Money Management

Making IRA contributions makes sense even when retirement is a few short years away. Read on to see why. 

The average 60-something today has $112,500 in retirement savings, reports Northwestern Mutual. But ideally, you’ll be inching closer to retirement with a larger IRA balance than that. While $112,500 is a lot of money, it may not last for 20 years or longer, which is what retirement has the potential to be.

You’ll often hear that it’s important to fund your IRA from a young age. That way, you’ll give your investments in that account many years to grow.

What if you’re nearing retirement with a decent IRA balance? If you’re a few years away from ending your career, you might assume that it doesn’t pay to keep making contributions to that account. After all, how much is your money going to grow in a few years?

But one thing you should realize is that while your pre-retirement contributions won’t have a lot of time to grow between the tail end of your career and the start of retirement, that money can continue to grow during your retirement. So it’s a good idea to fund that account down to the last minute.

A move worth making

Let’s say you’re 63 and are aiming to retire at 65. You might assume that funding your IRA doesn’t make sense anymore.

Even if your IRA delivers a 10% return, which is consistent with the stock market’s average over the past 50 years, and you put in $625 a month during the next two years (that’s in line with the $7,500 maximum IRA contribution today), you’ll only be looking at about $750 in gains. If you have a $500,000 IRA balance, you may not care very much about an extra $750.

But one thing to remember is that your IRA stays invested during retirement. The money you put in right before retirement doesn’t stop working for you.

Granted, in retirement, you may not see an average annual 10% return in your IRA because it’s a good idea to shift toward safer investments at that point, and those might deliver a smaller return. In fact, it’s smart to make that change in the years leading up to retirement, too.

But remember, you might end up retiring at 65 and living until 95. During that time, you’ll ideally be withdrawing your money bit by bit so it doesn’t run out. So any funds you sneak into your IRA right before retirement can continue to work for you.

It pays to get the tax break

Another reason it pays to continue funding your IRA right before retirement? Those contributions can serve as a tax break. If you put in $7,500 a year during your last couple of years in the labor force, you’ll shield $15,000 of your earnings from the IRS. That’s something you might as well do, even if your IRA is in great shape and you don’t particularly need the extra money in your account.

All told, it pays to contribute to an IRA at every opportunity you can. You can even fund an IRA during retirement, because the only requirement to do so is having earned income. So if you decide to work occasionally as a retiree, IRA contributions are still on the table. And that’s an opportunity worth embracing at any age.

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Costco’s printers and ink are low priced and come with a generous return policy. Learn what makes Costco a great place to buy your next printer. 

Last Christmas, my wife bought me my first printer from Walmart. We were trying to be frugal, as we had just moved to Portland, Oregon, and for the sake of our personal finance goals I asked her to buy me the cheapest printer I could find — an HP 2700, which at that time was heavily discounted to $40.

Nine months later and I’m looking for a new printer. I don’t know what evil has possessed the HP 2700 but it seems bent on haunting me. It prints when I don’t ask it to print, it doesn’t print when I ask it to print, and, worse, it prints more “troubleshooting” instructions (from its own will!) than I know what to do with. If only there was a poltergeist inside it — I would at least know the problem.

I still want to save money on a printer. But I don’t want to buy one that frustrates me. All in all, I think I might buy a printer from Costco. Here’s why.

1. Generous return policy

Costco lets you return most electronics within 90 days of purchase. However, printers are not named directly among other electronics in its return policy (found on Costco’s customer service page), which means you might get away with returning it after 90 days.

In fact, some users on Reddit claim printer returns are not limited to 90 days and can be returned for a full refund indefinitely. Of course, this is Reddit we’re talking about, which isn’t exactly the conveyor of truth. But the printer’s absence from Costco’s list of electronics may give you some negotiating power if you encounter problems returning it after 90 days.

2. Low prices on ink

Costco sells black ink in packages of two cartridges, while its colored ink is usually sold as a tri-color pack with one cartridge per color. As with most of its bulk goods, buying black ink as a pack of two can help you save between $10 and $20, while its colored ink is priced on par with or slightly lower than other retailers.

For instance, I’m currently looking at the HP 8028e, which takes HP 910XL ink. Costco sells two cartridges of 910XL black ink for $75.98 and 910XL colored ink for $64.98. Together you’d spend about $141 for the set. In contrast, Amazon sells the same quantity (two 910 XL black cartridges and one set of tri-color) for $150. That’s $9 of savings just by buying the same ink at Costco.

3. Promotions make prices hard to beat

Finally, the big reason you should buy your next printer at Costco — its prices are hard to beat, especially when Costco is offering promotions. To give you some perspective, here’s the price difference for a few printers between Costco and other retailers.

As you can see, when Costco is running a promotion, its prices are nearly impossible to beat. When it’s not, however, you might find the printer cheaper elsewhere, as seen in the Epson EcoTank, which Amazon is selling cheaper.

One thing to consider is that these prices were taken from Costco.com, which has a slight upcharge to account for shipping and handling. That means, you might find the same printers cheaper in store than online.

Great service and low prices are why you should buy a printer at Costco

Buying a printer at a low price is a compelling enough reason to buy one at Costco. But don’t forget — you can also call Costco Concierge Service with any troubleshooting or technical problems. This service could really come in handy if your printer is Bluetooth-only and, like mine, begins to develop a mind of its own.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon.com, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy.

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Rental costs are hitting record highs. But so is new apartment construction. Where’s the disconnect? Here’s the problem. 

It is a truth, universally acknowledged, that housing is expensive. A huge chunk of our budgets go to housing, and that’s true whether you own or rent.

But while housing prices tend to fluctuate, sometimes rising, sometimes falling, rental prices somehow manage to rise every year. And it seems to be getting much, much worse.

