Investing

A Norfolk Southern rail terminal in Austell, Georgia, US, on Tuesday, July 25, 2023.
Elijah Nouvelage | Bloomberg | Getty Images

Company: Norfolk Southern (NSC)

Business: Norfolk Southern is a railway company. It transports a variety of raw materials, intermediate products and finished goods in the United States.
Stock Market Value: $57.56B ($254.83 per share)

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Norfolk Southern’s performance over the past year

Activist: Ancora Advisors

Percentage Ownership:  ~1.75%
Average Cost: n/a
Activist Commentary: Ancora is primarily a family wealth investment advisory firm and fund manager with $9 billion in assets under management, with an alternative asset management division that manages approximately $1.3 billion. It was founded in 2003 and hired James Chadwick in 2014 to pursue activist efforts in niche areas like banks, thrifts and closed-end funds. Ancora’s website lists “small cap activist” as part of its products and strategies, and its strategy has evolved in recent years. From 2010 to 2020, the majority of Ancora’s activism was 13D filings on micro-cap companies. In the past few years, the firm has taken a greater number of sub-5% stakes in larger companies. The alternatives team has a track record of using private and when necessary, public engagement with portfolio companies to catalyze corporate governance improvements and long-term value creation.

What’s happening

The Wall Street Journal reported on Feb. 1 that an investor group led by Ancora has taken a position in Norfolk Southern and plans to run a proxy fight to replace a majority of the company’s board and to replace the CEO, Alan Shaw.

Behind the scenes

Ancora is a $9 billion wealth advisory firm that has been using activism more often and has developed into an activist to be respected and feared. With an approximate $1 billion position in NSC, the firm likely has a partner who has shared in the investment and is relying on Ancora to lead the activist effort.

Norfolk Southern (NSC) is a Class I railroad operating freight trains in the United States. Railroads have been frequent targets of activist investors for many years with TCI at CSX, Pershing Square at Canadian Pacific, Mantle Ridge at CSX, TCI at Canadian National and now Ancora at Norfolk Southern. One of the reasons why railroads are so frequently targeted by activists is because they are relatively simple businesses. When they underperform their peers, it is easy to understand why and generally simple to fix.
Norfolk Southern has materially underperformed the markets and its peers over the past one, three and five years. When you see that in a railroad company, there is one key metric to look at, which drives railroad profitability and shareholder return: It’s the operating ratio. The operating ratio is the company’s operating expenses as a percentage of revenue. When Pershing Square and the late railroad veteran Hunter Harrison went to Canadian Pacific, CP had an operating ratio of 81% and Harrison was able to get it down to 64.7%. When Mantle Ridge and Hunter Harrison came into CSX, the company had an operating ratio of 70%, which Harrison was able to get down to 58.4%. NSC’s operating ratio is almost 69% and the right management team with the right strategy should easily be able to get the operating ratio down close to 60%.
The strategy that Hunter Harrison and his “cubs” have so successfully been able to implement is precision scheduled railroading, or PSR. This strategy prioritizes consistent, reliable, predictable service through scheduling and running fewer trains. It reduces switching costs, which also leads to fewer safety risks, and the move has worked pretty much every time it has been implemented. But, for some reason, NSC utilizes a resilience model that does not prioritize cost reductions; they are the only publicly traded Class I rail company that does not utilize the PSR strategy. Moreover, a resilience model enables more short-haul and lower margin intermodal transportation: This uses two modes of transportation, like rail and truck or rail and water. Under a PSR strategy, the company would also be able to improve its transportation mix to more higher margin routes and merchandise categories.
There is no need to reinvent the wheel here; the roadmap has already been drawn at Canadian Pacific and CSX. Ancora is likely to follow the same strategy here. First, get a majority – or close to a majority – of the board. Second, bring in a CEO with experience successfully implementing a PSR strategy. Ancora is nominating a majority slate of directors that include former Ohio governor John Kasich and former Kansas City Southern executive Sameh Fahmy. The firm will likely include at least one Ancora representative on the slate who we would expect to be Jim Chadwick, signaling Ancora’s commitment to be a long-term shareholder here. Just because the firm is nominating a majority slate does not mean that there is no room for settlement below a majority. Ancora does not need a majority of the board to be successful here. At Canadian Pacific, Pershing Square got less than a majority. At CSX, Mantle Ridge got five of 13 directors. But the key element in both of those situations is that the CEO was replaced. That is something that we believe will have to happen here for Ancora to be successful.
We would expect to see the company come to the table for settlement discussions, but short of a settlement, we have no doubt that Ancora will take this to a proxy fight and win. Inside the activist world, and among investors who were shareholders of Canadian Pacific and CSX, this is as sure of an activist strategy as there is. Three of NSC’s top shareholders are also former investors of CSX when Mantle Ridge created so much value for them with this strategy. Further, there are several other hedge funds that own NSC, and we would expect them to support Ancora’s director slate.
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

Fluence is a leader in the rapidly growing energy storage market.
CEO Julian Nebreda said the company is preparing for “hypergrowth” as wind and solar play a growing role in the U.S. power grid.
Fluence’s stock is up about 13% this week despite reporting a net loss for its most recent quarter.
Nebreda said Fluence is seeing strong demand and will be profitable for the full year.

