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    What investors need to consider when choosing a dividend-paying fund

    ETF Strategist

    ETF Street
    ETF Strategist

    Investors who want income may turn to dividend-paying strategies.
    When choosing between funds, it’s important to consider whether the strategy fits your goals and what you will pay, experts say.

    Jamie Grill | Tetra Images | Getty Images

    For investors who want income, dividends may provide an answer.
    Dividends are corporate profits that companies pay to shareholders in the form of either cash or stock.

    In comparison to other income-paying investments — such as certificates of deposit, bonds or Treasurys — dividends may provide the opportunity for more appreciation, said Leanna Devinney, vice president and branch leader at Fidelity Investments in Hingham, Massachusetts.
    “Dividends can be very attractive because they offer the opportunity for growth and income,” Devinney said.
    Dividend investment options may come in the form of single company stocks or dividend-paying funds, like exchange-traded funds or mutual funds.

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    With individual stocks, it’s easy to see the dividend a company may offer in exchange for owning its share, Devinney said. Notably, not all companies pay dividends.
    However, dividend-paying funds like ETFs or mutual funds may provide a broader exposure to dividend securities, often at lower costs, she said.

    For investors who are considering putting a portion of their portfolios in dividend-paying strategies to fulfill their income-seeking goals, there are some things to consider.

    What kind of dividend-paying fund fits my goals?

    Generally, there are two types of dividend funds from which to choose, according to Daniel Sotiroff, senior analyst for passive strategies research at Morningstar.
    The first group focuses on high dividend yield strategies. Dividend yield is how much a company pays in dividends each year compared to its stock price. With high-yield strategies, the investor is trying to get higher income than the market generally provides, Sotiroff said.
    High-yield dividend companies tend to have been around for decades, like Coca-Cola Co., for example.
    Alternatively, investors may opt for dividend growth strategies that focus on stocks expected to consistently grow their dividends over time. Those companies tend to be somewhat younger, such as Apple or Microsoft, Sotiroff said.

    To be clear, both of these strategies have trade-offs.
    “The risks and rewards are a little bit different between the two,” Sotiroff said. “They can both be done well; they can both be done poorly.”
    If you’re a younger investor and you’re trying to grow your money, a dividend appreciation fund will likely be better suited to you, he said. On the other hand, if you’re near retirement and you’re looking to create income from your investments, a high-yield dividend ETF or mutual fund is probably going to be a better choice.
    To be sure, some fund strategies combine both goals of current income and future growth.

    How expensive is the dividend strategy?

    Another important consideration when deciding among dividend-paying strategies is cost.
    One dividend fund that is highly rated by Morningstar, the Vanguard High Dividend Yield ETF, is well diversified, which means investors won’t have a lot of exposure to one company, he said. What’s more, it’s also “really cheap,” with a low expense ratio of six basis points, or 0.06%. The expense ratio is a measure of how much investors pay annually to own a fund.
    That Vanguard fund has historically provided a yield of about 1% to 1.5% more than what the broader U.S. market offers, which is “pretty reasonable,” according to Sotiroff.

    While investors may not want to add that Vanguard fund to their portfolio, they can use it as a benchmark, he said.
    “If you’re taking on higher yield than that Vanguard ETF, that’s a warning sign that you probably have exposure to incrementally more volatility and more risk, Sotiroff said.
    Another fund highly rated by Morningstar is the Schwab U.S. Dividend Equity ETF, which has an expense ratio of 0.06% and has also provided 1% to 1.5% more than the market, according to Sotiroff.
    Both the Vanguard and Schwab funds track an index, and therefore are passively managed.
    Investors may alternatively opt for active funds, where managers are identifying companies’ likelihood to increase or cut their dividends.
    “Those funds typically will come with a higher expense ratio,” Devinney said, “but you’re getting professional oversight to those risks.” More

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    Credit card debt among retirees jumps — ‘It’s alarming,’ researcher says

    FA Playbook

    The share of retirees with credit card debt has risen “substantially” since 2022, according to the Employee Benefit Research Institute.
    That’s largely due to pandemic-era inflation, one researcher said. Credit card interest rates are also at all-time highs.
    Financial advisors offered some tips for retirees to whittle down their debt.

    Mixetto | E+ | Getty Images

    The share of Americans with credit card debt in retirement has jumped considerably — a worrisome financial trend, especially for those with little wiggle room in their budgets, experts said.
    About 68% of retirees had outstanding credit card debt in 2024, up “substantially” from 40% in 2022 and 43% in 2020, according to a new poll by the Employee Benefit Research Institute.

    “It’s alarming for retirees living on a fixed income,” said Bridget Bearden, a research strategist at EBRI who analyzed the survey data.

