Money Management

That’s actually much better news. 

“Gear up for a recession now, while you can.” Such were the warnings many financial experts issued during the latter part of 2022 on the heels of interest rate hikes by the Federal Reserve.

The Fed has been raising interest rates in the hopes of slowing the rate of inflation. There’s been progress since inflation levels peaked in mid-2022, but the Fed insists there’s more work to be done.

By making it more expensive to borrow, the central bank is hoping to encourage consumers to spend less. That should, in turn, help close the gap between supply and demand that’s been causing inflation to surge.

But if consumer spending declines to an extreme degree, it could fuel an economic downturn. And that could lead to a prolonged period of higher-than-average unemployment.

But recently, economists have changed their tune with regard to those recession warnings. And while many experts still think economic conditions could worsen in the near term, they’re not as convinced that things will be truly terrible.

We could get a ‘slowcession’ in 2023

Consumers were warned to boost their savings account balances and pay off high-interest debt in 2022 to gear up for a 2023 recession. But now, Moody’s Analytics says that the most likely near-term scenario is not a full-blown recession, but rather, a “slowcession” — a period of economic decline without the full-on assault of a recession.

Now to be clear, a “slowcession” doesn’t mean things will be rosy. We could still see unemployment levels rise from where they are today.

But it’s also important to recognize that the national unemployment rate is currently at almost the lowest level in 20 years. And so if the jobless rate rises modestly, that wouldn’t necessarily drive the economy into crisis mode.

Furthermore, a “slowcession” — or even a full-blown recession, for that matter — won’t necessarily impact stock or home values. Stocks had a miserable 2022, and home values, though still high, have dropped over the past number of months as mortgage rates have risen and buyers have been forced out of the market. But things won’t necessarily get better or worse in either regard if the broad economy declines.

It still pays to prepare

While the idea of a “slowcession” may not seem as bad as an actual recession, it’s still a good idea to get ready for a downturn. That could mean boosting your emergency fund and paying off lingering credit card balances you racked up during the holidays.

It’s also not a bad time to set yourself up with a second job. That extra money could help you shore up your savings and chip away at costly debt. Plus, a side gig can serve as a backup income source in case economic conditions worsen and your job winds up on the chopping block.

Whether we call it a recession, a “slowcession,” or simply a decline, the fact of the matter is that most experts think the economy will worsen to some degree this year. Preparing for that could spare you a world of stress and financial upheaval.

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It takes only a few moments to see if your card issuer will extend a retention offer. 

As the new year approaches, you may be trying to decide which credit cards you want to keep in your wallet. If you’re not using your credit card often or aren’t getting value from the benefits offered, you may decide to get rid of it. But before canceling a rewards credit card, there’s something you should do first. Keep reading to find out what you need to know.

Your credit card issuer wants to keep you as a customer

Your card issuer wants to keep you as a customer. If you cancel your credit card, it’ll be down one customer, which doesn’t benefit the issuer. After all, card issuers make money by charging annual fees, interest charges, and late fees. With more customers, they have a chance to make more money.

An explanation of retention offers

Many of the best rewards credit cards promote attractive welcome offers that incentivize you to apply for and use the cards. But after a few years, if you’re not getting value out of a card, you may have to decide if you want to continue using it or if it’s time to move on.

In some cases, card issuers will extend a retention offer as an incentive for you to keep using the card. These offers could be in the form of bonus points or miles, a statement credit, or an annual fee waiver. The issuer hopes you will agree to accept the offer and continue using your card.

Note: If your card issuer extends an offer of bonus points or miles, you may be required to hit a minimum spend to earn the rewards, similar to how bonus offers work when you get a new credit card. Be sure to verify all details of the offer and do the math to see if you can hit the minimum spend comfortably.

How to get a retention offer

If you’re unsure if you want to say goodbye to a credit card, you may want to find out if you can get a retention offer. Your card issuer may extend an offer to keep you as a customer. If it’s good enough, you may want to hold on to the card for the time being.

Here’s how to try your luck at getting a retention offer:

Contact your card issuer by phone or through online chat.Tell the representative you’re considering closing your credit card account.If they extend a retention offer, accept or decline it.

Keep in mind that the issuer may not offer you anything at all. If this happens, you can go ahead and close your account or say you’ll give it more consideration and make a choice at a later time.