Rows of cabinets containing lithium ion batteries supplied by Fluence, a Siemens and AES Company, are seen inside the AES Alamitos Battery Energy Storage System, which provides stored renewable energy to supply electricity during peak demand periods, in Long Beach, California on September 16, 2022. 
Patrick T. Fallon | AFP | Getty Images

Energy storage leader Fluence is seeing strong demand from the power hungry utility sector and will become profitable this year, CEO Julian Nebreda told CNBC in an interview Friday.
Fluence shares jumped 13% this week despite reporting a net loss in its most recent quarter. Orders, however, are strong, with the company booking a record quarterly intake of $1.1 billion, boosting its contracted backlog to an all-time high of $3.7 billion.

Nebreda said Fluence is preparing for “hypergrowth” as wind and solar play a growing role in the U.S. power grid. Solar energy, for example, is collected during the day but consumption peaks in the evening. Fluence’s technology helps balance supply and demand by storing energy for later use.
“Our technology is fundamental to ensure that we can all take advantage of the great benefits of renewables,” Nebreda said. Fluence is the energy storage leader in the U.S., he said.
Fluence swung to net loss for the three months ending Dec. 31 after reporting a profit of $4.8 million in the prior quarter. The $25.6 million loss the company reported was 31% lower than its loss in the year-ago period.
Fluence’s gross profit margin is now in the double digits, 10.5% on an adjusted basis, and its cost structure is stable, Nebreda said. About 70% of Fluence’s forecast revenue of $2.7 billion to $3.3 billion is backlogged toward the end of the year, the CEO said.
“As the revenue goes up during the year, we will become profitable and we will be profitable for the full year,” Nebreda predicted. Fluence expects $50 million to $80 in earnings before interest, taxes, depreciation and amortization in 2024.

Founded in 2018 by Siemens and AES, Fluence went public in October 2021 at $28 a share, quickly touching $35 on its first day of trading. The stock is down about 36% since then, to $22.43 at Friday’s close. Today, Siemens and AES still own 29% each, with the Government of Qatar controlling another 8%.

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Fluence shares over the past year.

Wall Street has grown bullish on Fluence with 73% of analysts rating the company’s stock the equivalent of buy, with an average price target of some $32, implying 43% upside from Thursday’s close.
“Fluence continues to experience robust growth momentum, boosted by solid market fundamentals for energy storage, favorable legislation such as the IRA, and improving supply chains,” James West, an analyst with Evercore ISI, told clients in a note Thursday, referencing the Inflation Reduction Act.
West said Fluence has a “clean path to profitability,” and his price target of $59 implies 163% upside from Friday’s close. That price target is the highest on Wall Street, according to FactSet.
Nebreda said the cost of energy has been a long-standing problem for utilities, but batteries are becoming more effective, less costly and less prone to safety issues.
Industry demand for energy storage will grow at a 27% compound annual rate over the next six years to hit 150 gigawatt hours by 2030, according to Bloomberg NEF. That is enough to power 15 million households for one year based on average consumption, according to Fluence.
“It’s an immense number,” Nebreda said. “We design our capabilities for hypergrowth.” More

Smart Tax Planning

A record 67.8 million Americans are expected to place an estimated $23.1 billion in bets on Sunday’s Super Bowl.
Whether you wager on the San Francisco 49ers or the Kansas City Chiefs, any money you win should be reported to Uncle Sam.

Travis Kelce of the Kansas City Chiefs, left, and George Kittle of the San Francisco 49ers stand on stage during the NFL’s Super Bowl Opening Night show at Allegiant Stadium in Las Vegas, Feb. 5, 2024.
Chris Unger | Getty Images Sport | Getty Images

Sunday’s Super Bowl between the NFL’s San Francisco 49ers and Kansas City Chiefs will take place in Las Vegas, the gambling capital of the nation.
And a record 67.8 million Americans are expected to place an estimated $23.1 billion in bets on the game, up from $16 billion in 2023, according to the American Gaming Association.

