Money Management

Not happy with your IRA? Read on to see how to change that. 

Your goal in contributing to an IRA account is no doubt to amass some wealth for retirement. That way, ideally, you’ll be able to end your career without financial worries.

But what if your IRA balance isn’t much to write home about? As of the fourth quarter of 2022, the average IRA balance was $104,000, according to Fidelity. But if you’re sitting on, say, one-tenth of that, you may be bummed about your IRA’s lack of growth. If that’s the case, these could be some of the reasons why.

1. You’re just not contributing a whole lot

In 2023, you can contribute up to $6,500 to an IRA if you’re under the age of 50, or up to $7,500 if you’re 50 or over. You may not be able to max out your IRA, especially if you’re barely managing your essential bills, like your mortgage and car payments. But if you’re only contributing, say, $500 a year to your IRA, then the fact that your account isn’t growing so quickly shouldn’t come as too much of a shock.

Now, this isn’t to say that contributing $500 a year to an IRA is useless. It’s definitely better than contributing $0. But cutting back on spending so you’re able to bump up your annual contributions to, say, $1,000 or $1,500 could help your balance grow a lot faster. So think about some of the expenses you can slash. And if you can’t identify any, consider picking up a side hustle and using your earnings to fund your IRA.

2. You’re investing too conservatively

Some people are hesitant to invest in stocks because of the risks involved. But if you’re avoiding stocks in your IRA, then it’s easy to see why your balance isn’t growing.

If you’re many years away from retirement, the reality is that you have lots of time to ride out stock market downturns. And if you branch out in your portfolio and buy stocks that span a range of market sectors, you’ll minimize your risks.

An easy way to diversify your holdings is to load up on broad market ETFs, or exchange-traded funds, since you’ll effectively be buying buckets of stocks with a single investment. S&P 500 ETFs, for example, track the index that consists of the 500 largest publicly traded companies. That’s a great way to invest in different industries without having to do a ton of legwork.

3. You’re staying invested in assets that have been underperforming

Maybe you do own stocks in your IRA. But if many of the stocks you hold have been losing money quarter after quarter, it could explain why your account balance isn’t growing. And if that’s the case, it may be time to cut some of those losses, regroup, and choose new investments.

When you’re parting with your hard-earned money to fund an IRA, seeing your balance stagnate can be disheartening. So if that’s the case, take a closer look at your investments and strategy, as well as your savings rate, and see if any major changes are in order.

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Airline cards have a lot of perks — but also big annual fees. See if it’s worth it for you to pick one up this summer. 

As a kid, you spent half the year already ready for summer vacation. As an adult, prepping for a big trip is a significantly more involved process.

Indeed, between planning and packing, your summer vacation to-do list is already long enough. But should you add one more thing? Before you hit the skies this summer, should you pick up an airline credit card?

Bringing bags? Pack your card

Good travel rewards cards, including airline cards, can have a lot of valuable perks. In my opinion, however, one of the main reasons you should consider getting an airline card before your summer trip is because of baggage fees.

The average cost to check a bag is $30 a piece. If you’re flying with multiple family members, you could easily hit $100-$120 in bag fees alone.

That’s where an airline credit card could help. Most of the mid-tier (and higher) airline cards allow you to check one bag for free. Even better, this typically extends to four to six members of your party who are flying on the same itinerary.

So, if your four-person family each gets a free checked bag, you’re saving around $120 — which is more than enough to cover the $95-$99 annual fee on a mid-tier airline card.

All the bonus you can carry

Of course, free checked bags aren’t the only reason to pick up an airline card right now. If you’re still in the booking phase, that airline card could be worth tens of thousands of frequent flyer miles, too.

That’s right, I’m talking about the sign-up bonus. Most credit card sign-up bonuses require you to spend a certain amount of money on your new card within a set period of time (usually three months after opening).

So, if you use your new airline card to pay for your summer vacation, you could get most — if not all — of the way through the spending requirement right away. Even better, you’ll be doing it with purchases you were going to make anyway.

Lounges and discounts, oh my

What if your summer vacation isn’t your only plane travel this year? If you’re going to be flying quite a bit over the next 12 months, you may want more than a mid-tier airline card. It may actually be worth upgrading to a top-tier card. Why? The lounge access.