    Inflation is the ‘true driver’

    Inflation is the “true driver” of retirees’ increased use of credit cards, Bearden said.
    But it’s not just retirees.
    About 2 in 5 cardholders have maxed out or nearly hit their card limit since early 2022, resulting from inflation and higher interest rates, according to a recent Bankrate poll.
    U.S. consumer prices grew quickly in recent years, as they have around the world due largely to pandemic-era supply-and-demand shocks.

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    “If so much of your Social Security income is now going toward your rent, then you have few funds left over for other essential expenses,” thereby driving up credit card use, Bearden said.
    Social Security beneficiaries get an annual cost of living adjustment meant to help recipients keep up with inflation. However, data suggests those adjustments don’t go far enough. To that point, Social Security recipients have lost about 20% of their buying power since 2010, according to the Senior Citizens League.
    EBRI polled 3,661 retirees between the ages of 62 and 75 during summer 2024. About 83% were collecting Social Security benefits, with the typical person getting roughly half their income from Social Security.

    An ‘expensive form of borrowing’

    Credits cards, which carry high interest rates, are an “expensive form of borrowing,” Federal Reserve Bank of St. Louis researchers wrote in a May 2024 analysis.
    Credit cards have only become more expensive as interest rates have swelled to record highs.
    Consumers paid a 23% average rate on their balances in August 2024, up from about 17% in 2019, according to Federal Reserve data.

    Rates have risen as the U.S. Federal Reserve hiked interest rates to combat high inflation.
    The average household with credit card debt was paying $106 a month in interest alone in November 2023, according to the Federal Reserve Bank of St. Louis.

    Retirees’ debt was rising before the pandemic

    Rising debt levels were a problem for older Americans even before pandemic-era inflation.
    “American families just reaching retirement or those newly retired are more likely to have debt — and higher levels of debt — than past generations,” according to a separate EBRI study, published in August.
    More and more families are having issues with debt during their working years, which then carries into and through retirement, the report said.
    The typical family with a head of household age 75 and older had $1,700 of credit card debt in 2022, EBRI said in the August report. Those with a head of household age 65 to 74 had $3,500 of credit card debt, it said.

    Fstop123 | E+ | Getty Images

    1. Reduce expenses
    There are a few ways retirees can get their credit card debt under control, financial advisors said.
    The first step “is to figure out why they had to go in debt in the first place,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida. She’s also a member of CNBC’s Financial Advisor Council.
    If a cardholder’s income isn’t enough to meet their basic spending, or if a big event such as a home repair or medical procedure required them to borrow money, the person should consider lifestyle changes to reduce future expenses, McClanahan said.

    McClanahan made these recommendations for ways cardholders can cut spending:

    Make sure you don’t have useless subscriptions or apps;
    Do an energy audit on your home to find ways to cut your water, electric and/or gas bill;
    Cook more and eat out less, which is both healthier and less expensive.

    Retirees may also choose to make a bigger lifestyle decision, including relocating to an area with a lower cost of living, said CFP Ted Jenkin, the founder of oXYGen Financial and a member of the CNBC Financial Advisor Council.
    Meanwhile, any spending cuts should be applied to reducing credit card debt, McClanahan said. Consumers can use a debt repayment calculator to help set repayment goals, she said.
    2. Boost income
    Retirees can also consider going back to work at least part time to earn more income, McClanahan said.
    But there might be some “low-hanging fruit” retirees are overlooking, advisors said.
    For example, they may be able to sell valuable items accumulated over the years — such as furniture, jewelry and collectibles — perhaps via Facebook Marketplace, Craigslist or a garage sale, said Winnie Sun, the co-founder of Sun Group Wealth Partners, based in Irvine, California. She’s also a member of CNBC’s Financial Advisor Council.

    It’s alarming for retirees living on a fixed income.

    Bridget Bearden
    research strategist at EBRI

    Sometimes, retirees hold on to such items to pass them down to family members, but family would almost certainly prefer their elders are financially healthy and avoid living in debt, Sun said.
    Consumers can contact a nonprofit credit counseling agency — such as American Consumer Credit Counseling or the National Foundation for Credit Counseling — for help, she said.
    3. Reduce your interest rate
    Cardholders can contact their credit card provider and ask if it would be possible to reduce their interest rate, Sun said.
    They can also consider transferring their balance to a card offering a 0% interest rate promotion to help pay off their debt faster, Sun said.
    Cardholders may also transfer their debt into a home equity line of credit, or HELOC, which generally carries lower interest rates, though it may take a month or so to establish with a lender, Sun said. She recommended working with a financial advisor to analyze whether this is a good move for you: A HELOC can pose problems, too, especially for consumers who continue to overspend.
    Additionally, cardholders can determine if the taxes they’d pay on a retirement account withdrawal would cost less than their credit card interest rate, Jenkin said.
    “It might make sense to let the tax tail wag the dog, pay the taxes, and then pay off your debt, especially if you are at a 20%-plus interest rate,” Jenkin said. More