But if you wager money, keep in mind that the U.S. government expects to participate in your gains, said Mitchell Drossman, national director of wealth planning strategies at Bank of America.
“The IRS is your silent partner when it comes to anything that you win,” he said.
This year’s Super Bowl provides many opportunities to bet on the game, coin toss, half time or even Taylor Swift. Sportsbooks, for example, are offering wagers on bets such as how many times the pop star, who is dating Chiefs tight end Travis Kelce, will be shown on camera during the game telecast or whether she will get a mention in the MVP speech.
Most Americans — 42.7 million — are expected to place a traditional sports wager online, while 36.5 million will bet with friends or through a pool or squares contest.
Regardless of how you bet, the federal government will expect to see a cut of any proceeds, Drossman said.

All winnings must be reported for tax purposes

When you win a bet, there’s no amount too small that you can say, “that doesn’t need to be reported,” Drossman said.
For example, if you wager $100 on the game and win $1,000, the $900 difference belongs on your tax return, he said.

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In some cases, you may receive a Form W-2 G to report your gambling winnings. That generally applies to amounts of more than $600, according to Drossman.
And if you bet a larger sum, generally more than $5,000, there may be a mandatory tax withholding, he said.
Regardless of whether you receive a formal notice of your gains, you are obligated to disclose it to the IRS.
“Income is income,” Drossman said.

It may be possible to deduct losses

If you bet and lose, it may be possible to deduct those losses, Drossman said.
But the catch is you cannot deduct losses in excess of your winnings, he said. So while you can net your gains and losses on bets you’ve made throughout the year, you cannot go below zero, he said.
For casual gamblers to deduct their losses, they need to itemize their deductions rather than take the standard deduction.
Most filers do not itemize deductions because the standard deduction is so large. In 2024, it is $14,600 for single filers and $29,200 for married couples who file jointly.
When it comes to state tax returns, it’s important to note that some follow federal rules while others do not, Drossman noted. If you’re filing in a state that taxes only gross income and does not allow itemizing, only your winnings will be taxed, he said.

Professional gamblers face different rules

For people who are professional gamblers, where placing bets is not just a hobby or sporadic activity, the tax rules are slightly different, according to Drossman.
For those individuals whose gambling is a livelihood, trade or business, itemizing is not necessary. Instead, they would file a Schedule C to report their gains as business income.

In that case, there is a broader array of expenses that may be deducted, such as travel and hotel expenses, Drossman said.
Notably, you have to have a certain level of gambling activity to prove that it rises to the level of a trade or business, he said.
Currently, 38 states and Washington, D.C., have legal sports betting markets. The two states that are home to the teams playing in this year’s Super Bowl — California and Missouri — are among the remaining states that have not approved such gambling activity. More

Smart Tax Planning

Tax incentives to save in work retirement plans reduce federal tax revenue and don’t meaningfully change saving behavior, economists contend.
Limiting those perks can free up funds to shore up Social Security, they said.
But the plan has plenty of critics.

Wand_prapan | Istock | Getty Images

There’s no debate that Social Security’s funds — which are projected to become insolvent in the next decade — need fixing.
But a new research proposal published by the Center for Retirement Research at Boston College by experts at the opposite ends of the political spectrum has sparked considerable opposition.

The research comes from an unlikely pair — conservative economist Andrew Biggs, a senior fellow at the American Enterprise Institute, and left-leaning economist Alicia Munnell, director of the Center for Retirement Research. (The brief is based on a paper Biggs and Munnell co-wrote with Michael Wicklein, a research assistant at the Federal Reserve Bank of Boston.)
Together, they call for limiting current tax preferences for retirement savings plans, and instead redirecting those funds to help shore up Social Security.

How retirement plan tax incentives work

In 2024, the limit for total employee and employer contributions to a defined contribution plan such as a 401(k) is $69,000. Individuals who are 50 and over can put away an extra $7,500.
However, the limit for employee contributions is $23,000, or $30,500 for those who are 50 and up. Those contributions are typically eligible for tax deferrals, whereby the money saved now is not taxed until retirement.
Only high-income individuals tend to meet those thresholds.