Pretty much every travel rewards card in the $400+ range comes with some sort of airport lounge access. Usually, it’s some version of Priority Pass. But with co-branded airline cards, you could get access to their branded lounges, which can be even better as they may not be as crowded as lounges that are more easily accessible.

Sure, a $400+ annual fee is a lot to ask. That’s why you need to crunch some numbers to make sure the cost is worth paying. For example, if you’re only going to use the lounges once or twice — definitely not worth $400. If you’re going to hit them half a dozen times or more…well, you can see how that may be worth the cost, especially when paired with the bonus and other perks.

Airline cards aren’t for everyone. If your summer vacation is the only time you fly — or, perhaps, you aren’t even flying at all — then an airline card makes little sense. However, it could be a great way to save a few bucks for some folks, so it’s definitely worth investigating.

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Saving is important. But what if you can only afford to save a little every month? Find out why saving any amount of money is better than none at all. 

Allocating some of your income toward savings is essential. Whether you’re stashing extra cash to grow your emergency fund or building a sinking fund to plan for upcoming expenses like car repairs, saving money can help you prepare for future costs that come your way. But what if you can’t afford to save much money? Should you bother to save at all?

A small savings fund can make a difference

When you don’t make much money, it can be challenging to prioritize saving. Many people struggle to save money because they’re most focused on paying expensive bills, like housing costs. With everyday costs climbing, your money no longer goes as far as it once did. It can feel impossible to save if there’s little or nothing left over after paying all your bills.

But saving is essential. Setting aside even a small amount of extra money is much better than saving none. What if you can only afford to save $150 a month? That may not feel like a lot of money, but it will add up if you continue to set aside money regularly. If you save $150 every month for a year, you’ll have $1,800 saved in twelve months — which is much better than $0.

Four tips to boost your savings

If you feel like your current financial situation is keeping you from reaching your savings goals, there are steps you can take to boost your savings. Here are a few tips to try.

1. Track your spending and follow a budget

Budgeting may sound complicated, but it gets easier once you become more experienced. Tracking your spending and setting a budget can allow you to free up some of your income for other goals. Using one of the best budgeting apps out there can make the process easier.

Let’s imagine you’ve been paying for a $20 monthly subscription you no longer use. By canceling this and allocating an additional $20 monthly toward your savings goals, you can increase your savings by $240 yearly. There may be other expenses you can trim, too.

2. Consider savings interest rates

It’s also essential to pay attention to interest rates. Many regular savings accounts have low rates. You can increase your income by stashing cash in a high-yield savings account. It’s not a bad idea to occasionally review interest rates to ensure you’re not missing out on earnings. Moving your money to a new bank with a higher rate could enable you to earn more money on your savings.

3. Increase your income

If your current salary isn’t cutting it, you may want to look for ways to boost your income. Getting a side hustle or part-time job is one option. Applying for better-paying full-time opportunities is another. If you can’t take on more work, you might consider selling unwanted items at home to bring in extra cash. The more you make, the easier it can be to save.

4. Automate your savings

If you’re forgetful or are worried you’ll spend the money you plan to save before you set it aside, this savings technique may help. You can set up automatic transfers through your bank so money is sent from your checking account to your savings account as often as you’d like. By automating your savings, you can save time and stay on track.

Don’t give up on your financial goals

You may feel stuck due to your personal financial situation, but remember that your current struggles don’t have to be forever. You can make small changes that help you get closer to reaching your goals. If you can only afford to save a small amount of money right now, that’s okay. Every little bit saved adds up and can make a difference in the long run.

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Curious as to how much Americans are saving? Read on to see. 

Many Americans live paycheck to paycheck every month and don’t manage to save so much as a dime. But ideally, you’re able to carve out some amount of money to put in your savings account on a regular basis.

If you’re curious as to how much the typical American saves, the Bureau of Economic Analysis has an answer. As of February, Americans were saving an average of 4.6% of their income, which isn’t actually too shabby given that inflation has been driving living costs up and making just about everything more expensive.

