Money Management

Don’t settle for an average retirement nest egg. Read on to see how you can build a lot more wealth than the typical saver. [[{“value”:”

People who retire on Social Security alone tend to wind up pretty cash-strapped. The average retired worker today only collects about $23,000 a year in benefits. Even with a frugal mindset, that’s not a lot of money to live on.

That’s why you need to save well for retirement, whether by signing up for your company’s 401(k) plan or making contributions to an IRA you manage on your own. But data from Northwestern Mutual reveals that the typical retirement saver hasn’t accumulated all that much money.

The average retirement savings balance among Americans of all ages is $88,400. And while that’s a lot of money for someone in their 20s or 30s to have saved for retirement, for older workers, it signals a serious savings shortfall. The good news, though, is that with the right strategy, you can set yourself up with a lot more savings than the average American today.

You need to do better than the typical American

An $88,400 nest egg might seem like a lot of cash in theory. But remember, that money could need to last for 20 years or more in retirement. So when you think about it that way, it’s not so much money on a yearly basis.

In fact, financial advisors have long recommended a 4% withdrawal rate for retirement savings (specifically, withdrawing 4% of your balance your first year of retirement and then adjusting future withdrawals for inflation). And 4% of $88,400 is only about $3,500 per year.

If we add that to the average annual $23,000 Social Security benefit, that’s only $26,500 a year — still not very much money to live on. So you should aim to save way more than the typical American.

How to retire with 10 times the typical American’s savings

Although a nest egg of $88,400 may not go very far in retirement, a savings balance of $884,000 is a different story. Attaining that balance may be easier than you’d think.

To end up with that much money, you need to do two things. First, give yourself as long a savings window as possible. Secondly, you’ll want to invest your money in stocks for solid growth.

Let’s say you’re 30 years old and aren’t particularly motivated to begin saving for retirement because it’s so far away. What you should realize is that by waiting until your mid-30s or 40s, you’re putting yourself at risk of a shortfall. On the other hand, if you start saving at age 30, you may not have to contribute so much to your nest egg each month to end up with a lot of money for retirement if you invest in stocks.

Over the past 50 years, the stock market’s average yearly return has been 10%, accounting for both good years and bad. So, let’s say you start saving for retirement at age 30 and end your career at 65. If you put away $275 per month, you’ll end up with $894,000 — roughly 10 times what the typical saver has today.

But if you wait until age 35 to start saving, it’ll take $450 per month to end up with about the same amount of money. That’s a lot harder, which is why it pays to make the effort to save earlier on.

All told, retiring with $88,400 is better than retiring with $0 saved. But you should aim higher for a comfortable retirement. And if you start early and invest in stocks, you may be surprised at how much money you ultimately end up with.

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You probably have a lot of competing financial priorities, but there’s one that should be at the top of your list. Here’s what you need to do. [[{“value”:”

A lot of financial moves have lasting, positive effects on your finances. Paying off credit card debt can give you more money to spend each month. Putting cash away for retirement can make your future a little more comfortable.

These are great habits to start if you haven’t already, but they’re probably not what you want to focus on first. There’s one financial goal that should always come ahead of the rest.

Prepare for the unexpected

We can have the perfect budget that covers all our expenses. We can be diligent savers who prioritize our long-term goals. But neither of those factors is much help when unexpected costs arise.

It happens to everyone. An appliance breaks. Someone in the family visits the ER. You back up into another vehicle in a store parking lot. These issues can leave you with bills worth hundreds or even thousands of dollars.

If you have no way to cover them, that perfect budget goes out the window and those regular savings transfers cease. You could even wind up in debt that you might spend months or years paying off.

You need an emergency fund if you hope to avoid this. This is extra cash you keep on hand in a high-yield savings account to cover unplanned expenses. How much you need varies, depending on your lifestyle. But everyone could benefit from having a little something set aside.

How to build your emergency fund

Here’s what you need to do to build your emergency fund from scratch.

Plan what you need

Determine how much money you need to save in your emergency fund. As a general rule, you want at least three to six months of living expenses. Some people include all of their expenses, even discretionary items like streaming service subscriptions. Others focus on just their essential costs.

Either is fine, but if you opt for just the minimum expenses and lose your job, you may have to cut back on discretionary expenses for a while. Some people feel more comfortable saving six to 12 months of living expenses. This is a good idea if you worry that it could take you a long time to find a new job should you lose yours.

