Money Management

Looking to store some money in CDs? Read on to avoid some key blunders. [[{“value”:”

There’s a reason October could be a great time to open a CD. The Federal Reserve is set to meet in early November. And there’s a good chance the central bank will cut interest rates again at that gathering. If you act now, you can potentially lock in a CD at a more favorable rate, before another rate cut happens.

But if you’re going to open a CD before the end of October, you need to avoid certain mistakes. Here are three big ones you’ll want to steer clear of.

1. Not shopping around for the best rate

CD rates are already down compared to where they were this summer. But some short-term CDs are still paying close to 5%. If you’re going to open a CD, you might as well find the best rate before rates fall again.

So don’t just jump on the first decent CD rate you see. Instead, spend a little time comparing rates, keeping in mind that different banks may have different minimum deposit requirements. You can click here for a roundup of the best CDs on our radar today.

2. Using a CD to house your emergency fund

It’s smart to have money set aside for emergencies — things like home repairs, medical bills, or a period of unemployment. But if you’re thinking about putting your emergency fund into a CD, you’re potentially setting yourself up for disaster.

Your emergency fund needs to be accessible to you at all times. But CDs typically charge an early withdrawal penalty for removing even a portion of your money prior to maturity. If your goal is to snag the highest return possible on your emergency savings, don’t look to a CD. Instead, shop around for the best high-yield savings account rate.

3. Not setting up a CD ladder

You may be inclined to open a 12-month CD this month to snag the best interest rate available. But before you go and put all of your money into a 12-month CD, you may want to look at a ladder instead.

With a CD ladder, you split your deposit into several CDs with staggered maturity dates. What you might do this month is take your initial deposit, divide it into four, and open CDs with these terms:

Three monthsSix monthsNine months12 months

The benefit here is that if you end up needing some of your money in a pinch, you won’t automatically be subjected to an early withdrawal penalty since you’ll have a portion of your money freeing up every three months.

And remember, as the Fed continues to lower interest rates, borrowing should get less expensive. You may realize in early 2025 that you’re ready to move forward with buying a car, or another big-ticket item. It would be a shame to have to delay that plan because all of your money is tied up in a CD. And it would be just as much of a shame to pay a penalty in order to be able to use your own money.

If you want to open a CD before the Fed’s next rate cut, October is the time to get moving. But do your best to avoid these mistakes so you don’t wind up regretting your decision to put money into a CD this month.

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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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There’s no way to know for sure where CD yields will be in a year. Read on for my prediction based on what we know now. [[{“value”:”

It’s impossible to predict future bank interest rates, and even if we could, different banks offer very different rates. However, with the Federal Reserve starting to lower benchmark interest rates, many banks are lowering their rates on CDs.

How low could they go? Although nobody can predict the future, here’s where I think 1-year CD interest rates will head over the next year, and why.

1-year CDs tend to follow the Fed’s moves closely

To be perfectly clear, CD yields don’t have a direct relationship with the Federal Reserve’s rate cuts. Banks set their own CD rates. But the Fed’s rate moves affect how much it costs banks to borrow money, so they usually influence the direction of CD yields.

Shorter-term CDs, which include 1-year CDs offered by top-notch online banks, tend to follow the Fed’s rate movements closely.

It’s not a coincidence that the federal funds rate (the rate that is being referred to when someone says the Fed “cut rates”) is set at a target rate of 4.75% to 5.00%, and some of the top banks on our radar offer yields just under that range.

Check out our updated list of the best CD rates to see how much yield you can get right now.

Now, this isn’t an exact science. After all, in the 2020-2021 era, when the Fed held rates at near-zero levels, it was still possible to find a 1-year CD with a yield greater than 1% from reputable online banks. But the point is that short-term CD rates track the Fed’s moves closely, as opposed to longer-term CDs, whose yields are mainly based on future expectations for the interest rate environment.

This is why 5-year CDs typically pay less than comparable 1-year CDs right now, although the former was by far the higher-paying CD before the Fed’s rate-hike cycle began in 2022.

What current expectations are telling us

Nobody has a crystal ball that can tell us exactly what the interest rate environment will be at the end of 2025. After all, at the start of 2022, virtually nobody expected the Federal Reserve to rapidly raise its benchmark rate to combat inflation, but it happened.

Having said that, the latest expectations from the policy makers at the Fed call for a total of a 150-basis-point reduction in the benchmark federal funds rate by the end of 2025, which would result in a target range of 3.25%-3.50%. And while it’s somewhat of a rarity, financial markets seem to agree. The median expectation priced into financial markets is for that exact target range, according to CME Group’s FedWatch tool.

Prediction for 1-year CD rates at the end of 2025

Considering that the top 1-year CD rates right now are in the 4%-4.5%% range as of this writing, my prediction is that we’ll see 1-year CD yields in the 3%-3.25% range from the highest-paying online banks at the end of 2025.

