Money Management

There’s a special type of savings account where access isn’t automatically granted. Read on to see what it is and whether you qualify. [[{“value”:”

The nice thing about savings accounts is that anyone with money can open one. And if you have extra funds at your disposal, you may be in a position to open a certificate of deposit (CD) if you’re all set on emergency savings.

HSAs, or health savings accounts, are a bit more exclusive in that you need to meet certain criteria via your health coverage to be able to fund one. But if you’re eligible for an HSA, you stand to benefit in a really big way. So even if you didn’t have HSA access in 2023, it pays to see if things have changed for 2024.

The upside of HSAs

You can contribute money to a savings account or CD, but it’s going to come in the form of after-tax income. And the interest you earn in a CD is also taxable.

With an HSA, your account is funded on a pre-tax basis, so your contributions shield some of your income from taxes. Also, you can invest your HSA to grow your balance, and investment gains are tax-free. Withdrawals are also tax-free, provided they’re taken to cover qualifying medical expenses.

Now, it’s easy to confuse HSAs with FSAs, or flexible spending accounts. After all, they’re both accounts used for healthcare spending, and both are funded with pre-tax dollars.

But the similarities largely end there. With an FSA, you have to spend your full plan balance year after year or risk forfeiting your money. With an HSA, you can carry your balance forward for as long as you want. In fact, with an HSA, you’re actually encouraged not to take immediate withdrawals, but rather, invest your money, since it grows tax-free.

You might, for example, put $5,000 into an HSA, leave that balance alone for several years, and watch it grow to $12,000. And the best part? Your $7,000 gain is yours to keep free and clear of taxes.

See if you can fund an HSA in 2024

Perhaps you were unable to fund an HSA in 2023 or other previous years. But the rules for HSA eligibility change on a yearly basis, so it may be that your plan qualifies now when it didn’t before.

A more likely scenario, though, is that you got a new job this year with a new health plan to go with it, and as such, you’re able to fund an HSA. Or maybe you stayed with the same employer but chose a different type of plan it offered.

Either way, if you have self-only coverage (meaning, you’re not covering a spouse or children as well), you can qualify for an HSA this year with a minimum deductible of $1,600 and an out-of-pocket maximum of $8,050. If you have family coverage, your minimum deductible is $3,200 and your out-of-pocket maximum is $16,100.

From there, your contribution limit for 2024 is $4,150 for self-only coverage or $8,300 for family coverage. If you’re 55 or older, add $1,000 to whichever of these limits applies to you.

Of course, don’t sweat it if you’re unable to max out an HSA this year. If it’s your first time being eligible for one of these plans, you may need to make room in your budget for contributions. But it definitely pays to take advantage of an HSA for the tax benefits, as well as the benefit of having access to funds for healthcare expenses.

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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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If you’re considering joining Costco, there are three key questions to ask yourself to decide if it’s the right move. Find out what they are. [[{“value”:”

Thinking about joining Costco? Before you pull the trigger and break out your credit cards to pay the membership fee, it’s worth taking the time to think about whether joining the club will cost you or save you money in the end.

It can be hard to determine which way things will go, but asking yourself three key questions can shed light on whether paying to become a Costco member is worth it or whether you’d have more money in your bank account if you steered clear of the warehouse club.

1. Will you shop at Costco enough to justify the membership fee?

The first big question is whether you’ll shop often enough at Costco to justify the upfront cost of joining.

Costco has two tiers of membership, with the entry-level Gold Star membership coming in at $60 a year and the upgraded Executive membership costing $120 a year. If you spring for the basic membership, you would have to save at least $60 a year by shopping at Costco compared with your local grocer or other stores you may already be shopping at.

A $60 per year annual membership fee comes to $5 per month. If you can save at least that much on gas or groceries by shopping at Costco compared to other stores, then your membership will save you rather than cost you. If you’re buying gas at Costco at least twice a month, or spending enough to save at least $5 per month, then chances are good you’ll more than cover your upfront fees.

2. Will you be tempted to overspend at the warehouse club?

Consider whether you’re likely to overspend on splurges or unnecessary items.

Costco is designed in a way that encourages you to spend on things you didn’t plan on purchasing, with essentials kept in the back and splurge items kept front and center. And its strategies work, with Reddit users impulse-buying everything from inflatable hot tubs to apple trees.

If you buy unexpected and unnecessary items when you go to Costco, you’ll negate any savings that come from the store’s good deals and you’ll likely end up spending more. You can’t overcome this problem by shopping online either, as Costco charges higher prices on its website than in-store. Plus, not everything is available online.

