Money Management

Abusing Costco’s return policy could get your membership revoked. Here’s how to know if you’re crossing a line. [[{“value”:”

Shopping at Costco can be a very positive experience — and not just because of the savings involved. You can also benefit from Costco’s exceptional customer service. And that extends to the store’s generous return policy.

With very few exceptions, Costco will take any item back at any time that doesn’t meet your expectations or is defective in some way. If you bring home a carton of strawberries and find that they’ve all turned moldy the following morning, you can usually bring them in for a refund without a hassle. And if you bring home a Halloween costume for your child that doesn’t end up fitting into, it’s really not a problem to return it a month later.

But while Costco’s outstanding return policy is a great reason to shop at the store, it’s important not to abuse it, as doing so could get your membership revoked. Here are a few signs that you may be pushing your luck when returning items to Costco.

1. You’re bringing food back after its expiration date

If you buy Costco bread with a sell-by date of May 20 and find that it’s stale by May 17 despite having been in a closed package, that’s a valid reason to bring it back to Costco. But bringing back stale bread on May 25 in this same situation isn’t going to fly as easily.

Costco may agree to give you your money back in that situation. But if you pull a similar stunt repeatedly, you may get your membership yanked.

2. You’re bringing back food that’s more than 50% eaten

Many people buy bulk produce at Costco to help their budgets since many products are cheaper on a per-ounce basis. But if you get a bad batch of a given item, it means you could be out a lot of money. So in a situation like that, it pays to bring your produce back. However, the key is to bring back the bulk of it if you’re going to ask for a refund.

In fact, Costco’s general policy is that if you’re returning food on the basis of it not tasting good or meeting your expectations, you can only get your money back if you bring back 50% of the item. So let’s say you buy a container of 40 blackberries and the first five you eat are sour beyond belief. You’ll probably get your money back without a problem if you return the remaining 35. But if you return 12 blackberries out of 40, you may get some pushback (varies by location).

And to be clear, this policy applies to all food purchases — not just produce. If you buy a cake whose taste you feel is off, you can bring it back with a missing corner. But don’t expect to get your money back if you only bring back one-third of the cake.

3. You’re returning products that have clearly been worn or damaged

Costco will take back products even after they’ve been taken out of their packages and used. But returning items that are worn out or damaged isn’t the right thing to do.

Let’s say you bought your child a swimsuit and needed to remove the tags so they could try it on comfortably. If it’s a poor fit, you shouldn’t hesitate to take it back. Chances are, it’ll be in perfectly good condition after having only touched your child’s body for the three minutes it took to give it a try. But don’t let your child wear a swimsuit all summer long and then take it back to Costco with stains and worn seams.

Abusing Costco’s generous return policy could cause the warehouse club giant to revoke your membership. Granted, this generally won’t happen if you push the limits once or twice. But a pattern of bogus returns or refund requests could result in that fate, so be careful if you want to keep shopping at Costco.

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

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There’s something unusual going on with CDs. Learn how it presents investors a rare opportunity to make a short-term commitment while getting great returns. [[{“value”:”

When you invest in certificates of deposit (CDs), you typically have to agree to lock up your money for a long time in order to get the most competitive rates. That’s because most CDs require you to leave your money invested for the entire CD term to avoid penalties. The term can be as long as five years.

Right now, though, you have a unique opportunity to get the best rates available by making a short-term commitment. This hasn’t happened for around 35 years. Here’s why it’s happening now and why it pays to take advantage of this unprecedented situation.

Short-term CDs almost never offer the best rates — but they do right now

When you take a look at the history of CD rates, the average yield offered by 5-year CDs has almost always been higher than the average yield offered by 6-month CDs. In fact, this was the case from 1989 all the way up through May of 2023.

There’s a good reason for this, of course. You take a lot more risk when you agree to leave your money in a CD for five years. You’re stuck if interest rates go up during that time, for one thing. And giving up the ability to access your money for so long limits your flexibility. That’s why banks pay more when you promise them your money for longer. It’s called the “term premium.”

In May of 2023, though, this long-standing tradition came to an end. Starting then, 6-month CDs began offering higher average yields and have done so ever since. And 1-year CDs are also offering higher average yields than 5-year CDs, and have done so for a few months.

This is a major switch after around 35 years of long-term CDs consistently offering better rates. It’s called an inverted yield curve, and it’s an unusual phenomenon that doesn’t happen very often.

Why is this a rare opportunity?

So, why does this unusual phenomenon present you with a rare opportunity? It’s simple. You get to make a short-term investment, agreeing to leave your money invested for a year or less. And you get an extremely competitive return for doing so while taking on very little risk.

The Ascent’s list of the best CD rates show there are multiple options for 6-month and 1-year CDs with rates around 5.00% or higher. These are FDIC-insured CDs, so you can’t lose money on them as long as you invest less than $250,000 and don’t withdraw your funds early. Being able to earn such a great rate with a virtually risk-free investment is all but unheard of — especially since you aren’t forced to make a long-term commitment.

