Money Management

Saving for retirement is always a good idea, right? Explore the circumstances in which investing in a 401(k) isn’t the best option. 

When it comes to financial planning and retirement, investing in a 401(k) is often considered a must-do. These tax-advantaged savings accounts are an excellent way to save for retirement while deferring taxes along the way. However, there are times when investing in a 401(k) could be a bad idea. Here’s when you should reconsider investing in your 401(k).

1. You’ll be charged high fees and have poor investment options

While most 401(k)s offer a variety of investment options, some may have restricted choices, high fees, or both. If your 401(k) plan charges high fees or doesn’t have a range of investment options, it’s worth exploring other savings alternatives.

High fees and poor investment options can eat away at your retirement savings and leave you with little to show for it. Depending on the situation, it may make more sense to contribute to a different retirement account or focus on other investments.

2. You’re close to retirement

If you’re approaching retirement age, investing in your 401(k) might not be the best option. Why? Because you won’t have time to recoup any potential losses before you start withdrawing from your account.

That being said, it’s possible a target-date fund that automatically adjusts its allocation to lower-risk investments might still be a good fit.

3. You lack an emergency fund

Before investing in a 401(k), it’s important to have an emergency fund. An emergency fund is a cash buffer that can be used to cover unexpected expenses.

If you don’t have an emergency fund, focus on saving one before investing in your 401(k). If you don’t and you experience an emergency, you might have to take out a loan or credit card debt with potentially heavy penalties.

4. You have high-interest debt

Before investing in your future, it’s important to consider your present. High-interest debt, such as credit card debt, can be a significant barrier when it comes to saving for retirement.

If that debt interest rate is higher than a reasonable rate of return on your 401(k) investment, it’s worth prioritizing paying off debt. With less money going towards debt, you will free up more funds that can be invested in a more financially secure future.

5. You need more control

When you invest in a 401(k), you’re not in complete control of your funds. Your employer’s retirement plan likely offers limited investment options, and you also might have to follow strict plan mandates.

If you want to have more control over your investments, consider contributing less to your 401(k), while investing in other alternative options like an IRA, a savings account, or a certificate of deposit (CD). While not all of these options are tax-advantaged, they will offer more flexibility and personal control.

While a 401(k) is a fantastic tool for retirement saving, it’s essential to consider all the facts before contributing to one. If you’re dealing with high fees, limited investment choices, or have other more important priorities, it might be time to explore alternative options.

Don’t worry, there are plenty of other avenues to save for retirement, including traditional and Roth IRA accounts, high-yield savings accounts, and taxable brokerage accounts. By doing your research and making sure your investment strategy meets your needs, you will ensure financial stability in the future.

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Sheds are expensive to build on your own, but cheap as a flat-pack kit through Sam’s Club. Learn if Sam’s sheds are worth it for you. 

Sheds are great for providing extra space for lawn and gardening equipment, keeping homes and garages free of clutter, and storing hazardous materials. But they could give your credit card a workout. According to Home Advisor, homeowners should expect to pay between $4,000 and $6,000 for a shed, with some high-end custom built sheds costing upwards of $33,000.

For Sam’s Club members, however, access to affordable sheds is as easy as shopping for one on Sam’s website and having it delivered to your home. The warehouse’s prices are low compared to some competitors, and it sells a wide range of sizes in both wood and plastic. If you’re looking to build a shed this summer, here’s what you should know about buying one at Sam’s Club.

Sam’s Club has several sizes — and good prices

Sam’s Club has numerous sheds with a variety of widths and depths, from those that can fit in a corner to those that are as large as a small house. While its selection admittedly isn’t as vast as Home Depot or Costco, you’ll still find several products within the broad categories of small, medium, and large.

As far as price goes, Sam’s Club is competitive but its prices aren’t always the lowest. For example, here’s how the warehouse retailer compares to its competitors for three of its sheds.

Sam’s Club beats Home Depot by a long shot for the sheds compared here, but it has a pretty fierce competitor in Costco sheds. I’d compare both of these warehouses closely, because when Costco is running specials on outdoor products, it might have lower prices than Sam’s. Likewise, when Costco isn’t running a promotion, Sam’s Club may have the better deal.

