Money Management

While taxes might seem unavoidable, strategic retirement planning can help you reduce or even eliminate some of them. Find out how. [[{“value”:”

Who woulda thunk it? Good ‘ol Benjamin Franklin was wrong.

Franklin famously said, “In this world, nothing is certain except death and taxes.”

Well, it turns out that while none of us can avoid death, you can avoid some taxes in retirement and retirement planning. And that is a good thing, because creating a retirement plan that avoids taxes to the extent possible is smart. For example, some work 401(k)s and individual IRAs can definitely be taxed as retirement income.

What to do? Plan accordingly. By being tax-savvy and playing your cards right, you can reduce your tax bill significantly during retirement. In fact, certain types of retirement income are entirely tax free.

Let’s take a look at some of those tax-free retirement options.

1. Some Social Security payments

Social Security benefits are often seen as the foundation of people’s retirement income, and in some cases, they just might be tax free. If, for example, you do not have other savings and you, or you and your spouse, live off of your Social Security payments, those proceeds are indeed tax free.

But if your income exceeds certain levels, then some — or maybe most — of your Social Security payments will be taxed. The calculations works this way:

Individuals with a combined income of $25,000 or more will pay tax on at least 50% of their Social Security benefits. The amount maxes out at 85% as you go up the income scale.For joint filers, the magic tax number is when you earn at least $34,000. You will start to pay taxes on your benefits at that point, but not before.

2. Roth IRA and 401(k) withdrawals

Roth IRAs and 401(k)s are another essential building block for many retirement plans, and one big reason has to do with taxability of such investments.

With a Roth account, you contribute after-tax dollars, but in return, your money grows tax free, and withdrawals in retirement are completely tax free, as long as you’re over 59 1/2 years old and the account has been open for at least five years.

The lack of taxes on Roth withdrawals makes them one of the most tax-efficient ways to fund your retirement. Click here to check out our favorite Roth IRA brokers and start saving today.

3. Income from municipal bonds

While municipal bonds are about the least sexy investment there is, the fact that they are another great source of tax-free retirement income makes them immediately far sexier.

Muni bonds are issued by state and local governments to fund public projects, and the interest they generate is exempt from federal taxes. Similarly, if you buy bonds issued in your state, you might also avoid state income taxes on the interest. This can be a big win for retirees in high-tax states like California.

Aside from the tax benefits, municipal bonds offer investors the added bonus of being very safe and low risk. This makes them a reliable source of tax-free income during retirement.

4. Lump-sum life insurance payouts

No, relying on a life insurance payout is not a real retirement strategy, but it can still happen, especially as you age and go deeper into retirement and old age. The good news is that if you receive a lump-sum life insurance death benefit payment at some point during your retirement, those proceeds are typically tax free. And given that most life insurance payments run into the hundreds of thousands, if not millions of dollars, the tax savings here are really quite significant.

So yes, while death is certainly still an inevitability, taxes in retirement are 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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No one wants to overpay for airfare. Learn about the costly mistakes you could be making when booking flights and find out how to fix them. [[{“value”:”

Most people don’t fly all too often. Americans took an average of 1.4 air trips in 2021, according to research by Gallup. There are travel enthusiasts who fly much more, but the typical person does it once or twice a year.

If airfare booking isn’t something you do regularly, you might not be sure how to get the best deals. You could also make mistakes and end up paying more than necessary. Here are the most common ways people overpay for airfare, starting with not using travel credit cards to save on their bookings.

1. Always paying with cash instead of travel rewards

There’s nothing wrong with paying for airfare in cash. But if you fly regularly, having a travel rewards card is a big help. Instead of paying cash for every flight, you’ll be able to book at least some of your trips with points or miles.

If you normally stick with the same airline, you could open an airline credit card with it. You’ll then earn miles on your credit card spending. Another option is to open a more all-purpose travel card that’s not tied to one airline. Many travel cards let you transfer your points to a dozen or more partner airlines.

Ready to start saving on flights? Check out our list of the top travel rewards cards to learn more and find the one that fits you best.

2. Not comparing fares on different dates

Whenever possible, it’s better to shop around and see how much flights cost on a few days. For example, I recently booked a business-class flight with Air France. Prices were about $1,800 on Dec. 21 and 22. They dropped to $1,200 on Dec. 23, because there was a special promo fare available. That’s $600 in savings, just from adjusting travel dates a bit.