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    Big retirement rule changes are coming in 2025 — here’s how you can save more money

    FA Playbook

    Starting in 2025, the 401(k) employee deferral limit will jump to $23,500, up from $23,000 in 2024.
    While catch-up contributions for workers age 50 and older will remain at $7,500, investors age 60 to 63 can save more, thanks to Secure 2.0.
    The higher catch-up contribution for workers age 60 to 63 increases to $11,250 in 2025. These workers can defer a total of $34,750, which is about 14% higher than 2024.

    Baona | E+ | Getty Images

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    Starting in 2025, investors age 60 to 63 can make catch-up contributions of up to $11,250 on top of the $23,500 deferral limit. Combined, these workers can defer a total of $34,750 for 2025, which is about 14% higher than 2024.
    “This can be a great way for people to boost their retirement savings,” certified financial planner Jamie Bosse, senior advisor at CGN Advisors in Manhattan, Kansas, previously told CNBC.

    This can be a great way for people to boost their retirement savings.

    Jamie Bosse
    Senior advisor at CGN Advisors

    Roughly 4 in 10 American workers are behind in retirement planning and savings, primarily due to debt, insufficient income and getting a late start, according to a CNBC survey, which polled roughly 6,700 adults in early August.
    For 2025, the “defined contribution” limit for 401(k) plans, which includes employee deferrals, company matches, profit-sharing and other deposits, will increase to $70,000, up from $69,000 in 2024, according to the IRS.

    How much older workers save for retirement

    The 401(k) catch-up contribution change is “very good” for older workers who want to save more for retirement, said Dave Stinnett, Vanguard’s head of strategic retirement consulting.
    Some 35% of baby boomers feel “significantly behind” in retirement savings, according to a Bankrate survey that polled roughly 2,450 U.S. adults in August.
    “But not everyone age 50 or older is maxing out [401(k) plans] already,” Stinnett said.
    Only 14% of employees deferred the maximum amount into 401(k) plans in 2023, according to Vanguard’s 2024 How America Saves report, based on data from 1,500 qualified plans and nearly 5 million participants.
    The same report found an estimated 15% of workers made catch-up contributions in 2023.
    Deferral rates for 401(k) plans typically increase with income and age, Vanguard found. Participants under age 25 saved an average of 5.4% of earnings, while workers ages 55 to 64 deferred 8.9%. More

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    Here are the best ways to save money this holiday season, experts say

    With household budgets already strained, many Americans are concerned about how they’ll manage holiday spending this year.
    To that end, experts weigh in on the best ways to save money in the weeks ahead.

    As the U.S. presidential election laid bare, economic anxiety is top of mind.
    High costs have weighed heavily on household finances, with 2 in 3 Americans concerned about how they’ll manage holiday expenses, when the temptation to splurge is heightened.

    This year, holiday spending, between Nov. 1 and Dec. 31, is expected to increase to a record $979.5 billion to $989 billion, according to the National Retail Federation.
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    Even as credit card debt tops $1.14 trillion, holiday shoppers expect to spend, on average, $1,778, up 8% compared with last year, Deloitte’s holiday retail survey found.
    Meanwhile, 28% of holiday shoppers still have not paid off the gifts they purchased for their loved ones last year, according to a holiday spending report by NerdWallet. 

    How to save money over the holidays

    Heading into the peak holiday shopping season, there are a few steps you can take to help maximize your cash.

    1. Pay attention to holiday sales
    With Black Friday and Cyber Monday falling later on the calendar this year, “it’s a shorter holiday season and that will force the retailer’s hand to be pretty promotional in November,” according to Adam Davis, managing director at Wells Fargo Retail Finance.
    Major retailers tend to heavily discount some of their products as the holiday season unfolds. While some sales events earlier in the year are becoming more common, it makes sense for consumers to pay attention to what products are tagged for those events. 