Of course, this depends on the actual trajectory of interest rates between now and then, and it’s important to keep in mind that banks set their own rates on CDs and high-yield savings accounts. In other words, even if interest rates fall considerably, there’s nothing preventing a particular bank from offering a 4% or higher promotional yield on a 1-year CD.

But based on the current expectations for interest rates, I think it’s fair to expect 1-year CD yields in the low-3% range at the end of 2025.

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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.Matt Frankel has no position in any of the stocks mentioned. The Motley Fool recommends CME Group. The Motley Fool has a disclosure policy.

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Costco’s annual membership fees rose in September. But what comes next? Read on to find out. [[{“value”:”

Costco’s business model is different from other major retailers in that it relies heavily on membership fees to make money. Most stores, like Target and Walmart, don’t charge you a yearly fee just to walk in the door.

Still, millions of customers are willing to pay Costco’s fees for access to savings on groceries and household essentials. And many were willing to take the increase in stride when Costco announced that membership fees would be rising in September.

On Sept. 1, the cost of a basic Gold Star Costco membership rose from $60 to $65 a year, while an Executive membership offering 2% cash back on purchases rose from $120 to $130. In light of this, you may be wondering if more Costco hikes are in store, whether in the form of additional membership fee increases or higher product prices.

The good news, though, is that we’re unlikely to see another membership fee hike for quite some time. And Costco is specifically trying to lower the cost of the products it sells rather than raise in-store prices.

If you’re looking for more ways to save, check out the best credit card to use at Costco to maximize your savings.

Your membership fee will probably stay the same for a while

Costco’s September fee hike may not have been something to celebrate. But you should know that the increase was actually two years overdue.

Costco CFO Gary Millerchip said during the company’s most recent earnings call when asked about the September fee hike, “We were very deliberate about the timing. In fact, we’re really delayed by two years from when we’ve traditionally increased the fee every five years and that was initially because of what we thought our members were experiencing with COVID and then we saw higher inflation.”

Millerchip also went on to note that so far, there doesn’t seem to be a lot of backlash regarding the fee hike. If anything, he thinks customers are appreciative of the fact that Costco delayed that hike by a couple of years.

“I think there’s been a recognition that in the context of what’s happened more broadly over the last seven years, we stayed true to our principles of really trying to help the member and deliver the value,” he added.

All told, there’s a good chance that Costco will wait at least another five years before raising the cost of its memberships. And it may even go beyond that point. So that’s one worry to check off of your list.

Prices are going down, not up

Costco may have raised the cost of its membership fees. But the company is making a concerted effort to lower prices on the items it sells as part of its pledge to offer members the maximum amount of value.

As Millerchip said, “Our goal is always to be the first to lower prices where we see the opportunities to do so.” And so recently, Costco slashed the cost of key items that include Kirkland foil, olive oil, and baguettes. If you look around the store in the coming months, you’re likely to see even more price cuts.

In fact, you should know that Costco uses its membership fee revenue to offset its costs. And so while you might now be paying $5 or $10 more for your membership, you might notice that the cost of the items you buy is lower in the coming months. Plus, Costco puts select items on sale on a monthly basis. It pays to check the deal books that are mailed out and posted online to see what’s available for less.

Also, you never know when a core item on your shopping list might go on clearance. Look for a price tag ending with the number seven, as that’s generally a sign that you’re getting a much lower price.

Finally, in case you were worried about your beloved hot dog meal at the food court, Millerchip pointed out that the store isn’t looking to change its $1.50 price point anytime soon. The same goes for Costco’s famous $4.99 rotisserie chicken. So for the time being, those two staples are safe.

Don’t stress about Costco price hikes

All told, Costco raised membership fees because it was time for an increase. But that doesn’t mean you’ll face another fee hike soon, or that your shopping list is about to get more expensive. If anything, you might spend less on groceries than in recent months if you shop at Costco.

And if you want to enjoy even more savings at Costco, use the right credit card when you shop. Click here for a list of credit cards offering top rewards at Costco.

Top credit card to use at Costco (and everywhere else!)

We love versatile credit cards that offer huge rewards everywhere, including Costco! This card is a standout among America’s favorite credit cards because it offers perhaps the easiest $200 cash bonus you could ever earn and an unlimited 2% cash rewards on purchases, even when you shop at Costco.

Add on the competitive 0% interest period and it’s no wonder we awarded this card Best No Annual Fee Credit Card.

Click here to read our full review for free and apply before the $200 welcome bonus offer ends!

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 Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.

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There are some significant changes coming, and we don’t just mean higher contribution limits. Keep reading for new IRA rules. [[{“value”:”

The SECURE 2.0 Act was signed into law a few years ago, but some of its most significant changes to retirement accounts like IRAs haven’t taken effect just yet. In fact, some major changes are scheduled to begin in 2025.

