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    That Roth IRA conversion comes with a tax bill — here’s how to pay for it

    FA Playbook

    If you’re eyeing a year-end Roth individual retirement account conversion, you’ll need to plan for the upfront tax bill.
    When you complete a Roth conversion, you’ll owe regular income taxes on the converted balance, based on your current-year taxable income. 
    Typically, it’s better to cover taxes with funds outside the conversion, experts say.

    Srdjanpav | E+ | Getty Images

    More from FA Playbook:

    Here’s a look at other stories impacting the financial advisor business.

    When a Roth conversion is completed, you’ll owe regular income taxes on the converted balance, based on your current-year taxable income. 
    Ideally, you’re “managing the tax bracket,” said CFP Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts. He is also a certified public accountant. 
    That could involve partial conversions by incurring only enough income to stay within a specific tier. For 2024, there’s a small increase from 10% to 12% or 22% to 24%, but a larger jump from 24% to 32%, Guarino explained.

    Ideally, you will want a conversion that keeps you comfortably within a tax bracket, meaning you can afford the upfront bill, Guarino said.

    Of course, Roth conversion strategies depend on clients’ long-term goals, including estate planning, experts say. 

    How to pay for taxes on your Roth conversion

    Typically, it’s better to cover the upfront taxes with other assets, rather than using part of the converted balance to cover the bill, Berkemeyer said.
    The more funds you get into the Roth, the higher your starting balance for future compound growth to “get the maximum benefit out of the conversion,” he said.
    Cash from a savings account is one of the best options to pay for taxes, Berkemeyer said. However, you can also weigh selling assets from a brokerage account.

    Something to consider if you’re selling brokerage assets to pay Roth conversion taxes: If it’s a lower-income year, you could qualify for the 0% long-term capital gains bracket, assuming you’ve owned the investments for more than one year, he said.
    For 2024, you may qualify for the 0% capital gains rate with a taxable income of up to $47,025 if you’re a single filer or up to $94,050 for married couples filing jointly.
    However, you’d need to run a projection since the Roth conversion adds to your taxable income. More

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    The Fed slashed interest rates, but some credit card APRs aren’t going down. Here’s why

    Although the Federal Reserve started slashing interest rates in September, the average credit card interest rate has barely budged.
    For some retail credit cards, interest rates have only gone up. 
    In part, card issuers are trying to get ahead of a new federal rule, which caps credit card late fees.

    Close-up of unrecognizable black woman opening mail containing new credit card
    Grace Cary | Moment | Getty Images

    Why some APRs are still rising

    Synchrony and Bread Financial, which both issue store-branded credit cards, have said that the moves were necessary following a Consumer Financial Protection Bureau rule limiting what the industry can charge in late fees.
    “One of the unintended consequences of trying to impose limits on fees is that it often leads to higher rates,” said Greg McBride, chief financial analyst at Bankrate.com.
    Card issuers are mitigating their exposure against borrowers who may fall behind on payments or default, he said.
    “Reducing the late fee doesn’t reduce the likelihood of a late payment so issuers are going to compensate for that risk in another fashion.” McBride said.

    “It doesn’t surprise me that card issuers would try and get out in front of these changes,” said Matt Schulz, LendingTree’s chief credit analyst. The CFPB’s new rule takes a bite out of what has been a very profitable business.
    Further, “stores want to be able to offer that card to anyone who walks up to the checkout counter and there is a fair amount of risk in that,” Schulz said.

    How to avoid paying sky-high interest

    Only consumers who carry a balance from month to month feel the pain of high APRs. And higher APRs only kick in for new loans, not old debts, as in the case of new applicants for store cards or new purchases.
    “Rates are not going up on an existing balance,” McBride said.
    APR changes only affect the whole balance if the change is due to a change in the underlying index, such as an increase or decrease in the Fed’s benchmark, he explained.
    “Otherwise, if the issuer wants to raise the rate — which would mean increasing the margin over prime rate — they can only do so on an existing balance if the cardholder is 60 days delinquent,” McBride said.
    However, credit card delinquency rates are already “elevated,” with 8.8% of balances transitioning to delinquency over the last year, and the share of borrowers with revolving balances rising as more people rack up new debt over the holidays.
    Currently, Americans owe a record $1.17 trillion on their cards, 8.1% higher than a year ago, according to the Federal Reserve Bank of New York.

