How Much to Save for Your Financial Goals

**Robert Brokamp** (0:03)
How to calculate the amount you need to save for your financial goals and how much taxes are taking from your investments. That and more on this Saturday Personal Finance Edition of the Motley Fool Hidden Gems Investing Podcast.
I'm Robert Brokamp. This week, I'm joined by my foolish colleague, Stephanie Marini, as we suggest ways to prioritize and quantify your goals and highlight some tools that will help crunch the numbers for you. But first, some headlines from the past week or so starting with an article from the Wall Street Journal's Jason Zweig, who wrote about a recent study from Andrew Ang, a former managing director at BlackRock. According to Ang, if you owned a total US stock market index fund for the 30 years ending in 2025, you earned 9.9 percent a year before taxes. Not bad. But if you own that fund in a taxable brokerage account, you earn just 8.25 percent annually after taxes, mostly due to owing taxes on the dividends and the funds capital gains distributions. Now, that may not sound like a big difference, but if you invested $100,000 and earned 9.9 percent annually for 30 years, you'd have almost $1.7 million.
But if you instead earned 8.25 percent, you'd have less than $1.1 million. In other words, you lost more than a third of your total return to taxes. This is from a total market index fund. It would have been worse if it were in a high turnover actively managed fund or an index fund that invested in an asset class that had a higher yield, such as a fund that invests in value stocks or real estate investment trusts. Even if you don't invest in funds, your after-tax returns could be significantly curtailed by active trading and or holding higher yielding investments in your taxable brokerage account.
The takeaway here is to give some thought to asset location, which is the science and art of deciding which investment should go in which accounts. Keep your most tax-inefficient investments in your IRAs and 401ks and use your brokerage account for investments that pay little to no dividends and that you plan to hold on to for many years, perhaps even decades.
For our next item from the news, we turn once again to the Wall Street Journal for an article with the headline, The Home Insurance Coin Flip. Nearly half of claims result in zero payout. According to the journal's analysis, the five largest home insurers didn't pay out on more than 44 percent of claims last year, up from 36 percent a decade earlier. The article cited various reasons, including higher deductibles for specific risks such as hurricanes and hail, and tighter criteria on paying for expensive claims such as roof repair. More damage from disasters caused in part by climate change and more development in vulnerable areas are resulting in claims that are excluded from policies, particularly flood damage. Also to cope with the cost of rising homeowners insurance, consumers have been choosing policies with higher deductibles, and the assessed damage from the claims are often below those deductibles. Adding insult to injury, many homeowners who have a claim denied still see their premiums go up or their policies canceled because the insurer sees them as a greater risk. So what should you do? Well, first off, read your policy to understand what is and isn't covered, and make sure that you have enough coverage to protect your home and everything in it. Document the current condition of your home and the stuff you own with a video or pictures so you can prove to the insurance company that future damage or loss was due to a disaster and not just regular wear and tear.
Consider a high deductible policy and have a sufficient emergency fund to cover that is deductible if necessary and don't file a claim unless you're reasonably confident that you'll get a payout. If you do suffer a loss, document everything related to the claim with pictures, videos, assessments from professionals. Keep every communication you have with the insurance company and if your claim is denied, get a detailed report about the reasons. You can file an appeal and if that doesn't work, submit a complaint to your state's insurance regulator. You can also get professional help from a public adjuster or attorney, perhaps by visiting the website of the National Association of Public Insurance Adjusters. Just know that they will get a percentage of any payout you receive.
Now for the number of the week, which is 16.7 percent. That is the share of national income that comes from corporate profits, an all-time high, according to data from the US Bureau of Economic Analysis and highlighted in a recent episode of the Moody's Inside Economics podcast. This partially explains why the stock market just keeps going up, at least for now. Meanwhile, the share of national income that comes from labor is going down, which is likely one of the reasons that consumer sentiment keeps dropping while stocks keep rising. Of course, we don't own stocks just to see the numbers on our brokerage statements go up. We invest today in order to pay for a financial goal in the future, which is our next topic of conversation when the Motley Fool Hidden Gems Investing podcast continues.