Many airlines have a fare calendar you can use to see what the lowest prices are on each day. You can check prices in cash or miles this way, so fare calendars are useful no matter how you’re paying for your flight.

3. Paying extra for airline fees

One of the most frustrating parts of flying is getting nickel and dimed with various fees. Need to check a bag? Most of the major U.S. airlines recently raised their fees to $35 for the first checked bag. That applies on each leg of your trip. Checking a bag on a roundtrip flight would cost an extra $70.

Other common fees include seat selection fees, change and cancellation fees, and carry-on baggage fees. The fees you pay depend on the airline and the fare you choose. Basic economy tickets may only include a seat and a personal item, and everything else costs extra.

Here’s what you can do to avoid airline fees — or at least keep them to a minimum:

Check what’s included with a ticket before you book it.Figure out the real cost of a basic economy ticket, after adding the cost of any extras you need, such as carry-on baggage.If you usually check a bag when you fly, consider getting an airline credit card that includes a free checked baggage perk.Weigh your luggage after packing to ensure it’s under the limit. Otherwise, the airline could charge an overweight baggage fee.

4. Waiting until the last minute to book

Travelers who book at the last minute often find themselves paying more. Christie Hudson, an Expedia travel expert, told Travel & Leisure that summer travelers who booked domestic travel zero to six days in advance paid $100 more than those who booked about a month in advance.

If there isn’t much availability left, airlines generally raise prices for last-minute bookings. And at that point, you don’t have the luxury of waiting for prices to decrease.

Sometimes late deals are available, especially if the flight isn’t that full. But it’s good to start shopping for airfare earlier — ideally at least a couple of months in advance, and potentially at least three to six months ahead of time for international airfare. When you have more time, you can shop around, and you’re not pressured to book right away.

Whether you fly once a year or once a month, avoiding these mistakes could help you save hundreds of dollars. Now that you know about them, you can make sure you don’t pay any more than necessary on your trips.

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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.Lyle Daly 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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Not sure what to do with an old 401(k)? Learn about your options, from keeping it where it is to rolling it into an IRA or new 401(k), and avoid costly mistakes. [[{“value”:”

Not sure what to do with your 401(k) from a job you left? I recently rolled over an old 401(k) into my individual retirement account (IRA), which was surprisingly easy. I love that I can choose investments I like, and it’s satisfying to see all my lovely retirement savings in one place.

But you have several other options. The one that’s right for you might depend on where you work now, whether you have access to a (different) 401(k), and how much you like (or dislike) your old retirement plan. The one thing you don’t want to do? Forget about it.

If you’re not sure what to do with that old 401(k), let’s discuss your options.

Keep it where it is

The first option is also the easiest. Even after you leave an employer, you can continue to use the 401(k) right where it is. You can buy and sell stocks, certificates of deposit (CDs), bonds, or any other investment opportunities available in the plan. The only thing you can’t do is add more money to the account.

You’ll also keep paying any fees that plan charges, and you’re limited to buying investments available in that plan. So if you love a certain index fund and the plan doesn’t give you access to it, you’re out of luck.

If you moved into a consultant role or to a company that doesn’t offer a 401(k), leaving the account right where it is is a viable option.

Roll it into an IRA

When I left my full-time role, I went back to freelancing. That means I don’t have access to a 401(k) — though freelancers can set up a Solo 401(k). So I rolled my old 401(k) into my IRA, which lets me buy the investments I want but doesn’t charge the same fees.

You can roll an old 401(k) into a traditional or Roth IRA — but there are tax implications if you roll over a non-Roth 401(k) into a Roth IRA. Specifically, your funds will be subject to income taxes.

This is because contributions to a traditional 401(k) are made pre-tax, meaning taxes were deferred. When you convert these funds to a Roth IRA, which grows tax-free and allows for tax-free withdrawals in retirement, the IRS requires that you pay taxes on the amount rolled over as if it were regular income.

If you don’t have access to a 401(k) or if you like your IRA account better than your new 401(k), this is the way to go. Just remember if you roll into a Roth, you’ll pay taxes. Rolling from a 401(k) to a traditional IRA does not create a taxable event.

Need a new IRA? Check out our review of the top IRA accounts.

