Money Management

Despite ongoing higher mortgage rates, home prices haven’t really fallen much. Keep reading to learn why waiting for lower prices may not be prudent. 

A house is likely to be the most expensive purchase you’ll ever make, and consequently, buying one should come with serious forethought and consideration of all the costs involved. Unfortunately, today’s market is only serving to make buying a home both more expensive and also more stressful.

If you’re in an affordable rental situation that is working for you, or you’re just hoping to upgrade from a home that’s comfortable but a tad too small, you might be waiting out the market for prices to come down. (As reported by Redfin, prices are up 2.6% from July 2022.) But according to market analysis from Redfin, you could be in for a long wait. Here’s why.

1. Buyers are getting used to higher rates

It’s fair to say that most people are not able to buy a house outright in cash, and so must rely on a mortgage loan to finance their purchase over time, generally 15 or 30 years. When you’re going to be paying interest on a purchase for that long, it’s vital to get the lowest rate possible to save money. But gone are the pandemic days of mortgage rates in the 3% range. Rates started climbing at the end of 2021, and while we’ve seen the occasional dip here and there, they’ve remained over 6% since fall 2022.

As of this writing, Freddie Mac has the average rate for a 30-year fixed mortgage at 6.81%. This represents a big additional cost on top of whatever price you’re paying for a home, and you can see the impact by plugging numbers into The Ascent’s mortgage calculator. For example, financing a $250,000 home with a 10% down payment at a 3% interest rate will have you paying $1,094 per month for principal and interest. Bump that rate to the current average, and you’re paying $1,615 per month. And these calculations don’t include homeowners insurance or property taxes. Ouch.

But interestingly, Redfin reports that buyers are getting used to the higher rates, and the higher cost of a mortgage loan hasn’t proved to be a serious deterrent for those who can afford it.

2. There just aren’t enough homes for sale — and if rates fall, this likely won’t change

As if the higher rates weren’t enough of an issue for home affordability, we’re continuing to struggle with inventory. And there’s a good reason for this: Current homeowners don’t want to give up those lower rates they snagged a few years ago by selling their homes. So less inventory on the market coupled with determined buyers who aren’t put off by those higher rates means sellers are still getting multiple offers on their homes.

You might think that if mortgage rates start to come down, this problem could ease as sellers who were staying put list their homes. Unfortunately, Redfin notes that lower rates and more homes for sale could mean an uptick in wannabe buyers, meaning prices could jump and you’ll still have the same problem of competition for not enough homes that cost more than you want to spend.

What should you do?

All in all, it’s still not a great market for buyers, and we’re likely going to be waiting a while for things to change in any significant way. In the meantime, if you are ready to buy and just waiting to see if prices will come down, you might want to grit your teeth and prepare to buy anyway. You can increase your odds of at least saving money on a mortgage (if not the home itself) by:

Improving your credit score: Pay down debt, make it a point to make all your payments on time, and pick through your credit report for errors you can have corrected.Saving money for a down payment: The better the down payment you can offer, the more likely you are to get a decent rate, as lenders will consider you less likely to default on a mortgage loan if you have a chunk of money tied up in a home.Shop around: Start with our list of the best mortgage lenders and get pre-approved to see what you can qualify for.

If buying a home is a part of your personal American dream, doing so sooner rather than later might be worth it to you, even if you end up paying a higher price for a home. Just ensure that a home purchase is the right move for your finances, and remember to account for all the costs involved in owning a home when you create your new budget.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More 

Saving for retirement in a regular brokerage account could mean missing a world of tax benefits. Read on to learn more. 

It’s important to save money for retirement so you’re able to supplement your Social Security benefits and cover your senior living costs with relative ease. And when it comes to finding a home for your savings, you have different options that will allow you to invest your money to grow it into a larger sum.

One option is to save for retirement in an IRA — either a traditional or a Roth. You could also opt to participate in a 401(k) plan if your employer offers one. And there’s always the possibility of saving for retirement in a regular brokerage account. But you may not want to go the latter route for one key reason.

When you’re giving up some major tax breaks

The downside of saving for retirement in an IRA or 401(k) is that these plans come with rules. They limit the amount of money you can contribute on an annual basis, and they force you to leave your money alone until age 59 1/2 or otherwise risk early withdrawal penalties. And if you find these rules restrictive, you may decide to save for retirement in a regular brokerage account.