Decide on your savings strategy

Once you have a target in mind, the next step is to save for it. If you already have some money set aside for emergencies, subtract this from your target amount to figure out what you still need to save.

Then, decide how much you can afford to set aside for emergencies each month. This is up to you. Larger contributions will help you build your emergency savings faster, but it may have more of an effect on your lifestyle today. Try to commit to regular savings deposits each month. You may be able to set up a transfer from a linked checking account if you don’t want to make your contributions manually.

Choose where to keep it

A high-yield savings account is a great option for an emergency fund. These accounts typically don’t have maintenance fees and they offer higher interest rates than you’ll find with brick-and-mortar banks. They also don’t impose many limits on how you can access your funds.

The only downside you could encounter is that most high-yield savings accounts are available through online banks. They don’t have branches and many don’t offer ATM cards, either. So you might have to first transfer your funds to a checking account when you need to withdraw them. This could cause a slight delay in accessing your cash.

Put your plan into action

Once you’ve got your plan in place, it’s time to put it into action. Check in with yourself after a couple of months to see how you’re doing. You may need to revise your savings goals.

When you inevitably have to tap your emergency fund, you’ll need to repeat this process to rebuild your emergency savings up to its previous level. Act as promptly as you can, so you’re prepared for the next emergency.

You may also want to review your emergency fund at least annually to ensure it’s still adequate. If your lifestyle has changed significantly — say you moved to a new home or welcomed a child into the family — that will affect how much you need in your emergency fund.

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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.Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Debit cards are a great way to help you avoid debt. However, here’s where you might want to think twice before using one. [[{“value”:”

Debit cards have changed the way we pay for things. Not only is a debit card more convenient than carrying cash, but it can also help you avoid debt.

However, debit cards are not always the best way to pay for things. Debit card transactions are processed differently than credit cards and don’t provide the same level of protection.

If your credit card number is stolen (as opposed to the card itself), you’re not responsible for any unauthorized transactions, according to the Federal Trade Commission. Even if your physical card is stolen, the most you can be out for unauthorized charges is $50.

How much it will cost you if someone uses your debit card depends on how long it takes you to notice the fraud.

As long as you report that your card is missing before someone else uses it for an unauthorized debit card purchase, you’re not responsible for anything they spend.If you report unauthorized charges within two days, your liability is limited to $50. If you don’t make a report until the third day, you could be liable for up to $500 in unauthorized charges. If you don’t realize the card is missing for 60 days, you may be responsible for all transactions made during that time.

The next time you decide whether to pay with a debit or credit card, you may want to consider which payment method would be the safest bet. Here are five instances when you should think twice about pulling out your debit card to pay.

1. When checking into a hotel

When you check into a hotel, the final amount you will owe is not fixed. It’s not until you’re checking out that restaurant charges, mini-bar charges, and other fees are added to your bill.

For that reason, hotels place a hold on a specific dollar amount above the room rate. That means if you use your debit card, you will temporarily be unable to access the funds on hold. Unless your checking account is flush with cash, you may want to pay with a credit card instead.

2. When dining in a restaurant

Like hotels, a restaurant may place a hold on a higher dollar amount than the cost of your meal under the assumption that you’ll add a tip to the bill. It could take several days for the amount held by the restaurant to fall off.

Another factor to consider when paying for a restaurant meal with a debit card is that if the servers take the card away from the table to be processed, it’s out of sight. Once it’s out of your line of sight, you don’t know if someone is stealing the card number to use later.

3. At the gas pump

You’re instructed to insert your debit card into a gas pump before pumping gas. Once you insert that card, you’re giving the gas station permission to withdraw money from your bank account. However, since the station doesn’t know how much gas you’ll buy, it puts a hold on a high enough amount to protect itself.

For example, even if you only end up putting $25 of gas into your vehicle, you could have a hold on your debit card of $75. That’s $50 extra you cannot access until the hold ends.

Plus, thieves love gas station pumps. It doesn’t take a sophisticated mastermind to install a small device on a pump that will capture debit and credit card information. They may even install a miniature camera that lets them see your PIN as it’s entered.

As mentioned earlier, depending on how long it takes you to realize that someone has accessed your card, unauthorized charges could cost you more when you use a debit card. If you want to use a debit card for gas, pay a specific amount inside the station before pumping.

4. When shopping online

Crooks can access your debit card information in many ways when you’re shopping online. They may pose as fake stores, offering deals too good to be true. They could hack into the e-commerce site you’re visiting, or you may have a virus on your computer that allows bad actors to capture your information as it’s entered.

