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The Federal Reserve may announce another interest rate cut this week.
It’s a smart time for cash savers to check whether they’re getting the best available yields, experts say.

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With the Federal Reserve expected to cut interest rates again this week, it’s a great time to earn competitive returns on cash, experts say.
“The best offers on savings accounts, money markets and CDs [certificates of deposit] are still well above inflation, and that’s likely to persist well into 2025,” said Greg McBride, chief financial analyst at Bankrate.

The Fed may cut interest rates by one-quarter of a percentage point on Dec. 18 at the end of its two-day meeting, experts predict. If it does, that would mark the third time the central bank has lowered rates since September, for a total reduction of 1 percentage point.
“There’s an urgency to act now,” McBride said. “You won’t get better yields by waiting.”

Yields may be lower by January

Consumers who are tempted to hold out may miss an opportunity to lock in better returns on their cash.
“If you’ve got money to put to work, there’s a good chance yields are going to be lower next month than where they are today,” McBride said.
By putting that money to work now, you can lock in yields that compare very favorably to inflation, he said.

Treasury bonds and many CDs are offering yields above 4%, with the ability to lock in that return for multiple years at a time, McBride said.
That could be an opportunity for savers who don’t need immediate access to their cash or who are looking to generate interest income or diversify their broader portfolio, he said.
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Another investment — Series I bonds — offers a way to beat inflation, McBride said. I bonds currently pay a guaranteed 1.2% fixed rate above the rate of inflation.
Notably, I bonds have some limitations, including a cap on annual purchases. Moreover, you can’t cash them in in the first year, and you also have to give up three months’ interest if you cash in before the five-year mark, McBride said.
“You’ve got to be pretty sure about your ability to live without the cash in order to get the full bang for your buck,” McBride said.
Alternatively, savers may opt for another government investment that also offers inflation protection — Treasury Inflation Protected Securities. TIPS allow for higher annual investments compared with I bonds, as well as more liquidity, since they can be bought and sold on the secondary market. As of Dec. 16, a five-year TIP yields 1.88% above inflation.

When to prioritize cash liquidity

Whether it makes sense to lock in returns on your cash now largely depends on the outlook for 2025.
With less expectation for additional interest rate cuts in 2025, there may not be as much reason to lock in returns on cash now, said Ken Tumin, founder of DepositAccounts.com.

Moreover, high-yield online savings account rates are generally higher than what CDs now offer, he said. Some online banks are offering over 5% annual percentage yields even on small balances, while the best one-year CD provides 4.65% with a $50,000 deposit.
“One strategy now is just maintaining liquidity in one of the top online savings accounts and not necessarily locking it in,” Tumin said.
Alternatively, savers may hedge their bets, he said, and put half their cash deposits in a high-yield savings account and the other half in longer-term CDs. More

The 4% withdrawal rule is a popular retirement strategy that helps investors withdraw money safely from their accounts, with low odds of running out of money later.
Lower expectations for long-term stock, bond and cash returns means new retirees may need to proceed a bit more cautiously, according to Morningstar.
There are ways retirees can be more flexible with their spending, experts said.

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A popular retirement strategy known as the 4% rule may need some recalibration for 2025 based on market conditions, according to new research.
The 4% rule helps retirees determine how much money they can withdraw annually from their accounts and be relatively confident they won’t run out of money over a 30-year retirement period.

According to the strategy, retirees tap 4% of their nest egg the first year. For future withdrawals, they adjust the previous year’s dollar figure upward for inflation.
But that “safe” withdrawal rate declined to 3.7% in 2025, from 4% in 2024, due to long-term assumptions in the financial markets, according to Morningstar research.
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Specifically, expectations for stock, bond and cash returns over the next 30 years declined relative to last year, according to Morningstar analysts. This means a portfolio split 50-50 between stocks and bonds would have less growth.
While history shows the 4% rule is a “reasonable starting point,” retirees can generally deviate from the retirement strategy if they’re willing to be flexible with annual spending, said Christine Benz, director of personal finance and retirement planning at Morningstar and a co-author of the new study.

That may mean reducing spending in down markets, for example, she said.
“We caution, the assumptions that underpin [the 4% rule] are incredibly conservative,” Benz said. “The last thing we want to do is scare people or encourage people to underspend.”

How the 4% rule works

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In many ways, drawing down one’s nest egg is harder than growing it.
Pulling out too much money early in one’s retirement years — especially in down markets — generally raises the odds that a saver will run out of money in later years.
There’s also the opposite risk, of being too conservative and living well below one’s means.
The 4% rule aims to guide retirees to relative safety.
Here’s an example of how it works: An investor would withdraw $40,000 from a $1 million portfolio in the first year of retirement. If the cost of living rises 2% that year, the next year’s withdrawal would rise to $40,800. And so on.