    McBride advises consumers against signing up for a store credit card with a high rate during the peak shopping season.
    “Store cards are so popular this time of year,” he said. “Having that same-day discount dangled in front of you is tempting, but you lose the benefit of the discount really fast if you start carrying a balance.”
    As a general rule, “the best way to avoid these sky-high rates is to pay your bill in full every month — that is easier said than done, but should always be the goal,” Schulz said.
    Cardholders who pay their balances in full and on time and keep their utilization rate — or the ratio of debt to total credit — below 30% of their available credit, can also benefit from credit card rewards and a higher credit score. That paves the way to lower-cost loans and better terms going forward.
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    Treasury Department may fine small businesses up to $10,000 if they don’t file this new report

    The Corporate Transparency Act requires many businesses to report “beneficial ownership information” by Jan. 1, 2025, in an effort to curb crime through shell companies.
    About 32.6 million businesses are subject to the new BOI reporting, according to federal estimates.
    Individuals that “willfully” violate the requirement may be subject to fines of $10,000 or more and possible jail time.
    A Texas court temporarily halted enforcement, for now.

    Treasury Secretary Janet Yellen following a tour of the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on Jan. 8, 2024.
    Valerie Plesch/Bloomberg via Getty Images

    Small businesses and their owners could face penalties of $10,000 or more if they don’t comply with a new U.S. Treasury Department reporting requirement by year’s end — and evidence suggests many haven’t yet complied.
    The Corporate Transparency Act, passed in 2021, created the requirement. The law aims to curb illicit finance by asking many businesses operating in the U.S. to report beneficial ownership information to the Treasury’s Financial Crimes Enforcement Network, also known as FinCEN.

    Many businesses have a Jan. 1, 2025 deadline to submit an initial BOI report.
    This applies to about 32.6 million businesses, including certain corporations, limited liability companies and others, according to federal estimates.
    The Treasury Department did not respond to CNBC’s request for comment on the number of BOI reports that had been filed to date.

    The data helps identify the people who directly or indirectly own or control a company, making it “harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures,” according to FinCEN.
    “Corporate anonymity enables money laundering, drug trafficking, terrorism and corruption,” Treasury Secretary Janet Yellen said in a January announcement of the BOI portal launch.

    More from Personal Finance:Number of 401(k) plan and IRA millionaires hits recordThe S&P 500 is up nearly 30% for the yearMany people can’t afford long-term care insurance
    Here’s the kicker: Businesses and owners that don’t file may face civil penalties of up to $591 a day, for each day their violation continues, according to FinCEN. (The sum is adjusted for inflation.) Additionally, they can face up to $10,000 in criminal fines and up to two years in prison.
    “To a small business, suddenly you’re staring at a fine that could sink your business,” said Charlie Fitzgerald III, a certified financial planner based in Orlando, Florida, and a founding member of Moisand Fitzgerald Tamayo.
    The federal government had received about 9.5 million filings as of Dec. 1, according to statistics FinCEN provided to the office of Rep. French Hill, R-Arkansas, who has called for the repeal the Corporate Transparency Act. Hill’s office shared the data with CNBC.
    That figure is about 30% of the estimated total.
    FinCEN was receiving a volume of about 1 million new reports per week as of early December, Hill’s office said.

    Many businesses may not be aware

    Nitat Termmee | Moment | Getty Images

    A “beneficial owner” is a person who owns at least 25% of a company’s ownership interests or has “substantial control” of the entity.
    Businesses must report information about their beneficial owners, like name, birth date, address and information from an ID such as a driver’s license or passport, in addition to other data.
    Companies that existed prior to 2024 must report by Jan. 1, 2025. Those created in 2024 have 90 calendar days to file from their effective date of formation or registration; those created in 2025 or later have 30 days.

    Corporate anonymity enables money laundering, drug trafficking, terrorism, and corruption.

    Janet Yellen
    U.S. Treasury Secretary

    There are multiple exceptions to the requirement: For example, those with more than $5 million in gross sales and more than 20 full-time employees may not need to file a report.
    Many exempt businesses — like large companies, banks, credit unions, tax-exempt entities and public utilities — already furnish similar data.
    Brian Nelson, under secretary for terrorism and financial intelligence for the Treasury Department, said in an interview at the Hudson Institute earlier this year that the agency was “on a full court press” to spread awareness about the BOI registry, which opened Jan. 1, 2024.

