How to Set Up Automatic Retirement Savings if You Don’t Have a 401(k)

By: Steven Porrello |
Updated
Oct. 17, 2023 – First published on Oct. 17, 2023

Certificates of deposit (CDs) can be a smart way to capture high interest rates. With some CD rates currently north of 5.50%, the headliner perk on today’s top-paying CDs is undoubtedly APY, APY, and APY. But don’t let high interest obscure some of the lesser-known benefits of buying CDs. Growing your money is important, but these three lesser-known perks could sweeten a CD contract.Ready to open a CD and earn extra cash? Western Alliance Bank is a top pick from our experts and features an incredible rate: 1 Year: 5.51% APY (Min. Deposit $1).1. Some CDs allow a “bump-up” rateStandard CDs offer a fixed rate for a specific period. For example, if you lock into a 5.50% APY, you’ll get 5.50% for the length of your term, whether that’s three months or five years.Locking in at a high rate can be glorious if CD rates fall. But if you lock your CD rate too early, the opposite could happen: You could watch CD rates soar, while yours is still paying out at a lower APY.This is where a “bump-up” CD can come in handy.Bump-up CDs let you increase your rate at least one time during your term (some allow several bump-ups). This allows you to capture a higher APY after your term has started. Typically, bump-up CDs have lower initial rates than standard CDs. But they can prove useful in a fluctuating rate environment, especially if you think the CD provider will raise its rates.2. You can access interest as you earn itWhile many CDs lock up your initial deposit for the length of your term, some will let you access the interest you’re earning. Yes, even without penalty. Often, these CDs will even transfer the interest into a separate account, like a checking or savings account. Depending on your CDs terms, the interest could be deposited monthly, quarterly, semiannually, or annually.3. Brokered CDs can be sold on secondary marketsBrokered CDs are a little-known CD type. These CDs are available only through brokerage accounts, such as:FidelityCharles SchwabVanguardEdward JonesThe broker isn’t the CD issuer but rather buys CDs in bulk from providers, like banks, then sells them to its customers. Often, these CDs have ridiculously high APYs.Because the broker isn’t the CD issuer, it usually doesn’t let you withdraw from your CD — not even with an early withdrawal penalty. Instead, you have to sell your CD on a secondary market if you want out early. This involves finding a buyer who will take the CD off your hands.Selling a CD on the secondary market could result in a loss, especially if rates have increased since you purchased yours. But for savvy investors focused on the long term, today’s top-paying CDs could eventually result in a gain. CD rates won’t stay high forever. If you load up on long-term CDs, you could turn a profit when rates start to fall, not to mention earn high interest as you wait.Of course, like investing in stocks and other assets, trading CDs has risks. But it’s a strategy that many fixed-income investors simply don’t know about.All in all, CDs can offer investors more than just a high APY. Don’t get me wrong: Earning high interest on your savings is a major benefit. But dig a little deeper into your contract; you might find some perks that surprise you.

Wouldn’t it be great if we all had a crystal ball that told us what the interest rate environment would do? We could figure out the best time to get a mortgage or the best time to buy a car. And of course, we would know exactly when to put all of our money into certificates of deposit (CDs) to maximize our yield.Unfortunately, that isn’t the case. Nobody knows what interest rates are going to do in the future — not even the people in charge of setting benchmark interest rates. However, we can use the latest economic projections to consider the most likely scenario and what else could happen instead. So here’s what we know (and don’t know) about what CD yields will do in 2024.Where do CD yields come from?The short explanation is that CD rates are a combination of three main factors:The current interest rate environmentThe bank or financial institution that offers themThe maturity termIn other words, when benchmark interest rates rise, CD rates generally tend to rise along with them. However, the rates paid by CDs can vary dramatically between banks.For example, as I write this, our top 12-month CDs have APYs ranging from 4.25% to 5.65%. The same is true for CDs of other maturity lengths as well. But because the Federal Reserve has raised benchmark interest rates so aggressively in the past couple of years, this range is significantly higher than it was.When it comes to different maturity lengths, it’s a little tricky to explain, but the general idea is that shorter-term CDs tend to track benchmark interest rates rather closely. The current federal funds rate (the most important interest rate the Fed controls) is set to a range of 5.25% to 5.5%, and this is certainly aligned with most of the top 1-year CDs we track.With longer maturities, there are a lot of economic factors at work, but the simple explanation is that CD yields are a combination of the current interest rate environment and expectations for future interest rate movements. In most environments, longer-maturity CDs tend to have higher yields, since banks typically pay a premium if customers agree to leave their money on deposit for a longer time. But as of Oct. 2023, the range of 5-year CD yields on our top CD list is 3% to 4.85%, with the average yield significantly lower than the average 1-year CD.This makes sense. According to the latest projections from the policymakers at the Federal Reserve, the benchmark federal funds rate is expected to fall to 4.6% by the end of 2024 and to 3.4% by the end of 2025.What will CD rates do in 2024?There’s no way to predict with accuracy what CD rates will do next year. Even the Federal Reserve’s own projections can be very wrong. In fact, the Fed’s projections in Sept. 2021 called for a federal funds rate of just 1% at the end of 2023.Having said that, the latest projections call for one further quarter-point rate hike by the end of 2023, which would likely push CD yields slightly higher to start 2024. And if the Fed’s projection of a 4.6% federal funds rate proves to be accurate, we could expect 1-year CD rates to gravitate towards that level, with other maturity terms drifting generally lower as well.However, it’s tough to overemphasize that we don’t know what is going to happen. If inflation proves far more difficult to control than the Fed expects, it’s entirely possible that several more interest rate hikes will be needed and CD yields will be much higher at the end of 2024. On the other hand, there’s the possibility of a recession coming and the need for the Fed to aggressively cut rates if the economy takes a worse downward turn than expected.The bottom line is that CD rates are higher right now than they’ve been in a long time, and the best course of action is to put your money in CDs that make sense for you now — not to leave your cash on the sidelines in anticipation of rates rising even further.However, one smart strategy could be to create a CD ladder, which gives you the best of both worlds. If rates end up rising in 2024, you’ll end up with some money to take advantage. And if rates fall, most of your money will be locked in at today’s rates.