Median asking rent tops $2,000

Indeed, rents are at a record high, with Redfin data showing the median asking rent in August 2023 was $2,052. Even traditionally affordable areas are seeing record highs, with the median asking rent in the Midwest hitting $1,434.

These haven’t been slow changes, either. Anecdotally, I’ve heard dozens of stories of rents going up by hundreds of dollars between one year and the next. And personally, our rent going up by $200 helped push my family into a move this year.

On the surface, you might think there’s some kind of shortage going on. Are there that many new renters? Are they just not building enough new apartments? As it turns out, they’re building a record number of new apartments — just not the kind we need.

9 in 10 new developments are “luxury”

More than 1.2 million apartments were added to the market over the last three years. There are expected to be more than 460,000 new rentals on the market this year, and another 1 million added through 2025.

Currently, we’re seeing the highest rate of new apartment construction in the last 20 years.

So what’s the problem? The same thing it always is: money.

About 89% of new apartments built in 2020 were “luxury” apartments aimed at mid- and high-income renters. In other words, of the more than 460,000 new apartments completed this year, only around 51,000 are affordable housing.

Considering that we’re short of more than 7 million rental units for low-income households, the construction boom may as well not exist for many of the people who need it the most.

Relief on the horizon?

The brightside is that there may be some signs of the rental market topping out. Rental vacancies rates were up to 6.3% in the second quarter of 2023, up from 5.6% the year before. And some reports indicate that while prices aren’t dropping everywhere, concessions — such as a month or two rent-free — are becoming increasingly common.

Ways to cut your housing costs

In the meantime, what can renters do to help their bank accounts? Unfortunately, a lot of the most common pieces of advice center around moving. And it’s true, downsizing and/or relocating are certainly the most straightforward ways to cut your housing costs. Of course, white it may be straightforward, moving is rarely easy — and never cheap.

What else can you do? You can try negotiating with your landlord or apartment complex. (This is a hit-and-miss tactic that may work better if you have a human landlord instead of a corporate overlord.) In some cases, agreeing to sign a longer lease can net you some savings. If you’re handy, offering to fix up the place could also help you out in rent negotiations.

There’s also the roommate option. Splitting expenses with a friend or coworker could help you cut costs. Just be careful to vet potential roommates — perhaps by running a background and credit check — and have them sign a lease before letting them move in.

Or, you could resort to what more and more young people are doing: living with family. Almost half of young adults now live with their parents, often due to their finances. This isn’t uncommon in other cultures, and was even the norm in the United States until late last century, so it’s interesting to see the stigma quickly wearing off.

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Many Americans responding to an MIT study expressed concerns about when they’d be able to retire. Find out what to do if you’re one of them. 

Many people eagerly anticipate their retirement, since it provides a chance to finally end going to work for money every day and instead let your interests and hobbies control how you spend your hours.

For many people, though, retirement is something they believe will never happen for them. That’s not a surprise, given how challenging it can be to sock money away in a brokerage account for the future. But it’s a problem because people who plan to just work forever may find they can’t end up doing that.

Far too many Americans believe retirement is out of reach

According to a study conducted by the MIT AgeLab and Transamerica, 33.4% of survey respondents indicated they didn’t expect they would be in a financial position to retire. Instead, they said they were going to keep on working until late in life and having paychecks deposited into their bank accounts because they had no other real choice.

This statistic is troubling because it means about a third of Americans see no prospect of ever achieving the financial security they deserve. And the sad reality is, a good number of these people may not be able to keep working in their senior years despite their desire to do so.

The Social Security Administration has reported that while many people indicate they plan to wait until they are 65 to stop working, 62 is actually the mean retirement age. What’s more, 47% of respondents said they ended up retiring sooner than they had planned to. And, while two-thirds of people said they expected to keep working for pay in retirement, only around one-third of actual retirees have jobs that bring money in.

While it may feel like a viable plan to keep working forever — and this may feel more feasible than actually saving enough for the future — it probably isn’t a smart strategy. A lack of job opportunities, family needs, and health issues are just some of the many obstacles that could prevent you from continuing to work in retirement.

What options do you have?

If you’re among the one-third of Americans who don’t think they’ll be able to retire, the big question is: What can you do about it?

The first step is to realize that you may have to retire someday whether or not you want to — or are prepared to. Planning to just keep working is simply infeasible and unrealistic. So, you have two choices:

You can make some changes now, while you’re young, healthy, and still working, so you can have the money you need later.You can keep going as you are. But unless you’re very lucky, there will come a day when you simply can’t work anymore — and you may have to make drastic life changes to try to live on Social Security alone, since those benefits only replace about 40% of pre-retirement income.

When you look at it this way, chances are good you will decide you must make some changes now to be ready to retire. Even if you’re struggling financially, it’s going to be a lot easier to try to fix being broke now than to try to fix being broke when you’re 85.

So, what changes can you make to be able to save for retirement? A lot depends on the specifics of your current situation but some options include:

Taking on a side hustle. Start freelancing, dog walking, babysitting, or selling on Etsy, and put every spare dollar you earn into retirement savings.Increasing income. Looking for a new job, learning new job skills, and negotiating your salary with your boss could potentially help you get a raise that you can use to save for retirement.Cutting a big fixed expense. If you downsize to a cheaper apartment or more affordable used car, you could free up funds for retirement.Tracking spending to find cuts to discretionary costs. If you monitor your spending for 30 days, you should be able to find at least some area where you’re overspending and can divert that money to retirement instead.

Doing these things probably won’t be fun and you may not want to do them. But it will be far worse to make painful sacrifices when you’re old and have fewer options left. Do them now if you’re among the portion of Americans who think retirement is out of reach.

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

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