Although you can report the fraudulent activity, the money taken from your account may not be available while your claim is being investigated. Using a credit card to shop online is safer, and there are plenty of great rewards credit cards for doing so.

5. In airports

Think about your average trip through an airport. Everything is rushed, and you’re typically trying to do more than one thing simultaneously. More importantly, you’re constantly pulling the card out to pay for things like parking, checked bags, food, and reading material.

Airports are a ripe hunting ground for thieves who count on travelers too distracted to notice their card or card number being stolen.

After suggesting that you use a credit card to make some purchases, it’s important to say this: Your smartest financial move is always to pay off your credit cards in full each month. Paying a high interest rate is a drain on your budget and an unnecessary expense.

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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.Dana George 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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Do you know the difference between bull and bear markets? See how to buy stocks during volatility — and why long-term returns could be better than you think. [[{“value”:”

One thing is always true about buying stocks: Sometimes stocks go up, and sometimes stocks go down. The risk of losing money in the short term is also part of why buying stocks for the long term can be so richly rewarding. If you’re a patient investor and accept the short-term risks, you can likely earn a significant return on your stock investments, even if stock prices go down today, this month, or this year.

The stock market is full of buzzwords like “bull market” (when stocks go up) or “bear market” (when stocks go down). But along with the everyday ups and downs of stock prices, sometimes the stock market seems to go wandering in unexpected directions.

Marci McGregor, head of portfolio strategy at Merrill and Bank of America Private Bank, was recently quoted in CNBC with a fun new buzzword for today’s unpredictable stock market: a “buffalo market.”

Let’s see what a “buffalo market” means for stocks, and how you can keep investing for retirement — no matter what happens on Wall Street.

“Buffalo Market” — roaming, wandering bull

Buffalo are majestic animals of the Great Plains, known for roaming and wandering great distances. Male buffalo are called “bulls.” But a “buffalo market” doesn’t behave the same as a “bull market.” According to Marci McGregor from Merrill and Bank of America in an interview with CNBC, a buffalo market “might roam, it might wander in the summer months.”

The stock market had some volatility this summer, including a one-day decline of 3% in the S&P 500 on Aug. 5, 2024. But the market has also come roaring back: the S&P 500 gained 8.6% from Aug. 5-Aug. 23, 2024. Just like a buffalo, the stock market can burst into action and accelerate fast, on short notice — and you don’t want to miss that momentum.

Can stocks keep going up in 2024?

McGregor told CNBC that “ultimately, what will turn the buffalo back to a proper bull is fundamentals.” Bank of America analysts expect U.S. stocks to end 2024 higher than they were in July at the time of Marci McGregor’s interview with CNBC — even if there is some short-term volatility.

No one can perfectly predict the future, of course. And past performance is no guarantee of future results. But unless the U.S. economy somehow slows down dramatically and tips into recession, or unless there is a new economic crisis that disrupts businesses, there are good reasons to believe that the U.S. stock market will keep climbing (with some unpredictable ups and downs) in the long run.

How to invest for bull markets, bear markets, or buffalo markets

It can be fun to think about the stock market being embodied by massive, powerful animals like bulls, bears, and buffaloes. But the truth about investing in the stock market is often more mundane.

Stocks go up, and stocks go down. Sometimes, the stock market suffers through a long-term downturn (“bear market”), like it did in 2022 when the S&P 500 lost about 19% of its value in one year. But at other times, the stock market goes on a “bull market” run, and stocks earn huge returns over several years.

In the long run, the overall stock market tends to go up — companies keep innovating, earning profits, and sharing those profits with shareholders.

For example, as of Aug. 23, 2024, the S&P 500 has gained 97.91% in the past five years — even after the pandemic, the 2022 stock market decline, and other short-term bad news and noise in the economy. Your No. 1 goal as a stock market investor should be to not miss out on those long-term gains.

Don’t try to time the market by deciding that you think “today” or “next month” is the best time to buy stocks. Don’t panic and sell all your stocks after a one-day decline. Picking individual stocks can be fun, and might even help you make money in the short term — but it can also be risky, by putting too many of your eggs in one company’s basket.

Most long-term retirement investors are likely to do better with broadly diversified, low-cost index fund ETFs like the S&P 500 index.

Bottom line

Long-term retirement investors shouldn’t worry about today’s stock market moves. Just make sure your 401(k), IRA, or brokerage account is well-diversified in an appropriate mix of stocks and bond assets for your age, target retirement date, and risk tolerance.