By: Maurie Backman |
Updated
Oct. 15, 2023 – First published on Oct. 15, 2023

The highest credit score you can get is an 850. But the reality is that most people don’t have perfect credit, and there’s a reason for it.Any time you apply for a new loan or credit card, a hard inquiry is done on your credit report, which can result in a very small hit to your score. So even if you’ve paid every single bill of yours on time in the past five years and maintain a $0 credit card balance, if you applied for a loan two months ago, chances are, you won’t have perfect credit.However, Experian, one of the three credit bureaus, reports that a credit score of 740 to 799 is considered very good, while a score of 800 to 850 is considered exceptional. So once your score reaches 800, there’s a good chance you’ll not only have a relatively easy time qualifying for a loan or credit card when you want one, but also, snagging a competitive interest rate in the process.But that’s not the only benefit to having a high credit score. Here are three perks you might also enjoy.1. You may have an easier time renting a homeIt’s common for landlords to perform a credit check on prospective tenants before letting them sign a lease. If you’re looking for an apartment in a city with few rentals, your high credit score might give you an edge. A landlord might prefer to rent to you than someone whose credit isn’t as great.You can also use a higher credit score as a negotiating tool for lower rent. Let’s say you’ve been in your rental for a couple of years and your landlord wants to impose an increase. You could point to your stellar credit as a reason they’d want to keep you around as a tenant — and potentially avoid having to pay more.2. You might save money on your car insuranceThere are different factors that determine what premium rates you’re quoted when you shop around for auto insurance. These include your driving history, location, and vehicle type and age.But another factor that auto insurers tend to take into account is credit. You’d think that wouldn’t be part of the mix, since your tendency to pay bills on time doesn’t necessarily correlate with the way you handle a vehicle on the road. But still, it’s often a factor unless you live in a state that bans the practice.3. You might have an easier time getting a jobSome employers conduct a credit check as part of the process of vetting employees. This is especially likely to happen if you’re applying for a job that requires you to handle or manage money.One thing you should know is that in the course of this type of credit check, a prospective employer generally will not get to see your actual credit score. However, they’ll see components of your credit report that include your payment history. And a strong payment history is indicative of a high credit score.It pays to boost your credit scoreA strong credit score could do a lot of good things for you. If you feel that your credit score needs work, you can boost it by:Paying bills on timeKeeping your credit card balances to a minimumNot applying for new loans or credit card accounts for a period of timeKeeping long-standing credit card accounts openChecking your credit report for errorsIt may take some time for these moves to have an impact on your credit. But once they do, you can put yourself in a position to benefit in more ways than one.