So, if you know you’re the type of person who will find yourself going for coffee and coming home with a boat, you should not join Costco.

3. Will you end up tossing bulk items in the trash?

Finally, you should know Costco sells bulk versions of most items. And, if you buy something big but can’t use it up before it goes bad, you’ve wasted your money instead of getting a deal.

Say, for example, you opt to spend $12.49 on Special K Cereal from Costco, ending up with 43 ounces. Or, you could spend $4.48 on a 16.9-ounce box of the same cereal from Walmart. If you only need 16.9 ounces of cereal, you’ll be much better off with the Walmart deal.

By considering whether bulk purchases make sense for you, as well as thinking about your tendency to buy impulse items, you can make an informed choice about whether a Costco membership will save or cost you money. You need to think about this issue before you sign up for a membership and end up with less money in the bank.

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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.Christy Bieber 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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I try to make HSA withdrawals off limits. Read on to see why. [[{“value”:”

A health savings account, or HSA, is an account I’ve only had for a short while now. Previously, the health insurance plans I was enrolled in weren’t compatible with an HSA.

But since 2022, I’ve been on a high-deductible health insurance plan. And while that does have me paying more money out of pocket, the upside is that I get HSA access. Since I have family coverage, we’re allowed to contribute up to $8,300 to an HSA this year. That $8,300 goes in tax free, so we shield that much income from taxes, which is a big win.

Now, the nice thing about HSAs is that you can access your balance at any time. I could, for example, withdraw funds tomorrow to pay for medication. But I also don’t have to use up my HSA balance by the end of the year, or by any specific deadline.

Because of this, I actually make a point to treat my HSA like a retirement savings account rather than an account I access for near-term medical costs. Here’s why.

Taking advantage of tax-free growth

The money you put into an HSA and don’t use right away doesn’t have to just sit there. You can invest your HSA to grow your money into a larger sum over time. And investment gains in an HSA are tax free, so that’s a nice perk.

Over the past 50 years, the stock market has averaged an annual 10% return. So let’s say I contribute $8,300 to my HSA this year, invest it in stocks, and leave that money alone for 20 years. At that point, my $8,300 contribution should be worth about $55,800. That’s a gain of $47,500. Only I won’t owe the IRS a chunk of that $47,500 due to the tax-advantaged nature of HSAs.

As you might imagine, the reason you get such neat tax breaks in an HSA is because you’re supposed to be using the money for healthcare costs. And as such, withdrawals taken for non-healthcare expenses generally incur a penalty.

But here’s another really cool thing about HSAs. Once you turn 65, you can withdraw from your account for any reason without facing a penalty. So that’s really why I take the approach of using my HSA as a retirement savings account. This doesn’t mean I’m not planning to use it in retirement to pay for medical bills. But I also know that savers get the flexibility to use their HSA funds for any purpose come age 65.

You may want to leave your HSA alone, too

There’s nothing wrong with taking HSA withdrawals to pay for near-term medical bills. That’s what that money is there for.

But if you can avoid tapping your HSA during your working years (or at least some of it), you could end up with a lot of money in that account by the time your senior years roll around. And you might also enjoy a world of gains that the IRS can’t touch.

Of course, to leave your HSA alone, you will need to make sure to pad your savings so there’s money in there for medical bills. In fact, I have a separate savings account earmarked for medical bills outside of my general emergency fund.

It’s also a good idea to factor medical expenses into your budget. Right now, for example, we allocate several hundred dollars a month to healthcare outside of our insurance premiums so we have the option to leave our HSA untouched.

But all told, perhaps the best way to maximize an HSA is to leave your money untapped for as long as possible. So if that’s something you can swing, you may end up really happy once retirement rolls around.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

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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If you’re buying life insurance, consider how it will fit into your overall financial goals. Read on for more insurance tips for seniors. [[{“value”:”

Buying life insurance can be a good idea at any stage of life, even for older adults. If you still have children at home, have dependent adult children with special needs, or want to provide financial protection for grandchildren or other loved ones, buying life insurance is a valid move for seniors.

But watch out for some costly life insurance mistakes. Not every life insurance policy is the right fit for seniors’ time horizons or budgets.

1. Buying the wrong life insurance policy for your goals

Before you buy life insurance, consider these questions:

What financial goal is this life insurance supposed to help?Do you want to help pay for your loved ones’ everyday expenses or pay off a mortgage in case you die?Do you want to help pay for grandchildren’s college educations?Have you started a family later in life, or joined a blended family, and you have a younger spouse and young children or stepchildren to support?

