Money Management

IRAs have their benefits, but you might miss out if you don’t sign up for an employer-sponsored 401(k). Read on to see why. 

When it comes to saving for retirement, you have choices. If your company doesn’t offer a 401(k) plan, you could always open an IRA and save for retirement there. And even if you do have access to a 401(k) through your job, you should know that you’re not obligated to participate in it. You may prefer to open an IRA because it gives you more investment choices.

With a 401(k), you’re generally limited to a bunch of different funds to invest in, like target date funds, mutual funds, and index funds. But with an IRA, you’re generally allowed to invest in individual stocks for retirement. And that can be helpful in two ways.

First, when you hand-pick stocks for your retirement portfolio, you get complete control over what you own, whereas with a target date or mutual fund, you don’t. That could allow you to generate higher returns in your portfolio.

Also, many of the funds you’ll typically find in a 401(k) charge high fees. So you might lower your investment fees by opting for an IRA.

But when you save for retirement in an IRA instead of your company’s 401(k), you miss out on employer matching funds. And giving up that money is something you may not want to do.

Forgoing free money could hurt you

Many companies that sponsor 401(k) plans also match worker contributions to some degree. BetterUp reports that the average 401(k) match today is 4.7% — meaning, the typical employer will match 4.7% of a worker’s salary.

So, let’s say you earn $60,000 a year and your employer offers a 4.7% match. That means that if you contribute 4.7% of your salary, or $2,820 a year, to your 401(k), your employer will also give you $2,820. If you don’t save in your company’s 401(k), but rather, opt for an IRA instead, you’ll lose out on that match.

That’s a big deal, though, because the money you put into your 401(k) doesn’t just sit in cash. Rather, it gets invested.

So, let’s say you pass up $2,820 this year, but your 401(k) plan’s investments normally deliver a 10% average annual return, which is comparable to the stock market’s average return over the past 50 years. If you’re 30 years away from ending your career, passing up $2,820 really means denying yourself $49,200 in retirement income when you factor in lost investment growth.

You may want a 401(k) and IRA at the same time

You may be inclined to believe that you can’t save for retirement in an IRA and 401(k) at the same time, but that’s not true. And if you’d rather save in an IRA but your 401(k) is eligible for employer matching dollars, what it pays to do is fund your 401(k) to get your match in full, but then put the rest of your retirement savings into your IRA.

So as an example, let’s say you can afford to save $500 a month, or $6,000 this year, for retirement. If you’re entitled to a match worth $2,820 in your 401(k), contribute that sum alone to your employer’s plan. Then, put your remaining $3,180 into your IRA. It’s that simple. And that way, you get the best of both worlds — free money for your retirement as well as the opportunity to invest your money however you want.

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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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It’s important to have a home you’re looking to buy undergo an inspection. But read on to see why there’s another crucial step you need to take. 

Rocket Mortgage says it typically takes 30 to 45 days to close on a home after making an offer to purchase it. And there’s a good reason for that.

First of all, the process of closing on your home loan itself takes time because your mortgage lender needs to verify your financial information via a process known as underwriting. And aside from securing your mortgage, you’ll also need to make sure your home is in the condition you think it’s in before finalizing your sale.

To that end, it’s common practice to have the house you’re buying undergo a home inspection. And it’s a good idea to attend your inspection rather than just wait for the report that comes out of it. That way, you can ask questions along the way.

But while your home inspector may be in a good position to spot flaws with your home, they’re not necessarily the right person to estimate the cost of having them dealt with. And that’s an important thing to keep in mind so you don’t lose out financially.

A mistake you don’t want to make

Sometimes, a home inspector will give an estimate of what they think it will cost to address a given issue with a property, whether it’s a problem with the roof, heating system, plumbing, or foundation. They may be giving you that estimate based on their knowledge of the home industry.

But chances are, your home inspector doesn’t go around fixing roofs, re-running plumbing, or replacing heating systems. Rather, your home inspector’s job is to identify problems with living spaces and warn buyers of what they’re getting into.

As such, you really don’t want to rely too heavily on the estimates a home inspector gives you for addressing problems with the home you’re looking to buy. Instead, what you really want to do before closing on that home is to talk to a contractor who specializes in addressing the issue at hand.

If there’s a problem with the roof, that means calling in a roofer. If plumbing is the issue, talk to a plumber. See what those professionals have to say about the cost of fixing the problem, because it may or may not align with what your home inspector tells you.

You may have an out

Most home purchase contracts include a home inspection contingency that allows you, as a seller, to walk away if issues with the property are discovered and the seller won’t address them or deduct their cost from your purchase price. If the property you’re buying has problems and your seller won’t step up to fix them or offer a substantial enough discount on your purchase price, then you can generally back out of the deal and get your deposit back.

That’s why it’s so important to know what numbers you’re really dealing with. You don’t want to ask your seller for a $10,000 discount on your home’s purchase price to fix the roof if it will really cost $20,000.

Your home inspector may have the best of intentions when estimating the cost of home repairs. But always talk to a contractor before completing a sale or negotiating with your seller to play it safe.

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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.
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Walmart might offer low prices and a vast selection, but you’ll need to be careful when shopping there. Read on to see why. 

No matter what part of the country you live in, chances are, there’s a Walmart nearby. Walmart opened its first store in Arkansas in 1962. Since then, it’s expanded to more than 3,500 supercenter locations throughout the country.

Now when you hear the name “Walmart,” a few things tend to come to mind — a massive selection and affordable prices. But it’s for these reasons that you’ll need to be very careful when shopping at Walmart, especially at a time when you may be on a tight budget due to inflation. Here are some pitfalls to avoid in the course of your Walmart experience.

1. Assuming Walmart has the lowest prices

Walmart’s motto has long been “everyday low prices.” Because of this, you may be inclined to assume that the prices you’ll see at Walmart are the lowest ones in town. But that’s not necessarily the case.

To know if you’re getting the lowest price, you’ll need to compare the numbers you see at Walmart with other retailers. You might think that $20 for a given kitchen gadget sounds like a great deal, but if Amazon has a similar item for $15, you might as well enjoy that savings.

For example, some of the fitted sheets Walmart sells retail for $26.99 online. At Amazon, you can find fitted sheets for under $10.

Now that said, you may not find the exact same brands at Walmart and Amazon, so your comparison may not be perfect. But if, for example, you’re buying sheets to send with your kid to sleepaway camp that are apt to get destroyed, then you probably don’t care what brand you’re getting — your focus is more likely to be on keeping your credit card tab to a minimum.

2. Assuming sale items are a great deal

Walmart is known for its rollbacks, which is the superstore’s way of saying that items are on sale. But just because a given item is being offered at a discount doesn’t mean you should buy it.

Let’s say a $30 sweater is discounted to $15 at Walmart. Sure, that’s a good deal on that specific item. But if you didn’t really want or need that sweater in the first place, then you’re not saving $15 — you’re spending $15.

3. Scooping up impulse buys on your way to check out

Like many retailers, Walmart tends to put items on display in front of and around its cash registers. Those displays are pretty much designed to encourage last-minute impulse purchases — so try to avoid them.

Make a list of the things you need before heading to Walmart, and pledge to stick to it. If candy bars didn’t make the cut when you put your list together, there’s no reason to scoop up a few on your way out.

Shopping at Walmart is, for many people, a good way to stretch a paycheck at a time when living costs remain high. But do your best to avoid these traps if Walmart is a regular store in your shopping rotation.

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

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