Markus Andrews

The Biden administration has been working on a new student loan aid package that could come as soon as this year.
While Biden first attempted to cancel student debt through an executive order, he has now turned to the rulemaking process.
Here’s who may qualify.

President Joe Biden speaks about his economic plan at the Flex LTD manufacturing plant in West Columbia, South Carolina, on July 6, 2023.
Sean Rayford | Getty Images

Since the Biden administration’s first student loan forgiveness plan was rejected at the Supreme Court, it has been working on creating a new, legally viable relief package.
That debt cancellation could come as soon as this year. The alternative plan, which has become known as Biden’s “Plan B,” could forgive the student debt for as many as 10 million people, according to one estimate.

While Biden first attempted to cancel student debt through an executive order, he has now turned to the rulemaking process.
The U.S. Department of Education and the negotiators tasked with determining who will be eligible for the president’s revised aid have identified five groups of borrowers.

1. Those who owe more than they borrowed

Borrowers with outstanding federal student loan balances that exceed what they originally borrowed may be among those who qualify for the cancellation.
A person’s student debt can balloon for a number of reasons, said Nadine Chabrier, a senior policy and litigation counsel at the Center for Responsible Lending.
“Unfortunately, it is very common,” Chabrier said.

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Student loan servicers, the companies the Education Department contract with to service its debt, have a record of steering consumers into forbearances and deferments, she said. These options for struggling borrowers can keep loans on hold for many years, but interest often continues to accrue. 
Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, denied that the companies benefit by veering from the government’s orders.
“We are incentivized to meet the requirements that the government sets, which includes giving borrowers the benefits that the law provides,” Buchanan said. “We are audited, and get business or lose it based on meeting those standards.”
Advocates have also said the interest rates on federal student loans are too high, especially for borrowers from the 1980s, who have rates exceeding 8%. Current fixed rates today can be nearly as high.

2. Borrowers in repayment for 20 years or more

Those who have been carrying their student debt for decades may also benefit.
With many of the Education Department’s repayment plans requiring 20 years or more of payments, such stories are common. Millions of Americans older than 60 are still paying off their student loans, research finds.
“There is both financial harm and psychological harm of being in debt for decades, especially when it feels like there is no hope that it will ever be repaid,” said Persis Yu, deputy executive director at the Student Borrower Protection Center.

3. Attendees of schools of questionable quality

In its revised relief package, the Biden administration notes it is looking to include student loan borrowers who attended career-training programs “that created unreasonable debt loads or provided insufficient earnings for graduates,” as well as borrowers who attended institutions with high student loan default rates.

4. People eligible for forgiveness who haven’t applied

The Education Department already has several programs that lead to student loan forgiveness, and as part of its new aid package, it is looking to identify those who may be eligible but just haven’t applied.
For example, the Public Service Loan Forgiveness program, signed into law by then-President George W. Bush in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 10 years of on-time payments. In 2013, the Consumer Financial Protection Bureau estimated that one-quarter of American workers may be eligible.
However, the technical and often confusing requirements of the plan have acted as a barrier, experts say.

Student loan servicers also earn a fee per borrower per month, which advocates say discourages transparency around loan forgiveness opportunities.
“Instead of providing borrowers with access to the affordable pathway out of debt, decades of mismanagement and abuse have left these borrowers trapped in debt like hamsters on a hamster wheel with no way out,” Yu said.

5. Borrowers experiencing financial hardship

The Biden administration has also said it wants to forgive the debt of those experiencing financial hardship.
So far, it has proposed a set of factors that could identify struggling borrowers, such as those with student loan balances and required payments that are unreasonable relative to their household income, and people with high child care and health-care expenses.
It also said that financial hardship could be based on other debt obligations, disability or age, among other factors.Don’t miss these stories from CNBC PRO: More

Homeowners and renters insurance don’t cover flood risk. That requires a separate flood insurance policy.
Most U.S. residents have flood insurance through FEMA’s federal National Flood Insurance Program.
NFIP policies generally exclude personal property and other items stashed in a basement. Private insurers may cover more items, but it depends on the company and policy.
Severe weather and flooding are expected to grow more frequent and costly due to climate change.

