Money Management

Learn how to approach some of the biggest decisions you’ll need to make as a new retirement saver. 

If you recently landed your first full-time job, congratulations are in order. However, there’s quite a bit to learn when you get your first “real” job, especially when it comes to the benefits package your employer offers.

One of the most important, and least understood, types of employee benefits is retirement plans. And it isn’t just new employees — many people who have been in the working world for decades are completely confused when they have to fill out paperwork to enroll in a 401(k) or similar retirement plan. With that in mind, here are three of the biggest decisions you’ll need to make when enrolling in a retirement plan, and what to keep in mind to help make the best choices for you.

Traditional or Roth?

Nearly 90% of 401(k) plans offer participants a “Roth” option, but fewer than 30% of workers make Roth 401(k) contributions. So, it’s important to know what this means and evaluate if it’s right for you.

In a nutshell, you have two ways to save for retirement in your employer’s plan (assuming there is a Roth option). The traditional way of saving is also known as tax-deferred retirement contributions. Essentially, the money you contribute from your paycheck is excluded from your taxable income, so if you are paid $75,000 in 2023 and contribute $5,000 to your 401(k), it will bring your taxable income down to $70,000. However, when you retire, any withdrawals from the account will be considered taxable income.

On the other hand, Roth contributions don’t get you a tax break right away. Instead, any eventual Roth 401(k) withdrawals will be completely tax free.

In short, do you want your tax savings now or later? Generally speaking, if you’re in a lower tax bracket (like many are when they start their career), Roth 401(k) contributions can be beneficial by allowing you to pay your current tax rate on your money. If you’re a higher earner, the immediate tax savings could be the way to go.

How much should you save?

Financial planners have different rules of thumb when it comes to how much is enough to save for retirement, but one common guideline is that workers should aim to set aside 10% of their salary in retirement accounts like a 401(k). This doesn’t include any matching contributions your employer makes on your behalf.

Most retirement plans have an auto-enrollment feature and a default contribution rate that is not enough. To be fair, the default contribution rates of workplace retirement plans have increased significantly over the past few years — 6% is now the most common, while 3% was the standard for a long time. However, even a 6% savings rate may not be sufficient to produce financial freedom in retirement.

How should you invest?

Your employer’s 401(k) or other retirement plan will offer a mix of investment options, usually in the form of mutual funds. These vary from plan to plan, but there are a couple of things to keep in mind.

First, most plans offer target-date retirement funds designed to provide an all-in-one investment option that starts out aggressive but becomes more conservative as you approach retirement. You’ll see these labeled as something like “XYZ Target Retirement Fund 2050.”

Second, plans generally offer a default asset allocation and/or access to retirement planners who can guide you through setting up an investment plan. Unless you’re familiar with the basics of mutual fund investing, you should absolutely take advantage.

There are many right ways to invest for retirement

One key takeaway is that there isn’t one perfect answer, and a lot of retirement savings is simply a matter of preference. For example, regardless of your income level, choosing either traditional or Roth 401(k) contributions isn’t a bad move. So, while the goal should be to optimize your retirement plan to best meet your goals, the most important thing is to save the right amount and stay invested over the years.

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There are costs associated with adopting a dog you’ll need to prepare for. Read on to see what to anticipate. 

Adopting a dog can be a wonderful experience. But unfortunately, it can also be an expensive one.

The cost of bringing a dog into your home can vary based on a number of factors. These might include the type of home you have and the type of dog you’re adopting. But data from Rover reveals that the upfront costs associated with adopting a dog can range from $1,135 to $5,155.

Clearly, that’s a wide range. But keep in mind that when you adopt a dog, there are generally fees you pay to the rescue or shelter you work with. And those fees tend to be higher for puppies, though that’s not always the case.

Also, you might, depending on your pet, have to cover the cost of spaying or neutering. You should also expect to shell out some money for an initial vet exam and purchase supplies that may include leashes, food bowls, a crate, and a dog bed (unless, of course, you’re looking to share your bed with your new buddy).

Because of these costs, it’s important to have plenty of money in your savings account before you adopt a dog. And it’s also important to have money in savings post-adoption for emergency pet expenses, the most costly of which are likely to be health-related in nature.

But as important as it is to have savings when you’re taking on the responsibility of having a dog, it’s also important to put pet insurance in place as soon as you can. Doing so could spare you a world of financial upheaval should your pet get injured or fall ill.