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Individual retirement accounts also enable workers to put away up to $7,000 in pretax contributions, or $8,000 for those 50 and up.
The maximum contribution thresholds are adjusted each year.
In 2020, those tax preferences reduced federal income taxes by about $185 billion to $189 billion, the research found. That is equal to about 0.9% of gross domestic product, defined as the final goods and services produced in the U.S.
The tax incentives have “virtually no impact on retirement saving,” the CRR research concludes.
Meanwhile, Social Security’s combined trust funds are projected to run out in the early to mid-2030s.
By rolling back the tax incentives provided through defined contribution retirement plans, the money saved could be used to help fix a portion of Social Security’s funding gap, the researchers contend.
That would provide immediate funding to the program that provides the nation’s retirement, disability and family benefits, and give lawmakers more time to consider other changes such as tax increases or benefit adjustments that would have to be more gradually phased in, according to Biggs.

Losing tax breaks ‘would be harmful,’ critics argue

Biggs and Munnell’s research, published in January, has been the subject of considerable pushback that aims to poke holes in their conclusions and defend the current defined contribution system.
That includes response pieces published by the Mercatus Center at George Mason University, the Cato Institute and the National Association of Plan Advisors.
Without a tax benefit, workers will likely be reluctant to save with their employer plans, said Jason Fichtner, chief economist at the Bipartisan Policy Center and a co-author of the response published by the Mercatus Center.
“We now have an industry and a policy based on 401(k)s and defined contribution plans that has been, relatively speaking, successful,” Fichtner said.
“Does that help everybody? No,” he said. “Can we do better? Yes. Would it be helpful to get rid of it? No, it would be harmful.”

‘Rich people are going to do it anyway’

Despite the pushback, Biggs and Munnell both say they are holding firm to their stance.
Admittedly, it is one of the rare issues upon which the two experts concur.
“Our disagreements go back decades,” Munnell wrote in a recent blog post detailing their opposing stances on certain issues.
“Sometimes, however, we see things the same way,” Munnell wrote.
Neither Biggs nor Munnell are strangers to controversy.
Recently, Biggs’ views on the future of Social Security, specifically whether benefits should be cut or whether the program should be privatized, were called into question during a Senate Finance Committee hearing.
The testimony was part of a Senate hearing to consider Biggs’ nomination to the Social Security Advisory Board, an independent, bipartisan federal government agency. The SSAB is a technical advisory panel, notes Biggs, and has no power over Social Security policy put forth in Congress.

Munnell, for her part, has also received more attention, including a post on social media site X that received more than 750,000 views to the delight of her grandchildren.
It’s not the first time Munnell has been surprised by attention to her proposal. In the 1990s as a Treasury official in the Clinton administration, she was featured in a Star Magazine article with the headline, “Watch out! This White House whiz wants to tax your savings.”
Yet she hasn’t let go of the idea.
“I’m convinced that it’s a waste of money, that rich people are going to do it anyway,” Munnell said of retirement savings.
After reading the criticism, Biggs said he is also still confident in their ideas.
“By and large, I think 401(k)s have been good for retirement security,” Biggs said. “But what they confuse is the effect of the 401(k) plan versus the effect of the tax preference.”
While IRAs offer similar tax incentives, they are not as popular as 401(k) plans. The 401(k)s have an advantage because they are provided by an employer, who picks a plan provider and default investments, Biggs noted.
Those plans also encourage participation through automatic enrollment, which tends to have a bigger effect than the tax incentives, he said.
“A tax preference that doesn’t affect behavior isn’t doing what you want it to do,” Biggs said. More

Smart Tax Planning

A $7,500 tax credit for new electric vehicles became available as a point-of-sale discount from car dealers in January 2024.
Previously, buyers had to wait until filing an annual tax return the year after purchase to claim a financial benefit.
Not all car dealers are participating yet.

Halfpoint Images | Moment | Getty Images

Consumers no longer have to wait to file their annual tax returns to get a tax break for the purchase of a new electric vehicle.
At the start of 2024, the federal “new clean vehicle” tax credit became available as a point-of-sale discount — worth up to $7,500 — at car dealerships.

That means participating dealers can give eligible consumers an immediate break on an EV’s purchase price, perhaps via a partial payment or down payment on the vehicle or a cash payment to buyers.
Buyers of used EV models are also eligible for an upfront price discount from dealers. That tax break for a “previously owned clean vehicle” is worth up to $4,000.
Prior to January, car buyers had to wait until tax season the year following their purchase to claim these tax credits.

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Aside from that delay, waiting until tax season carried an additional financial hurdle for consumers because the value of their total EV tax credit couldn’t exceed their annual tax liability, since the credit is “nonrefundable.”
That meant many consumers — especially lower earners, who tend to have smaller tax bills — didn’t qualify for the full $7,500.

