Money Management

The Fed is virtually certain to start cutting rates at its September meeting. Find out what it would likely mean for CD interest rates. [[{“value”:”

The economy is looking as if it’s starting to slow, with lower inflation and higher unemployment. As a result, it’s a virtual certainty at this point that the Federal Reserve is going to cut interest rates at its next meeting in September. The financial markets are pricing in a 100% chance of this happening — the median expectation is for two full percentage points in interest rate cuts in the next year.

You’ve probably noticed that certificate of deposit (CD) interest rates — especially for shorter-term CDs — are far higher than they were just a few years ago. This is because since the beginning of 2022, the federal funds rate (the interest rate people are referring to when they say “the Fed raised rates”) has increased by more than five percentage points.

With the Fed now set to cut rates for the first time since the March 2020 onset of the COVID-19 pandemic, what will it mean for CD rates?

What would happen to CDs?

In general, CD yields fall into two categories when it comes to how reactive they are to interest rate movements. Shorter-term CDs tend to have yields based on current interest rates. Longer-term CDs, on the other hand, tend to have yields based on expectations of interest rates through their term. This is why 5-year CDs currently pay less than 1-year CDs at most banks.

Generally speaking, CD yields tend to move in the same direction as benchmark interest rates like the federal funds rate. But the changes tend to be the fastest among the lower maturities.

So, if the Fed cuts rates in September by 0.25 percentage points (a movement of 0.25% is considered to be a standard Fed rate movement), it would likely make short-term CD yields decline by roughly the same amount at the top online banks. On the other hand, rates paid on 3- and 5-year CDs would likely decline, but to a lesser extent.

Having said that, it’s important to point out that CD rates, as well as savings account interest rates, are set by the financial institutions that offer them. And while banks generally base these rates on benchmark rates, they aren’t required to do so. For example, if a bank has a 4.5% 1-year CD rate and the Fed cuts rates by 0.25%, that bank could choose to leave its rate as is. In other words, even if we know exactly what the Fed will do, predicting CD interest rates isn’t an exact science.

The bottom line

If the Fed cuts rates in September, whether by 0.25% or 0.50%, the likely impact on CD rates would be to lower them, but by a rather small amount. However, the key point is that the Fed isn’t expected to simply be one-and-done with rate cuts — this is likely to be the first step in a cycle of rate cuts that is expected to last for well over a year.

So while we aren’t likely to see a big knee-jerk reaction from CD rates, we are likely to see them continually trending downward through at least the end of 2025, and perhaps beyond.

The bottom line is that if you have cash sitting on the sidelines, CD yields are highly unlikely to get any higher, so it could be a smart idea to check out some of the top CD rates and lock them in right now. However, the decline in CD rates is likely to be a gradual one, so there will still be some income opportunities for new CDs in the years ahead.

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Age 30 is not too late to start saving for retirement. Read on to learn how to best catch up on your retirement savings. [[{“value”:”

When you get your first job, saving for retirement is probably the last thing on your mind. And if you’re nearing 30 and you haven’t started yet, it can be easy to panic. After all, some of the most common financial advice around retirement is that the earlier you can start, the better. And while it is true because of compound interest, that doesn’t mean you’ve completely missed the opportunity to start.

Here’s what you should know if you’re late to the retirement-saving party.

30 is not too late to start saving for retirement

It’s easier to build your retirement savings by starting early, but that doesn’t mean you should give up if you’re starting to save later in life. Really, there is only one thing that is certain here: If you never start, you won’t have anything to fall back on when you reach retirement age. And though it may feel impossible, you still have a chance to meet your retirement goals.

Let’s say you’re 30 years old, earn $75,000 a year, and you start putting 5% of your income into a 401(k), which your employer matches. That means you’d be putting away $7,500 per year for retirement. Assuming a 7% annual return, you’d have about $1.47 million once you turn 65.

That’s no small feat. And it’s worth calling out that this wouldn’t even require you to max out your 401(k) every year, which is capped at $23,000 per year as of 2024.

Depending on your retirement goals, this may or may not be enough to retire on. Using a retirement calculator is a good way to understand how much you need to retire so you can plan around your needs.