If you buy one of these CDs, you’re not agreeing to give up your money for half a decade; you’ll be able to access your cash very soon if you need it. Your money won’t be stuck in a CD for years on end if rates happen to go up more and better investment options become available. There’s very little downside and a lot of upside, especially compared to in the past when you had to let the bank have your money for years just to reliably earn 2% or 3% on a CD.

If you have money you won’t need for six months or a year, there’s no reason to pass up this opportunity. Since it’s been 35 years since the last time investors had this chance, it may not come around again for another few decades. Jump in now if you don’t want to be left with regrets.

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CDs and bonds are both popular investment options. Here’s how you can tell which is best for you in the current economic climate. [[{“value”:”

The sheer number of investments available at any given time can often feel overwhelming, but two of the most popular are CDs and bonds. The big question is this: Which is a better investment for you right now? The answer depends on your risk tolerance and investment goals.

Here’s a quick breakdown of both designed to help you decide your next best investment move.

CDs

CDs, or certificates of deposit, are a type of savings account readily available through banks and credit unions. CDs typically offer a fixed rate of interest for a set period of time, ranging anywhere from three months to 10 years. Because CDs are FDIC-insured, you know your investment is protected up to $250,000 if your financial institution fails.

Advantages of opening a new CD

Your money is guaranteed to be safe if you invest less than $250,000 in a single CD.Today’s CD rates are impressively competitive.As long as you don’t withdraw the money from your CD before it matures, you know precisely how much you’re going to earn on the investment.Some CDs require no minimum deposit, meaning you can open one with a very small investment.Technically, you can put as much into a CD as you want (although it’s never wise to put more than $250,000 in a single CD).

Disadvantages of opening a new CD

It’s possible to lose a portion of your principal investment if you withdraw from your CD before the term is up and the early withdrawal penalty is more than the interest you’ve earned so far.CD rates can vary widely, meaning you must do your own research before deciding where to open a new CD. Once you’re committed, you’re committed for the entirety of the CD term — even if a better rate comes along.If you don’t remember to cash out a CD before its maturity date, it will roll over into a new CD with the same term (possibly with a lower rate of interest).

Bonds

A bond is a loan, and you’re the lender. When a corporation, municipality, or government needs to borrow money, they do so by allowing people to invest in bonds. Bonds are bought and sold on the open market, and their value is determined by a number of factors, including the issuer’s credit rating.

Advantages of investing in bonds

Depending on which entity you’re loaning money to, bonds can be quite safe.If you’re risk-averse, you have the option of choosing a type of bond that is less likely to lose money than others. For example, Treasury bonds are backed by the U.S. government and are considered the safest of all bonds, whereas junk bonds pay a higher rate of interest but are also riskier. Going in, you have a good sense of the risk you’re taking.Bonds provide a steady income stream through interest payments and may appreciate in value over time.

Disadvantages of investing in bonds

No bond is 100% safe. While it may be rare to lose money on government-backed bonds, other types of bonds are more prone to loss.The composite interest rate on Series I savings bonds is 4.28%, not quite as high as the advertised rates on some CDs. For example, a 5-month CD from Western Alliance Bank currently pays 5.30%.Bond values drop as interest rates rise, and there’s a good reason for this. Let’s say you purchase a bond with a face value of $1,000 that pays 4% interest. Further, imagine that investments like CDs are paying 2.5%. If you decide to sell your bond, chances are investors will be willing to pay more for it because it has a higher fixed interest rate. But what if interest rates are on the rise and CDs suddenly pay 5%? Investors are not going to pay you $1,000 for a bond that earns less interest than they can earn elsewhere.

No bad choice — as long as your decision aligns with your goals

CDs and bonds are both considered low-risk investment options, especially when compared to stocks. Which one is a better fit for you today depends on your goals. For example:

If your goal is to earn a higher interest rate, bonds sometimes have CDs beat due to the slightly higher risk associated with bonds. While it’s not always the case, it has been a common scenario historically.If your goal is to create a steady stream of income, bonds may appeal to you more than CDs.If you want to avoid risk altogether, CDs are the clear winner.CDs offer more security if you’re looking for a place to save money for a predetermined future goal.

Of course, there’s no saying you can’t diversify your portfolio by investing in both CDs and bonds. As long as you understand the way each works, it’s possible to squeeze the maximum from your investment dollars by using both.

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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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I normally make a point to keep my savings intact. But read on to see why I just took out a whole bunch of cash. [[{“value”:”

I’m the sort of person who finds it painful to remove money from savings. When I had to take $12,000 out of my savings account last year for home repairs, I was grateful I had the money, but I also cried a little bit. True story.

As such, removing money from my savings isn’t something I do lightly. But earlier this month, I took a huge amount of cash out of my savings account for one big reason. And I’m not upset about it in the slightest.