    A shopper looks at clothes inside a store at Twelve Oaks Mall on November 24, 2023 in Novi, Michigan. 
    Emily Elconin | Getty Images

    “Retailers need to stay proactive and nimble to ensure they are not stuck over-inventoried after holiday, and you will see deeper discounts as we get closer to the holiday on items not moving off shelves,” Davis said.
    Nearly half, or 47%, of all consumers are waiting for discounts on clothes or accessories, followed by electronics, at 45%, according to Morning Consult.
    To snag the best price, shoppers can use online tools to track and search for sales products and items, said Sara Rathner, a credit card expert at NerdWallet. 
    2. Consider trading down
    Some shoppers are also more willing to alternate higher-cost products for cheaper or less expensive versions, Morning Consult found. 
    For instance, shoppers are more likely to trade down from high-end skin and hair care products to less expensive alternatives, said Sofia Baig, an economist at Morning Consult.
    “Maybe they’re not shopping for luxury items at Sephora, they’re going to Target instead to get something that is a little bit more in their budget,” she said.
    Whether that means trading down to a lower-priced retailer or specific brand, consumers are actively looking for bargains this year, Davis said.
    Gen Z and millennial shoppers, in particular, tend to often walk away from name brand products and “dupe” shop instead to save some cash. 
    Davis also recommends shopping secondhand to save on big-ticket items.
    3. Try ‘slow shopping’
    So-called “slow shopping” promotes the importance of taking time to think through each purchase to make more intentional buying decisions, according to consumer savings expert Andrea Woroch.
    “Slow shopping encourages consumers to think through each potential purchase rather than jumping on impulse,” Woroch said.
    “This allows you to be mindful about what you’re buying, why you’re buying and who you’re buying for while also giving you time to save up, compare prices and look for coupons,” Woroch added.

    In many cases, there are good reasons to wait.
    Slow shopping allows you to time your purchase based on when it’s on sale for the lowest price, Woroch said.
    Identifying and eliminating spending triggers can also help you avoid impulse spending that leads to debt, she said, such as unsubscribing from store emails, turning off push notifications in retail apps and deleting payment information stored online.
    4. Dog-ear this date for travel discounts
    While some people booked their travel plans for the season, about 45% of travelers have not purchased plane tickets yet because the price was too high, Morning Consult found.
    While mid-October may have been the best time to book your holiday travel, you might have one last chance. “Travel Tuesday,” or the Tuesday that follows Black Friday, is a date to pay attention to, according to Hayley Berg, lead economist at travel site Hopper. 
    In 2023, Travel Tuesday saw a spike in hotel, cruise and airline bookings by travelers in the U.S., according to McKinsey & Company.
    Some experts recommend booking a trip or experience in lieu of presents to keep the holiday expenses in check. “Spending time together is better than any gift you could give,” Woroch said.
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    Investors should stay with their long-term financial plans no matter who is in the White House, advisors say

    Feelings should not overshadow your focus when assessing the potential impact of a second Trump presidency on your finances, financial advisors say.
    Improving your personal economy is possible by taking better control of your money.

    A version of this article first appeared in CNBC’s Money 101 newsletter with Sharon Epperson, an eight-week series to improve your financial wellness with monthly updates. Sign up to receive these editions, straight to your inbox. 

    Stocks soared in the days after President-elect Donald Trump won the 2024 election, and the Federal Reserve announced another interest rate cut less than two days later.
    The Dow Jones Industrial Average, S&P 500 and Nasdaq markets reached record highs and their best week in a year. 
    Yet, Wall Street’s reaction to the election outcome does not reflect how many Americans feel about the state of their personal finances, some financial experts say. “Vibecession,” or the disconnect between the markets, the economy and people’s feelings about their financial standing, continues. 
    Feelings, however, should not overshadow anyone’s focus when assessing the potential impact of a second Trump presidency when it comes to finances, advisors say. 
    “While a new presidency may bring changes to the economic environment, it’s crucial to focus on financial strategies within our control,” said certified financial planner Rianka Dorsainvil, founder and senior wealth advisor at YGC Wealth and a member of the CNBC Financial Advisor Council. “Stick to your long-term financial plan, adjusting only when your personal circumstances or goals change.”

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    Consumers and investors have little or no control over government policies on tariffs, taxes, interest rates or the state of the economy. However, improving your personal economy is possible by taking better control of your money, experts say. 
    Here are five ways to improve your finances:
    1. Build an emergency fund
    Build up your emergency funds in a high-yield savings account. “Aim for three to six months of living expenses,” Dorsainvil said. “This financial buffer provides peace of mind and stability, regardless of broader economic conditions. It ensures you’re prepared for unexpected expenses or income disruptions.” 
    2. Increase savings goals
    Boost savings goals in accounts that also offer tax breaks. Compare tax advantages of traditional and Roth 401(k) plans and other workplace retirement savings accounts — and Roth IRAs, too.
    “If you’ve got a 401(k) plan with a matching contribution, if you put it in the stable value fund or the cash option and you put in $100 with each paycheck, you’re ahead of the game,” said CFP Lee Baker, founder of Claris Financial Advisors in Atlanta.

    Combination picture showing former U.S. President Donald Trump and U.S. President Joe Biden.

