Money Management

You may be surprised at how much retirement savings you can amass on a modest income. Read on to learn more. [[{“value”:”

Retiring with millions of dollars is something you might dream about. It’s also a goal that might seem unattainable if you only earn a modest wage.

But here’s the thing. If you commit to saving for retirement from a young age, you can build a lot of wealth on a pretty small amount of money. So don’t assume that a large nest egg is out of the question just because your salary isn’t so high.

Making the most of a $50,000 income

Saving $10,000 a year or more for retirement may be doable if you’re bringing home a $100,000 salary. But if you’re only earning half that much, it’s a different story.

To save $10,000 a year for retirement would mean parting with 20% of your income if you earn $50,000. That may not be doable unless you happen to have really low expenses.

So let’s be realistic and say that the most you can save from a $50,000 salary is $3,000 a year, or about 6% of your pay, which is pretty respectable in its own right. That has you contributing $250 a month to an IRA or 401(k).

Now in time, your $50,000 salary is likely to increase. And from there, it makes sense to try to allocate your raises to retirement savings if possible.

Perhaps that next year, you find yourself earning $52,000. A smart move is to send that extra $2,000 into your retirement account before you get used to the extra money.

But let’s actually assume for a second that your income doesn’t rise through the years, even though that’s extremely unlikely. Can you retire with a nice sum of money if you never contribute more than $250 a month to a retirement account in your lifetime?

Actually, you can — if you invest your savings wisely.

Over the past 50 years, the stock market has rewarded investors with an average annual 10% return. Go heavy on stocks, and your return might be the same.

So, let’s say you start funding a retirement plan at age 25 and retire at 67, all the while contributing $250 a month and enjoying a 10% return on your money. By the time you’re ready to end your career, you’ll have $1.6 million to your name. Really.

It’s all about getting an early start on retirement savings

People who retire as millionaires don’t necessarily earn six-figure salaries throughout their careers. Some of them earn modest wages. But what they do is start saving for the future at a young age so their money gets an opportunity to compound and grow.

The $1.6 million balance above? That’s coming at a cost to you of just $126,000. The reason your contributions are able to grow so much is your lengthy savings window.

If you’re first starting out in the workforce and aren’t earning a whole lot of money, don’t tell yourself you’ll save for retirement when your income rises. Start saving now. It could do you a world of good.

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It’s good to have money in savings, but not too much. Read on for a few big downsides you could face if you do. [[{“value”:”

It is a good thing to have money in a savings account. After all, you need to be prepared for emergencies, and putting money into savings means it will be there and ready for you to cover unexpected expenses.

If you have short-term goals and will need to access your money soon, a savings account can also be a good place for it, since you won’t risk losing any of it. And it won’t be mixed in with funds in your checking account, where you’re more likely to spend it.

But while it’s good to have some money in savings, you don’t want too much. Here’s what could happen if you end up with an overfunded savings account.

1. You could miss out on better opportunities with your money

One big issue is that you could miss out on other opportunities if you have too much in savings. Right now many high-yield savings accounts are paying APYs above 5.00%, but that’s an unusually high rate and it’s not likely to last indefinitely. Savings account rates tend to move with the federal funds rate, which is high right now thanks to the Federal Reserve’s actions against inflation.

Even if it did stay fixed for a time, a 5.00% return isn’t that great — especially when you could reasonably expect a 10% average annual return if you invested in an S&P 500 index fund (a fund that tracks the performance of around 500 of the largest U.S. businesses). There’s a big opportunity cost to accepting smaller returns than you could get if you invested.

If you won’t need the money you are saving for around three to five years, it does not belong in a savings account. In savings, it may barely earn enough to keep pace with inflation. That money should be invested, so you can benefit from more generous returns which can, in turn, be reinvested and help your balance grow even bigger.

2. You could be very vulnerable to fluctuations in interest rates

There’s another big downside to having too much in savings. Savings accounts have variable rates. If interest rates decline, this means you will earn less on the money you have in your account.

This isn’t a huge deal if you have only the amount invested that you need for emergencies and short-term goals, since you probably won’t have that much in savings. But the bigger your balance, the more you could be impacted when your rate changes.

There’s another great option if you don’t want your money at risk of being lost, but you want protection from these fluctuations in interest rates. You could put some of your funds into a CD. Certificates of deposit guarantee your rate for the duration of the CD term and they are also typically FDIC insured, just like savings accounts, so you won’t risk loss, up to FDIC insurance limits.

CDs come with set terms, typically ranging from three months to five years. You can’t take money out without penalty during your CD term, but your rate also won’t change. So, if you are saving for a short-term goal but won’t need the money for six months, or a year or two, a CD could be a better place for it than savings.