Chasing a better interest rate

Right now, I’m getting 4.25% on the money I have in my savings account. But because my bank is offering 5% on a 12-month CD, I decided to move a lot of money out of my savings and replace my 4.25% APY with a 5% APY.

CD rates are up right now following a series of interest rate hikes from the Federal Reserve that happened in 2022 and 2023. But the Fed has signaled that it’s likely going to be ready to start cutting rates later in 2024.

Once that happens, I fully expect CD rates to go down. And I expect savings account rates to fall as well. So I wanted to lock in a great CD rate while I still could.

Not only can I get a better rate on my money right now with a 12-month CD compared to what my savings account is paying, but the 4.25% I’m getting at present is not by any means guaranteed. On the other hand, the 5% rate on a 12-month CD is a sure thing. And I’d rather know that I’m getting a return on my money that I’m happy with.

Don’t put all of your money into a CD

Emptying my savings account and moving a bunch of cash into a CD made sense this month. But to be clear, the savings account I took the money from was not my emergency fund account.

I maintain separate savings accounts for different purposes. The account I raided this month was my savings account for home improvements and vacations.

Since I don’t have big home projects on the horizon, and because I’ve already put down money for the trips we’re planning to take in the near term, I’m comfortable taking that money and putting it into a 12-month CD, knowing full well that I won’t be able to access it for a year. If I do take an early withdrawal, I’ll face a penalty.

However, I have a separate savings account that houses my emergency fund — cash I might need to tap in the event of a layoff or income loss, home repairs, or issues with my vehicle. And the money in that savings account is money I absolutely will not put into a CD, since I need that cash to be accessible to me at all times.

Today’s CD rates won’t be around forever. So if you have extra money in a regular savings account, you may want to take it and open a CD before rate cuts come down the pike.

But don’t tie any of your emergency fund up in a CD. Doing so is a mistake that could cost you big time and negate the financial upside of locking in a higher interest rate on your money.

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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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Not sure if you should save for retirement in a Roth IRA? Check out a few lesser-known reasons to consider going this route. [[{“value”:”

If you’re ready to save and invest for retirement, there are a number of different accounts you can choose from. If your workplace offers a 401(k) plan, you may be inclined to contribute if that feels like the easiest way to build a nest egg. And a 401(k) could especially make sense if your company matches a portion of your contributions.

If you don’t have access to a 401(k), an individual retirement account (IRA) might be your next best bet. And in that regard, you could choose between a traditional IRA and a Roth IRA.

You may be aware that a primary benefit of saving for retirement in a Roth IRA is getting tax-free investment gains in your account, as well as tax-free withdrawals. But here are a few lesser-known Roth IRA features that could benefit you tremendously.

1. Flexible options for withdrawing money

The money you put into a Roth IRA comes from after-tax dollars. Because of this, the IRS is fairly lenient about when you can take withdrawals.

With a traditional IRA, removing funds prior to age 59 1/2 could result in an early withdrawal penalty equal to 10% of the sum you take out of your account. But with a Roth IRA, you won’t be penalized for removing the principal portion of your account prior to age 59 1/2 since you never got a tax break on that money in the first place. It’s only the gains portion where you risk paying taxes on your withdrawals prior to 59 1/2. And you may even be able to avoid those if your Roth IRA has been open for longer than five years.

Of course, you don’t want to go around removing funds from your Roth IRA for any old reason, since you’d be taking away from your nest egg and limiting your future investment gains. But in a real pinch, the option to take those withdrawals penalty-free is pretty big.

2. No required minimum distributions

Traditional retirement accounts, like IRAs and 401(k)s, force you to start removing some of your savings in the form of required minimum distributions, or RMDs. RMDs begin at 73 or a bit later, depending on your year of birth.

The problem with RMDs is twofold: First, they create a tax liability because the sum you’re forced to remove from your account is taxable income. But the other issue is that you’re losing out on the chance to keep growing that sum of money in a tax-advantaged manner.

With a Roth IRA, you don’t have to take RMDs at all. Even if you did, they wouldn’t create a tax liability for you since Roth IRA withdrawals are tax-free. But by avoiding RMDs, you can continue to grow your money tax-free if you don’t need funds to pay for retirement expenses right away.

3. Tax-free income for your heirs

Because Roth IRAs aren’t subject to RMDs, it’s easy to reserve some of that money (or all, if you so choose) for your heirs. The nice thing here is that you’re passing along income that your beneficiaries can access tax-free.

Note that an inherited Roth IRA that’s less than five years old may be subject to taxes on the gains portion. But otherwise, you could leave a completely tax-free legacy behind for the people you love.

It could be worth funding a Roth IRA for the tax-free investment gains and withdrawals alone. But these lesser-known rules could really make the case for putting your retirement savings into a Roth IRA.

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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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