For example, newly established 401(k) plans will now be required to have an automatic enrollment feature. And the rules governing inherited IRAs will require certain types of beneficiaries to withdraw money from the account faster.

In addition to these, there are a few changes that will impact IRA contributions. Here’s what you need to know.

If you are looking to save more for retirement, or aren’t happy with your current brokerage, check out our top brokerage account list for your traditional, Roth, or other IRA needs.

Larger catch-up contributions for older savers

If you’re self-employed or work for a small business that offers SIMPLE IRA accounts to employees, the catch-up contribution rules are changing in 2025.

There is already a catch-up provision in place for SIMPLE IRAs. In 2024, the SIMPLE IRA limit is $16,000 for employee deferrals, with another $3,500 allowed for individuals age 50 or older.

In addition, there will now be a higher catch-up limit for participants who are 60 to 63 years old. This group will be allowed a catch-up contribution of $5,000 or 150% of the standard SIMPLE IRA catch-up contribution, whichever is greater. These numbers will be indexed for inflation starting in 2026.

There’s a similar catch-up provision for 401(k)s for those in the 60-63 age group, which increases the catch-up contribution to $10,000 or 150% of the standard catch-up contribution, whichever is greater.

IRA catch-up contributions will be linked to inflation

Technically speaking, this rule change happened last year, but it didn’t actually change anything just yet. I’m talking about the catch-up contributions for traditional and Roth IRAs.

If you aren’t familiar, there are two components to the IRA contribution limits each year. There’s a standard contribution limit that applies to everyone, and a catch-up contribution that applies to people age 50 or older. For 2024, the standard contribution limit is $7,000 and the catch-up contribution adds $1,000.

The standard IRA contribution limit is adjusted for inflation over time. For example, it increased from $6,500 in 2023 to $7,000 in 2024. However, the catch-up limit has been $1,000 for years and has not been linked to inflation — until now.

The SECURE Act 2.0 included an annual cost-of-living adjustment for the IRA catch-up contribution starting in 2024. It remained $1,000 in 2024, but it could certainly rise in 2025 (or for 2026, which will be announced in late 2025).

There’s a big (potential) change we don’t know just yet

The IRS has yet to announce 2025 retirement account contribution limits. Based on recent inflation figures, we can get a good idea of what to expect, but we haven’t officially learned the new limits yet.

For the 2024 changes, the IRS released its official figures on Nov. 1, 2023, so it would be fair to expect a similar timetable for this year. Inflation has cooled off over the past year or so, and the most likely scenario will be a $7,000 standard and $1,000 catch-up contribution yet again in 2025 for traditional and Roth IRAs, and slight increases in the limits for SEP IRA and SIMPLE IRA accounts, but we’ll have to wait for official word from the IRS.

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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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IRAs can let you boost your annual retirement contributions and even provide tax-free money in retirement. Read on to learn more about these accounts. [[{“value”:”

Retirement savings goals can be lofty, especially if you want to live a certain lifestyle once your career comes to a close. And while 401(k)s offer a simple, convenient way for many to reach those goals, they aren’t the only type of brokerage account you should consider.

In fact, if a 401(k) is your only retirement account, you could be missing out on a potentially critical part of your retirement savings plan: individual retirement accounts (IRAs). Here are a few ways that these accounts can help pave the way to a wealthier retirement.

IRAs have separate contribution limits from 401(k)s

The annual contribution limit for a 401(k) is substantial ($23,000 for those under age 50 as of 2024, $30,000 for those 50 and over). But that doesn’t mean there isn’t value in also contributing to an IRA.

In fact, the IRA contribution limit ($7,000 for 2024, or $8,000 if you’re 50 or over) is separate from that of a 401(k). So you can contribute to an IRA without having to reduce your 401(k) contribution — and those extra contributions can really add up.

If you’re interested in boosting your retirement savings, you can explore our list of the best IRA accounts of 2024.

Let’s say you max out your IRA contribution limit this year. That money would amount to over $120,000 if invested over a 30-year period. That’s if your investments earned a 10% annual return, which is just below the average return for the S&P 500 over the last 10 years.

IRAs give you access to more diverse investments

With a 401(k), you only have access to the investments offered by your employer. And those are often limited, when compared to IRAs. For example, on average, 401(k)s offer around 28 investment options. These can include things like target date funds and asset allocation funds. Meanwhile, IRAs can offer thousands of investment options, including mutual funds, ETFs, stocks, and bonds, among others.

This stark contrast happens because IRAs are offered by many financial institutions, each with their own lineup of investments. So you can shop around until you find an option that suits your needs. Meanwhile, 401(k)s are tied to your employer and are therefore entirely dependent on what they choose as options for you.