A Johnson, Vermont, resident removes items destroyed in flooding of a finished basement in 2023.
Jessica Rinaldi/The Boston Globe via Getty Images

American basements are a hodgepodge of personal property, leveraged as storage units, man caves, game rooms, wine cellars, home bars and secondary living rooms.
The problem is: If your basement floods, your flood insurance policy likely won’t cover damages to most — if any — of your belongings.

It may be a consequential exception for policyholders as storms (and resulting flood damage) are expected to grow more intense due to climate change, experts said.
“You can put anything you want in your basement, but don’t expect it to be insured for floods,” said Peter Kochenburger, an insurance expert and visiting law professor at Southern University Law Center.

What is flood insurance?

Flooding is the “most common and costly natural disaster in the United States,” according to the Insurance Information Institute.
To that point, 99% of U.S. counties have experienced a flood since 1998 — and more than 40% of flood insurance claims are from outside high-risk flood areas, according to FEMA.
Flooding causes 90% of annual disaster damage in the U.S., according to the Federal Emergency Management Agency. Just an inch of water can cause roughly $25,000 of damage to a property, the agency said.

But homeowners and renters insurance policies don’t cover flood damage.
Consumers need separate insurance to cover physical damage caused by a flood, defined as water entering a home from the ground up. That may occur due to storm surge, heavy rainfall or an overflowed body of water like a lake or river.
(Homeowners insurance may cover water damage in some instances — burst pipes, sump pump backup, even water entering from the ceiling due to a collapsed roof — though insurers may require consumers buy additional coverage beyond a policy’s basic terms, experts said.)
Most people who have flood insurance get it through the federal government, via FEMA’s National Flood Insurance Program, experts said.

Americans had about 4.4 million residential NFIP policies at the end of 2023, according to FEMA. They had total coverage of $1.2 trillion.
Many homeowners go without coverage. On average, only 30% of U.S. homes in the highest-risk areas for flooding have flood insurance, according to the University of Pennsylvania’s Wharton Risk Center.
NFIP policies offer up to $250,000 of residential coverage for building structure (like the foundation and electrical system) and a maximum $100,000 for personal property (like clothing, furniture and electronic equipment).
Nearly 21,000 policyholders filed a claim in 2023, with an average payment of almost $46,000, according to FEMA data.
The average annual flood insurance premium was $700 in 2019, it said.
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Private insurers also offer flood policies, and may offer higher coverage than FEMA’s policies, according to the Insurance Information Institute.
There were 58 private companies writing flood insurance in 2020, the group said. The five largest by premiums in 2022 were American International Group, Zurich Insurance Group, Assurant, AXA and Berkshire Hathaway, respectively, it said.

What items aren’t covered in a basement?

A flood sign during a storm in Whittier, California, on Feb. 6, 2024.
Eric Thayer/Bloomberg via Getty Images

Basement coverage “is limited” through NFIP policies, FEMA said.
The agency defines a “basement” as any area of a building with a floor below ground level on all sides. Even rooms that aren’t fully below ground level — like sunken living rooms, crawlspaces and lower levels of split-level buildings — may still be considered basements, the agency said.
Its flood policies exclude the following items from coverage in a basement:

“Personal property” like couches, computers, or televisions
Basement improvements (such as finished flooring, finished walls, bathroom fixtures, and other built-ins)
Generators (and similar items)
Certain dehumidifiers

Items “stored in a basement, meaning they are not connected to a power source,” aren’t covered, FEMA said.
Consumers concerned about flood risk and insurance coverage should consider not putting their stuff in a basement, if possible, Kochenburger said. They should “move it to a storage unit or somewhere else” on higher ground, he said.

These basement items are included with an add-on

The following basement items are covered, but only if NFIP policyholders buy additional “contents coverage,” which is optional, and if connected to a power source, FEMA said:

Clothes washers and dryers
Air conditioners (portable or window units)
Food freezers and the food in them (excluding walk-in freezers)

Private insurance policies may offer broader property coverage in basements, depending on the insurer, said Don Griffin, vice president of policy and research at the American Property Casualty Insurance Association.