This year, IRAs limit you to $6,500 in contributions if you’re under the age of 50, or $7,500 if you’re 50 or older. But if you want to contribute, say, $10,000 toward retirement savings, then a brokerage account could be your ticket to doing so.

Granted, 401(k) plans have much higher contribution limits than IRAs — $22,500 this year if you’re under 50, and $30,000 if you’re 50 or older. But if you don’t work for an employer that sponsors a 401(k), that option won’t be available to you. So a brokerage account might seem like a better bet.

Meanwhile, you may have the goal of retiring early — say, in your mid-50s. With an IRA or 401(k) plan, withdrawals might be off the table for several years unless you’re willing to pay a penalty. So in that situation, using a brokerage account for retirement savings might seem like a good bet.

But when you save for retirement in a regular brokerage account, you give up some lucrative tax breaks. Traditional IRA and 401(k) contributions go in tax-free, helping you to exempt some of your earnings from taxes. And Roth IRAs and 401(k)s allow you to enjoy tax-free investment gains in your account, as well as tax-free withdrawals. These are perks you shouldn’t be so quick to give up, as they could ultimately put more money in your pocket.

A good compromise

You may want the flexibility of a regular brokerage account and the tax savings from an IRA or 401(k). Well, the good news is that you can actually have both. You can split your retirement savings between a brokerage account and an IRA or 401(k) to enjoy the best of both worlds.

Let’s say you want to save $10,000 this year for retirement and you’re 45. You could max out your IRA at $6,500 and put the remaining $3,500 into a brokerage account. Or, you could split that $10,000 evenly between both accounts.

In fact, it actually pays to consistently fund a regular brokerage account if you’re certain early retirement is on your radar. You don’t want to get to a position where you can afford to retire at age 54, only all of your money is restricted for five more years.

But either way, it does pay to put at least some of your retirement savings into an IRA or 401(k). If you don’t, you’ll really lose out on major tax benefits, and that’s kind of a shame.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.

 Read More 

Inflation is easing, and that’ll make it easier to buy a house, right? Read on to see what might be next for mortgage interest rates. 

If you’re dreaming of closing on a mortgage loan and getting the keys to your very own home, you’re not alone. Unfortunately, mortgage interest rates jumped from the 3% range to touch 7% over the course of 2022, and despite a few dips here and there, as of this writing we’re still sitting at an average rate of 6.81% on a 30-year fixed mortgage (according to Freddie Mac).

A higher mortgage rate only serves to make the most expensive purchase of your life even more costly, so as we watch inflation fall, you’re likely wondering if mortgage rates will follow suit. Let’s take a closer look at inflation and the federal funds rate, and see some expert predictions for the future of mortgage rates.

The Fed just raised rates again, despite inflation easing

Yes, inflation is finally easing — hooray! The most recent Consumer Price Index found that inflation stood at 3% in June 2023, which is a stark contrast from the 9.1% just a year prior. This is clearly a welcome change, and you might expect that as prices ease elsewhere, we could see mortgage rates take a similar dip.

However, despite the lower inflation and taking a break on interest rate hikes at its June meeting, the Federal Reserve just elected to bump rates up yet again in July. This was the 11th rate hike since March 2022, and the current federal funds rate is 5.25% to 5.50%.

While this rate isn’t directly correlated with consumer borrowing rates, the two are linked — if it costs banks more to loan to one another, consumers will pay more to borrow as a result. The Federal Reserve has three more meetings left this year, and it remains to be seen what will happen next. AP News reported that Federal Reserve Chair Jerome Powell was noncommittal about future moves.

Some experts are predicting a modest drop in 2024

Unfortunately, some mortgage experts don’t expect to see lower rates until 2024. The National Association of Realtors is predicting a return to rates under 6% by the end of 2023, and a rate of 5.6% next year. The Mortgage Bankers Association released data in June that predicted a rate of 5.8% in Q4 2023, and a further drop over the course of 2024 to land at 4.9% in Q4 2024.

These are optimistic predictions, but no one really knows for sure what comes next. One silver lining to stubbornly higher rates is that they’re an indication that the much-predicted 2023 recession hasn’t yet come to pass.

Should you buy a home now?

If you can afford a higher monthly cost due to higher mortgage rates, there’s really no reason to wait if you want to buy a home. To put yourself in the best possible position, it’s worth saving up as much as you can for a down payment — remember, the more you put down, the less you have to finance at 6% or higher. Work on improving your credit score, as the higher it is, the more likely you’ll be to qualify for a better rate when you’re ready to buy.