Historically — over a period from 1926 to 1993 — the formula has yielded a 90% probability of having money remaining after a three-decade-long retirement, according to Morningstar.
Using the 3.7% rule, the first-year withdrawal on that hypothetical $1 million portfolio falls to $37,000.
That said, there are some downsides to the framework of the 4% rule, according to a 2024 Charles Schwab article by Chris Kawashima, director of financial planning, and Rob Williams, managing director of financial planning, retirement income and wealth management.
For example, it doesn’t include taxes or investment fees, and applies to a “very specific” investment portfolio — a 50-50 stock-bond mix that doesn’t change over time, they wrote.

It’s also “rigid,” Kawashima and Williams said.
The rule “assumes you never have years where you spend more, or less, than the inflation increase,” they wrote. “This isn’t how most people spend in retirement. Expenses may change from one year to the next, and the amount you spend may change throughout retirement.”

How retirees can tweak the 4% rule

There are some tweaks and adjustments retirees can make to the 4% rule, Benz said.
For example, retirees generally spend less in the later years of retirement, in inflation-adjusted terms, Benz said. If retirees can enter retirement and be OK with spending less later, it means they can safely spend more in their earlier retirement years, Benz said.
This tradeoff would yield a 4.8% first-year safe withdrawal rate in 2025 — much higher than the aforementioned 3.7% rate, according to Morningstar.
Meanwhile, long-term care is a big “wild card” that could increase retirees’ spending in later years, Benz said. For example, the typical American paid about $6,300 a month for a home health aide and $8,700 a month for a semi-private room in a nursing home in 2023, according to Genworth’s latest cost of care study.

Additionally, investors may be able to give themselves a bit of a raise when markets are up significantly in a given year and reduce withdrawals when markets are down, Benz said.
If possible, delaying Social Security claiming to age 70 — thereby increasing monthly payments for life — may be a way for many retirees to boost their financial security, she said. The federal government adds 8% to your benefit payments for each full year you delay claiming Social Security benefits beyond full retirement age, until age 70.
However, this calculus depends on where households get their cash in order to defer the Social Security claiming age. Continuing to live off job income is better, for example, than leaning heavily on an investment portfolio to finance living costs until age 70, Benz said. More

The Biden administration is still taking steps to deliver sweeping student loan forgiveness to millions of Americans.
The final rule for the so-called “Plan B” for student loan cancellation has been submitted to the Office of Management and Budget for review.
“OMB review is the last step,” said higher education expert Mark Kantrowitz, before the policy is published in the Federal Register.

US President Joe Biden speaks during an event in Madison, Wisconsin, US, on Monday, April 8, 2024. 
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With weeks to go before President-elect Donald Trump takes office, the Biden administration is still taking steps to deliver sweeping student loan forgiveness to millions of Americans.
The U.S. Department of Education has submitted its so-called “Plan B” for student loan cancellation to the Office of Management and Budget for review.

“OMB review is the last step” before the policy is published in the Federal Register, said higher education expert Mark Kantrowitz.
Once the rule is published, the Education Department could begin reducing or eliminating people’s loans, Kantrowitz said.
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President Joe Biden began working on his revised student loan relief plan after the Supreme Court blocked its first program in June 2023. The updated policy targets several groups of borrowers for relief, including those who have been in repayment for decades or attended schools that defrauded them.
“The Biden administration continues to seek student debt relief even in the waning days of his tenure as president,” Kantrowitz said.

The Education Department may also try, in the last month under Biden, to clear the loans of those experiencing financial hardship through a second rule also under OMB review, experts say.
That loan cancellation could reach borrowers “with persistent financial burdens that prevent them from repaying their student loans” and for whom the department’s existing aid options don’t fully help, an Education Department spokesperson said earlier this year.
Biden has already forgiven more student debt than any other president, affecting nearly 5 million people. But Republican-led legal challenges have stymied all of Biden’s attempts at delivering wide-scale relief.
His last efforts could face the same fate. Consumer advocates expect new lawsuits to seek an immediate injunction against Biden’s latest forgiveness plans as soon as they are published in the Federal Register.
A spokesperson for the U.S. Department of Education declined to comment.