    3. Review benefits from employers
    During open enrollment, thoroughly review health insurance coverage options and other benefits, including flexible spending accounts and health savings accounts.
    FSAs and HSAs are tax-advantaged accounts for health expenses. Unlike FSAs that are “use it or lose it” savings vehicles generally for the calendar years, HSA funds roll over from year to year.
    The account comes with you if you change jobs and HSA money can be invested. HSAs also offer three ways to save on taxes: funds go in pretax, grow tax-free and you can withdraw money to pay for qualified medical expenses without paying taxes on it. 
    “They’re the perfect investment vehicle,” said Baker, who is also a member of the CNBC Financial Advisor Council. “Turbocharging it or putting as much money into as possible has always been our advice to the vast majority of clients.”
    4. Pay down debts
    If you’re dealing with credit card debt, experts say to take a break from using cards and work with a nonprofit credit counselor to develop a strategy to pay down your debt. You can find one through the National Foundation for Credit Counseling.
    “By reducing debt, you’re better positioned to adapt to potential changes in interest rates or economic policies,” Dorsainvil said.
    5. Look for ‘missing money’
    Another option is finding “missing money” or unclaimed assets from accounts you may have forgotten.
    Search for your “unclaimed property” on the National Association of State Treasurers’ missingmoney.com website or go directly to the state’s unclaimed property office. It may only take a few minutes to fill out a form to claim funds from an old bank or brokerage account. 
    The bottom line: don’t let short-term market reactions or speculative headlines scare you into decisions that may adversely affect your portfolio or wallet, Dorsainvil said.
    Instead, focus on fundamental financial practices that “provide a solid foundation to navigate any economic environment, regardless of who’s in the White House,” she added.
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    Here’s what the Trump presidency could mean for the housing market, experts say

    “We’re going to open up tracks of federal land for housing construction,” Trump said during a Aug. 15 news conference. “We desperately need housing for people who can’t afford what’s going on now.”
    While building more homes is the simpler answer to address the housing issue in the country, other promises Trump has made could deter affordability efforts, experts say.

    Scott Olson | Getty Images News | Getty Images

    President-elect Donald Trump wants to address housing affordability in the U.S. by fomenting the construction of new homes.
    “We’re going to open up tracks of federal land for housing construction,” Trump said during an Aug. 15 news conference. “We desperately need housing for people who can’t afford what’s going on now.”

    As of mid-2023, there has been a housing shortage of 4 million homes in the U.S., according to the National Association of Realtors.
    “It’s clear that the prescription for that crisis is more building,” said Jim Tobin, president and CEO of the National Association of Home Builders. 
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    There has been a small increase in new homes being built this year, but it’s still not enough to meet the high demand for housing, leaving a significant gap in the market where there are not enough homes available for buyers, experts say.
    Single-family housing starts in the U.S., a measure of new homes that began construction, grew to 1,027,000 in September, according to U.S. Census data. That is a 2.7% jump from August.

    While building more homes is the simpler answer to address the housing issue in the country, other promises Trump has made could deter affordability efforts, experts say.
    For instance, Trump has talked about enacting a mass deportation of immigrants in the U.S. But doing so might lead to higher building costs, as the construction industry depends on immigrant labor, said Jacob Channel, senior economist at LendingTree.
    He also claimed that he would pull down mortgage rates back to pandemic-era lows, although presidents do not control mortgage rates, experts say.
    Here’s how some of Trump’s policies could affect the housing market during his administration, according to experts:

    1. Deregulation to increase affordability

    At the end of Trump’s first presidency, he signed an executive order creating “Eliminating Regulatory Barriers to Affordable Housing: Federal, State, Local and Tribal Opportunities.” 
    “That could be a blueprint going forward,” said Dennis Shea, executive director of the Bipartisan Policy Center’s Terwilliger Center.   
    During his 2024 campaign, Trump called for slashing regulations and permit requirements, which can add onto housing costs for homebuyers. Experts say that regulatory costs trickle down to the prices homebuyers face.
    “We will eliminate regulations that drive up housing costs with the goal of cutting the cost of a new home in half,” Trump said in a speech at the Economic Club of New York on Sept. 5. 
    About 24% of the cost of a single-family home and about 41% of the cost of a multifamily home are directly attributable to regulatory costs at the local, state and federal level, Tobin said. 
    “If we reduce the regulatory burden on home construction or apartment construction, we’re going to lower costs [for] the consumer,” Tobin said.   