That may be via an add-on to a homeowners insurance policy, as with water backup from drains, for example, he said.
One silver lining to all this: Fewer U.S. homes are being built with basements. The share of new single-family homes with full or partial basements has fallen by more than half since the mid-1970s, from 45% to 21%, according to U.S. Census Bureau data as of 2022.
On Feb. 6, FEMA announced a proposal to update its NFIP program and potentially enhance basement coverage for policyholders.
“Policyholders with basements continue to be surprised that under the current Dwelling Form, the policy provides limited coverage in a basement,” FEMA wrote.
However, it’d likely take more than a year for consumers to see these changes enacted, Griffin said.

What items are included in a basement?

“Flood insurance’s primary focus is structure: the building itself,” Kochenburger said.
Here are examples of how NFIP policies cover building and structure in basements, FEMA said:

Central air conditioners
Fuel tanks and the fuel in them
Furnaces and water heaters
Sump pumps, heat pumps, and well water tanks and pumps
Electrical outlets and switches
Elevators and dumbwaiters
Certain drywall
Electrical junction and circuit breaker boxes
Stairways and staircases attached to the building
Foundation elements and anchorage systems required to support a building

Policyholders can also get compensation for cleanup costs such as pumping out trapped floodwater, treatment for mold and mildew and structural drying of the interior foundation, FEMA said.

You can put anything you want in your basement, but don’t expect it to be insured for floods.

Peter Kochenburger
visiting law professor at Southern University Law Center

As a precaution, the agency recommends documenting the manufacturer, model, serial number and capacity of equipment in your basement like furnaces, central AC units and appliances like freezers, washers and dryers. Should you experience flooding, the NFIP requires this information during the claims process, FEMA said.
Policyholders should review their flood insurance policy for a comprehensive list of covered items and expenses, according to FEMA.

‘Where it rains it can flood’

Flood risk is only expected to worsen due to global warming.
Extreme weather events like heavy rainfall, hurricanes and floods — which are “increasing in frequency and/or severity” — conservatively cost the U.S. close to $150 billion each year, according to the Fifth National Climate Assessment.
That sum is expected to rise in the near term, according to the 2023 report, which the federal government issues every four to five years.

The U.S. experienced 96 billion-dollar weather disasters in the two decades from 1983 to 2002, costing a total $546.3 billion in damages, according to The Pew Charitable Trusts. In the ensuing two decades — from 2003 to 2022 — those sums ballooned to 244 disasters and $1.95 trillion in costs, Pew found.
Annual losses from flooding are expected to grow by 61% by 2050, according to the Fifth National Climate Assessment.
Yet, there’s a shortfall in the number of properties insured for floods relative to those at risk, Griffin said.
About 14.6 million U.S. properties are at “substantial risk” of flooding, of which 5.9 million (and their owners) are underestimating their risk because they’re not within a designated FEMA Special Flood Hazard Area, according to a 2020 report by the First Street Foundation.
“Where it rains it can flood,” Griffin said. “That’s pretty much everywhere.” More

Smart Tax Planning

The IRS will continue to crack down on top earners who haven’t paid taxes owed — and certain returns may see increased scrutiny, experts say.
“We are working to reverse the historically low audit rates for large corporations, complex partnerships and high-wealth individuals,” IRS Commissioner Danny Werfel said last week.
The tax gap, or the difference between taxes owed and paid, was an estimated $688 billion for tax year 2021, the IRS reported in October.

IRS Commissioner Daniel Werfel testifies before the Senate Finance Committee on April 19, 2023.
Chip Somodevilla | Getty Images

The IRS will continue to crack down on top earners who haven’t paid taxes owed — and certain returns may see increased scrutiny, experts say.
“We are working to reverse the historically low audit rates for large corporations, complex partnerships and high-wealth individuals,” IRS Commissioner Danny Werfel said during a House Ways and Means Committee hearing last week.

The audit rate for taxpayers earning $1 million or more was 0.7% in 2019, compared to 7.2% in 2011, according to the IRS.

More from Smart Tax Planning:

Here’s a look at more tax-planning news.

Bolstered by billions in Inflation Reduction Act funding, the agency in January announced it had already collected more than $482 million from 1,600 millionaires who were delinquent on taxes.
“We’ve already collected half a billion dollars and that’s just scratching the surface,” Werfel told legislators last week, noting that the agency aimed to close the “inequity gap.”
The tax gap, or the difference between taxes owed and paid, was an estimated $688 billion for tax year 2021, the IRS reported in October.
Here are some of the areas the agency could scrutinize more heavily, according to tax experts.