Even so, consumer advocates and lawmakers are urging Biden to do everything he can to deliver relief to student loan borrowers before the Trump administration takes over.
Trump and Vice President-elect JD Vance are vocal critics of student loan forgiveness.
Meanwhile, just 15% of Republicans find student loan forgiveness important, compared with 58% of Democrats, according to a national poll from mid-May by the University of Chicago Harris School of Public Policy and The Associated Press-NORC Center for Public Affairs Research.
“Time is running out, and what Biden doesn’t do in the next four weeks will mean tens of millions of working people suffer for four years,” said Braxton Brewington, spokesperson for the Debt Collective, a union of debtors.
On Dec. 4, dozens of lawmakers, including Sen. Bernie Sanders, I-Vt., and Ed Markey, D-Mass., wrote a letter to Education Secretary Miguel Cardona, urging the Department of Education to forgive the debt of borrowers who have applied for relief after being defrauded by their colleges.
Among their requests, the lawmakers asked the Education Department to process the pending borrower defense applications of an estimated 400,000 borrowers. Borrowers can be eligible for that discharge if their schools suddenly closed or they were cheated by their colleges.
“Under the previous Trump Administration, borrowers’ applications were allowed to languish for years,” the lawmakers detailed in their letter. “If their application was reviewed, borrowers often were denied and granted no relief.” More

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Nvidia shares slumped on Monday, putting the AI chip darling officially in correction territory even as the rest of the Nasdaq Composite rose to a record.
The chipmaker and de facto artificial intelligence trade has rallied 166% this year amid ongoing excitement for the buzzy technology trend. However, shares have faced a sluggish stretch as of late.

The stock is down 4.5% in December and officially in correction territory, sitting about 11% off its closing high of $148.88 reached last month. The definition of what comprises a market correction can vary. Many generally regard it as a drop of 10% or more from an all-time high close.
The stock closed down 1.7%.
“You need Nvidia, and you need their chips for infrastructure,” said Keith Lerner, co-chief investment officer at Truist. “But I think what the market’s also saying is that there are other beneficiaries beyond that. There’s a rotation within the Magnificent Seven, which we’ve seen a couple times this year already.”

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Nvidia shares on Monday

The recent underperformance in Nvidia could signal some profit-taking on Wall Street after another marquee year. The maker of graphics processing units underpinning large language models has benefited, as data center demand has swollen since ChatGPT’s late-2022 launch.
But there are some reasons for concern for the market leader and fundamental player among the three major averages. The market has continued powering to new highs as Nvidia underperforms. That could be a warning signal if the pattern continues, with Roth MKM noting that the $125 to $130 level marks a key test for the stock and the overall market.

As Nvidia struggles, other chipmaking stocks have fared well, with Broadcom powering to new highs Monday. The stock surged around 11% during Monday’s session, building on a 24% rally from Friday that pushed the stock above a $1 trillion market capitalization following a strong earnings report.
The Nasdaq Composite hit a record in trading Monday without Nvidia’s help.
“Broadcom’s comments last week probably drove momentum investors to start looking there for even faster growth,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. “Momentum has been driving this stock. I don’t think momentum is going to kill it quite yet, but momentum does what momentum does, which is it seeks the higher flyer.”
Other semiconductor stocks also rallied Monday, with Micron Technology jumping about 6% ahead of its quarterly results this week. Marvell Technology and Lam Research gained 3% and 2%, respectively, while On Semiconductor and Taiwan Semiconductor added around 1% each. More

There is still time to slash your tax bill or boost your refund for 2024, according to financial advisors.
It may be difficult to find assets for tax-loss harvesting or to boost pretax 401(k) employee deferrals.
But you can contribute to your health savings account, make pretax individual retirement account contributions or donate profitable assets to charity.

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As year-end approaches, there’s still time to slash your 2024 tax bill or boost your refund, financial advisors say.  
Typically, you can expect a tax refund when you overpay taxes throughout the year. Alternatively, you get a tax bill when you haven’t paid enough.

Most 2024 tax strategies must be completed by Dec. 31, so there’s limited time to make last-minute moves. 
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After a strong year for the stock market, many investors won’t have tax-loss harvesting opportunities, which can turn portfolio losses into tax breaks.
It could also be too late to boost pretax 401(k) employee deferrals for 2024, which reduces your adjusted gross income.
But there are some key strategies still available, according to financial advisors.

Leverage tax-free ‘compound interest’

If you have a high-deductible health plan, you can funnel money into a health savings account, or HSA, which offers an upfront tax deduction, among other benefits, experts say. 
For 2024, the HSA contribution limit is $4,150 for self-only coverage or $8,300 for family plans. The invested balance grows free of federal taxes and you can withdraw the money tax-free for qualified medical expenses.