You need to be prepared

The last thing you want to do is end up with credit card debt in the course of adopting a pet, so it’s important to make a list of your initial costs and make sure your savings can cover them. Just as essential is to have added savings for ongoing expenses, and pet insurance in case a major health issue arises.

In fact, one of the first moves you should make upon bringing a new dog home is to buy pet insurance.

You never know when a health issue might emerge with a new dog. And if an issue pops up before you put insurance in place, it’ll be considered a pre-existing condition. That means a pet insurance plan generally won’t cover it. So you want to get ahead of that to avoid getting stuck with added costs yourself.

Make sure you’re up to the task — logistically and financially

A lot of people adopt dogs with the best of intentions only to realize they can’t handle it from a logistical or financial standpoint. So try to spend some time talking to dog owners to get a sense of what you’re signing up for.

Walking a dog, for example, is something you have to do multiple times daily — either that, or prepare to pay someone. If your schedule doesn’t allow for that, you may want to wait to adopt a dog until things change.

Similarly, owning a dog means incurring ongoing expenses. Even if you have pet insurance, there are medications and other preventive care items you’ll need to cover the cost of. You’ll also have to pay for food and supplies continuously. So before you adopt a dog, make sure your personal finances allow for all of that. If they don’t, save up and adopt a dog when your savings are looking more robust.

Having to give up a dog can be heartbreaking. Go in prepared so you’re not forced into that sort of situation.

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

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Costco’s smartphone prices are competitive, but that’s not the only reason you should buy one here. Learn why it’s a good idea to buy a smartphone at Costco. 

Costco may not be the first place that comes to mind when you’re shopping for a smartphone, but for the sake of your personal finances it may be worth considering. The prices are competitive, the models are up to date, and Costco usually gives you more than just the smartphone (like a case, screen cover, or extra charger).

If you’re dreading the experience of buying a smartphone from a phone store, here’s three reasons why Costco might just be the best place to buy your next phone.

1. No upgrade fees

Many cellphone providers charge a one-time “upgrade fee” for buying a new smartphone or connecting a new device to its network. For example, Verizon, AT&T, and T-Mobile all charge $35 for new phones or new lines of services.

When you buy a new phone at Costco, however, the $35 upgrade fee is waived. Just pay attention to ensure your local Costco actually waives the fee for you. Since Costco has recently replaced its third-party cellphone service — Wireless Advocates — with T-Mobile and AT&T, these two companies may forget Costco waives the fee. Check your receipt after you buy and make sure there’s a big “$0” under the upgrade fee.

2. Costco might offer you a gift card

Costco will frequently offer gift cards when you activate a new line on your network or buy a new phone. And Costco doesn’t skimp on the gift cards, either. For example, in January, Costco was offering $150 gift cards for each new line activation on a T-Mobile network. Getting a Costco gift card for buying or activating a new phone means getting to save more of your own money on future Costco purchases.

3. You have 90 days to return it

Costco’s return policy is famously generous. Most items have no timestamp for when you have to return them by, but electronics — which includes smartphones — have a timeline: 90 days, starting on the day you purchase it.

That’s still a lot of time, however. For comparison, Verizon has a 30-day return policy, T-Mobile’s is 14 days, and AT&T’s is also 14 days.

The process of returning a smartphone at Costco is a bit peculiar, however, as you have to contact the carrier directly and initiate the process through it. In other words, you can’t take your phone back to your local Costco and expect them to refund it on the spot. You’ll have to contact your carrier (Verizon, AT&T, T-Mobile, etc.) and receive your refund through it.

It’s worth mentioning, too, that Costco’s smartphone prices are rarely higher than those found at phone stores. Toss in the fact that you can wander around Costco while your phone is being programmed, and you have a winning combination of convenience and cash in your savings account.

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

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Do you know where your money is going? Unless you review your transactions frequently, you may be overspending. Here are a few ways people waste money. 

Everyone can benefit from taking the time to review their finances and devise a plan to reach their goals. Some of your everyday habits could cost you money without realizing it. Every dollar spent adds up and impacts your wallet. We’ve outlined a few ways you may be wasting money without knowing it, so you can get a closer look at your finances and make changes.

1. Bank fees

You may be paying bank fees without realizing it. A common mistake is not researching maintenance fees before opening a bank account. Some checking accounts and savings accounts charge monthly maintenance fees.