    2. Impacts on construction workforce

    Trump has also blamed rising home prices on a surge of illegal immigration during the Biden administration. However, experts say that most undocumented immigrants are not homeowners.
    Instead, they live in homes owned by U.S. citizens, Channel said. If a mass deportation were to happen, such homes would remain occupied, he added.
    Yet, proposals like mass deportations and tighter border control could impact housing affordability, Tobin said.
    About a third, or 31%, of construction workers in the U.S. were immigrants, according to the NAHB.
    “Anything that threatens to disrupt the flow of immigrant labor will send shock waves to the labor market in home construction,” Tobin said. 
    It’s been difficult to recruit native-born workers into the construction industry, experts say.
    According to a 2017 NAHB survey, construction trades are an unpopular career choice for young American adults. Only 3% showed interest in the field, the poll found.

    Therefore, a mass sweeping of available workers can create a labor shortage in construction. And with fewer workers, wages might increase, which “will likely be passed onto consumers” through higher home prices, Channel said.
    What’s more, it will take longer for construction companies to complete housing projects and therefore slow down efforts to increase supply, he added.
    While “we are doing a better job” training the domestic workforce through trade schools, apprenticeship programs and other initiatives, the industry still heavily relies on immigrant labor, Tobin said.

    3. Tariffs could hike building costs

    Trump has proposed a 10% to 20% tariff on all imports across the board, as well as a rate between 60% and 100% for goods from China.
    A blanket tariff at 10% to 20% on raw building materials like lumber could push housing costs higher, as well as materials for home renovations, experts say. 
    “Any tariffs that raise the cost of the products are going to flow directly to the consumer,” Tobin said.
    On average, construction costs for single-family homes is around $392,241, according to a data analysis by ResiClub, a housing and real estate data newsletter.
    “It depends on what the tariffs look like,” said Daryl Fairweather, chief economist at Redfin. “There could be varying impacts.”

    Overall, homebuilders expect to construct about 1.2 million new single-family homes and around 300,000 multifamily units over the next year, Tobin said.
    “We’re not quite building back up to the pace that we need to, but it’ll be higher,” he said. “It’ll be higher than this year.”
    It might be too soon to tell if the Trump administration will prioritize housing costs as much as a Harris administration would have. And the aid Trump has mentioned might not help densely populated areas, said Fairweather.
    Trump mentioned plans to release federal lands for housing, but federal lands tend to concentrate in rural areas, she said.
    “That doesn’t do anything for these densely populated blue cities that really need the most help,” Fairweather said.

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    Here’s what a new Trump administration could mean for your money, financial advisors say

    FA Playbook

    Now that Donald Trump is set to occupy the Oval Office for a second term, many Americans are wondering what that means for their money.
    Financial advisors are cautioning against making any sudden moves in response to the news. Instead they say a wait-and-see approach is best.
    Here’s what advisors say about how the president-elect’s proposed policies may impact the markets, tax policy and inflation.

    Trump supporters take photographs near the U.S. Capitol building as the sun sets the day U.S. President Elect Donald Trump was declared the winner of the presidential election in Washington, U.S., November 6, 2024. 
    Leah Millis | Reuters

    Now that Donald Trump has been elected president, many individual investors are wondering what that means for their money.
    The markets rallied this week on news of Trump’s win, with the Dow Jones Industrial Average climbing past 44,000 for the first time on Friday.

    Yet, when it comes to long-term performance of the markets and policies that Trump proposed on the campaign trail, financial advisors say it’s best to take a wait-and-see approach before making any big money decisions.
    “If clients have a financial plan, have a long-term strategy that meets their goals, our best advice is to stay with that plan and strategy,” said Jude Boudreaux, a certified financial planner who is a partner with The Planning Center in New Orleans.
    “Then we’ll make adjustments as more details come forward,” said Boudreaux, who is also a CNBC FA Council member.
    Lee Baker, a CFP and owner of Claris Financial Advisors in Atlanta, said he’s also told clients not to make wholesale financial changes now.
    “That’s not to suggest that, based on the policies, that there might not be tweaks or tilts, depending on how things play out,” said Baker, who is also a CNBC FA Council member.

    Markets may be volatile

    The markets reacted favorably to Trump’s win. However, it remains to be seen whether that upward trajectory will continue.
    “One thing that I’ve cautioned people about is don’t necessarily confuse the market pop that we saw being an affirmation of all things Trump,” Baker said.
    Markets generally don’t like uncertainty, and experts say the post-election rally is evidence of that.