And shop around with the best mortgage lenders rather than going with the first offer you get. You may be able to refinance your mortgage later, if rates come down, but it’s still worth trying to secure the best deal possible now.

It’s certainly frustrating to look back at the recent past and see mortgage rates in the 3% range just a year and a half ago. Take a deep breath and rest assured that none of us really know where rates will go — but we all get to sit and watch together.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More 

Waiting until your 40s to buy life insurance could leave you paying more. Read on to learn more. 

If there are people in your life who depend on you financially, then it’s important to put a life insurance policy in place. Leaving your loved ones with a benefit to cover their expenses could spell the difference between them struggling financially in your absence or not.

Generally speaking, the younger you are when you apply for life insurance, the less you’ll spend on your premiums. So if you don’t apply for life insurance until your 40s, it may end up costing you more than expected.

Why life insurance might cost more in your 40s

There are different factors that life insurance companies consider when calculating premium rates, such as your health and your line of work. Generally speaking, the greater the chances of your insurer having to pay out on your policy, the more you can expect to pay for it.

As such, if you’re a smoker or have health conditions that might shorten your lifespan, those things will be reflected in your premium rates. And if your line of work happens to be dangerous — say, you’re a firefighter — then that, too, could drive the cost of life insurance upward for you.

The reason you might pay more for life insurance in your 40s instead of your 30s or 20s is that the older you are, the more likely you might be to pass away while your policy is still in place. That’s a risk your insurer will account for by charging you more.

How much more will you pay for life insurance if you first apply in your 40s?

There’s no hard and fast rule when it comes to applying for life insurance a bit later in life. Some companies might charge you X amount for being an older applicant while others might charge you Y. And remember, it’s not just your age going into that calculation, but rather, the sum total of all of your different risk factors.

That said, according to Dave Ramsey, if you’re a non-smoker looking for $1 million in coverage, you can expect to pay $54 a month for a 20-year term life insurance policy at age 30 and $84 a month at age 40. So all told, you’re looking at an extra $30 a month, or $360 a year.

This is just one set of calculations. The point, however, is that you should expect to pay more for life insurance due to your age if you’re applying in your 40s.

Does it ever pay to wait until your 40s to get life insurance?

It may be that you didn’t get married or have children until your 40s, and you therefore didn’t have a need for life insurance before then. In circumstances like that, waiting until your 40s makes sense.

However, one thing you don’t want to do is wait years to get life insurance because you’re worried about the premium costs when your need for coverage arises earlier. In doing so, you might not only drive the cost of your policy up, but also, put your loved ones at risk of financial struggles in the event that something happens to you before you’ve managed to secure coverage.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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.

 Read More 

A savings account is one of the safest places to keep your cash, but there are still times when your money is at risk. Read on for what to watch out for. 

A savings account is about as basic as bank accounts come. You add money to it, and you’ll earn interest on your savings. You’ll likely be limited in how often you can withdraw money, since some banks still adhere to withdrawal and transfer limits related to Regulation D. You may also be limited in how you withdraw your cash — savings accounts don’t often come with an ATM or debit card.

Savings accounts are a great place to keep your emergency fund, as well as money you’re putting aside for a near-term financial goal, like buying a home or funding a big vacation. With such a simple product, you likely assume there’s no way to lose money in your savings account. You’d be wrong, though. Let’s take a look at a few ways your savings account can cost you.

1. Bank fees

You might be charged different bank fees, which will cost you money in a very concrete way. For a savings account, you should watch out for account maintenance fees in particular, which are charged monthly. There are ways to avoid them, however, such as by keeping a certain amount of money in the account or by opting to have money transferred automatically from your checking to savings every month.

Pay attention to your account’s requirements to see what you need to do. I’m still kicking myself for losing $50 to maintenance fees on one of my savings accounts last year, because as it turned out, I only needed to keep $300 in the account to avoid being charged. Thankfully, banking fees are going the way of the dodo, especially if you choose an online-only bank.

2. Inflation

Inflation is finally easing; per the last Consumer Price Index report, it stood at 3% in June 2023. If you’ve got your money in a high-yield savings account, you could well be earning a higher APY than this, and getting to preserve the value of your savings in the face of inflation. For example, the account I have with an online-only bank is currently earning an APY of 4%. Savings account rates are variable, though — it’s likely that my bank will lower the APY on my account eventually.