If you don’t take advantage of the chance to open a CD and instead keep all that cash in savings, you could end up with a lot less money than you expected if your account’s rate goes down.

3. You could put your money at risk

Finally, if you really have a lot of money in savings, you could actually risk losing it. That’s because the FDIC insurance limit is $250,000 per person, per account. If you have more than this, unless you spread it around to different banks, you might not get back everything you put in.

For all of these reasons, you should avoid keeping too much in your savings account. Store the money in your account that you’ll need soon, and consider opening a brokerage account or CDs for the rest of it.

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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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My healthcare bills are higher due to a health insurance change. Read on to see how I’m coping with it. [[{“value”:”

My husband switched jobs not so long ago, and we knew that would result in several changes. For one thing, his current job is remote, so he doesn’t have to drag himself into an office day in, day out.

Another thing that changed when my husband switched jobs was that we went from having a health insurance plan with no deductible to a plan with a large deductible. Of course, I recognize that we were privileged to be without a deductible for many years, since many people have to fork over some amount of money before their insurers pick up the tab for their care.

But still, going from a $0 deductible to the $3,200 deductible we have now was not an easy thing. So we’ve had to make changes to deal with that shift.

Reworking our budget to account for higher medical bills

Once my husband and I realized that we’d be going from no health insurance deductible to a giant one, we immediately sat down and started crunching numbers. And we made some changes to our budget to account for the fact that we’d potentially have to spend $3,200 a year or beyond on medical costs.

To be fair, it’s not like we were paying $0 under our old plan. Every time we went to the doctor, I had to shell out anywhere from $25 to $40, depending on whether it was a primary care provider or a specialist. And that doesn’t include the cost of medication and supplies.

But still, this change has left us spending hundreds of dollars more each month on healthcare. For the most part, that money has had to come out of our travel and entertainment budget.

That said, we base our budget on a certain income we bring in jointly. But as a freelance writer, my income is variable. So some months, I’m able to earn more, and when I do, that money goes into a special savings account that’s earmarked for travel and leisure.

The one benefit of a high-deductible insurance plan

Being on a high-deductible health insurance plan isn’t so fun — especially when your kids get injured or sick and you find that you’ve basically paid your multi-thousand-dollar deductible before the midpoint of the year (true story). That said, there is one perk to having a high health insurance deductible, and it’s getting access to a health savings account, or HSA.

To qualify for an HSA in 2024, you need a minimum individual deductible of $1,600 or a minimum family deductible of $3,200. Your plan also needs to have an out-of-pocket maximum of $8,050 for individual coverage or $16,100 for family coverage.

Since our health plan meets these requirements, we’re able to contribute up to $8,300 to our HSA this year. And that’s money that goes in on a pre-tax basis, allowing us to exempt $8,300 of our income from taxes. (Note that for individual coverage, the limit is $4,150, and there’s also a $1,000 catch-up contribution for savers 55 and over at both the individual and family level.)

Now, that said, one thing we don’t do with our HSA is dip into it. That might seem counterintuitive when I just said that we’re now spending thousands of dollars extra per year on medical care.

But the reason is that HSA funds that aren’t withdrawn can be invested and grown tax free. So I’d rather pay for my medical bills from my earnings and let my HSA gain value over time.

My goal is to reserve my HSA for retirement, since seniors tend to see their healthcare costs rise. At the same time, though, I know that my HSA is there for me should I need to use the money sooner.

It hasn’t been easy seeing our health insurance costs rise so much. But the silver lining is that our high deductible gives us access to a really useful savings tool that helps us enjoy tax breaks in more than one regard.

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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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Even if you only fly a few times per year, the best airline credit cards can give you better travel experiences. See how to make it happen. [[{“value”:”

I just recently got started with travel rewards credit cards, and I already opened a Chase Trifecta. I’m excited about traveling, and I want to do more to explore this fun new way of life. So even though I’m not a frequent flyer, I’m strongly considering applying for an airline credit card in 2024.

Is it worth getting an airline credit card, even if you only fly a few times per year? If you plan ahead, pay your bills on time, and get enough value from the card, it can be worth having one (or more) of the best airline credit cards in your wallet.

Here are a few good reasons to get an airline credit card, even if you don’t fly often.

1. You like the airline and its routes

Are you a fan of Southwest Airlines, or Delta Air Lines? Or when you book a flight, do you tend to fly through a big hub for United Airlines or American Airlines more often?