Think carefully about how this life insurance policy fits into your overall personal finances and investment goals. If your top priority for buying life insurance is to get the maximum amount of financial protection in case you die prematurely, you should probably consider term life insurance. Term life tends to have the lowest-cost premiums and gives you the biggest amount of death benefit. And you can choose a shorter term life policy that covers the duration of the stage of your life when you have maximum need; for example, if your kids are 8 and 10 years old, you can buy a 10-year term life policy to cover your family until the kids are out of high school.

But if you want to combine your life insurance policy with investment options, other types of life insurance can build cash value while you’re alive (along with paying benefits if you die). Some types of whole life insurance can be a good option, even for seniors. For example, universal life insurance can give you flexible ways to use your life insurance policy. You can invest the cash value for growth, borrow against the policy’s value, and get flexible options for how to use the policy.

By choosing the right whole life insurance policy, life insurance can be a flexible financial asset. Universal life insurance and other whole life insurance policies are more complex and tend to be more expensive than term life. But they can be the right fit for some families.

2. Paying too much for premiums

Think carefully about how much you’re prepared to spend on life insurance. Especially for seniors who might not be in perfect health, life insurance premiums might cost a lot more money than when you were younger. And some life insurance premium costs go up, year after year.

If you want the cheapest life insurance premium, getting term life insurance is probably the best choice. If you have more complex financial needs and a bigger budget, you might be willing to pay higher premiums for universal life insurance or other permanent life insurance policy. But don’t assume that any life insurance for seniors is going to be “cheap.” Instead, try to find the best value that suits your financial goals.

3. Getting the wrong amount of coverage

Don’t overpay for the wrong amount of life insurance coverage. Think strategically about what you want this life insurance to accomplish: do you want to pay for final expenses? There are lower-cost life insurance policies that can help with that. Do you want to give your family a financial legacy by helping to pay off the mortgage or cover college costs? Choose a term life insurance policy with a big enough death benefit to help accomplish those goals.

Bottom line

Buying life insurance is not always an easy, inexpensive proposition for seniors. But the best life insurance companies will often have options for you to get life insurance, even if you have to get a medical exam or pay higher premiums. But before you start shopping for life insurance price quotes, think carefully about “why” you need life insurance and what you want that policy to accomplish. If you can qualify for a good policy, term life insurance often gives the most financial protection for your premium dollars.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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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Getting a joint mortgage could be tough when one person’s credit needs work. Read on to learn more. [[{“value”:”

You may be one of those married couples who likes to do everything together, whether it’s grocery shopping, decorating for the holidays, traveling, or signing a mortgage. And often, signing a joint mortgage makes sense when you’re part of a couple and both work, since you can combine your income for a higher borrowing threshold.

But what if you’re looking to get a mortgage and your spouse has really poor credit? Will that make it so a joint mortgage is off the table? The answer is, it depends on how strong your credit score is and just how poor your spouse’s is.

When there’s a big gap in credit scores

The minimum credit score to qualify for a conventional mortgage is 620. It used to be that if you were applying jointly for a home loan and one of you had a score of under 620, then a joint mortgage was off the table. But Fannie Mae now does things differently. Now, Fannie Mae will take the average score of both borrowers on the loan to determine eligibility.

So let’s say you have excellent credit and your score is 780. But let’s say your spouse’s score is just 580. In the past, that would’ve excluded you from qualifying for a joint mortgage, because a 580 is below the 620 threshold needed for a conventional loan. But now, you might qualify based on an average score of 680, which is well above 620.

However, let’s say your spouse has a 550 credit score and yours is a 670. With an average score of 610, you may not be able to sign a conventional mortgage jointly.

Of course, just because you’re able to qualify for a joint mortgage doesn’t mean you’ll end up with a great interest rate if your spouse has poor credit. So that’s something to take into consideration, as well.

Should you just apply for a mortgage on your own?

If you have great credit and your spouse has poor credit, you may decide to try to apply for a mortgage on your own. That way, you might snag a more favorable interest rate on it, resulting in lower monthly payments. However, the problem you might run into there is not having a high enough income to qualify for the loan amount you need.

Let’s say you and your spouse are equal earners, bringing home $75,000 a year each for a combined total of $150,000. You might need a $140,000 income to qualify for the loan amount you’re looking for. With your joint income, that’s no problem. But if your spouse’s name isn’t going on your mortgage application, then their income can’t count toward your eligibility. So you might run into an issue there.

On the other hand, if you earn a high enough salary, then applying solo could be your better bet. If your spouse’s credit improves, you could always refinance your mortgage into a joint loan down the line. But applying on your own may be the way to go for now.

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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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