Tips to increase your retirement savings

If you’re starting to save for retirement in your 30s, there are steps you can take to boost the value of your retirement savings. For example, if your employer offers a 401(k) match, it’s usually best to contribute enough to that account to at least capture that match. Otherwise, you’d be leaving money on the table.

Additionally, you’re likely eligible to contribute to both a 401(k) and an IRA. If so, opening an IRA alongside your 401(k) can increase your total annual retirement contributions by $7,000, as of 2024. (Based on the prior example, that could almost double your annual contributions, if it’s in your budget.)

You can also automate those contributions to make this tactic that much easier. Just make sure you’re investing those funds (which isn’t automatic) rather than simply stashing them in the account. There are also a few opportunities to increase your retirement contributions that you may want to consider, assuming you aren’t maxing those out each year.

For instance, you could contribute bonuses or tax refunds to an IRA instead of holding onto that cash. And, if possible, you could opt to increase your retirement contributions by a small percentage per year (for example, an additional 1% of your annual salary), especially if you’re getting annual raises. You would simply need to talk to your 401(k) provider to adjust your contribution level.

Another thing to consider is using a Roth IRA rather than a traditional IRA. This wouldn’t reduce your taxable income now like contributing to a traditional IRA would. But you would be able to take out that cash in retirement tax-free. That can be a useful tactic to ensure that the money you have for retirement goes further.

Just get started

It can be easy to feel as if you’ve fallen too far behind to catch up on your retirement savings. But the sooner you can start, the better. And if you’re willing to do the math and use the retirement tools available to you, you can get back on track.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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The right investments could put a lot of extra money in your pocket. Read on to learn more. [[{“value”:”

If you like the idea of earning money without having to lift a finger, then you’re in good company. There’s a reason so many people like to set themselves up with passive income — it’s easier than grinding away at a side hustle.

The good news is that choosing the right investments for your brokerage account could be your ticket to a lucrative passive income stream. And there’s one investment that could be an even more rewarding bet.

It pays to own dividend stocks

Not all stocks pay dividends. Those that do are effectively taking a share of their profits and giving some of that money back to the people who invest in them. But what makes dividend stocks so great is that they offer multiple opportunities to make money passively.

First, stock values tend to rise over time with quality investments. You could put $10,000 into a given company, only to see those shares grow to be worth $200,000 over many years.

Second, dividend stocks tend to pay dividends on a quarterly basis, which gives you access to a fairly predictable stream of income. This isn’t to say that companies can’t stop paying dividends — they certainly have the right to. But companies with a long history of both paying dividends and increasing them over time are less likely to suddenly stop paying.

And if you really want to put your dividend income to work, you can sign up for an automatic reinvestment plan. Once you enroll, as dividend payments hit your account, that money will be automatically reinvested in shares of the company that made those payments. And from there, you have the potential to collect — wait for it — even more dividends.

Of course, you don’t have to set up an automatic dividend reinvestment plan. You could always take that cash and spend it, or actively invest it yourself. But putting the process on autopilot could make your life easier, thereby constituting a true source of passive income where you don’t have to do a thing.

A word of caution

Owning dividend stocks is a great way to continuously generate passive income. And there are many quality businesses that pay dividends to shareholders.

But you don’t want to buy shares of a given stock only for the dividend payments. Your first priority should be to find quality businesses to add to your portfolio whose shares are likely to gain value over time. The dividend aspect should be secondary.

Dividend payments are not necessarily an indication that a company is doing well financially. They simply mean that a company is choosing to share the wealth with stockholders rather than reinvest all of its profits in the business itself. And some companies fail investors by sharing too much of the wealth to the detriment of growing the business.

So while it’s a good idea to load up on dividend stocks, it’s even more important to make sure you’re putting your money into companies with the potential to succeed. But from there, you have the potential to earn steady passive income if you reinvest your dividends rather than take the cash and run.

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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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Shopping at Costco is an adventure in savings. Check out these hot buys for any budget in August. [[{“value”:”

Costco is more than just a warehouse store — it’s a whole vibe. If you’re shopping at Costco, you’re obviously there for the deals, but have you ever actually stood in the aisle and checked the prices on Costco items vs. other retailers?