Assembly can take some time, unless you hire professionals

Most Sam’s Club sheds are do-it-yourself projects that require numerous steps, from laying a concrete slab to building the shed from instructions, to securing the structure to the slab and finally slating its roof.

In regards to the ease of their assemblies, many sheds have a mixed bag of reviews. Some reviewers found the instructions easy to follow, while others criticized the steps for being vague or for mislabeling parts. The enormous difference, however, between satisfied customers and those who posted one-star reviews may have something to do with practical experience rather than a deficiency with the product itself, as many customers — satisfied and not — did say the kits required some handiness to assemble without hassle.

Sheds will arrive in flat-packs with hardware, parts, and instructions, but you’ll need to lay your own concrete slab and supply the power drills. Most reviewers said you’ll need two people for certain steps, like erecting the walls or putting the roof on, but you can likely get away with doing it alone for most of the project.

If you’re not particularly handy — or you don’t have six to nine hours to devote to shed building — you can hire help through Sam’s Club. The warehouse retailer will source out the work to a third-party company (GoConfigure) that will bring the shed to your home and assemble it on the day you schedule. It will cost extra, but it might be worth it if it means doing the job right. You can request quotes on GoConfigure’s website.

You can return your shed for a full refund

Most sheds are backed by Sam’s “Member Satisfaction Guarantee,” which lets you return most purchases at any time for a full return. That said, if you hire GoConfigure to build your shed, the assembly portion may have a separate warranty (30 days, according to Sam’s Club), even if the shed itself falls under Sam’s satisfaction guarantee.

The money back guarantee should give you some peace of mind when buying a shed from Sam’s Club. Of course, returning a shed isn’t as easy as returning a shirt that doesn’t fit, so you’ll want to research before you make a purchase. Read reviews on sheds you like to gauge how easy (or difficult) assembly will be, and compare it to similar products from Costco and Home Depot to see which can best benefit your personal finances.

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There are still steps you can take if you missed your last quarterly tax payment. Read on to see how to remedy the situation. 

There are different benefits to being self-employed, like getting to set your own hours and say no to work that doesn’t interest you (provided you can afford to do so). But from a tax-filing standpoint, being self-employed can be tricky. That’s because it’s on you to send the IRS money every quarter to account for your earnings and make up for the fact that tax is not being taken out of your paychecks.

The IRS requires people who are self-employed to make estimated tax payments every quarter. For 2023, those payments were or are due on the following dates:

April 18June 15Sept. 15Jan. 16, 2024

The reason your final estimated tax payment isn’t due until January is that your final earnings for the year may not hit your checking account until very late December, so it’s not reasonable to expect you to be able to calculate and make your last payment by the end of 2023.

It’s likely easy enough to remember to submit your first estimated quarterly tax payment, since it aligns with the tax-filing deadline in April. But you may have forgotten to send in your quarterly payment in June.

That’s understandable because that payment may not have been on your radar at that point. But if you missed the June deadline, it’s important to rectify that situation as soon as you can.

Don’t just wait until September

If you failed to make your last estimated tax payment, you may be inclined to just pay the IRS a little extra in September. But that’s a mistake.

The IRS expects you to pay taxes as you earn money, and you could face penalties for not paying your taxes quarterly as you’re supposed to. In fact, you could be on the hook for penalties and interest even if you’re just one day late in making your payment past the quarterly deadline. As such, TurboTax says that if you miss a payment deadline, the best thing to do is calculate how much you owe and send the IRS that money as soon as you can.

A good way to avoid missing deadlines

The IRS will generally let you set up automatic payments for estimated tax purposes. Of course, the tough thing here is estimating exactly what you’ll owe each quarter, but an accountant may be able to help you with that.

You may decide to err on the side of overpaying the IRS to avoid having to write the agency a check when you file your tax return. But either way, you should be able to set up automatic payments so the IRS receives its money on or by any upcoming deadlines.

If you don’t want to sign up for automatic payments, mark Sept. 15 on your calendar and set a reminder so you don’t forget to make your payment. You may, in some cases, be able to appeal a penalty for a missed quarterly deadline if you were only late once. The chance of pulling that off two quarters in a row is a lot slimmer.