‘Significant emphasis’ on partnerships

“You’re going to see a significant emphasis on partnerships,” said Eric Hylton, national director of compliance for Alliantgroup.
Known as a “pass-through entity,” partnerships don’t pay corporate income taxes. Instead, profits flow through to the business owners’ tax returns.
The IRS is focused on “tiered partnerships,” or partnerships that own another one, which can provide an “opaque way” of hiding income, said Hylton, who is a former IRS commissioner for the agency’s small business and self-employed division.

They’re looking to use data analytics and artificial intelligence in ways they have not previously.

Colin Walsh
Principal and practice leader at Baker Tilly

As of December, there were open examinations of 76 of the largest partnerships in the U.S., with average assets of more than $10 billion, according to the IRS. These companies included hedge funds, real estate investments, publicly traded partnerships, large law firms and more.
“They’re looking to use data analytics and artificial intelligence in ways they have not previously,” said Colin Walsh, a principal and the practice leader of Baker Tilly’s tax advocacy and controversy team.

Other ‘red flags’ for higher earners

In addition to complex partnerships, the IRS is watching for other “red flags” from higher earners, according to Hylton.
For example, there could be heightened scrutiny of residency in Puerto Rico, international tax evasion and cryptocurrency, he said.
Another area of for increased audits could be estate and gift tax returns, particularly those using “aggressive valuation discounts” for assets, Hylton said.

“I think we’ll see a heightened audit of traditional issues,” Walsh said, such as individuals reporting business income on Schedule C or so-called “passive losses” used to offset certain types of business income.
In the meantime, his team is watching closely to see where the data leads future IRS exams.Don’t miss these stories from CNBC PRO: More

By some measures, Black women are outpacing Black men when it comes to homebuying.
Yet, it does not necessarily mean that homebuying is easier for this group, experts say. 
Here are some of the reasons women of color face challenges toward homeownership.

Kali9 | E+ | Getty Images

Black women are outpacing Black men when it comes homebuying.
Single female homebuyers are most common among Black women, representing 27% of Black homebuyers, according to the 2023 Snapshot of Race and Home Buying in America report by the National Association of Realtors. To compare, single women represent 24% of Asian homebuyers, 17% of white buyers and 7% of Hispanic buyers.

Female buyers represented 32.4% of all Black homebuyers between October 2017 and September 2018, according to a 2022 data analysis by Realtor.com. The share jumped to 35.4% from October 2020 to September 2021.
The share of Black female homebuyers grew at an average annual rate of 7.3% from October 2018 to January 2020. Black male buyers only grew at an annual rate of 3.4% during the same period, Realtor.com found.
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But single Black women buyers still face plenty of challenges.
“There are instances where Black people are buying homes, Black women are buying homes. That doesn’t mean that it’s easy for them and that doesn’t mean that it’s not being made unnecessarily difficult by certain societal hurdles that stand in the way, that should not exist,” said Jacob Channel, a senior economist at LendingTree.

“I think it’s demonstrably true if you’re a Black woman in America, you’re probably going to have a harsh time buying a house in many circumstances,” he said.

3 hurdles that affect homeownership for Black women

1. Education debt: While Black women are becoming more educated, it also means they are more likely to have student loans. Compared to other female undergraduate borrowers, Black women carry the most undergraduate student loan debt, averaging $41,466.05 a year after graduation, according to Bankrate. 
Higher student loan debt can make it harder to save for a down payment and qualify for mortgages. Lenders consider student loan payments when figuring out how much you can afford.
2. Mortgage access: Lending standards in the early 2000s were more relaxed than they are today, said Channel. Single Black women were less likely to be homeowners in 2021 compared to 2007, according to a report by the National Women’s Law Center.
That said, those who got mortgages before the Great Recession often didn’t fare well: Banks were more likely to offer Black women high-cost mortgages and when the housing market crashed, women of color were overrepresented in foreclosures, the report found.
During the Great Recession, Black women were 256% more likely to have a subprime mortgage compared to white male borrowers of similar economic circumstances, said Sarah Hassmer, director of housing justice at the National Women’s Law Center. 