Do this if you decide to cancel a card with an annual fee

If you have a card with an annual fee and are ready to cancel it, you may want to check to see if the card issuer will downgrade your current card to one with no annual fee. This will be easy to do if it offers no annual fee credit cards. Doing this allows you to keep your account active.

Your credit history is one factor that makes up your credit score. Closing a credit card soon after opening it can hurt your score. Creditors want to see that you have older accounts on your credit report, because it shows that you’ve been managing your credit for a while. Keeping a credit card account open for several years can improve your credit history and may help you increase your credit score.

If your current card isn’t meeting your needs, another card out there may be a better fit. Check out our list of best credit cards to learn more about your options.

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The best time to start saving and investing is today. 

No one knows precisely how much money they’re going to need in retirement. There are simply too many potential scenarios to factor in. Still, if your goal is a $2 million nest egg at age 65, here’s what it’s going to take to get there.

For the sake of this discussion, we won’t factor in pensions or Social Security payments as they, too, vary tremendously. Instead, we’ll focus on investments.

It’s all about compound interest

If you’ve heard it once, you’ve probably heard it a thousand times: The earlier you begin saving and investing for retirement, the easier it’s going to be to hit your goal.

Compound interest is all about earning interest on interest you’ve already earned. Here’s how it works:

Imagine that you invest $1,000 in an asset that pays an average annual interest rate of 7%.After one year, your balance grows from $1,000 to $1,070, even without adding any more money to your initial investment.Because you leave the investment where it is, after two years it’s worth $1,144.90.After three years, that amount grows to $1,225.04.

Now, there is no guarantee that your investment will earn 7% each year. One year it may be 3% and the next 10%. Still, guaranteed interest works the same way, whether it’s 3% or 10%.

And when you’re thinking of retirement funds, it pays to think long term. Over the past 50 years, the stock market has returned an average of 10%. Now, a few years provided dismal returns and many provided fantastic returns, but it all averages out to 10%.

Investing by the numbers

How much you’ll need to hit the $2 million mark is dependent on two things: How early you begin and how much you invest.

The goal is to build a balanced portfolio, so if one sector takes a hit another can keep your portfolio afloat. Whether you invest in your company’s 401(k), an IRA, or any other investment plan, here’s a close approximation of what it will take to get you to the finish line:

Your specific situation

How much you’ll actually need to save depends on the other sources of income you expect to receive in retirement. This includes a pension, Social Security, annuities, and other guaranteed income.

The rule of thumb is to take no more than 4% from your retirement funds during the first year of retirement. You’ll adjust that percentage each year, based on inflation and how much you want to spend in any given year. For example, if you’re taking a first-class trip to see the Egyptian pyramids one year, you may want to withdraw more money. On the other hand, if you plan to spend a few months visiting grandkids across the country the next year, you may not need as much in your bank account.

And remember, any money you have invested will continue to grow throughout retirement.

If $2 million feels like an impossible goal, think about how you want your retirement to look and how much that’s likely to cost. Then, set a new goal accordingly.

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Which account is right for your retirement savings goals? 

If you want to save for retirement, it makes sense to do so in a tax-advantaged account. You have a number of options for these types of accounts, although which ones you can use will vary depending on factors including what retirement plans your employer offers and how high your income is.

There are two very popular options to choose from. You may be able to open a 401(k), which employers make available. You can also opt for a Roth IRA account. These can be opened with any brokerage firm.

Although both come with tax benefits and can be great ways to save for your future, there are key differences between them. Here are seven discrepancies to be aware of so you can make a fully informed choice about where to put your retirement savings dollars.

1. Eligibility rules are different

You need earned income to contribute to a Roth IRA, and your income can’t exceed a certain threshold, which varies by year. As long as you meet these requirements, you are eligible to make tax-advantaged contributions to a Roth IRA.

A 401(k), however, is typically available to you only if your employer offers one. If you’re a small business owner, you may choose to open a solo 401(k) on your own. If your employer offers a 401(k), you can contribute to the account even if your income is high — there’s no upper limit.

2. Contribution limits vary

There is a much higher contribution limit for a 401(k). In 2023, you can put in up to $22,500 per year or up to $30,000 if you’re 50 or over. Your employer can also contribute on your behalf.

The maximum you can contribute to a Roth IRA in 2023, on the other hand, is $6,500 or $7,500 if you’re 50 or over.

