

A recent report from MIT AgeLab suggests that some of the old ideas around work and retirement may not hold up as well as they used to because people are living longer.

The average lifespan in the U.S. was just 68 years in 1950 and reached 76 in 2021. And although the average lifespan has dropped over the past few years, it’s still significantly higher than it was decades ago, according to data from Harvard Health. And with these longer lifespans, there are new challenges for retirement planning.

“The traditional three-part career map of education, work, and retirement is out of date,” part of the MIT study executive summary stated.

Here’s how the traditional idea of retirement is changing and how you can prepare for it.

How retirement planning is different these days

Longevity is the biggest factor affecting people’s retirement these days. JPMorgan data shows that a non-smoking 65-year-old woman in excellent health has a 1-in-3 chance of living to 95, and a man in the same condition has a 1-in-5 chance.

And while that’s great news for those of us looking forward to a long life, it also means that people are spending a far larger portion of their adult lives in their retirement years than ever.

Unfortunately, the reality is that most people often retire earlier than they planned, which can result in less money saved. According to U.S. Census Bureau data, about 42% of working baby boomers aged 55 to 64 have no retirement account at all, and 58% of retirees in their 60s and 70s reported that they entered retirement earlier than they wanted, the MIT AgeLab survey noted.

How to get your retirement plan on track

So people are living longer, and they are retiring earlier than they want. That sounds a little unnerving, especially considering that the MIT data showed that 33% of workers believe they won’t have enough money to stop working when they reach retirement age.

Fortunately, you can do a few things to get your retirement plan into better shape if you feel like you’re falling behind. One great way to do that may be by opening a brokerage account and setting up an individual retirement account (IRA).

IRAs typically offer a lot of control over managing your retirement investments. For example, you can buy and sell individual stocks in your IRA or even buy low-cost exchange-traded funds if you’re not interested in picking stocks.

When setting up your account, you can also choose either a Roth IRA or a traditional IRA. Both have tax advantages, so compare a traditional IRA to a Roth IRA to determine which is best for you. In 2023, you can contribute up to $6,500 into your IRA account — or $7,500 if you’re 50 or older.

One of the main differences between the two is that with a traditional IRA, you get a tax deduction in the year you make the contributions. You don’t get that benefit with a Roth IRA, but you do get to withdraw money in retirement tax-free.

There are other ways to help improve your retirement planning as well, including opening a 401(k) account through your employer, signing up for an employer match program if it’s available, or even pursuing additional sources of income to boost your savings rate.

Focus on what you can control

It can be discouraging if you think you don’t have enough money saved for retirement, but it may be best to focus less on past financial decisions and more on what you can control right now.

If you need help figuring out where you should begin, check out our personal finance hub, where you can learn more about financial planning, paying off debt, how brokerage accounts work, and much 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.The Motley Fool has a disclosure policy.

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