    But it seems many business owners either aren’t complying with or aware of the requirement, despite outreach efforts.
    The scope of national compliance is “bleak,” the S-Corporation Association of America, a business trade group, said in early October.
    The “vast majority” of businesses hadn’t yet filed a report, “meaning millions of small business owners and their employees will become de facto felons come that start of 2025,” it said.

    Enforcement is up in the air

    Bevan Goldswain | E+ | Getty Images

    However, the situation isn’t quite that grim, others said.
    For one, a federal court in Texas on Dec. 3 temporarily blocked the Treasury Department from enforcing the BOI reporting rules, meaning the agency can’t impose penalties while the court conducts a more thorough review of the rule’s constitutionality.
    “Businesses should still be filing their information,” said Erica Hanichak, government affairs director at the Financial Accountability and Corporate Transparency Coalition. “The deadline itself hasn’t changed. It just changes enforcement of the law.”

    The government is expected to appeal, and enforcement “could resume” if the injunction is reversed, wrote attorneys at the law firm Fredrikson.
    Additionally, Treasury said it would only impose penalties on a person (or business) who “willfully violates” BOI reporting.
    The agency isn’t out for “gotcha enforcement,” Hanichak said.
    “FinCEN understands this is a new requirement,” it said in an FAQ. “If you correct a mistake or omission within 90 days of the deadline for the original report, you may avoid being penalized. However, you could face civil and criminal penalties if you disregard your beneficial ownership information reporting obligations.” More

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    5 housing market predictions for 2025, according to economists

    In October, the median sales price for a single-family home in the U.S. was $437,300, up from $426,800 a month prior, according to the latest data by the U.S. Census. 
    Here are five key factors to watch out for in the housing market in 2025, according to experts. 

    Miniseries | E+ | Getty Images

    Housing is not cheap — whether you’re buying or renting. 
    In October, the median sales price for a single-family home in the U.S. was $437,300, up from $426,800 a month prior, according to the latest data by the U.S. Census. 

    Meanwhile, the median rent price in the U.S. was $1,619 in October, roughly flat or up 0.2% from a year ago and down 0.6% from a month prior, according to Redfin, an online real estate brokerage firm.
    While it can be difficult to exactly pinpoint how the housing market is going to play out in 2025, several economists lay out predictions of what’s likely to happen next year in a new report by Redfin, an online real estate brokerage firm.
    More from Personal Finance:This factor can get your mortgage application deniedStudent loan borrowers may find bankruptcy harder under TrumpCollege enrollment falls 5% for 18-year-old freshmen
    “If the housing market were going to crash, it would have already crashed by now,” said Daryl Fairweather, chief economist at Redfin. “The housing market has been so resilient to interest rates going up as high as they have.”
    Here are five housing market predictions for 2025, according to Fairweather and other economists. 

    Home price growth will return to pre-pandemic levels

    The median asking price for a home in the U.S. will likely rise 4% over the course of 2025, a pace similar to that of the second half of this year, according to Redfin.
    The 4% annual pace is a “normalization” compared to the accelerated growth last seen in 2020, said Fairweather. 
    Earlier in 2024, the rate at which home prices grew slowed down to pre-pandemic levels. In other words, while prices were still rising, the speed of price growth was not as fast as it was in previous years. 

    Despite predictions of growth slowing, there may still be some volatility in prices.
    In fact, home price appreciation might stay flat, or less than 1%, going into the 2025 spring home buying season, said Selma Hepp, economist at CoreLogic.
    But the possibility of President-elect Donald Trump enacting some of his economic policies could drive home prices much higher, said Jacob Channel, senior economist at LendingTree. 
    “We kind of have some mixed signals right now in terms of what may or may not happen to home prices,” he said. 
    General tariffs on foreign goods and materials as well as mass deportations could result in higher construction costs and slower home-building activity. If fewer homes are built in a supply-constrained market, prices might grow much higher, said Channel.

    Flattening rents, with more room to negotiate

    At a national level, the median asking rent price in the U.S. will likely stay flat over the course of a year in 2025, as new rental inventory becomes available, according to Redfin.
    “If rents are flat, and people’s wages continue to grow, that means people have more money to spend,” Redfin’s Fairweather said, as well as increase their savings.
    More than 21 million renter households are “cost-burdened,” meaning they spent more than 30% of their income on housing costs, according to 2023 U.S. Census data.
    A stable rental market will also give renters more strength to negotiate with landlords. In some areas, property managers are already offering concessions like one month rent free, a free parking space or waiving fees, experts say.