3. Tax breaks differ

With a 401(k), you get to claim your tax break upfront. Your contributions are made pre-tax, so the amount of your contribution is subtracted from your taxable income and you don’t pay taxes on it. When you take money out in retirement, you do pay taxes on the distribution.

With a Roth IRA, you contribute with after-tax dollars. But distributions in retirement are tax free. If you think your tax bracket will be higher in retirement, this is likely the better option.

4. Only one account offers the potential for an employer match

Many 401(k) accounts come with an employer match. This means your company that sets up the account offers to match the contributions you make. This is essentially free money, and it always makes sense to invest what you need to in order to earn the full match.

You won’t get a match with a Roth IRA.

5. Rules for required withdrawals differ

You must take required minimum distributions (RMDs) with a 401(k) starting at age 72. This means you have to withdraw a certain amount each year to avoid hefty penalties. This isn’t required with a Roth IRA.

6. Your investment choices differ

Typically, you are restricted to a limited number of investments in your 401(k). Your plan may offer a dozen or fewer funds you can invest in. With a Roth IRA, though, you can invest in whatever your brokerage offers — which is usually almost anything.

7. Rules for early withdrawals differ

You can withdraw contributions from a Roth any time without penalty, although you are penalized if you take out earnings or gains. With a 401(k), you always face a 10% penalty if you withdraw money before age 59½ — unless you fit into a limited hardship exception.

You should be aware of all of these differences so you can decide what account makes sense for you. Think about your preferred withdrawal rules, whether you want lots of investment options, and whether you have a match to take advantage of when you decide where to put your retirement dollars.

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Are you missing out on these features? 

Sam’s Club has many great products at discount prices that members can buy. In fact, once you’ve become a member of this warehouse club, you can give your credit card a workout purchasing everything from electronics to groceries to clothing and beyond.

While most people know about the bargain prices on bulk and house brand items, there are Sam’s Club features that club members often miss out on that they should be taking advantage of. Here are five of them.

1. Scan & Go’s Easy Checkout Service

While shopping at Sam’s can be a lot of fun, waiting in line to buy all of your purchases isn’t — especially if you go to the club at a busy time. The good news is, you don’t actually have to wait in line at all. You can use Scan & Go.

While this feature won’t save you money, it saves you a ton of time and hassle. All you have to do is download the Sam’s Club app, scan the barcode of your items as you add them to your cart, pay within the app using any major credit card, EBT, or Sam’s Cash, and then show your digital receipt as you walk out the door.

If you start taking advantage of Scan & Go, you can say goodbye to long lines for good, which will make shopping at Sam’s even more attractive.

2. Curbside Pickup

This feature is also a major timesaver, and one you should seriously consider taking advantage of if you tend to be an impulse shopper (or if you like to buy online).

Curbside pickup is free for Sam’s Club Plus members and costs $4 for regular members (which could be a bargain if it enables you to avoid even one impulse purchase). You can shop online 24/7 and pay for your items directly on the computer or you can shop in the Sam’s Club app directly from your phone.

When you get to the store, you simply park in a curbside pickup spot, check in on your phone, and your items will be brought directly to you. This can be especially helpful if you’re purchasing large or bulky items like pet food that you may not want to cart around.

3. Travel and entertainment deals

Sam’s Club may not be the first place you think about when you’re booking rental cars, hotels, or event tickets — but perhaps it should be. You can save as much as 60% on a host of popular travel deals ranging from theme park tickets to zoo visits and beyond.

Whether you’re booking a hotel or want to go see the Christmas Spectacular at Radio City Music Hall, chances are good Sam’s has a great price on the experience.

4. Tire service

Sam’s Club installs tires for as little as $20 per tire for most vehicles. Installation includes tire mounting, new valve stems, lifetime tire rotations and flat repairs, a reset of your tire pressure monitoring system, lifetime balancing, and road hazard protection. It’s essentially an extended manufacturer warranty.

The store regularly runs specials on tires, so you can get a great deal on new wheels and an even better bargain on installation that comes with tons of add-ons and protections.

5. Sam’s Optical Center

Whether you need contacts, prescription eyeglasses, reading or blue light glasses, or glasses or contact accessories, Sam’s has you covered. Prices are better than many competitors, with designer frames starting as low as $59.

Each of these perks may not be ones you’re aware of, but you should look into the features today if you are a Sam’s Club member. You can start saving money and time and get more out of your membership.

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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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