You have until the tax deadline to make 2024 HSA deposits, but if you’re investing the balance, starting sooner gives you more time in the market. “You don’t have to wait,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.     
“Get it invested and let the compound interest work for you,” he said.
You also have until the tax deadline for 2024 pretax individual retirement account contributions. But the deduction depends on your filing status, income and workplace retirement plan, so it’s better to wait until you’ve run tax projections for 2024, Lucas said.

Donate profitable assets for a ‘double tax advantage’

When filing your taxes, you take the standard deduction or total itemized deductions, whichever is larger. If you expect to itemize for 2024, you can score a tax break for donations to charity.
Gifting profitable assets offers a “double tax advantage,” because you get a tax break and bypass capital gains taxes, said certified financial planner Rick Nott, managing director at Angeles Wealth Management in Santa Monica, California.
There’s growing interest in the strategy among cryptocurrency investors, with record gains for digital assets such as bitcoin over the past year.
Typically, you can deduct the market value of the investment, as long as you’ve owned it for more than one year. You can claim a deduction capped at 30% of adjusted gross income for public charities. More

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Drone stocks rallied Monday as retail interest ramped up in the sector following a Palantir partnership with Red Cat Holdings and amid a flurry of mysterious sightings in New Jersey and other Northeast states that Wall Street believes could boost funding for the industry.
Red Cat shares rallied 27% on news that it’s working with Palantir to integrate visual navigation software into its drones. The ticker RCAT has been the sixth-most-popular mention on Reddit’s famed WallStreetBets page over the last 24 hours, behind only crypto play MicroStrategy, Nvidia, Tesla, Palantir and SPY (SPDR S&P 500 ETF Trust), according to data tracking firm Quiver Quantitative. RCAT’s popularity on WSB has surged more than 1,625% in the past 24 hours, the firm said.

Donald Trump Jr.-affiliated Unusual Machines was another big winner Monday, surging about 16%. Kratos Defense and Security Solutions added about 5%. Aerovironment gained 8%.
The partnership news comes as recent sightings across the Northeast have reignited interest in the sector, while also fueling national security concerns. FBI officials on Thursday said there was “no evidence” that the drones jeopardize “national security and public safety.” Officials also said Saturday that many of the sightings are “manned aircraft being misidentified as drones.”
Many on Wall Street view the incoming White House administration as a potential boon that could boost funding for the sector and U.S.-made drones. Tesla CEO Elon Musk has spoken favorably of drone technology and is poised to play an influential role in President-elect Donald Trump’s White House.
“On the drone protection side, federal government counter-drone technologies are increasingly being used by local and state law enforcement to protect stadiums, airports, prisons, and other public settings,” said William Blair analyst Louie DiPalma in a note to clients. “This will likely result in a surge in counter-drone investments by local and state government agencies over the next decade.”
Investors have also come to view ties to the sector through Trump Jr.’s connection to Unusual Machines as another potential tailwind for the industry. The eldest son of the president-elect joined the advisory board of the company in November.

Congress has also taken interest in the sector. The National Defense Bill, recently passed in the House, is also drawing interest. If the bill is passed by the Senate and signed into law, China-based DJI would be barred from selling new drones to the U.S.
— CNBC’s Yun Li contributed reporting. More

Overall, households are feeling more optimistic about their financial future.
Some are already making strides to better their standing: 47% have paid off their debts, 39% established an emergency fund and 32% started saving for retirement, a recent report found.

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As the Federal Reserve prepares to lower interest rates once again at the end of its two-day meeting this week, Americans’ assessments of the future are improving.
Although a prolonged period of high inflation took a toll on household budgets, consumers are feeling increasingly optimistic about their financial situation, according to a new report by the New York Federal Reserve.

The share of households expecting their financial situation to be better a year from now jumped to 37.6% in November, the highest since February 2020, just before the Covid-19 pandemic’s effects hit. 
The Conference Board’s consumer confidence index also rose in November, to the highest level since July 2023.
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In recent months, other studies show Americans have been making progress toward key financial goals, from building up savings to paying down debt.
Nearly half of Americans, or 47%, have paid off debt, while 39% established an emergency fund and 32% have saved for retirement, according to a separate survey by Empower, which polled more than 1,000 adults in September.

Roughly 60% of Americans feel confident about reaching their financial goals, Empower also found.