Now, participating car dealers can pass along the credit’s full value regardless of a household’s tax liability, so long as the buyer and vehicle meet other eligibility criteria.
“It has so many benefits,” Ingrid Malmgren, policy director at Plug In America, said of the new rules. Plug In America is non-profit educational organization.
Consumers can still opt to receive the financial benefit at tax time instead of receiving it as an advance payment of the tax credit.

Sales reports submitted to the IRS indicate more than 70% of consumers have used the upfront option so far in 2024, according to Jan. 31 remarks from Lily Batchelder, assistant secretary for tax policy at the U.S. Treasury Department.
U.S. electric vehicle sales hit a record 1.2 million in 2023, up 46.3% from 2022, according to Kelley Blue Book.
The average consumer paid $50,798 for a new EV in December, down 17.7% from January 2023, Kelley Blue Book said. (That cost includes financial incentives.) By comparison, the average transaction price for all new vehicles in December was $48,759.

Not all EV dealers are participating yet

Maskot | Maskot | Getty Images

The Inflation Reduction Act, a landmark U.S. law to address climate change, turned the EV tax credit into an upfront discount starting in 2024 by creating a so-called “transfer” provision.
Consumers can choose to transfer the value of their tax credit to a car dealer, which would then be reimbursed by the IRS for fronting that money to consumers. The amount provided by dealers must equal the full amount of the tax credit available for the eligible vehicle, according to the Treasury Department.
Dealers must sign up via the IRS Energy Credits Online portal to facilitate these transfers. The Treasury opened registration to dealers and car manufacturers in November.
Not all car dealers have yet signed up. That means qualifying consumers who want an upfront EV discount may not be able to get one, depending on their seller.
As of Feb. 6, more than 11,000 dealers had registered in the IRS portal, according to a Treasury official speaking on background. Of those, 74% — more than 8,200 — are registered to make advance payments of transferred clean vehicle credits to consumers, the official said.

(Those two figures differ for a few reasons, the official said. For one, there’s a minimum 15-day waiting period for dealers to be able to provide point-of-sale discounts after registering. The IRS must also conduct manual reviews in some cases.)
For context, there were 16,839 franchised retail car dealers in the U.S. during the first half of 2023, according to the National Automobile Dealers Association.
There are also roughly 60,000 independent car dealers, which largely sell used cars, according to a 2021 Cox Automotive estimate.
However, not all franchises or independent dealers necessarily sell EVs.

Not all EVs are eligible for a tax credit

And not all EVs are eligible for a tax break.
The Inflation Reduction Act has manufacturing requirements for new EVs that limit (temporarily, most likely) the models that qualify for a full or partial tax break. Dealers who sell non-qualifying models don’t have an incentive to yet sign up for IRS Energy Credits Online, Malmgren said.
There are 27 new EV models currently available for a full or partial tax break in 2024, according to the U.S. Energy Department. They’re manufactured by Chevrolet, Chrysler, Ford, Jeep, Lincoln, Rivian, Tesla and Volkswagen.
At present, there’s not a database where consumers can search for car dealers that have registered to offer a point-of-sale EV discount, Malmgren said.
“There’s not really any way to know, unless it’s listed on the dealer’s website or if you call a dealer,” she said.
Consumers can ask respective dealers if they’re registered with the IRS to offer the point-of-sale tax credits, Malmgren added. Phrased differently, they can also inquire if the dealer offers advance payments of the $7,500 EV tax credit or a transferrable EV tax credit, she said.

Watch out for pitfalls

Not all consumers qualify for a tax break, either.
The EV tax credit carries some eligibility requirements for consumers. Household income must fall below certain thresholds, for example. The requirements vary for new and used EV purchases.
Buyers will need to sign an affidavit at car dealerships affirming their annual income doesn’t exceed certain eligibility thresholds. Making an error would generally require consumers to repay the tax break to the IRS.
Buyers must file an income tax return for the year in which they transfer their EV tax credit to a dealer. Buyers should make sure to get a copy of a successfully submitted seller report from their car dealer, which consumers would then file with their tax return, Malmgren said. More

By some measures, millennials lag on retirement preparedness and net worth relative to older generations such as Gen X and baby boomers.
There are many reasons for this, such as a shift away from pensions toward 401(k) plans and high student debt burdens.
However, there are also reasons for optimism, such as advances in 401(k) plan design.

JGI/Jamie Grill | Blend Images | Getty Images

Millennials’ retirement prospects seem rockier than those of older generations of Americans.
That’s largely a function of long-term policy changes such as a later age for full Social Security benefits and a shift to 401(k)-type plans, longer average lifespans and a bigger student debt burden relative to cohorts such as Generation X and baby boomers, according to retirement experts.