    “The markets could be reacting with relief that this toss-up election actually really did produce a clear, undisputed winner,” said CFP Stacy Francis, CEO of Francis Financial, based in New York City.
    Many investors expect Trump to lead with faster economic growth and more market friendly policies, said Francis during a Friday webcast on what Trump’s presidency could mean for investors’ money. Francis is also a CNBC FA Council member.
    For individual investors, it’s still best to base asset allocations on their individual situation, such as personal goals, time horizon and risk tolerance, said Marguerita Cheng, CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.
    Those factors should not change based on the outcome of the election, said Cheng, a CNBC FA Council member.
    Because Trump is expected to be easier on regulation, some investors expect to see a boost for energy, financial and industrial stocks. To mitigate risk, individuals may get exposure to those sectors by investing in a broad-based index, she said.
    Ultimately, market moves do not necessarily depend on who is president.
    “The stock market tends to perform well no matter which party holds the White House,” Francis said.

    Lower taxes could be extended

    The Tax Cuts and Jobs Act, which was enacted in 2017 during Trump’s first presidential term, ushered in lower tax rates. That legislation — which included a higher standard deduction, a $2,000 child tax credit and a $10,000 cap on the state and local deduction — is due to expire at the end of 2025. With Trump’s re-election, many of the tax changes could be extended, advisors say.

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

    Both individuals and corporations are expecting tax cuts with Trump’s win, Francis noted during her Friday webcast, which may have also been a factor in this week’s stock market surge.
    “These tax cuts are expected to lead to somewhat faster economic growth in both 2026 as well as 2027,” Francis said.
    On the campaign trail, Trump also floated the idea of eliminating taxes on Social Security benefits, as well as on tips and overtime pay. While those policies would put more money in Americans’ pockets, Francis noted, other experts say it’s too soon to count on those changes.
    “You don’t know what the law or policy is going to be if it hasn’t even been properly drafted yet, much less adopted,” David Haas, a CFP and owner of Cereus Financial Advisors in Franklin Lakes, New Jersey, told CNBC.com earlier this week, referring to the proposed Social Security changes.

    Inflation could go up

    The Federal Reserve has helped to bring the pace of inflation down, close to its 2% target.
    Yet, some policies proposed by Trump may risk elevating inflation.
    Tariffs could prompt prices on imported goods and services to go up. Inflation may also increase if individuals have more money in their pockets due to Trump’s pro-business policies as well as tax cuts, Francis said.
    That could change the trajectory of the Federal Reserve’s interest rate policy. The central bank cut interest rates by 25 basis points on Thursday. However, any coming moves in 2025 could be impacted by Trump’s leadership. More

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    Young adults in Puerto Rico are struggling financially. Here’s what that means and why some return

    About 59% of adults ages 18 to 29 in Puerto Rico are financially fragile, compared to 47% of those 30 to 54 and 41% of those 55 or older on the island, the report titled “An Overview of Factors Tied to the Financial Capability of Adults in Puerto Rico” found.
    “It highlights things that people feel and experience, but that are hard to find numbers for,” said Harold Toro, Research Director and Churchill G. Carey, Jr. Chair in Economic Development Research at the Center for a New Economy.

    Parade attendees wave Puerto Rican flags on Fifth Avenue in Manhattan during the annual Puerto Rico Day Parade. 
    Luiz C. Ribeiro | New York Daily News | Tribune News Service | Getty Images

    Young adults in Puerto Rico are on shaky financial ground, a study finds.
    About 47% of respondents in the U.S. territory are financially fragile, meaning they lack confidence in their ability to absorb a $2,000 economic shock, according to a September report from the Financial Industry Regulatory Authority Investor Education Foundation.

    “This is the first time a study of this nature has been done on Puerto Rico,” said report co-author Harold Toro. He is also the research director and chair in economic development research at the Center for a New Economy, an economy-focused think tank based on the island.
    “It highlights things that people feel and experience, but that are hard to find numbers for,” Toro said.

    More than half, or 59%, of adults ages 18 to 29 on the island are financially fragile, compared to 47% of those ages 30 to 54 and 41% of those age 55 or older, FINRA found. The organization in 2021 polled 1,001 adults who live in Puerto Rico.
    “The financial fragility and capability more broadly in Puerto Rico … it’s pretty dire when we compare it to the mainland United States,” said report co-author Olivia Valdés, senior researcher at the FINRA Investor Education Foundation.
    Financial fragility, particularly for young adults, is much higher in Puerto Rico than on the mainland U.S. More than half, or 59%, of 18 to 29-year-olds are financially struggling in Puerto Rico compared to 38% of the same age group in the U.S., according to FINRA data.

    About 30% of U.S. residents overall were considered financially fragile in 2021, according to FINRA’s latest Financial Capability in the United States report, which polled 27,118 U.S. adults in 2021. The Puerto Rico survey was separate, but fielded at the same time.

    The younger generation has experienced financial strain for over two decades.