    However, “it’s December,” Channel said. “Rent prices typically decline in the colder months of the year,” as fewer people are apartment hunting in the late fall and winter seasons. 
    If would-be buyers continue to be priced out of the for-sale market next year through high home prices and mortgage rates, competition in the rental market may ensue, he said.
    Also keep in mind that the typical rent price you see will depend on what’s going on in your local market, Hepp explained.
    For instance: Austin, Texas was the “epicenter of multi-family construction,” she said, meaning a lot of new supply was added into the city’s rental market, bringing rental costs down. The metro area’s rent prices fell by 2.9% from a year ago, CoreLogic found.
    In contrast, supply-constrained metropolitan areas like Seattle, Washington, D.C., and New York City, are experiencing high rent growth of 5% annually. 

    A ‘bumpy’ and ‘volatile’ year for mortgage rates

    Redfin forecasts mortgage rates will average 6.8% in 2025, and hover around the low-6% range if the economy continues to slow.
    Yet experts expect 2025 will be a “bumpy” and “volatile” year for mortgage rates.
    Borrowing costs for home loans could spike if policies like tax cuts and tariffs are enacted, putting upward pressure on inflation. 
    “We’re sort of in uncharted territory. It’s really tough to say exactly what’s going to happen,” said LendingTree’s Channel. 
    Mortgage rates declined this fall in anticipation of the first interest rate cut since March 2020. But then borrowing costs jumped again in November as the bond market reacted to Donald Trump’s election win. Since then, mortgage rates have somewhat stabilized — for now.
    “Our expectation is that rates are going to be in the 6% range as we move into 2025,” Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, recently told CNBC.

    More home sales than in 2024

    Pent-up demand from buyers and sellers on the sidelines may drive home transactions next year. 
    “People have waited long enough,” Fairweather said. 
    About 4 million homes are expected to be sold by the end of 2025, an annual increase between 2% and 9% from 2024, according to Redfin. 
    The market is piling on with “people who need to move on with their lives,” like buyers who are getting new jobs and need homes suitable for life changes, and sellers who have delayed moving plans, Fairweather said. 

    While more buyers are expected to hit the market next year, the level of competition may not be as aggressive as in recent years, when bidding wars were the norm.
    Other affordability factors may come into play, like rising insurance costs and property taxes, in turn slowing down competition, said CoreLogic’s Hepp. 
    “We’ll definitely see more buyers out there,” she said. “But I don’t see the competition heating up to the levels that it has over the last few years.” 

    Climate risks will bake into homes prices

    The risk of extreme weather and natural disasters may anchor down home prices or slow down price growth in areas like coastal Florida, California and parts of Texas, which are at high risk of hurricanes, wildfires or other disasters, Redfin expects.
    If palatable price tags have you eyeing homes in a high-risk market, be aware of potential complications.
    For instance, home insurance policies in some of these markets are harder to come by, and tend to carry high price tags. The financial impact of natural disasters may also be felt in rising home maintenance and repair costs, said Redfin’s Fairweather.

    What’s more challenging, “every part of the country is vulnerable” because the weather patterns are changing, she said. “Lately, there have been these atmospheric rivers in California that have caused days of heavy flooding, and those homes aren’t built for that.”
    While there’s a lot of focus on Florida for hurricane risks, the state is more prepared for this natural disaster, unlike areas like Asheville, North Carolina, a mountainous city battered by the hurricane Milton earlier this year. 
    “We will probably see insurance increase pretty broadly because that mismatch between what homes were built for and the climate that they are going to be facing in the coming years,” she said. More

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    Top Wall Street analysts tout these energy stocks for attractive dividends

    A Chevron gas station in Richmond, California, US, on Wednesday, June 19, 2024. 
    David Paul Morris | Bloomberg | Getty Images

    Adding dividend-paying stocks to a portfolio helps enhance total return while ensuring income and diversification. Moreover, the appeal of dividend stocks increases as interest rates decline, as is currently the case.
    Following the recommendations of top Wall Street analysts can help investors pick attractive dividend stocks, given that these experts conduct an in-depth analysis of a company’s financials to assess its ability to pay — and increase — dividends.