However, there’s room for optimism, because younger households have some advantages that may allow them to make up lost ground.    
“Millennials are behind,” said Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute. “But they have time to catch up, too.”
Millennials, a cohort born from roughly 1981 to 1996, are the nation’s largest adult generation. They’ll be 28 to 43 years old this year.
By comparison, individuals in Gen X were born from 1965 to 1980, and baby boomers from 1946 to 1964.

‘Deteriorating’ retirement outlook

About 38% of early millennials, those born in the 1980s, will have “inadequate” retirement income at age 70, according to projections from a 2022 Urban Institute study.

By comparison, 28% to 30% of early and late boomers and 35% of early Gen Xers are projected to have inadequate income, according to the study. It measures income from Social Security, other government cash benefits, earnings, pensions and 401(k)-type plans.

“We do see the retirement outlook deteriorating for future generations,” including millennials, said Richard Johnson, director of Urban’s retirement policy program and co-author of the report.
The Urban study measures income inadequacy in two ways: either an inability to replace at least 75% of one’s pre-retirement earnings (i.e., a decline in living standards), or income that falls in the bottom quarter of the annual U.S. average wage (i.e., not being able to meet basic needs), Johnson said. It assumes all cohorts will get full Social Security benefits under current law.   
Early millennials of color, those who aren’t married, and individuals with little education and limited lifetime earnings are in an “especially precarious” position, according to the Urban report.

Millennials’ student loans dent their net worth

A 2021 paper by the Center for Retirement Research at Boston College had similar findings.
While millennials resemble boomers and Gen Xers in many ways — they have comparable homeownership, marriage rates and labor-market experience at similar ages, for example — they’re “well behind” on total wealth accumulation, CRR said.
For example, millennials ages 34 to 38 have a net-wealth-to-income ratio of 70%, much lower than the 110% and 82% for Gen X and late boomers, respectively, when they were the same age, according to its report. Likewise, net wealth for 31- to 34-year-olds is 53% of their annual income, versus 76% and 59% for similarly aged Gen Xers and boomers, respectively.
The primary reason for the wealth gap: student loans, CRR found.

Millennials are behind. But they have time to catch up, too.

Craig Copeland
director of wealth benefits research at the Employee Benefit Research Institute

More than 42% of millennials ages 25 to 36 have student debt, versus 24% of Gen Xers at that age, according to a 2021 Employee Benefit Research Institute study.
Household wealth for the typical millennial household was about three-quarters that of Gen X at the same ages ($23,130 vs. $32,359, respectively), despite millennials having more home equity and larger 401(k) balances, EBRI found.
“Student loans are really taking a dent out of [millennials’] net worth,” said Anqi Chen, a co-author of the 2021 CRR report and the center’s assistant director of savings research. “It’s unclear how that will play out in the long run.”
To that point, 58% of millennials say debt is a headwind to saving for retirement, compared with 34% of boomers, for example, according to an annual poll by the Transamerica Center for Retirement Studies.

Why pensions provided more security

Millennials have other disadvantages compared with older generations.
For one, longer lifespans mean they must stretch their savings over more years. Out-of-pocket health-care costs and those for services such as long-term care have spiked, and they’re more likely to have children at later ages, experts said.
Further, while older workers with access to workplace retirement plans relied on pension income, workers today, especially those in the private sector, largely have 401(k)-type plans.
“Pensions started to go away in the mid-’90s, when Gen Xers were just starting in the workforce and millennials were still in grade school,” Copeland said.
More from Personal Finance:Why working longer is a bad retirement planThis account is like an ‘extra strength’ Roth IRAAre U.S. seniors among the developed world’s poorest?
Pensions give a guaranteed income stream for life, with contributions, investing and payouts managed by employers; 401(k) plans offload that responsibility onto workers, who may be ill-equipped to manage it.
In 2020, 12 million private-sector workers were actively participating in pensions, while 85 million did so in a 401(k)-type plan, according to EBRI. 
While workers can potentially amass a larger nest egg with a 401(k), the “big issue” is that benefits don’t accrue automatically as with a pension, Copeland said.

“The old pension system didn’t work for everyone,” Johnson said. “But it did provide more security than the 401(k) system does today.”
Meanwhile, the last major Social Security overhaul, in 1983, gradually raised the program’s “full retirement age” to 67 years old. This is the age at which people born in 1960 or later can get 100% of their earned benefit.
That increase, from age 65, delivers an effective 13% benefit cut for affected workers, according to the Center on Budget and Policy Priorities.
Congress may deliver more benefit cuts to shore up Social Security’s shaky financial footing; such reductions would likely affect younger generations.