It’s also worth noting that 4.6% of income saved is actually an improvement from recent months. In January, the personal savings rate was 4.4%, which was also the case in December. And in November, that rate was 4.1%.

If you’re saving about 4.6% of your income, it means you’re on par with the typical worker. And you should also give yourself a pat on the back for being able to save any amount of money given how high living costs are today.

But if you’re not happy with your personal savings rate, and you want to do better, there are steps you can take to ramp up your savings. Here are a few to consider.

1. Get on a budget

Many people think budgeting is boring and/or a waste of time. In reality, setting up and sticking to a budget could spell the difference between meeting your savings goals and falling short.

All you really need to do to create a budget is list your various bills, like your mortgage, car payment, food, and utility costs. Once every expense of yours is accounted for, identify those that are non-essential and aim to cut back in those areas. The less you spend in those categories, the more money you’re apt to save.

2. Use different strategies to avoid impulse buys

A big reason some people struggle to boost their savings is that they’re frequently tempted to buy unplanned things and have a hard time telling themselves no. But there are strategies you can employ to avoid impulse buys.

First, make a point to never shop out of boredom. If you’re sitting in a cafe waiting for your friend who’s late meeting you for lunch, don’t spend those 10 minutes browsing on Amazon, because that could lead to an unplanned purchase. Instead, read the news or find a free game you can play.

Next, don’t store your credit card information on your phone and other electronic devices. Having that data stored makes it all too easy to complete an unplanned purchase on a whim.

Finally, implement a rewards system for avoiding impulse purchases where for, say, every month you go without one, you get to treat yourself to a little something special. Chances are, the cost of your monthly reward will be less than what you’d normally spend on purchases you weren’t planning for.

3. Put the savings process on autopilot

Many people collect a paycheck, spend money, pay their bills, and hope there’s a decent amount left over at the end of the month to put into savings. If you want to increase your personal savings rate, set up an automatic transfer that has money moving from your checking account to your savings account at the start of each month, before you’ve had a chance to spend any of your earnings.

If you’re saving a chunk of your income right now, you should feel good about it. But that doesn’t mean you can’t take steps to boost your savings rate if that’s something you feel you want to do, or should do.

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Pet insurance is an important thing to have. Read on to see what to do if you’re not interested in buying coverage. 

When my husband and I adopted our old dog, Casey, when he was about a year old, we decided not to get pet insurance for him. At the time, we had a hard time finding a policy that offered decent coverage at what we felt was a reasonable cost. And since Casey seemed like a healthy dog, we decided that forgoing coverage made sense.

Fast forward a whole bunch of years, and Casey wound up with diabetes, kidney stones, and a host of issues that resulted in some very expensive vet care. But thankfully, we had the money to cover it without pet insurance. That’s because instead of paying for pet insurance, we decided to build a pet emergency fund. And if you’re going to skip out on pet insurance, you should prepare to do the same.

You need some kind of back-up plan

Pet insurance won’t necessarily cover every single pet care bill you encounter. And even for covered issues, it may not pick up the tab in full. But pet insurance could spell the difference between giving your pet the care they need versus having to skimp on care due to financial constraints. It could also help you avoid debt if you refuse to skimp on care.

Let’s say your pet ends up needing a $6,000 surgery. Your pet insurance policy may not pick up the tab for it in full, but rather, cover $4,500. But you’re better off, in that case, getting stuck with a $1,500 bill than one for four times as much.

Now, you may be of the opinion that pet insurance is a waste of money. But if so, then at the very least, take the money you would’ve spent on pet insurance premiums and put it into a savings account earmarked for pet care bills. That way, if you end up in a situation where you’re looking at a bill that amounts to thousands of dollars, you’ll have cash reserves to tap. And you won’t necessarily have to resort to costly credit card debt.

Although I regret not getting pet insurance for Casey, my husband and I were really good about putting money into our savings every month to take the place of our premium costs. When we wound up on the hook for expensive medical bills, we had them covered.

Don’t leave yourself in a bad spot

I know a few people who have, in recent months, racked up debt to care for their older pets when health issues arose. And a big reason boiled down to them not having pet insurance or savings for pet care expenses. One friend of mine even contemplated the idea of a GoFundMe campaign but was able to scrounge up the funds by getting a loan from her parents.