By: Natasha Etzel |
Updated
Oct. 17, 2023 – First published on Oct. 17, 2023

Dental care is considered to be separate from other healthcare needs in the United States. If you have health insurance, it’s likely that dental care coverage is not included. Instead, dental insurance is an additional expense — and without it, treatment can be expensive. There were times when I paid for traditional dental insurance, but I’ve found another option that works better for my needs and budget. For the last five years, I’ve been going to a dental practice that promotes its own savings plan. Find out why this solution is ideal for my wallet. Dental care is expensive in the United States Many Americans go without dental insurance. Sadly, those without coverage tend to delay taking care of dental issues due to the fear of the cost. Without insurance, a bill for one dental procedure, like a root canal, could quickly drain anyone’s checking account. Those who do have insurance may find that their coverage has limitations. There may be an annual coverage cap and some services (such as composite fillings) may not be covered. If dental care doesn’t cover an entire procedure, the patient is left to pay for the rest of the cost. As someone who has undergone several dental procedures, dental insurance wasn’t always the most useful. I’ve had several cavities filled or replaced in adulthood. Even when I had dental insurance, the composite fillings I needed weren’t covered. So I was left to pay $100 or more per filling. These additional costs have changed how I approach paying for dental care. Look for savings plans offered by local dental offices When I returned to the United States after living abroad for a couple of years, I began the quest to find a new dentist. I have some dental anxieties, so I spent a lot of time looking at reviews. My top priority was finding a dental practice that would make me feel at ease. But I also considered the cost. At the time, I was paying for my own healthcare coverage as a freelancer and had to decide if purchasing dental insurance made sense. I ultimately decided to skip paying for dental coverage because I hadn’t gotten much value out of it in years past. Instead, I chose a dental office that offers a savings plan. It functions like a yearly membership and each patient pays a set fee for coverage. For individual coverage, I pay my dental office $250 per year. I get a cleaning and exam every six months, annual X-rays, fluoride treatments every six months, and one free emergency exam visit per year. Additional dental care services, like getting a cavity filled, are an extra expense. But as I mentioned earlier, composite fillings weren’t covered when I had dental insurance in the past, so I’m used to paying for this service when it’s needed. With my membership, I get a 20% discount on all additional dental procedures.I pay $250 every winter when it’s time to renew my membership. That works out to be less than $21 per month for proper dental care. I set aside money throughout the year to pay for this membership so I’m prepared to reimburse myself after swiping my credit card. But I also set aside additional money in case I ever find myself needing to cover a more expensive dental procedure in the future. You, too, can prepare for future expenses by regularly contributing money to a high-yield savings account. Consider alternative solutions to make dental care affordable Ignoring healthcare concerns, including dental issues, is never a good idea. With how expensive treatment can be, it’s understandable why many people delay care. However, ignored health issues can quickly worsen and become a more severe and costly fix. If you’re worried about dental or other medical care costs, you’re not alone. Exploring alternative solutions to make dental and healthcare more affordable can be beneficial. Going to a dentist that offers an annual savings plan is one option. But that’s not all. Many dental schools offer discounted services to patients so students can get real-world practice. Most dental schools have licensed dentists overseeing the care. If you have a dental school in your area, this could make staying on top of routine dental care needs less expensive. For additional ways to save money, check out our personal finance resources. 

By: Maurie Backman |
Updated
Oct. 20, 2023 – First published on Oct. 18, 2023

Many people shop at Costco regularly and marvel at the savings involved. Costco shopping can leave you with more cash to add to your savings account. But have you ever wondered what it would be like to work at a Costco warehouse club store?On the one hand, working at Costco could mean spending a lot of the day on your feet. But if you’re someone who just doesn’t do well with a desk job, and you like the idea of getting to interact with people, then it could pay to see if your local Costco is hiring.Before you take that step, though, you may be curious as to what sort of wage you might be looking at as a Costco employee. And the answer might surprise you — in a good way.A far from shabby hourly rateDuring Costco’s most recent earnings call, CFO Richard Galanti was asked to talk about employee wages. And the details he revealed actually paint a pretty positive picture. Galanti said that 90% of Costco’s employees are paid hourly. And the average hourly wage for Costco employees is close to $26. So for someone working 40 hours a week and 52 weeks a year, that’s an annual income of about $54,000.Granted, at that income level, you’re not necessarily rolling in dough and signing a $500,000 mortgage loan. But in some parts of the country, it’s possible to more than get by on an annual income of $54,000, especially if you’re single. Also, Costco warehouse positions may not require the same amount of schooling as a corporate job paying more. It’s common for corporate positions to want a college degree or some sort of college. If you skipped that step, you may find that you’re able to earn more at Costco than at a competing retailer, or a comparable job that doesn’t require a degree.Costco employees get other nice benefits as wellNot only is Costco’s hourly wage fairly generous, but in addition, Costco employees are eligible for what Galanti described as a “very rich healthcare plan.” Plus, Costco employees are entitled to a 401(k) plan contribution on the company’s part. And that free money for retirement is available “irrespective of what an employee contributes to his or her 401(k),” Galanti said.It’s also worth noting that Costco contributes anywhere from 3% to 9% of employee wages to a 401(k) based on years of service. And while a 3% match is fairly standard, a 9% match is notably generous. Should you apply to work at Costco?If you’re earning a lot less than $26 an hour and aren’t happy with your workplace benefits package (if it even exists), then it could pay to look into applying at Costco. Even if you’ve been working in a corporate environment, if you’re feeling burned out at this point, taking a few months to work at a place like Costco could provide the refresh you need to pursue a different long-term job down the line. Of course, if you are offered a job at Costco, you’ll want to pay attention to the fine print. Just because the average hourly wage is around $26 doesn’t mean that’s what you’ll be getting, especially if you don’t have much experience.And it’s a good idea to compare wages and benefits across retailers you want to work for to see which pays the most and offers the best perks. But if the idea of working at Costco appeals to you, then it’s certainly worth looking into.