Millennials have advantages, too

Of course, millennials also have advantages that mean today’s gloomy retirement prospects won’t necessarily become reality.
For one, while millennials shoulder more student debt, they’re also more educated. That will make it easier to save for retirement, according to a Brookings Institution report. Higher educational attainment generally translates to higher wages; higher earners also tend to save more of their income, be healthier, and have less physically demanding jobs, it said.
Pensions also generally incentivize retirement at a relatively early age, meaning 401(k) accountholders may stay in the workforce longer, making it easier to finance their retirement, according to the report’s authors, William Gale, Hilary Gelfond and Jason Fichtner.

The old pension system didn’t work for everyone. But it did provide more security than the 401(k) system does today.

Richard Johnson
director of the Urban Institute’s retirement policy program

401(k) plans are also adapting to boost participation and savings for covered workers.
For example, automatic enrollment and automatic contribution increases have grown more popular with employers. A recent law, Secure 2.0, also made it easier for workers to receive a 401(k) match from their employer while paying down student debt.
Vanguard Group, an asset manager and retirement plan provider, found that 401(k) enhancements have helped put a subset of millennials, ages 37 to 41, ahead of older cohorts in retirement preparedness. For example, the typical “early” millennial is projected to replace 58% of their job earnings with retirement income, relative to 50% for late boomers, ages 61 to 65, according to a recent Vanguard report.
So, while there’s cause for concern, there’s also room for optimism, experts said.
“You’re not really going to know for 40, 50 years” how this plays out, said Copeland.

What to do if you’re behind on retirement savings

Young savers who feel behind on building their nest egg should try increasing their savings incrementally, according to Sean Deviney, a certified financial planner based in Fort Lauderdale, Florida.
The goal is to eventually save at least up to your full company matching contribution; retirement planners generally recommend contributing at least 15% of pay to a 401(k), between a worker’s and company’s contribution.
Savers who can’t do that should start small instead of forgoing saving entirely, Deviney said.
“Even if you just start with 1% of pay — one penny on every dollar — it starts that automated savings process for you,” Deviney said. “If you do it in small steps, it’s much easier than trying to do some massive change.”

Automate savings to the extent possible so it’s on autopilot, such as by turning on a function that automatically escalates savings by 1% or more each year, he added.
However, households should generally first prioritize paying down “bad” debt, such as credit card balances, which carry a high interest rate, Deviney said. Build up a few months of emergency savings and make sure you’re not spending more than you make each month; otherwise, households may more readily turn to credit cards to fund their lifestyle.
Further, don’t forgo your retirement savings to save for a child’s college education, he said. There are many ways to fund education — grants, scholarships and loans, for example — but “not a lot of ways to fund your own retirement,” he said.
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Couples who merge their finances fight less often about money than those who don’t, recent reports show.
Experts say there’s generally not a right or wrong way for couples to manage their assets — as long as they are on the same page.

Some say money is the root of all evil; it can also be the secret to a happy marriage.
Co-mingling accounts may lead to less frequent fights about money, according to a report by LendingTree. Of those who have at least a joint account, only 12% said financial issues caused problems with their partner, compared to 15% of those who don’t have a shared account.

Further, 58% of those who share at least one bank account said they stayed together after a financial argument, compared to only 47% of those who don’t have a shared account.
“If you want your marriage and relationship to survive, at least get a joint account,” said Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York.
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Of course, there can be varying degrees of financial entanglements. While most experts recommend some variation of having “yours, mine and ours,” completely combining finances is steadily becoming less common.
According to a recent report by Bankrate, 39% of couples who are married or living together completely combine their finances, while 38% have a mix of joint and separate accounts and 24% keep finances completely separate.

When broken down by generation, baby boomers are the most likely to rely just on a joint account, according to Bankrate’s survey of the more than 2,200 adults.
Alternatively, Gen Zers, or those between the ages of 18 and 27, are the most likely to keep their money completely separate from their partner, due, in part, to managing higher student loan balances among other financial constraints.

‘A marriage is also an economic union’

Francis, who is also a member of CNBC’s Financial Advisor Council, says she has witnessed this in her own practice, as well, particularly with more young adults choosing to keep their finances separate — “we just didn’t see that 40 years ago.”
Francis advises her clients to open a shared account to cover joint expenses or save for future plans. “Essentially what it does is create financial unity, they are working together toward joint goals,” she said.
“A marriage is also an economic union and keeping your finances 100% separate doesn’t really fit with that definition,” Francis said.