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You may have your reasons for moving a Roth 401(k) into a Roth IRA. Read on to see what that means from a tax perspective. 

The sooner you’re able to start saving for retirement, the better. You may be tempted to save in your employer’s 401(k) plan if that option is available to you. That’s because 401(k)s commonly come with employer matches that equal free money for your retirement.

But there may come a point when you decide you don’t want to leave your retirement savings in your 401(k). You may be interested in moving that money over to a Roth IRA.

In some cases, moving funds from a 401(k) to a Roth IRA could have tax implications. But when you’re moving money from a Roth 401(k) to a Roth IRA, you won’t have to pay taxes when doing that transfer.

When it pays to move over to a Roth IRA

Any time you leave a job, whether willingly or not, it’s a good idea to roll your old 401(k) plan into a new plan — either a 401(k) at a new job or an IRA. Capitalize reports that there are more than 29 million left-behind or forgotten 401(k)s, so you don’t want to run the risk of forgoing money you’re entitled to for your retirement.

But even if you’re not leaving a job, you might just plain want to move your money out of a 401(k) and into an IRA. IRAs commonly offer a wider range of investment options, since they allow you to buy individual stocks and 401(k)s generally do not. And you may find that your fees are lower with an IRA.

If you roll funds from a traditional 401(k) into a Roth IRA, you’re going to have to pay taxes on that conversion. That’s because traditional 401(k) are funded with pre-tax dollars, whereas Roth IRAs are funded with after-tax dollars.

But let’s say your 401(k) is of the Roth variety and you want to switch over to a Roth IRA. In that case, there’s no need to worry about a tax bill, because you never got a tax break on your Roth 401(k) contributions. So the IRS would have no reason to tax you simply because you’re switching from one Roth account to another.

Should you keep your retirement savings in a Roth account?

Whether it’s an IRA or a 401(k), the primary drawback of a Roth retirement plan is that you don’t get a tax break on the money you contribute. But on the flipside, you get to enjoy tax-free investment gains in your account and tax-free withdrawals during retirement.

You also don’t have to take required minimum distributions in a Roth account. This is currently the case for Roth IRAs, and it will be for Roth 401(k)s starting in 2024. Not having to worry about RMDs gives you added flexibility with your money.

With a traditional IRA or 401(k), you eventually pay taxes on your investment gains, and your withdrawals are taxable. That could be a huge burden during your senior years. So if you’re able to make retirement plan contributions without receiving an immediate tax break, then a Roth savings plan could be a good bet.

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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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Wouldn’t it be nice to have someone assemble your mortgage loan options for you? Keep reading to learn how to hire the right mortgage broker. 

Getting a home loan these days is not for the faint of heart. Mortgage interest rates have more than doubled from the salad days of 3% back in 2021, and as of this writing, we’re sitting at an average rate of 6.78% for a 30-year fixed-rate loan (per Freddie Mac). On top of the higher rates, you have so many options to choose from when it comes to mortgage types and even mortgage terms. And that’s not even considering how many mortgage lenders are out there. How are you supposed to know which is right for you?

Maybe you should hire a mortgage broker. Let’s take a closer look at how these home loan professionals operate, as well as a few tips to find the right one for you.

What is a mortgage broker?

Simply put, a mortgage broker works with home buyers on getting a new mortgage, or current homeowners who want to refinance their existing mortgage. This means they’ll get the appropriate financial documents from you (your income documentation, identification, bank statements showing your assets, and anything else you might need to apply for a mortgage) first. Then they’ll be able to match you up with mortgage lenders offering home loans and rates that are favorable to you as a borrower.

This can take a lot of the guesswork out of deciding which lenders to apply with, especially if you have a less common financial situation, such as being self-employed, or you’re too busy to research your options yourself. Mortgage brokers can either be paid by the lender you end up getting your loan from, or by you directly. They’re required to disclose their fees upfront so there won’t be any surprises.

How do you find one?

A good mortgage broker can be an asset to a buyer. Here’s how to find one.