Roll it into a new 401(k)

If you land a new job and have access to another 401(k), you can roll that old account into your new 401(k). This puts all your retirement savings in the same bucket, making it easier to manage. Rolling your 401(k) over does not create a taxable event, so you won’t have to worry about paying Uncle Sam.

If you like your new company’s plan (and the investment options) and want to keep your retirement planning simple, rolling it over is the way to go.

Start a business

The IRS allows you to roll over your 401(k) to start a business in an arrangement called “Rollover as Business Start-up” or ROBS. To do this, you’ll need to create a C Corporation business and can then purchase stocks in the business.

This isn’t a great idea for most people, as it impacts your retirement savings. The IRS even notes that this arrangement has a high failure rate, so proceed with caution.

The big mistake to avoid

Once you roll your 401(k) over, it rolls as a cash balance, which means you have to remember to go into your IRA or new 401(k) and purchase investments. Otherwise, it’ll just sit there as cash doing nothing except losing value due to inflation.

Looking to increase retirement savings? These budgeting apps help you see where you can cut your spending so you can invest more.

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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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Discover hidden gems at Costco that offer unbeatable value and quality. Explore these top picks and elevate your next haul! [[{“value”:”

Costco. It’s the land of oversized everything — where you go for bulk toilet paper and leave with a kayak, a 24-pack of muffins, and a deep sense of satisfaction. But among the giant jars of peanut butter and pallets of water bottles, there are some real gems you don’t want to miss.

So, grab your membership card and a cart (the big one), because these are the five best products you should buy at Costco to maximize your savings.

1. Electronics

We all love a good deal, and Costco delivers with its electronics department. You can score a Samsung 50″ TV for more than $50 less than you’d pay anywhere else — sweet! But the real magic is in the return policy. If something goes wrong in the first 90 days, Costco’s got your back with its return policy, making buyer’s remorse a thing of the past.

Want to save more on your Costco shopping? Click here for The Ascent’s favorite credit cards for Costco spending to earn 1.5%, 2%, or more cash back at the warehouse.

A little pro tip: shop around. Not all electronics are cheaper here, so do a quick price comparison before loading that big-screen TV into your cart.

2. Diapers and wipes

Parents, rejoice! Costco is a diaper and wipe paradise. Whether you’re brand loyal or simply after great savings, its deals can shave significant dollars off each box. Kirkland Signature diapers are essentially Huggies in disguise — yes, really! Made by the same company that makes Huggies, Kirkland gives you the same top-notch quality for a lower price.

Costco also has you covered with Kirkland Signature Scented Baby Wipes — 900-count packs cost just $0.02 per wipe. In some cases, you can save over $25 on brand-name diapers. Add in Costco’s special manufacturers’ savings, and you’ll be wondering why you ever shopped anywhere else.

3. Cakes

Costco cakes. If you haven’t had one, do yourself a favor and make up an excuse to buy one ASAP. These massive, semi-customizable cakes range from $15.99 to $24.99 and can easily feed a small army (or your next family reunion).

And they aren’t just big — they’re delicious. Vanilla, chocolate, sheet cake — you name it, they’ve got it. Whether you’re celebrating a birthday or just indulging in a Wednesday night treat (no judgment here), Costco’s cakes offer the best bang for your buck.

4. Prescriptions

Did you know that Costco also offers fantastic savings on prescriptions? The Costco Prescription Program (CPP) is an often-overlooked perk of being a member. Depending on the medication, you can save up to 80% — a serious deal, especially if you regularly take prescription drugs. The program is easy to join, and it even works if you don’t have insurance.

5. Gift cards

Gift cards might not be the first thing that comes to mind when you think of Costco, but trust me, they should be. Costco offers killer deals on gift cards to some of your favorite spots.

Take Domino’s, for example — you can snag four $25 e-gift cards (a $100 value) for just $74.99. That’s like getting one of those pizzas for free! This isn’t just limited to pizza places, either. Costco has discounted gift cards for restaurants, movie theaters, and more.

So next time you’re thinking of a night out (or just planning to treat yourself to a pizza delivery marathon), grab a gift card at Costco first.

Shopping at Costco is like going on a treasure hunt, and with these five products, you’re guaranteed to score big on both savings and quality. From top-notch electronics and cakes that could feed an army to discounted gift cards that make you feel like you’re cheating the system, the savings are unbeatable.

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.

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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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