3. Low-wage jobs: Black women, as well as Latinas, are also disproportionately represented in low-wage jobs such as child care and hospitality work.
“These jobs are vastly undervalued but critical to our economy,” Hassmer said.
The median hourly wage of a child care worker in 2022 was $13.71 per hour, or $28,520 annually, according to the U.S. Bureau of Labor Statistics. 
“That makes it very hard to afford a down payment, which is one of the biggest obstacles to afford a home,” Hassmer said. More

With household finances still tight for many Americans, increasing your credit score may be one way to save money.
A new LendingTree study finds increasing your score may help you save $22,263 over the life of your credit and loans.

Jose Luis Pelaez Inc

With consumer prices still rising due to higher inflation, there is one way to save money that you may be overlooking: raising your credit score.
Increasing your score from fair (580 to 669) to very good (740 to 799) may help you save $22,263 over the life of your credit and loans, according to a new LendingTree study. Mortgages represent the biggest portion of that savings, with $16,677.

Overall, consumers stand to save an extra $92 per month, LendingTree estimates, based on four common debt types: auto loans, credit cards, mortgages and personal loans.
The total projected savings is down from a sum of $49,472 calculated by LendingTree in 2022, due to changes in the interest rate environment. Nevertheless, consumers with good credit scores still have an advantage.
“There is little in life that’s more expensive than crummy credit,” said Matt Schulz, chief credit analyst at LendingTree.
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Improving your credit score can save you tens of thousands of dollars over the course of your life through lower interest rates, lower fees and other terms associated with loans, according to Schulz.

“It’s a big deal, especially when you consider what else you could do with that extra money,” Schulz said.
A lot of people are relying on credit cards and loans for purchases, based on data from the last quarter of 2023, said Bruce McClary, senior vice president at the National Foundation for Credit Counseling.
“Many people right now are still struggling with the cost of living and keeping up,” McClary said.

The credit score you should shoot for

Prospective lenders use your credit score to gauge your financial behavior, particularly when it comes to how likely you are to pay a loan back on time.
Credit scores typically range from as low as 300 to as high as 850.
Generally, if you are over 700, you are doing OK, according to Schulz. But the higher above 700 you can get your score, the better off you are, he explained.
“If you can get up to 740, 750, you’re going to get most loans that you apply for,” Schulz said.

If your score is lower — around 670 or 680 — you will still have a lot of options, he said.
Keep in mind that your credit score may vary by provider, such as FICO or VantageScore. If you’re applying for a loan, it helps to ask the lender which score they will check, Schulz said.

How to best improve your score

Your credit score is based on a mathematical model that takes multiple factors into account.
That includes your current unpaid debts; bill payment history; the number and kinds of loans you have; how long you have had your accounts open; how much of your available credit you’re using; any new applications for credit you have made; and whether you have any debts in collection, foreclosure or in bankruptcy.
To improve your score, it first helps to look at your credit report to see what might be weighing it down. You can monitor your credit report weekly, for free, from the three major credit reporting agencies by visiting AnnualCreditReport.com.
“It’s a great resource in situations where you’re looking for ways to improve your credit score,” McClary said.
Inaccuracies on those reports can drag your score down and alert you to potential fraudulent activities in your name, Schulz said. If you spot those discrepancies, it helps to contact the credit bureau and lenders as soon as possible, he said.

One way to quickly boost your credit score is to ask your lenders to raise your credit limits, which can bring your credit utilization down, he said.
The best way to improve your utilization is to pay the balances down, if you can afford to, he said.
It also helps to consolidate your debts. To assess your options, consider reaching out to a nonprofit credit counseling agency for advice.
Automating your payments can also help ensure you do not miss a bill due date, which can lower your credit score.
While your credit score affects the rates of the loans you receive, it may also affect other aspects of your financial life, such as your car insurance rates, recent Bankrate research found.
If your credit score improves, you may have your auto insurance policy adjusted by reporting the change to your insurer, said Bankrate analyst Shannon Martin. More

The logo of Chipotle Mexican Grill is seen in Manhattan, New York.
Shannon Stapleton | Reuters

Inflation worries and concerns around the timing of the Federal Reserve’s rate cuts have shaken the market, but attractive stocks are available if you know where to look.
Wall Street analysts are ignoring the short-term noise to focus on picking stocks with strong fundamentals and long-term growth potential. 