1. Get ready ahead of time

To lay the initial groundwork, it’s a good idea to get your ducks in a row first, so to speak. Pull your credit report to see how things are looking (and see if there’s anything you’ll need to explain to a mortgage lender in the process of getting approved). Collect bank statements and perhaps tax returns, if you’re self-employed. Once you have everything together, it’ll be much easier to pass it all off to your mortgage broker when you get one.

2. Ask for personal recommendations

If you know people who used a mortgage broker to buy a home or refinance, ask them for recommendations. This can be a great way to get more information about a broker’s personality and how easy they were to work with.

3. Look online, too

Online reviews can also be a good way to get more information about a broker you might be considering. Look for reviews that mention a broker’s communication as well as how long it took to get the transaction completed. Oh, and while you’re at it, plug broker names into the Nationwide Multistate Licensing System database to ensure they’re legit and allowed to work in your state.

4. Ask your real estate agent

If you’re already working with a real estate agent in your home search (even though it’s a better idea to get your financial needs addressed first, as it’ll make you a more competitive buyer), you can ask them for recommendations. Real estate agents have a vested interest in ensuring a buyer finds a home and the loan goes through, so they do have a vested interest in setting you up with a good broker.

5. Be prepared with a list of questions

Once you’ve got a solid candidate, ask them a few questions to assess whether they’re a fit.

Do you work with the loan types I’m considering? For example, if you’re hoping to buy with a VA loan, don’t hire a broker who is unfamiliar with them.Which lenders do you work with? You may already have an idea of which lenders appeal to you, so choose a broker who works with them.What are your fees and who pays them? If your prospective broker is paid by the lender, it might be an incentive for them to steer you toward the one that pays them the most.

A mortgage broker can make the home-buying process easier. Use these tips to find the right one for you, if you decide to go this route.

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HOA neighborhoods come with perks such as extra amenities. But there may also be restrictions and added fees you must contend with. Find out more. 

Neighborhoods with homeowners associations (or HOAs) are pretty common. In fact, in 2021, about 66.9% of new homes completed that year were part of HOA communities.

When there is a homeowners association in your neighborhood, you’ll often find more amenities such as parks or playgrounds. The association may also organize activities. However, there will likely be rules about what you can and cannot do with your property, along with HOA fees that have to be paid in addition to your monthly mortgage payment.

Before you buy a home in an HOA neighborhood, it’s important to consider what this decision will mean for your future — and essential to take the time to think about whether you’re a good fit for this kind of community.

Are you OK with people telling you what you can and can’t do with your home?

Homeowners associations often have a lot of rules. You may have to paint your house a certain color, maintain specific kinds of plants in your yard, keep your garage doors closed, and avoid keeping an RV in your yard. And this is just a very small sampling of some of the rules you’re likely to encounter.

If you feel your blood boiling at the idea of someone telling you that you can’t paint the home you paid a fortune to buy in the way you want, then you are not a good fit for an HOA neighborhood.

How concerned are you with maintaining property values and a certain look in your neighborhood?

The upside of HOAs is that they help maintain property values by ensuring a neighborhood stays nice. The HOA will ensure you don’t end up with neighbors who let the house fall into disrepair or who build an ugly home addition you don’t want to look at.

If it’s very important to you that houses are kept up nicely and if you want to make sure a bad neighbor doesn’t hurt your home’s value, an HOA neighborhood may be a great fit.

Do you have extra money for HOA fees in your budget?

You are going to have fees if you live in an association neighborhood. Sometimes, those fees are a few dollars a month. But sometimes they are several hundred or even several thousand dollars a month.

If you cannot afford to pay for the extra cost of HOA fees, you don’t want to move to a neighborhood that requires you to cover this cost. You could find yourself facing late charges and potentially even having your home foreclosed on if you don’t pay the HOA as required.

How important are neighborhood amenities to you?

Most often, neighborhoods that offer amenities such as swimming pools and activities tend to have HOAs. After all, someone needs to maintain all those features and also plan events. If you want these amenities and you want to live in a place where there are community events for you and your kids, an HOA neighborhood may be your best option.

By considering these key issues, you can decide whether moving to a place with an HOA Is going to make you happy or bother you. Be sure to think about this decision carefully, as once you buy a home in an HOA neighborhood, you’re going to be bound by the rules whether you like them or not.

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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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