    Here are three dividend-paying stocks, highlighted by Wall Street’s top pros as tracked by TipRanks, a platform that ranks analysts based on their past performance.
    Chevron
    We start this week with oil and gas producer Chevron (CVX). The company reported better-than-expected results for the third quarter of 2024. It returned $7.7 billion to shareholders in the third quarter, including $4.7 billion in share buybacks and $2.9 billion in dividends. At a quarterly dividend of $1.63 per share (or an annualized $6.52), CVX offers a dividend yield of 4.1%.
    Recently, Goldman Sachs analyst Neil Mehta reiterated a buy rating on CVX and slightly raised the price target to $170 from $167 to reflect his updated earnings estimates. The analyst continues to have a constructive view on Chevron, thanks to “expectations for volume and [free cash flow] inflection driven by Tengiz [in Kazakhstan], where the company continues to demonstrate strong execution progress.”
    Mehta added that his optimism is also driven by Chevron’s attractive capital returns profile that includes dividends and buybacks, with expectations of a yield of around 10% in both 2025 and 2026. He also highlighted the company’s differentiated capital allocation, which supports consistent shareholder returns despite a volatile macroeconomic backdrop.
    Among other positives, Mehta also noted favorable updates on Chevron’s Gulf of Mexico projects, where the company intends to increase production to 300 Mb/d (million barrels per day) by 2026. He is also impressed by the company’s cost reduction efforts, which aim to generate as much as $3 billion of structural cost savings by the end of 2026.

    Mehta ranks No. 391 among more than 9,200 analysts tracked by TipRanks. His ratings have been profitable 62% of the time, delivering an average return of 11%. See Chevron Stock Buybacks on TipRanks.

    Energy Transfer                 

    This week’s second dividend pick is Energy Transfer (ET), a midstream energy company that is structured as a limited partnership. In November, the company made a quarterly cash distribution of $0.3225 per common unit for the third quarter, a 3.2% year-over-year rise. Based on an annualized distribution of $1.29 per common unit, ET pays a yield of 6.8%.
    Recently, JPMorgan analyst Jeremy Tonet reaffirmed a buy rating on ET and raised his 12-month price target to $23 from $20. The analyst noted the company’s third-quarter adjusted earnings before interest, taxes, depreciation and amortization of $3.96 billion exceeded JPMorgan’s estimate of $3.912 billion and the Street’s consensus of $3.881 billion.
    While Energy Transfer reiterated its full-year adjusted EBITDA guidance in the range of $15.3 billion to $15.5 billion, Tonet thinks that the company is positioned to surpass the high end of that guidance, as the full impact of its optimization efforts isn’t reflected in the outlook.
    Tonet further highlighted that the integration of the WTG Midstream acquisition is on track and Energy Transfer has approved several projects to improve reliability, reduce losses and enhance system efficiencies.
    Overall, Tonet thinks that ET is trading at a discounted price, offering a lucrative entry point for investors. “We see [natural gas liquids] logistics, particularly [U.S. Gulf Coast] and Marcus Hook exports, as key growth engines for ET, particularly given global LPG demand growth,” said Tonet.
    Tonet ranks No. 420 among more than 9,200 analysts tracked by TipRanks. His ratings have been successful 61% of the time, delivering an average return of 10.5%. See Energy Transfer Stock Charts on TipRanks.

    Enterprise Products Partners

    Tonet is also bullish on Enterprise Products Partners (EPD), a partnership that offers midstream energy services. The company’s distribution of $0.525 per unit for the third quarter reflects a 5% annual increase. EPD’s annual distribution of $2.10 per common unit is equivalent to 6.4% yield.
    The JPMorgan analyst said EPD’s Q3 performance gained from three natural gas processing plants that started commercial operations over the past year. The third quarter also benefited from wide natural gas spreads between Waha and other market hubs.
    At its Investor Day, EPD emphasized that one of its key operating objectives for 2024 was to enhance the reliability and utilization rates of its two propane dehydrogenation (PDH) plants. Tonet said EPD expects its PDH enhancements to deliver an incremental $200 million in cash flows.
    Capital allocation is favorable, Tonet said, noting that EPD repurchased $76 million in stock in the third quarter, up from $40 million in the second quarter. Enterprise plans to continue making buybacks in an annual range of $200 to $300 million over the remainder of 2024 and 2025, he said.
    Tonet continues to be bullish on EPD stock, saying it “consistently delivered strong results throughout the various cycles, weathering downdrafts yet still participating during upward cycles.”
    Tonet’s optimism is also based on EPD having the largest and most integrated natural gas liquids (NGL) footprint in North America, supporting superior operating leverage. He also believes that EPD’s financial flexibility gives it an edge over its peers.
    Given all the positives, Tonet reiterated a buy rating on EPD stock and increased his price target to $37 from $34. See EPD Ownership Structure on TipRanks. More