    Vicente Feliciano
    founder and president of Advantage Business Consulting, a market analysis and business consulting firm in San Juan, Puerto Rico

    Many young adults leave Puerto Rico to try and improve their financial situation, by seeking education or employment in the United States or in other countries. For the young adults who stay, the generation must contend with an economy under recovery, an electric grid hanging on by a thread and sky-high costs for basic needs like housing.
    Understanding why young Puerto Ricans are financially fragile could help with efforts to retain younger residents and bring working professionals back to the island, experts say.
    But “living in Puerto Rico can’t just be a matter of survival, it also has to be a place where you can thrive,” said Fernando Tormos Aponte, an assistant professor of sociology at the University of Pittsburgh.

    Young Puerto Ricans are ‘having a tougher time’

    To be sure, a certain degree of financial strain is typical for people just starting out. Generally speaking, financial standing gets better with age.
    But financial fragility is more prominent among young adults in Puerto Rico compared to the U.S.
    “People who are younger seem to be … having a tougher time,” Toro said.
    Adults age 18 to 29 in Puerto Rico are less likely than adults ages 30 and over to report having emergency and retirement savings, FINRA found.

    Less than a quarter, 22%, of 18- to 34-year-olds in Puerto Rico have any type of retirement account. Among that age group on the mainland U.S., 43% do, according to the broader FINRA analysis.

    Young adults in Puerto Rico are also more likely than older residents to have student loan and medical debt.

    Younger generations only know a Puerto Rico in crisis

    Puerto Rico’s economy “is doing quite well,” said Vicente Feliciano, founder and president of Advantage Business Consulting, a market analysis and business consulting firm in San Juan, Puerto Rico.
    The job market has improved, and salaries are growing at a faster pace than inflation, thanks to the increase in minimum wage, Feliciano said. While the federal minimum wage in the U.S. is $7.25, it’s $10.50 in Puerto Rico.

    Employment in the private sector was at a 15-year high since mid- 2022, according to the Federal Reserve Bank of New York.
    Still, the median household income on the island was just $25,621 in 2023, less than a third of the $80,610 median household income in the mainland U.S., per Census data.
    Even though the last couple of years have been better, for adults under 40 in Puerto Rico, “most of their working lives have been overshadowed by the depression that Puerto Rico fell through from 2006 through 2015,” Feliciano said.
    “The younger generation has experienced financial strain for over two decades,” he said. “They have seen many of their friends leave the country. They are frustrated. They blame the traditional [political] parties for something that may or may not be their fault, but is very real.”

    ‘We want people to come back’

    Alejandro Talavera Correa moved to Washington, D.C. in 2019 for a job in finance. The role and pay were too good to pass up, he said: “People have to leave in order to get a competitive salary.”
    But within a few years, he found himself moving back to Puerto Rico.
    Talavera Correa, now 28, found an opportunity to return to Puerto Rico through El Comeback, an online job board that is tailored to include job postings that meet market salary standards or offer benefit packages for prospective applicants.

    “We want people to come back,” said Ana Laura Miranda, project manager of El Comeback. “We need to be realistic. We need to invest in employees and if we don’t have the salaries, then we need to create benefit packages.”
    According to Miranda, the audience that mostly uses the platform are in their late 20s to those in their mid to late 30s. They vary from single adults to families with kids.
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    The initiative is still in its early stages, and has attracted and retained 51 candidates, Miranda said.
    Candidates are often looking to be close to family or regain the sense of belonging or warmth that comes with being in Puerto Rico, said Miranda. But young workers returning to Puerto Rico may face new financial challenges.
    “There’s always going to be a certain pay cut,” as six figure salaries are not as common on the island as they are in the U.S. And “Puerto Rico is not cheap,” said Miranda. “The cost of living … it’s real. We cannot miss that.”
    The island — like the mainland U.S. — has a housing market that’s unaffordable for many residents, and having a car is essential to get around because public transportation services can be unreliable.

    Talavera Correa was fortunate to buy a condo during the pandemic when mortgage rates were low.
    “If you don’t have that kind of money, you’re essentially stuck either renting or living with your parents,” said Talavera Correa.
    Yet, like most Puerto Ricans on the island, he still struggles with regular blackouts and electricity problems. Those send him to his mom’s house, where service is more reliable due to her solar panels.
    “Blackouts and problems with electricity are quite recurrent,” said Advantage Business Consulting’s Feliciano. “Electricity is a major distinction between the U.S. and Puerto Rico and it hits the younger generation harder than it hits the wealthier, older generation.” 

    Despite the challenges, Talavera Correa is happy with his decision.
    “It’s essentially the quality of life that you can have here in Puerto Rico. You have the beaches, everything outdoors, and the opportunity that you can have to have a happy life,” he said.
    “But if that comes with economic restraints, or just overall living situations regarding the electricity, water … that disappoints a lot of people [who] come back.” More