Optimism is high

“Optimism has certainly increased in recent weeks,” said Greg McBride, chief financial analyst at Bankrate.com.
Nearly half, or 44%, of Americans believe their personal financial situation will get better in 2025, including 14% who said it will get significantly better, according to another Bankrate poll of nearly 2,500 adults in November.
Overall, most people have jobs and are taking home more pay. Average hourly earnings are up 1.3% from a year ago, according to the Bureau of Labor Statistics, and the unemployment rate remains low at 4.2%.  
“That’s where the ability to pay down debt comes from,” McBride said.

The ‘vibecession’ is over

“The economy as a whole has fared far better in 2024 than the consensus expected, and we have seen inflation come down and consumer spending remain strong — not withstanding a bit of a ‘vibecession’ in the beginning of the year,” said Brett House, economics professor at Columbia Business School.
The so-called vibecession was often used to describe a disconnect between how well the economy was doing and how badly people felt about their financial standing. That appears no longer the case, according to House.
Despite earlier expectations of a recession, the U.S. has dodged a downturn, House said.
Meanwhile, “the stock market has charged ahead, people are feeling positive wealth effects and interest rates are coming down,” he said.

Perhaps most importantly, inflation has cooled considerably since hitting a 40-year high in mid-2022. 
“People look most closely at the one economic data point they see every day and that is prices at the grocery store,” House said.
Food costs still rose 0.4% in November and 2.4% year over year, but within that group, cereals and bakery products fell 1.1% in November, the single-biggest monthly decline in the consumer price index’s history going back to 1989, according to the BLS.
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If you have a flexible spending account, you may be subject to a Dec. 31 deadline to use those funds.
Here’s what to know about using your 2024 balance and how to get an earlier start in 2025.

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If you have a flexible spending account, you could be facing a use-it-or-lose-it deadline to spend down those funds before the end of the year.
Flexible spending accounts, or FSAs, allow workers to set aside pre-tax money to pay for qualified medical or dependent care expenses.

They are not to be confused with health savings accounts, or HSAs, which are paired with high-deductible health plans and don’t come with spending reimbursement deadlines.
About 70% of FSA account holders have a Dec. 31 deadline to spend their funds, according to FSA Store, an online retailer for FSA-eligible products.
For FSA balance holders who still haven’t fully used their funds for 2024, it’s a great time to check with your plan or human resources department to see whether the Dec. 31 deadline applies to you, said Rachel Rouleau, chief compliance officer at FSA Store.
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For some FSAs, a grace period may provide up to two and a half months after the end of the plan year — or until March 15, 2025 — to spend down the funds, Rouleau said. Other plans may instead allow for a carryover of up to $640 from their FSA balance from this year into 2025.

However, it’s important to note that for many other FSA account holders, neither of those options apply, Rouleau said.
If that’s the case, “you really want to make sure you’re tracking to Dec. 31 and spending down your funds appropriately before that date,” Rouleau said.
In 2024, participating employees could put up to $3,200 in a health care FSA account.
Households with FSAs put an average of $2,250 into their accounts annually, according to Numerator, a provider of market research data. That includes $1,820 from personal contributions and $430 from employers.

How to make the most of your FSA funds

Most FSA holders use their accounts for dental and vision care, with 67%; as well as prescription medications, 65%; and medical services and procedures, 64%; according to Numerator.
Many plans offer run-out periods, where FSA account holders can submit for reimbursement up to three months after the end of the plan year, according to Rouleau. In that case, whether you submit for reimbursement now or later, the funds still must be spent by Dec. 31.
Many over-the-counter items, such as acne treatments, pain relievers like Tylenol or allergy medicines like Claritin are FSA eligible, Rouleau said.

However, not all health care items or services are necessarily eligible for FSA reimbursement.
Nicole DeRosa, a certified public accountant and director of tax at SKC & Co. CPAs in Boonton Township, New Jersey, said she refers her clients to IRS Publication 502 to check to see whether certain expenses qualify.
Medical expenses that qualify for FSA reimbursement generally also qualify for the medical and dental expenses deduction, according to the IRS.
“There’s a lot of expenses that people might not think are eligible that are eligible,” DeRosa said.
For example, for service dogs, their veterinary, food and grooming expenses are covered, she said. Notably, the same does not apply for emotional support animals.
Generally, weight loss programs and cosmetic procedures are not eligible expenses, unless a doctor prescribes them to help treat a medical condition, DeRosa said.

Don’t wait to spend 2025 FSA funds

As the calendar turns to the new year, you don’t have to wait to spend your new FSA balance for 2025.
“You don’t have to wait for each paycheck or to accrue a balance,” DeRosa said. “You can be proactive, and you can start spending it all right away.” More