Don’t worry, I did it for you this month and found six amazing Costco buys for under $25.

1. Natural Vitality Calm Magnesium Citrate Power, 20 ounces

Costco price: $22.99

Amazon price: $35.80

As time ticks ever on, I start to discover, one item at a time, that I am paying way more than I should be for the things I regularly purchase at retailers besides Costco. One of those items is Natural Vitality Calm Magnesium Citrate Powder. No lies, at Costco the bubbly lemon-raspberry drink is a whopping 35.78% off Amazon, and priced at just $22.99 for a 20-ounce jug.

2. Bite Force, Monster Plush Dog Toy Built with Kevlar, 2-count

Costco price: $19.99

Walmart price: $26.99

I love my dogs dearly, but when you live with terriers — even small ones — you’re constantly replacing toys and always on the hunt for sturdier and sturdier ones that maybe, hopefully, they can’t destroy in under an hour. Enter Bite Force toys.

Costco has a two-pack of adorable monster Bite Force dog toys for just $19.99, which is 25.94% off Walmart’s best price, and about what I pay for just one sturdy toy of other brands at certain retail pet stores that shall not be named.

3. Caboo Bamboo Paper Towels, 2-Ply, 75 Sheets, 8 Rolls

Costco price: $22.79

Amazon price: $28.79

If you’re interested in environmentally friendly paper products, bamboo is where it’s at. This highly sustainable material is quick to regrow and spares our precious trees from the ax. But they can also be really expensive, since demand and awareness are still building and they can’t always be found in the places you shop in person.

That’s OK, because Costco has the planet’s back. Caboo Bamboo Paper Towels are just $22.79 for eight rolls of 75 two-ply sheets. That’s 20.84% off of Amazon’s price, making it more affordable to help do your part for the environment.

4. Refresh Tears Lubricant Eye Drops Multi-Pack, 65 ml.

Costco price: $20.49

Amazon price: $25.49

I will always sing the praises of the Costco pharmacy, even for the over-the-counter items. I have never found more budget-friendly bulk purchases for medication than I have there, and it just keeps giving. When I was checking the website for great deals, I came across these Refresh Tears Lubricant Eye Drops for just $20.49 for four 15 mL bottles and a bonus 5 mL bottle for the road.

I’m not sure how Costco can actually offer pharmacy deals like it does, but it’s a boon to humanity in general. These eye drops, for example, are 19.62% off the Amazon price, and the exact same product.

5. Duracell 2000 Lumen Tri-Power Lantern

Costco price: $24.99

Amazon price: $27.89

I was very surprised to see the Duracell 2000 Lumen Tri-Power Lantern on the Costco website, but I also immediately put it in my cart for later. Where I live, ice storms are common in the winter, and a few years ago, I bought an older version of this lantern because I was sick to death of candles for those nights without power.

Now that I have two cats (may we survive the experience), candles just seem incredibly dangerous to have burning under any circumstances, but these Duracell lanterns are so bright and deliver a lot of light on one charge. Currently, they’re 11% off of Amazon prices, and I should probably just order another dozen.

6. Duracell 9V Alkaline Batteries, 8-count

Costco price: $18.99

Amazon price: $20.98

Before we get to ice storm season, though, it’s going to be fall before we know it. That means bonfires and, most importantly, time to check the smoke alarms. Now, I get it, 9-volt batteries are not a sexy purchase in any way, shape, or form, but knowing that your smoke alarms are ready and willing to warn you of danger is an amazing feeling.

For 9.53% off Amazon’s price, you not only get a substantial discount, but you also get a whole year of solid sleep, with no random chirping at 1 a.m.

Costco is the place for deals

Although Costco will never be the cheapest place for everything, it sure will be cheap enough for enough items to make it worth checking. If you’re looking for deals under $25, then pick up these six must-have items in August.

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

If you’re shopping with a debit card, you could be missing out on hundreds or even thousands of dollars each year. These versatile credit cards offer huge rewards everywhere, including Costco, and are rated the best cards of 2024 by our experts because they offer hefty sign-up bonuses and outstanding cash rewards. Plus, you’ll save on credit card interest because all of these recommendations include a competitive 0% interest period.

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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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Kristi Waterworth has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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