Recent data from Lemonade found that pet owners put aside an average of $439 per year for pet care. If you’re not going to buy pet insurance, you may want to try to sock away even more money than that in case you one day wind up with a very expensive surgery or course of medical treatment for your pet to pay for on your own.

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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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Rumor has it the IRS is amassing 87,000 auditors to go after tax filers. Read on to learn what the IRS is really doing with its $80 billion. 

Since mid-2022, several politicians have warned Americans about a growing army of tax auditors, 87,000 to be exact. The only problem — it’s false. True, the IRS wants to hire new employees, using funds from the $80 billion allocated to it by the Inflation Reduction Act. But the IRS isn’t mobilizing an army of 87,000 new auditors, nor does it plan to use all of that funding for hiring purposes alone.

So what exactly does the IRS plan to do with $80 billion? Let’s take a look at the plan it released in April 2023.

The IRS wants to rebuild its staff

No one likes doing taxes. Not for themselves and apparently not for the IRS.

As the New York Times pointed out, the IRS’s total number of full-time employees in 2023 (roughly 80,000) is about 20% fewer than what the agency had in 2010, even though the U.S. population grew from roughly 309.32 million to 333.33 million in the same period.

To bolster its numbers, the agency plans to use funding to hire roughly 20,000 new employees over the next two years, with roughly 7,239 of those hires being enforcement staff. This would add to the 5,000 phone personnel the agency hired before the 2023 tax season began.

This is a far cry, however, from the claim that the IRS is hiring 87,000 auditors. That number was misappropriated from a report filed by the Treasury Department, which stated that an $80 billion investment in the IRS could lead the agency to hire 86,852 employees between 2022 and 2031.

But this is just an estimate, not a policy goal. Moreover, a large portion of these employees would be hired to counterbalance those lost to attrition. For perspective, the IRS currently has about 80,000; if we included the 86,852 to be hired, the Treasury Department estimates the IRS would grow to roughly 110,000 employees by 2031. Not exactly the army of auditors certain politicians are expecting.

Clamp down on tax evasion

The second objective laid out in the IRS’ plan is to stamp out Americans who are habitually underreporting income on their tax returns.

The IRS has made it clear though that it doesn’t intend to go after households and small businesses earning $400,000 or less, as some politicians have also claimed. Instead, the agency wants to hire more auditors to deal with complicated tax filings, which often come from wealthy individuals and large businesses.

The audit rate on wealthy individuals has fallen from 16% in 2010 to roughly 2% in 2019. Part of the reason for this drop is that the IRS is operating with fewer tax auditors today than any time before World War II. To put that into perspective, consider the U.S. population in 1950 was 157.8 million, less than half what it is today.

Increased funding to the agency, then, would help it hire more experienced auditors who can handle complicated tax filings. It could also help the agency close the annual gap between what is owed to it and what is collected, which is currently as wide as $163 billion.

Update technology

Anyone who’s visited the IRS’s website understands the urgency of this objective: One look at it is all you need to realize the extent of its tech resource depletion.

The IRS’s plan for technology is ambitious but dare I say — exciting. The agency wants powerful applications to let tax filers track the status of their filling online, with real-time updates and estimates on processing times. And all those long — long — hold times waiting for IRS personnel to take your call might be something we tell our grandkids: The IRS wants a robust messaging system that can help tax filers get answers to questions faster and with less hassle.

The best part — the agency wants to help taxpayers get the deductions and tax credits they deserve. Right now, the focus is on providing educational materials that break down deductions in plain language. Later, it wants to start using data analytics to identify taxpayers who are not claiming the deductions they are indeed eligible to claim.

How will these changes affect you?

For most taxpayers, these changes will have no negative impact. If you’re doing your best to file your tax returns accurately — whether that’s using the best tax software or hiring a tax professional — the IRS’s plan will likely make the process easier (finally!). Wealthy taxpayers earning $400,000 or more, however, will be scrutinized more closely. Again, as long you’re not habitually underreporting income, you have nothing to worry about. If anything, the IRS’s changes will bring more equity to the system, ensuring that all Americans pay their fair share of taxes.

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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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