Here are three stocks favored by the Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.
Chipotle Mexican Grill
We start with fast-casual restaurant chain Chipotle Mexican Grill (CMG). The company recently reported better-than-expected fourth-quarter results, as customer traffic at its restaurants maintained its momentum despite ongoing macro pressures.
In reaction to the upbeat results, Baird analyst David Tarantino reiterated a buy rating on CMG stock and boosted the price target to $2,850 from $2,650. The analyst noted the company’s robust transaction momentum in the fourth quarter, driven by factors like better unit-level execution, enhanced menu promotion and robust marketing efforts.
The analyst thinks that these factors can continue to drive healthy sales for CMG in 2024 and beyond, with management focusing on growing average unit volumes to more than $4 million in the long term, compared to $3 million in 2023.
Tarantino noted that CMG aims to ramp up its unit growth to about 10% annually by 2025. He thinks that this pace of unit growth, coupled with mid-single-digit comps, would help the company “sustain scarce top-line growth characteristics for many years to come.”

Tarantino ranks No. 321 among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 65% of the time, with each delivering an average return of 10.8%. (See CMG Financial Statements on TipRanks)
Meta Platforms
Next up is social media giant Meta Platforms (META). The company’s earnings per share more than tripled in the fourth quarter of 2023 and bolstered investor sentiment for the stock. Moreover, Meta announced its first-ever dividend, backed by its splendid performance and strong cash flows.
Impressed by Meta’s results, Monness analyst Brian White reaffirmed a buy rating on the stock and significantly raised the price target to $540 from $370. The analyst highlighted the company’s accelerated revenue growth, solid operating margin, dividend initiation and $50 billion stock repurchase plan.
While regulatory headwinds persist, White is bullish on Meta as he believes that the company is “well positioned to benefit from the digital ad trend, innovate with AI, and leverage a leaner cost structure.”
The analyst noted that the company is much more efficient now, with its leaner cost structure and efficiency measures expected to continue this year. That said, the company is committed to investing in innovative products and services, while enhancing its platform with generative artificial intelligence capabilities, White added.
The analyst cautioned that macroeconomic uncertainties and geopolitical tensions might impact ad spending in the upcoming quarters. Nonetheless, he thinks that Meta deserves to trade at a premium to the market and tech sector in the long term, given its impressive sales growth and operating margin.  
White holds the 28th position among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 68% of the time, with each delivering an average return of 21.5%. (See Meta Hedge Fund Trading Activity on TipRanks)
Costco Wholesale
Membership warehouse chain Costco Wholesale (COST) is this week’s third pick. Earlier this month, the company announced a 4.5% rise in its sales for the January retail month, ended Feb. 4. Total comparable sales growth came in at 2.7%, with e-commerce comps rising 21%.
Baird analyst Peter Benedict noted that the calendar-adjusted core comps of nearly 6.7% in January showed improvement when compared to December’s 5.1% growth, despite steep multi-year comparisons. He added that comps accelerated across all regions — U.S., Canada, and other international markets — and merchandise categories, thanks to a rise in transactions.
The analyst also highlighted the acceleration in e-commerce sales and the impressive traffic trends. Overall, Benedict thinks that Costco’s premium valuation is justified due to multiple strengths, including its sticky membership model and strong balance sheet.
He reiterated a buy rating on Costco stock and increased the price target to $775 from $700, saying, “Valuation is steep, but accelerating comp momentum, easing compares and a potential membership fee increase lend an upward bias to estimates in coming quarters.”
Benedict ranks No.71 among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 70% of the time, with each delivering an average return of 14.6%. (See COST Stock Analysis on TipRanks) More

One of my goals for this year is to be more intentional with my savings.
While I can’t predict the future, I can certainly prepare for it, even as I’m paying down student loan debt at my own pace.