You can often avoid these fees by meeting balance requirements or setting up direct deposit. Plus, some bank accounts don’t charge this fee at all. You may want to review your most recent bank statement to see if you’re paying extra fees like this.

2. Paying for convenience

To save time and reduce stress, paying for convenience can sometimes be well worth it. But if you’re not careful, paying for convenience can become an expensive habit that impacts your personal finances. An example is frequently paying delivery fees when using food delivery apps for takeout.

If this is of value to you and you can afford to pay extra fees, it may be well worth the cost. But make sure you don’t rack up costly credit card debt.

3. Credit card interest

Credit card interest is an expense that many Americans pay. This type of high-interest debt can quickly get out of hand. If you sometimes carry a balance from month to month, you may not realize how much money you spend on credit card interest charges.

The best way to avoid this extra expense is to pay off your card balance. If you have existing credit card debt, you’ll want to pay off your debt before making new purchases with your card.

4. Unused subscriptions and memberships

With so many subscription and membership-based services to choose from, keeping track of them can be difficult. Many people continue to pay for services they’re not using often or at all because they forget about them.

Now is an excellent time to review your active subscriptions and memberships to ensure you’re not wasting money. Pausing some subscriptions until you’re ready to use them again can help you boost your checking account balance.

5. Not monitoring your spending

Another common mistake that people make is not watching their spending. It can be easy to spend beyond your means if you make purchase decisions without considering your financial goals.

If you spend most of your money before payday, prioritizing important money goals, like building an emergency fund, can be challenging. Budgeting apps are an excellent tool to help you keep your spending in check.

Small changes can make a big difference

It’s never too late to make a change. If you’re unhappy with your finances, remember that your current situation doesn’t have to be forever. You can make small changes that allow you to make progress. Noticing your money mistakes and finding ways to adjust your behavior can help you reach your financial goals sooner.

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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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If your life insurance policy lapses, it’s important to take action. Read on to learn what to do. 

Although life insurance is an important thing to have, it certainly isn’t free. And if you stop making your premium payments, generally speaking, your coverage will end. However, it may not end right away. And even once it ends, you may have the option to get your life insurance back.

When your life insurance policy lapses

Most of the time, you’ll have a grace period from when you miss a premium payment to when your life insurance policy officially lapses. Progressive says that most life insurance policies give you a 30-day grace period, but some might give you 60 or 90 days. You’ll need to review the details of your life insurance policy to see what your options entail.

You can generally avoid having your life insurance policy lapse by paying your missed premium before your grace period ends. Also, your life insurance company must let you know that you’ve missed a payment and are in a grace period. They must also tell you that your life insurance policy has lapsed once that happens officially.

Now you should know that in some cases, a missed premium payment won’t lead to your life insurance lapsing. If you have whole life insurance, which accumulates a cash value, your insurer can apply that cash value to what you owe on your premiums. But if there isn’t enough built-up cash in your policy to cover a missed premium payment, then your policy might lapse.

And if you have term life insurance, your policy won’t have a cash value at all. So if you miss a term life payment and don’t make good on it during your grace period, your policy might lapse.

What to do after your life insurance policy has lapsed

Many life insurance policies have a reinstatement provision that allows you to get your coverage back if you meet certain criteria. You may, for example, be able to get your insurance coverage back if you reach out to your insurer within a short period of time, certify that your health hasn’t changed, and make up the missed premium(s) you neglected to pay.

But again, as is the case with a grace period, the process for having your life insurance policy reinstated will depend on the specifics of your policy and insurer. So you’ll need to review your contract and reach out to your insurer to see what options are available.

How to avoid having your life insurance lapse

The best way to avoid a lapsed life insurance policy in the first place is to make sure you can afford your premiums. To this end, you may want to opt for term life insurance over whole life coverage.

Whole life insurance does offer the benefit of permanent coverage, and your policy can accumulate a cash value over time. Term life insurance only covers you for a preset period of time and accumulates no cash value — so if you don’t end up passing away during your coverage period, your beneficiaries get no payout.

But term life insurance tends to be far more affordable than whole life insurance. And so you may be better off opting for term life insurance so you’re less likely to fall behind on your premiums and risk losing your coverage.

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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 recommends Progressive. The Motley Fool has a disclosure policy.

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