Even if you’re not a frequent flyer, if you have a regular airline that you tend to use, it can be worth getting that airline’s credit card. For example, I have recently had good experiences flying to Europe from the U.S. Midwest on Delta Air Lines through Atlanta. If I had to choose a regular flight route, I’d rather fly through Atlanta more often (instead of through Chicago — Atlanta tends to have better weather and warmer winters). Based on how I travel, this could make a Delta Air Lines card worth getting.

2. You want to get thousands of bonus miles

Some of the best airline cards have welcome offers with tens of thousands of bonus frequent flyer miles! For example, the best Delta cards offer 40,000-60,000 bonus miles. Terms apply: you have to meet the minimum spending requirements to earn those bonus miles, and some of the best airline cards also charge annual fees.

If you can cash in on a generous welcome offer for a new airline credit card, that’s like getting a cheap/nearly “free” plane ticket. Keep in mind: award travel airline tickets are not “free,” because you still have to pay some cash to cover taxes and fees. But using frequent flyer miles to buy plane tickets can make the cost much cheaper.

3. You’re open to receiving extra perks and benefits

Airlines have recently announced higher fees for checked bags. Some airline credit cards let you have a free checked bag, just for being a cardholder. I am 6’3″ and so I like to have extra leg room on the plane; if I can check my carryon bag and then stow my laptop (personal item) in the overhead bin, that’s more leg room for me! Many cards also allow free checked bags for a certain number of companions on the same reservation.

Other examples of easy-to-get perks from airline credit cards include airport lounge passes and in-flight discounts on purchases.

The future of the airline industry is likely to be more rewarding for airline credit card customers, no matter how often they fly. American Airlines recently announced that it’s re-thinking its credit cards and trying to offer better value for its AAdvantage® program. This is a sign that airlines are likely going to make extra efforts to reward frequent flyers and give people incentives to spend more money on premium seats.

Bottom line

Getting the best credit cards can help you get the best experiences from airlines in the years ahead. If you only fly once or twice a year, finding the cheapest ticket on any airline is a valid travel strategy. But if you want more consistency and perks like free checked bags and free airport lounge access, applying for an airline credit card can help you unlock a higher-quality air travel experience — without much extra effort or extra costs.

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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.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.

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Relocating? Read on to see how it might impact your auto insurance rates. [[{“value”:”

There may come a point when you decide to relocate to a new state. You might do so for a job, a romantic partner, or even just to experience life in a part of the country that appeals to you.

Moving to a new state could impact your auto insurance, though. So it’s important to loop your insurer in on your plans once they’re finalized.

Can you keep your auto insurance when you move to a new state?

Whether you’re able to keep your auto insurance after moving to a new state will depend on if your insurance company operates in the state you’re moving to. If it doesn’t, then you’ll have to shop for insurance with providers who serve that state.

Once you know with certainty that you’ll be moving out of state, contact your auto insurer and ask if it provides coverage in your new state. If so, you can ask for a rate quote if you know exactly where you’ll be living (keeping in mind that your costs could vary from one ZIP code to another).

But don’t assume that your car insurance premiums will stay the same in your new state if you stick with your current insurer. They might rise due to different factors, or they might go down.

Will moving to a new state result in higher auto insurance premiums?

This is one of those “it depends” situations. There are lots of factors that go into calculating auto insurance rates. Depending on how those shake out, your insurance costs might stay mostly the same, rise, or fall.

One factor that insurers use to set rates is the local crime rate. If it’s high, your premiums might rise.

Another factor insurers will consider is the claims history for that area. Some parts of the country have roads and infrastructure that may be more or less conducive to accidents. So that’s something that will go into setting your rate as well.

Also, different states have different requirements when it comes to things like minimum liability coverage. Your rates might change depending on the rules.

Also, your costs for auto insurance might go up if you move from an at-fault insurance state to a no-fault state. No-fault insurance means that if you’re in an accident, you can’t rely on the other driver’s insurance to pick up the tab for the damages at hand, even if the other driver caused the accident. Rather, you have to file a claim against your own insurance policy either way.

Because of this, no-fault insurance can be more expensive, because it means you’re filing a claim against your own policy every time an issue arises. This doesn’t mean that no-fault insurance is always more expensive, but it’s something to keep in mind if you’re moving to a no-fault state.

There are 12 states that maintain no-fault insurance laws:

FloridaHawaiiKansasKentuckyMassachusettsMichiganMinnesotaNew JerseyNew YorkNorth DakotaPennsylvaniaUtah

All told, moving out of state has the potential to impact your auto insurance coverage and costs. Let your insurer know about your move to see what options you have. And even if your insurer offers coverage in your new state, it could still be a good idea to shop around for rates to make sure you don’t end up overpaying.

Our best car insurance companies for 2024

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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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