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    Retail returns: An $890 billion problem

    Returns in 2024 are expected to be about 17% of all goods sold, totaling $890 billion, according to a new report by the National Retail Federation and return management company Happy Returns. That’s up from 15% in 2023.
    The growing amount of returned merchandise presents major challenges for retailers, not to mention the environmental cost.

    A driver for an independent contractor to FedEx delivers packages on Cyber Monday in New York, US, on Monday, Nov. 27, 2023.
    Stephanie Keith | Bloomberg | Getty Images

    Holiday shopping is expected to reach record levels this year. But a growing share of those purchases will be sent back.
    Returns in 2024 are expected to amount to 17% of all merchandise sales, totaling $890 billion in returned goods, according to a new report by the National Retail Federation and return management company Happy Returns. That’s up from a return rate of about 15% of total U.S. retail sales, or $743 billion in returned goods, in 2023.

    Even though returns happen throughout the year, they are much more prevalent during the holiday season, the NRF also found. As shopping reaches a peak in the weeks ahead, retailers expect their return rate for the holidays to be 17% higher, on average, than the annual rate.
    “Ideally, I hope there is a world in which you can reduce the percent of returns,” said Amena Ali, CEO of returns solution company Optoro, but “the problem is not going to abate any time soon.”
    More from Personal Finance:Here are the last days to ship a holiday packageThe best ways to save money this holiday seasonHoliday shoppers plan to spend more

    Why returns are a big problem

    With the explosion of online shopping during and since the pandemic, customers got increasingly comfortable with their buying and returning habits and more shoppers began ordering products they never intended to keep.
    Nearly two-thirds of consumers now buy multiple sizes or colors, some of which they then send back, a practice known as “bracketing,” according to Happy Returns.

    Even more — 69% — of shoppers admit to “wardrobing,” or buying an item for a specific event and returning it afterward, a separate report by Optoro found. That’s a 39% increase from 2023.
    Largely because of these types of behaviors, 46% of consumers said they are returning goods multiple times a month — a 29% jump from last year, according to Optoro.
    All of that back-and-forth comes at a hefty price.
    “With behaviors like bracketing and rising return rates putting strain on traditional systems, retailers need to rethink reverse logistics,” David Sobie, Happy Returns’ co-founder and CEO, said in a statement.

    What happens to your returns

    Processing a return costs retailers an average of 30% of an item’s original price, Optoro found. But returns aren’t just a problem for retailers’ bottom line.
    Often returns do not end up back on the shelf, and that also causes issues for retailers struggling to enhance sustainability, according to Spencer Kieboom, founder and CEO of Pollen Returns, a return management company. 
    Sending products back to be repackaged, restocked and resold — sometimes overseas — generates even more carbon emissions, assuming they can be put back in circulation.
    In some cases, returned goods are sent straight to landfills, and only 54% of all packaging was recycled in 2018, the most recent data available, according to the U.S. Environmental Protection Agency.
    Returns in 2023 created 8.4 billion pounds of landfill waste, according to Optoro.
    That presents a major challenge for retailers, not only in terms of the lost revenue, but also in terms of the environmental impact of managing those returns, said Rachel Delacour, co-founder and CEO of Sweep, a sustainability data management firm. “At the end of the day, being sustainable is a business strategy.”

    To that end, companies are doing what they can to keep returns in check.
    In 2023, 81% of U.S. retailers rolled out stricter return policies, including shortening the return window and charging a return or restocking fee, according to another report from Happy Returns.
    While restocking fees and shipping charges may help curb the amount of inventory that is sent back, retailers also said that improving the returns experience was a key goal for 2025.
    Now 33% of retailers, including Amazon and Target, are allowing their customers to simply “keep it,” offering a refund without taking the product back.