Make a money date

Experts say there’s generally not a right or wrong way for couples to manage their assets — as long as they are on the same page.
“Whatever you decide, make sure you and your partner agree upon the framework,” said Ted Rossman, senior industry analyst at Bankrate. “Aim to schedule occasional money dates to check in on your progress toward short- and long-term financial goals.”
Francis also recommends “financial date nights” at least once a month. “Having open and honest conversations about money is absolutely fundamental to a long-term happy and healthy marriage.”
Money dates are great — just not on Valentine’s Day, advises Douglas and Heather Boneparth of The Joint Account, a money newsletter for couples. Douglas Boneparth is also a member of CNBC’s FA Council and president and founder of Bone Fide Wealth, a wealth management firm based in New York.
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Alzheimer’s affects 1 in 9 Americans age 65 and older — an estimated 6.7 million people.
Planning is not solely about us, but also the spouse and the children who must make difficult and often heartbreaking decisions about their loved one. 
I bear witness to how dementia affects responsible people who thought they had everything figured out.

Ivory Johnson, Sr., and Catherine Johnson
Courtesy Ivory Johnson

Dementia, according to the Mayo Clinic, is an umbrella term used to describe a group of symptoms affecting memory, thinking and social abilities and is caused most often by Alzheimer’s disease.
Alzheimer’s affects 1 in 9 Americans age 65 and older — an estimated 6.7 million people, about twice the population of Arkansas.

I often address elder care planning in my capacity as a financial advisor, because health-care expenses add up during retirement, some more than others, and in the case of my family it can seemingly happen overnight. My father went from playing golf with his buddies in 2020 to requiring around-the-clock care just two years later. 
This is not something I read in a textbook — I bear witness to how dementia affects responsible people who thought they had everything figured out.

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Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

Care costs can swiftly deplete savings 

A memory care center for dementia patients in northern Florida costs my family $6,700 a month. In Washington, D.C., where I live now, until I’m forced to relocate, that same facility would cost twice as much. My dad may be among the 6.7 million Americans living with dementia, but it is my aging mother who must now watch her retirement savings evaporate one monthly payment at a time.

Planning is not solely about us, but also the spouse and the children who must make difficult and often heartbreaking decisions about their loved one. 

Even those who have properly saved for retirement will see their accounts dwindle with all deliberate speed. After all, withdrawing $10,000 or more each month net of taxes to pay for a facility can devastate even the most responsible among the middle class. 
Medicaid will provide a nursing home if you run out of money, after the children have exhausted their own savings, but these facilities do not resemble the lifestyle you have likely become accustomed to. Moreover, the quality gap of a state-provided at-home nurse versus a private-pay service may be just as cavernous and unsettling. 

Proactive moves may help

Ivory Johnson with his father, Ivory Johnson, Sr.
Courtesy Ivory Johnson

There are two ways to protect your family and your finances from this awful disease.  
First, there are long-term care insurance policies that will pay for care once you are unable to perform two of six assisted daily living activities without assistance such as bathing or showering, dressing, getting in and out of bed or a chair, walking, using the toilet and eating. 
A policy can come in the form of straight long-term care insurance or as a hybrid life insurance policy. The former is less expensive with premiums that can be increased by the insurance company, while the latter has a death benefit if you never need long term care and premiums that cannot be increased, and as a result are more expensive.  
For instance, in 2022, the average annual premium for a straight long-term care insurance policy that pays $165,000 in benefits with a 5% inflation provision was $3,800 and $6,600 respectively for an average 60-year-old male and female, according to data from the American Association for Long-Term Care Insurance.
In contrast, a healthy 65-year-old client of mine purchased a hybrid long-term care policy with a $250,000 death benefit that would pay $200,000 in long-term care benefits, for $6,000 a year in premiums. As with all insurance, your health status will be reflected in the cost of coverage. 

Second, from a health standpoint, you can exercise, eat a more balanced diet, and attempt to reduce the stress that sends cortisol throughout the body. If one were to forecast future dementia diagnoses, they would only need to review the high-glucose diet many Americans consume.
In fact, recent research by Dr. Dale Bredesen, author of “The End of Alzheimer’s,” suggests that chronic inflammation from stress, diet and other lifestyle choices may play a role in how plaque builds up in the brain. Good health habits offer no guarantee that you won’t get dementia, but there’s reason to believe it will increase your odds of a favorable outcome. 
Once you consider the costs and the energy required to navigate dementia, a proactive attempt to prevent the wrath of this disease is not only sensible, but financially responsible. 
— By Ivory Johnson, certified financial planner and the founder of Delancey Wealth Management in Washington, D.C. He is a member of the CNBC Financial Advisor Council. More