Whether the stock market is a bull, bear, or buffalo, you can keep your retirement savings strong by sticking with a long-term investment plan, owning a diversified mix of index funds, and trying not to get distracted by short-term noise.

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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.Bank of America is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Bank of America and Target. The Motley Fool has a disclosure policy.

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Costco Tires is a go-to tire shop for a lot of people, and for good reason, but it’s not for me. Find out why I won’t be buying my next tires there. [[{“value”:”

I recently wrote an article about the Costco Tire Center, and it dawned on me that I probably need a new set of tires myself. So while I was researching that piece, I checked out what a set of new Costco tires would cost for my car.

As it turns out, although Costco is a great place to buy an upright freezer, when it comes to my tire needs (and budget), Costco is not where it’s at. Now, I don’t want you to leave this article thinking that Costco is a rip-off, because that’s not at all what I’m saying. Depending on what it is that you’re looking for in a tire, Costco may be a killer deal for you. But boy, it isn’t for me.

Here are three reasons why.

1. Costco only offers name-brand tires

Buying quality tires is a great idea for most people. You want to be safe when you’re transporting your kids to baseball practice or back and forth from school (or Costco), but I don’t have any small kids and I don’t drive my non-existent children to sports.

I also have roadside assistance on my insurance policy, so I’m covered should my Temu-quality tires go south on me. Quality is about the last factor I’m really worried about for tires. As long as they do the rolling thing and the stopping thing, I’m set.

2. I rarely drive

For those of you who live the commuting lifestyle, this is not meant to rub salt in the wound, but as it turns out, a lot of journalism jobs these days are fully remote. We can do this job from anywhere, and since we largely call people for interviews, even that can be done via the internet.

So, I rarely leave the house, because most of my life is spent in front of this computer, comparing deals at Costco and trying to help you figure out if you should invest in certificates of deposit.

I drive so rarely that in the eight years I’ve owned my car, I’ve only put about 20,000 miles on it. It’s about 15 minutes to the fancy grocery store and five minutes to the “nicer” Walmart. The vet’s office is half a mile away.

It’s under 30 miles round-trip to take my dogs hiking in a pretty decently remote spot, or it’s one-third of a mile to the nearest reasonably sized city park, which we just walk to anyway.

In short, it makes no sense to invest in my tires when I am never going to wear them out before they simply die of old age. In fact, the whole reason I’m even shopping for tires is that I’ve realized how old the tires I have are. I don’t want to be caught by a surprise failure that is certainly no longer covered under the warranty I got for them at Walmart eight years ago next month.

3. Costco is simply not in the budget

Everybody’s budget is different, but I admit that I am stingy about car expenses. I’ll pay for insurance, because that protects me and everyone else in the event of a serious accident. But I’m not prioritizing getting my air conditioning fixed since I don’t drive much, and I’m not going to spend more than is strictly necessary on tires that I won’t use but half of.

Walmart’s tires start at around $50, and although I have to pay for installation, and insurance if I want it, the whole cost only comes to $336 plus tax and my time where I’m located. That’s for size 215/55R16 tires that have a 50,000-mile tread life warranty.

Compare that to Costco’s best deal in the same size, the BFGoodrich Advantage Control, with a 75,000-mile tread warranty. A set of four of these, including installation (Costco does not charge for installation) and road hazard warranty, are just over $600 in my location. I’m sure they’re amazing tires, and I’m sure I’d love to drive around on them, if I drove more. But just to get groceries and to go to the nearby wilderness to pretend to be a tree? Way overkill.

That’s a difference of $264, a 44% savings over Costco tires. I can do a lot with $264 where I live. It’s my entire utility bill (remember, I’m home basically 24/7), two weeks of groceries, or just extra money to toss into my retirement savings or toward paying off bills.

Costco tires are good deals — but not for me

If Costco had a cheerleading squad, I’d be cheer captain. Well, no, that’s not true, my friend’s husband Anthony would be, but I’d sure be supporting him on the human pyramid. Regardless of my place in the cheer hierarchy, I’m a huge fan.

But like anything at Costco, you have to compare apples to apples, and the tires Costco Tire Center offers aren’t really comparable to the type of tires I need in my life.

If you drive a lot of miles, often, then Costco is almost certainly your best bet for tires that you can count on to not leave you stranded on a busy and terrifying five-lane highway. But for me? A set of Walmart tires will get me where I’m going, and for a lot less.

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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.Kristi Waterworth has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.

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