    How return policies shape shopping habits

    Increasingly, return policies and expectations are an important predictor of consumer behavior, according to Happy Returns’ Sobie, particularly for Generation Z and millennials.
    “Return policies are no longer just a post-purchase consideration — they’re shaping how younger generations shop from the start,” Sobie said.
    Three-quarters, or 76%, of shoppers consider free returns a key factor in deciding where to spend their money, and 67% say a negative return experience would discourage them from shopping with a retailer again, the NRF found.
    A survey of 1,500 adults by GoDaddy found that 77% of shoppers check the return policy before making a purchase.
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    Activist Starboard has a stake in Healthcare Realty Trust. Two paths to create value emerge

    Healthcare Realty Trust building in in Nashville, Tennessee.
    Source: Google Maps

    Company: Healthcare Realty Trust (HR)

    Business: Healthcare Realty Trust is a self-managed and self-administered real estate investment trust that owns and operates medical outpatient buildings primarily located around hospital campuses. The company selectively grows its portfolio through property acquisition and development. Its portfolio includes nearly 700 properties totaling over 40 million square feet, concentrated in 15 growth markets. The company’s properties are in high-growth markets with a broad tenant mix that includes over 30 physician specialties.
    Stock Market Value: $6.38B ($17.99 per share)

    Stock chart icon

    Healthcare Realty Trust’s shares in 2024

    Activist: Starboard Value

    Ownership: 5.90%
    Average Cost: $17.14
    Activist Commentary: Starboard is a very successful activist investor and has extensive experience helping companies focus on operational efficiency and margin improvement. Starboard has taken a total of 155 activist campaigns in its history and has an average return of 23.37% versus 14.29% for the Russell 2000 over the same period.

    What’s happening

    On Nov. 26, Starboard filed a 13D with the U.S. Securities and Exchange Commission, disclosing a 5.90% position in Healthcare Realty Trust.

    Behind the scenes

    Healthcare Realty Trust (HR) is a real estate investment trust that owns and operates medical outpatient buildings located primarily on or around hospital campuses. On Feb. 28, 2022, the company entered into an agreement to merge with Healthcare Trust of America (HTA) in an approximately $18 billion deal.  Despite HR shareholder strong approval with 92% of the votes cast, the merger was somewhat dilutive to HR shareholders as the deal implied a sub-5% cap rate, whereas HR traded above that at the time.

    But management had the opportunity to show the wisdom in the acquisition by integrating the two businesses, recognizing synergies and cutting costs and bringing down the cap rate to below the 4.85% blended cap rate implied in the merger. That did not happen. Just over two years later, property operating expenses have risen from 31% to 37%, several percentage points above peers. Further, funds from operations (“FFO”) yield is 9%, far higher than its peers in the 5% to 6% range. Finally, the cap rate is at 7%, and the stock is down over 15%, versus an increase of 33% for the Russell 2000. About three weeks ago, the company’s long-time CEO Todd Meredith, who served as president and CEO for eight years and spent a total of 23 years with Healthcare Realty, stepped down.
    Help is on the way, in the form of Starboard Value (although, I am not sure if that is how the company views it). Nevertheless, Healthcare Realty is now at a critical inflection point, and there are two paths to unlocking value here. The first is to remain a standalone company, which would require the hiring of a new CEO, the most important function of a corporate board. However, after entering into a questionable acquisition and overseeing an underperforming management team, stockholders would be well within their rights to question whether this is the right board to embark on this crucial search. So, going down this path in a way that creates value for shareholders would mean a refreshment of the board. We would expect that Starboard would want at least one of those seats to assist in this decision. From there, the company is in great need of an operational turnaround to address its bloated cost structure to bring Healthcare Realty more in line with peers, something else that Starboard has shown to have an expertise in from a board level. This would be a long and uncertain path, but definitely doable with the right board and management team.
    That brings us to the second, shorter and more certain path: a sale of Healthcare Realty. If there are two things that put a company in pseudo-play, it is the arrival of an activist and the departure of a CEO. This company has both of those. There are several potential strategic acquirers for this company – specifically larger companies whose cost of capital and cap rates are lower, such as Welltower, Healthpeak and Ventas, whose cap rates are approximately 5% to 5.5%. This is not just an academic hypothesis. Interest from strategic buyers has already been demonstrated: About a month after Healthcare Realty and Healthcare Trust of America agreed to merge, Welltower offered to acquire Healthcare Realty for $31.75 a share in a nearly $5 billion all-cash bid (the company ended Friday’s session at $17.99 per share). It is interesting to note that when the Healthcare Trust of America merger was approved, activist fund Land and Buildings unsuccessfully opposed the transaction in favor of the Welltower offer.
    Boards and management teams generally cower at the thought of an activist. But this board should welcome Starboard and not only because of its reputation as a constructive activist who works well with management to create value, but because Healthcare Realty is at an inflection point where the board needs to decide whether it is going to do a full search for a new long-term CEO or explore a sale. In either case, it is helpful to have a shareholder representative like Starboard involved. Starboard is a top operational and corporate governance activist. If the first path – a search for a new CEO – is the right path for shareholders, there is nobody better to work with the board in implementing that plan. While the firm is the furthest thing from a “sell the company” activist, it’s a fiduciary and an economic animal that will do whatever is in the best interest of shareholders. Further, if there is an opportunity to sell the company, they would weigh that against a plan to find a new CEO. This is very similar to what the firm did in one of its prior activist campaigns. In 2018, a similar dual-path situation unfolded at Forest City Realty Trust. Initially, Starboard went down the path of long-term value creation – refreshing the board and focusing on improving the company’s cost structure. However, during this process, Brookfield Asset Management came into the picture with an offer to acquire Forest City Realty at $25.35 per share – a huge premium. This was an offer Starboard simply could not refuse, and the firm exited this situation up 47.27% compared to a 7.2% loss for the Russell 2000 over the same period. 
    While we believe management should welcome Starboard at this crucial juncture, we have been surprised by management teams before. Starboard has not yet officially nominated directors, and the firm has until Dec. 10 to do so. That is not a long time to agree on a settlement, and we could see Starboard nominating a slate if only to preserve their options going forward.
    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. Healthcare Realty Trust is owned in the fund. More