Klaus Vedfelt | Digitalvision | Getty Images

‘The Roth IRA is an incredible savings vehicle’

Roth individual retirement accounts require investors to pay taxes on the contributions they make now, rather than when they take withdrawals in their retirement years. That trade-off means after-tax dollars grow tax-free for decades.
A Roth can be a powerful tool for younger investors, who are often starting out their careers with lower salaries, putting them in lower tax brackets. And in all likelihood, they are in lower tax brackets than they’ll be later in their careers.
“For younger professionals, the Roth IRA is an incredible savings vehicle, because given our earnings, it’s very likely that we’re not being taxed at the highest rate,” said Clifford Cornell, a certified financial planner and associate financial advisor at Bone Fide Wealth in New York.
Roth IRAs also tend to be great for younger savers because there are income limits on eligibility for single and married filers, he said.
Original contributions to a Roth IRA can be withdrawn at any time without penalties, serving as a great tool for long-term goals or short-term emergencies. However, there are penalties involved if you withdraw earnings from the account too early.
Here are three more key strategies I learned or was reminded of as I prepared to open a Roth IRA:
1. Investors can make prior year contributions before tax season ends: You have until the end of tax season, or April 15 this year, to save money in your Roth IRA that will count toward the prior tax year, experts say.
“If you’re between January [1] and April 15, you can technically make both a 2023 contribution and a 2024 contribution,” said CFP Tommy Lucas, an enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
2. While you can’t get a deduction, you may qualify for a credit: Unlike a traditional IRA, you can’t get a tax deduction from Roth contributions. Yet, there is a perk that gets overlooked a lot, said Lucas: Roth savings count toward the so-called Saver’s Credit, which is available to low- and moderate-income taxpayers.
“Depending on your income level, it can go as high as for every $2 you put in, you get $1 back,” he said. “To be able to put money tax free and essentially get some sort of matching contribution from the IRS is actually really nice.”
3. Remember to invest the money: This point was more of a self-reminder for me, especially after I saw my initial deposit linger in cash in my account for 24 hours. In order to make your money grow, it’s not enough to merely fund the account; you have to invest the money. (Not doing so is actually a common mistake.)
“The Roth IRA is kind of like a label on the account; it still must be invested,” Cornell said.
While there’s a plethora of investment products to choose from, ask yourself two important questions: “How hands-on do you want to be? What’s your risk tolerance?” Cornell said.
Younger investors are able to be more aggressive with their investments because these are savings they won’t, ideally, use for two or three decades, Lucas explained.
“Investing in a diversified way is what yields results over the long term,” he said.
Investors can either build their portfolios themselves or delegate the decision-making process to an account manager or robo-advisors. From there, you can decide how you want your post-tax dollars to grow over time.

What I learned about high-yield savings accounts

About 56% of adult Gen Zers, or ages 18 to 26, did not have enough savings aside to cover three months of expenses, according to Bank of America, which conducted the survey in August.
Reading these reports sometimes feels like I’m looking into a mirror, or even the renowned line from Taylor Swift’s song “Anti-Hero”: “It’s me, hi. I’m the problem, it’s me.”
To address the issue, I opted for a high-yield savings account. While you are typically limited to a certain amount of penalty-free withdrawals per month, these accounts can be an ideal nest for both emergency funds and sinking funds, or money saved for bigger goals such as homeownership.
Here are two things to know about opening an account like this:
1. Compound interest does not make money appear overnight: When it comes to compound interest, it will depend on the bank or financial institution you choose to work with. But usually, the 5% interest is an annual rate, not monthly, said Lucas.
For example, if you put in $10,000 into an account that earns a 5% APY, you could earn $500 worth of interest, said Lucas.
“So it’s not $500 a month, it’s $500 for the year — and that’s assuming that the interest rate doesn’t change with the high yield savings account,” he said.
2. The IRS wants a piece: The tax man considers money earned from compound interest as an income. Any time you make over $10 in interest income, the bank will notify the IRS, which will send you a 1099-INT form, said Lucas. Even if you earn less than that, you’re supposed to report it on your taxes.
“The IRS knows you made $500 on that interest, you need to pay tax on it,” Lucas said.
Even so, “that is a lot better versus a checking account making half a percent,” he added. More

JetBlue Airbus A321LR is displayed at the 54th International Paris Air Show at Le Bourget Airport near Paris, France, June 20, 2023. 
Benoit Tessier | Reuters

Company: JetBlue Airways (JBLU)

Business: JetBlue is a New York-based airline company serving over 100 destinations across the United States, the Caribbean and Latin America, Canada and Europe. JetBlue was incorporated in August 1998 and commenced service on Feb. 11, 2000.
Stock Market Value: $2.36B ($6.96 per share)

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JBLU’s performance over the past year