You can hedge against high retirement tax bills with a Roth IRA

There are two primary types of IRAs that are available to most workers: traditional and Roth. Traditional IRA contributions are generally tax-deductible now, but you pay taxes once you start withdrawing funds in retirement. Roth contributions won’t reduce your taxable income now, but they can be tax-free in retirement.

So if you’re looking for a way to hold onto more of your cash in retirement, a Roth IRA can be an excellent strategy.

In order to get that tax-free cash, however, you do have to follow certain rules. For example, your first distribution must be made at least five years after opening and funding the account. And you have to be at least 59 1/2 years old when you withdraw the funds, or become disabled, to get tax-free distributions.

Plus, you can withdraw contributions from a Roth IRA (but not investment gains) whenever you need to, tax- and penalty-free.

Roth IRAs don’t have required minimum distributions

Traditional IRAs and 401(k)s require you to start taking cash out when you reach age 72. But Roth IRAs don’t have this requirement until the account holder dies. So that tax-free cash can act as both a tax-buffer and a cushion for your later years. That way, if your 401(k) runs a bit leaner than you expected, you’ll still have something to fall back on.

Saving for retirement can be a tricky proposition. But if you’re willing to look into your investing options outside of a 401(k), you can find ways to solve future problems before they pop up. And that can lead to a wealthier retirement.

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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 Target. The Motley Fool has a disclosure policy.

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You’re likely to get more use (and bigger rewards) from a cash back credit card than a store credit card. Find out why here. [[{“value”:”

There’s a whole wide world of high-quality credit cards out there. You may even be able to get one from your favorite chain store — but is that a good idea? Here’s why cash back credit cards beat store credit cards.

Earn more versatile rewards

I don’t know many people who would turn down the chance to earn cash back on every dollar they spend on a credit card — and cash back cards give you this. Store credit cards usually earn in-store currency that can only be used on purchases from that store. Sure, saving money on a particular brand can be nice — but straight cash back can be used anywhere.

My own favorite cash back card pays me beaucoup rewards on my grocery spending. And since I redeem that cash back as a statement credit every month, I get to directly lower my credit card bill. That makes a solid difference in my budget.

Ready to earn cash back rewards? Of course you are — click here for The Ascent’s best cash back credit cards to get more budgetary breathing room.

Use your card at more places

One reason store credit cards can be kind of a bummer is that many of them are closed-loop — meaning you can only use them at that particular store, or perhaps a small group of stores owned by the same company. Personally, I don’t like keeping one-trick-pony credit cards in my wallet, where space is at a premium.

But a good cash back card can be used just about anywhere (one caveat is if you’re shopping in-person at Costco, it’ll have to be a Visa). You can use it to earn cash rewards not just at your favorite clothing or housewares store but also at the gas station, grocery store, drugstore — really anywhere you shop.

Get a sweet sign-up bonus

Store credit cards often come with a welcome offer. It’s usually kind of paltry, though — one example I’ve seen recently is 35% off your first purchase with the card. I suppose this could save you some real money if you happen to be making a large purchase. But a sign-up bonus from a great cash back card could be worth much more.

Cash back, points, or miles, just for spending on a new card? What could be better? Check out our favorite sign-up bonuses here.

A common sign-up bonus offer among cash back cards is spending $500 to $1,000 in the first three months with the card in exchange for $200 in cash back. That’s not bad — but you might do even better. One major cash back card issuer matches your entire first year’s cash back earning, with no limit. That easily beats a percentage off your first purchase with a store card.

Take advantage of an intro 0% APR offer

Store credit cards aren’t known for offering intro 0% APR offers. If you’re making a large purchase (like a computer or a home appliance), you might be offered deferred interest financing, but this isn’t the same thing.

Deferred interest financing gives you a period (often dependent on how much you’re spending) to pay off your purchase with no interest. But if you don’t manage to get the entire charge paid off before that time limit (maybe six to 12 months) is up, BOOM. You get charged all of the interest you would’ve paid, going back to the beginning. And store cards also often have punishingly high APRs — in some cases, topping 30%.

Granted, credit card interest is never cheap — the average rate is over 23%. But many of the best cash back credit cards come with a year or longer of 0% APR on new purchases and balance transfers (you’ll have to pay a 3% to 5% fee to transfer a balance, though). And if you don’t pay off the balance before the time is up, you’ll only be charged interest on the amount that’s left.

All in all, cash back credit cards are a much better deal than store credit cards. Don’t let that cashier bully you into handing over your driver’s license so you can save 35% today. Get a cash back card and earn a percentage back on all your spending.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

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Click here to read our full review for free and apply in just 2 minutes.

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 and Visa. The Motley Fool has a disclosure policy.

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