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    Here’s what to know before taking your first required minimum distribution

    FA Playbook

    Since 2023, most retirees must start taking required minimum distributions, or RMDs, from pre-tax retirement accounts at age 73.
    The first deadline is April 1 after turning age 73, and Dec. 31 for future withdrawals.
    But you need to consider the tax consequences when timing your first RMD, according to financial experts.

    Grace Cary | Moment | Getty Images

    After decades of building your nest egg, you will eventually have to start taking required minimum distributions, or RMDs, from pretax retirement accounts. The first RMD can be tricky, according to financial experts.
    Since 2023, most retirees must begin RMDs at age 73. The first deadline is April 1 of the year after you turn 73, and Dec. 31 for future withdrawals. This applies to tax-deferred individual retirement accounts, most 401(k) and 403(b) plans.

    “You want to be tactical and savvy when you take the [first] distribution,” said certified financial planner Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts. He is also a certified public accountant. 

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    Pre-tax retirement withdrawals incur regular income taxes. By comparison, you’ll pay long-term capital gains taxes of 0%, 15% or 20% on profitable assets owed for more than one year in a brokerage account.  

    Two required withdrawals in one year

    If you wait until April 1 after turning 73 to take your first RMD, you’ll still owe the second one by Dec. 31. That means you’ll take two RMDs in the same year, which can significantly boost your adjusted gross income.
    That can trigger unexpected tax consequences, according to CFP Abrin Berkemeyer, a senior financial advisor with Goodman Financial in Houston.

    For example, boosting AGI can lead to income-related monthly adjustment amounts, or IRMAA, for Medicare Part B and Part D premiums. For 2024, IRMAA kicks in once modified adjusted gross income, or MAGI, exceeds $103,000 for single filers or $206,000 for married couples filing together.

    “That’s the biggest one that catches retirees off guard,” Berkemeyer said.
    With a higher AGI, lower-earning retirees could also incur higher Social Security taxes or increase their long-term capital gains bracket from 0% to 15%, he said.

    When to defer your first distribution

    If you’re age 73 and just retired in 2024, it could make sense to delay your first RMD until April 1, because 2025 could be a lower-income year, experts say. 
    However, your RMD is calculated using your pre-tax retirement balance as of Dec. 31 from the prior year, meaning 2025 RMDs are based on year-end 2024 balances. The calculation divides your previous year-end pretax balance by an IRS life expectancy factor.
    That could mean a larger-than-expected RMD for 2025 “if your [2024] portfolio went through the roof,” Guarino warned. 
    “You really have to run the numbers” to see if it makes sense to incur more income in 2024 or 2025, based on account balances and tax projections, he said. More