Activist: Carl Icahn

Percentage Ownership:  9.91%
Average Cost: $5.57
Activist Commentary: Carl Icahn is the grandfather of shareholder activism and a true pioneer of the strategy. He is very passionate about shareholder rights and good corporate governance and will go to extreme lengths to fight incompetent boards and over compensated managers. While Carl Icahn is not slowing down at all, in October 2020, he reached an agreement with his son Brett Icahn to rejoin the firm as the eventual successor. Brett has said that he plans to employ his father’s favored approach of pushing companies to make changes designed to boost their stock prices, though he hasn’t ruled out friendly bets. This is not a departure from the strategy Carl has succeeded with for many years. He can be friendly (i.e., Apple, Netflix) or he can be confrontational (i.e., Forest Labs, Biogen). Often it depends on the response of management. Brett is an impressive activist investor in his own right, not because he is Carl’s son, but because he has demonstrated a long track record of extremely successful activist investing. Much has been written about the Sargon portfolio he co-headed at Icahn, which at one time totaled around $7 billion and included extremely profitable investments in companies such as Netflix and Apple. The Sargon portfolio significantly outperformed the market with an annualized return of 27%. However, prior to that Brett started in 2002 with Icahn as an analyst and was later responsible for campaigns like Hain Celestial (280.3% return versus 46.7% for the S&P 500), Take-Two Interactive (81.5% versus 64.5%) and Mentor Graphics (106.4% versus 79.4%).

What’s happening

Behind the scenes

Carl Icahn is the quintessential, iconic corporate governance investor. When he takes a nearly 10% position in a company and does not state that he wants board seats, he generally wants them. When, as here, he states in his 13D filing that he has spoken to the company about getting board seats, he will not stop until he obtains them. On Jan. 8, JetBlue’s CEO stepped down. On Jan. 16, a federal court blocked the JetBlue/Spirit merger. On Jan. 19, Carl Icahn started acquiring his position. This is an inflection point in the history of JetBlue, and there is no better time to have an activist on the board – at least if you are a shareholder. This is less the case if you are the brand-new CEO.

Investors seemed relieved that JetBlue wouldn’t be paying $3.8 billion for Spirit, which has a market capitalization of $702 million. On Jan. 16, JetBlue’s stock rose 4.9% on the development, and we believe that Icahn acquiring after the news signals that he was not a fan of the merger. The company is now appealing the decision, and we would expect Icahn and other shareholders to convey their opinion to put the merger behind them and move on with an organic plan to create value for shareholders.
This plan will be happening with a new CEO, Joanna Geraghty. On Feb. 12, her first day in her new post, she had a Carl Icahn 13D on her desk. This 13D filing is certainly not a reflection on her; it is a reflection on the trading price of a company that Icahn sees as undervalued. However, former CEO Robin Hayes resigned abruptly. Geraghty was not appointed after a thorough CEO search, so it is still somewhat of an unknown as to whether she is the right person to lead JetBlue. While the Spirit deal was part of Hayes’ growth strategy, Geraghty has been at JetBlue for nearly two decades, most recently as president and chief operating officer, so she would at least be aware of the company’s issues.
With everything moving so quickly, Icahn likely has not even been able to decide as to whether Geraghty is the right CEO for the company. That is probably one of the reasons he sought board seats. He wants a seat at the table to evaluate these important decisions as JetBlue embarks on a turnaround to close its valuation gap. As he has done so many times in the past, from a board level he can work with management in executing its plan, but he can also hold them accountable if they fail.
JetBlue has an excellent brand and has historically had innovative ideas to improve the customer experience, but it has been struggling with cost controls and reliability. Among U.S. airlines, it is ninth in on-time arrivals through the first 10 months of 2023, per the Transportation Department. Yes, it is difficult for JetBlue to compete as a small player in an industry dominated by four large airlines (American, Delta, United and Southwest) that control about 80% of the domestic market. But JetBlue’s last annual profit was in 2019, before the pandemic, while its peers have returned to profitability. The company said it is on track to cut as much as $200 million in costs by the end of the year and is reportedly working on $300 million in new revenue initiatives. This is a good start, but there is likely a lot more that can be done and having an experienced shareholder representative on the board during this time will be very beneficial to investors.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.  More