But if your savings is languishing in an account with a traditional bank, you’re likely only earning a fraction of this. The savings account I have at a big national bank (the one that charged me $50 worth of fees last year) is currently earning an APY of 0.01%. There’s clearly a big difference there, and it’s for this reason that the bulk of my savings is in the online bank and I only keep the other savings account for overdraft protection on my main checking account.

During the higher inflation we suffered through last year and earlier this year, no savings account would have beaten it, but at least a high-yield account could somewhat mitigate your money’s value loss. It’s important to not keep too much money in your savings, and consider investing money over what you need for an emergency fund or that big near-term financial goal you’re working toward. Money kept in a savings account for many years will definitely lose value to inflation.

3. Bank failure — if your bank isn’t FDIC insured

This last way to lose money in a savings account is definitely an extreme situation. If you have money in a bank that isn’t FDIC insured, and that bank fails, you’re likely to lose your savings. Thankfully, most of the bigger names in the banking world are covered by FDIC insurance. This means that in the event of a bank failure, up to $250,000 of your money in a savings account will be returned to you (this amount is per depositor, per bank, so if it’s a joint account, up to $500,000 is protected). To check whether your bank is covered, you can look it up using the FDIC’s BankFind Suite tool.

Savings accounts are a safe place to keep your money. But watch out for fees, inflation rates, and a lack of FDIC insurance to ensure you don’t lose any of your hard-earned cash.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More 

Men’s underwear is certainly an odd financial indicator. Keep reading to learn why it matters for predicting an upcoming recession. 

Economic indicators come in many forms, from stock prices to housing starts. But did you know that men’s underwear sales can also be used to predict recessions? It may seem like a joke, but former Federal Reserve Chair Alan Greenspan found that men’s underwear sales can offer valuable insights into the overall state of the economy. Here’s how, as well as some other very interesting non-traditional economic indicators.

Lagging vs. leading indicators

There are two types of economic indicators: leading and lagging. Lagging indicators, like interest rates, the unemployment rate, and inflation, show us what has already occurred in the economy. These indicators can be compared to using a car’s rear view mirror. It shows you where you’ve been.

On the other hand, leading indicators are trends and patterns that come before economic changes. They are used to forecast the future performance of the economy, like stock market trends and consumer confidence. Think of them as signs you see on the road ahead.

Leading indicators are more valuable than lagging indicators for investors and policymakers, as they offer valuable insight into future events. In order to predict an upcoming recession, three of the most common leading indicators are yield curve inversion, consumer confidence, and manufacturing output.

Currently all three indicators point to a recession, but what about other unique leading indicators?

Men’s Underwear Index

Believe it or not, men’s underwear sales is a leading economic indicator. The most private garment in the household is arguably men’s underpants, as they are rarely seen by anyone. It is often the last item you need to purchase, as men tend to wear them until they are completely worn out.

The sale rates of male underpants are typically stable, but when they do decrease, it indicates that men are prioritizing other expenses over replacing their underpants. This hesitancy to buy something relatively inexpensive has been a reliable indicator that could mean recession.

What is the underwear index telling us now?

Men’s underwear sales faced a decline during the 2008-2009 financial crisis and experienced a significant drop in 2020 due to the pandemic-induced recession. This was confirmed by Euromonitor data shared by David Swartz (a senior equity analyst at Morningstar Research Services) and reported by Barron’s.

While the dollar sales of men’s underwear remained fairly consistent from 2021 to 2022, there was a notable 12% decrease in the number of pairs sold compared to the previous year. Additionally, households with incomes below $50,000 spent considerably less on men’s underwear in 2021 compared to 2020.

Even with the decline, men’s underwear sales are currently on the rise. However, it’s worth noting that sales tend to stagnate in times of economic downturn. The silver lining is that we have not experienced this trend yet.

These are just some of the unique indicators certain economists study to better understand the behavior of consumers and its impact on our economy. Some other quirky indicators are the “lipstick index,” “the champagne index,” and “the library index.” These indicators show that it’s too soon to tell whether we should worry about a recession, but they’re worth monitoring.

While this indicator may initially seem absurd, men’s underwear sales can provide insight into the state of the economy. The correlation between this seemingly trivial item and economic activity has been demonstrated before and is closely tracked by experts today. So, the next time you see an ad for men’s briefs, remember that this seemingly small purchase can actually tell us a lot about whether a recession is coming. This is a signal to get your personal finances in order!

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More