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Over the holidays, the use of “buy now, pay later” loans hit an all-time high.
Because the lenders generally don’t report to the major credit-reporting companies, it’s hard to know exactly how much of this debt is currently out there.
These loans can also be hard for consumers to keep track of, which can lead to debt problems, experts say.

Some types of debt can haunt you.
“Buy now, pay later” loans, especially, can be hard to track, making it easier for more consumers to get in over their heads, some experts say — even more than credit cards, which are simpler to account for, despite sky-high interest rates.

Over the holidays, the use of installment payments hit an all-time high, up 14% year over year, according to Adobe’s latest online shopping data.
Buy now, pay later is now one of the fastest-growing categories in consumer finance, according to a separate report by Wells Fargo.

‘Phantom debt’ may mean people are more in the red

“Because no central repository exists for monitoring it, growth of this ‘phantom debt’ could imply total household debt levels are actually higher than traditional measures,” said Tim Quinlan, senior economist at Wells Fargo and co-author of the report.
Since buy now, pay later loans are not currently reported to major credit reporting agencies, that makes it a challenge for a lender to know how many loans a consumer has outstanding, Quinlan said. 
“It’s hard to know how much of this debt is out there,” said Ted Rossman, senior industry analyst at Bankrate. “It’s this kind of shadow debt that’s hanging over people.”

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There’s a reason that buy now, pay later companies, such as Affirm, Afterpay and Klarna, are so popular among shoppers.
“With credit card interest rates north of 20%, a BNPL [buy now, pay later loan] affords consumers access to capital without increased costs,” Quinlan said.
“What we have is a business model that is perfect for uncertain times,” Affirm co-founder and CEO Max Levchin said recently on CNBC’s “Squawk on the Street.”
However, managing multiple buy now, pay later loans with different payment dates can also be a challenge, Quinlan added.
“BNPL could lead to an increase in consumer debt, as consumers may be more likely to take on additional debt if they know they can spread out the payments,” he said. “You can bury yourself in low monthly payments.”

While the typical terms might break a purchase into four equal interest-free payments, not all buy now, pay later loans work that way.
“A lot of these plans are stretching on longer and even charging interest; I find that very ironic,” Rossman said. “It’s feeling more and more credit-card like — that can get people into trouble.”
In addition, if a consumer misses a payment, there could be late fees, deferred interest or other penalties, depending on the lender. 
Separate studies have also shown that installment buying could encourage consumers to spend more than they can afford on impulse purchases.
“This can lead to debt problems,” Quinlan said.

Buy now, pay later operates in ‘de facto stealth mode’

Buy now, pay later products are not regulated in the same way as credit cards, which means there may be fewer protections in place for consumers, Quinlan said. 
“More worryingly, BNPL does this in de facto stealth mode because it largely flies beneath the radar of both regulators and policymakers,” Quinlan said.

Meanwhile, the Consumer Financial Protection Bureau has opened an inquiry into buy now, pay later lenders.
The CFPB said it is particularly concerned about the lack of clear disclosures of loan terms as well as how these programs affect consumer debt accumulation, what consumer protection laws apply and how the payment providers harvest data.
“Until there is a definitive measure for it, there is no way to know when this phantom debt could create problems for the consumer and the broader economy,” Quinlan said.
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Federal Reserve officials expect three quarter-percentage-point cuts in 2024, but there’s lingering uncertainty over when, or if, those changes may occur.
With interest rates in limbo, savers may consider certificates of deposit, Treasury bills or money market mutual funds for short-term cash.

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After higher yields in 2023, investors are bracing for interest rate cuts that could put a damper on shorter-term savings.
Federal Reserve officials expect three quarter-percentage-point cuts in 2024, according to December meeting minutes released Wednesday. But there’s lingering uncertainty over when, or if, those changes may occur.

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With the Fed policy in limbo, savers have several options to consider for their cash, depending on their goals and timeline, explained Ken Tumin, founder and editor of DepositAccounts, which closely tracks rates.
Here are four of the best options for cash in 2024, according to Tumin and other financial experts.

1. Certificates of deposit

With interest rates in flux, you can lock in a higher yield for 2024 with a certificate of deposit, or CD, Tumin said.
CDs earn interest for a set period. Rates may be higher than savings accounts, but you’ll typically incur a penalty if you need the money before the CD matures.

Currently, the top 1% average rate for one-year CDs is above 5.5%, as of Jan. 4, according to DepositAccounts. But “as we get closer to the Fed rate cut, CDs will start going down,” Tumin said.

As we get closer to the Fed rate cut, CDs will start going down.

Founder and editor of DepositAccounts

The average penalty for a one-year CD is three months of interest, according to Tumin. But early withdrawal penalties can be higher, so it’s important to read the fine print.

2. Penalty-free certificates of deposit

If you may need the money in less than one year, you can opt for a penalty-free CD, which can “optimize yield without much work,” Tumin said.
Penalty-free CDs typically offer lower interest than a traditional CD, but you may find one at your current bank with a higher rate than your savings account. Plus, there’s no early withdrawal fee if you need the money before maturity.

3. Treasury bills

Whether you’re saving for short-term or long-term goals, Treasury bills, or T-bills, are a “great place for cash right now,” said certified financial planner Patrick Lach, founder of Lach Financial in Louisville, Kentucky, and assistant professor of finance at Indiana University Southeast.
Backed by the U.S. government, T-bills have terms ranging from one month to one year and can be purchased via TreasuryDirect or a brokerage account and interest isn’t subject to state or local taxes.

How to buy T-bills through TreasuryDirect
1. Log in to your TreasuryDirect account.
2. Click “BuyDirect” in top navigation bar.
3. Choose “Bills” under “Marketable Securities.”
4. Pick your term, auction date, purchase amount and reinvestment (optional).

As of Jan. 4, 1-month and 2-month T-bills were yielding roughly 5.4%. If you’re in the 13% tax bracket in California, your after-tax yield for those T-bills may be equivalent to a CD earning 6.21%, Lach said.
However, T-bills purchased via TreasuryDirect aren’t as liquid as cash held in a savings account or a penalty-free CD. If you want to sell T-bills before maturity, you must keep the asset in TreasuryDirect for at least 45 days before transferring it to your brokerage account. You can learn more about the transfer process here.

4. Money market mutual funds

Money market mutual funds are another “great option” for cash, said CFP Seth Mullikin, founder of Lattice Financial in Charlotte, North Carolina.
Money market funds, which are different than money market deposit accounts, are a mutual fund that typically invests in shorter-term, lower-credit-risk debt, like Treasury bills. While money market funds are relatively low risk, your cash won’t have Federal Deposit Insurance Corporation protection.
Currently, some of the largest money market funds are paying roughly 5.5%, as of Jan. 4, according to Crane Data. However, money market yields “follow the Fed closely,” Tumin said. “So when they do cut, you can be pretty assured those will fall very fast.”

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Company: Nihon Kohden  

Company: Nihon Kohden (6849.T-JP)
Business: Nihon Kohden is a Japan-based company engaged in the research, development, manufacture and sale of medical electronic equipment, as well as the provision of maintenance and repair services. The company offers a wide array of devices to aid with medical diagnoses, including electroencephalographs, evoked potential testing equipment, electrocardiographs, cardiac catheterization equipment, diagnostic information systems and related consumables. The company is also engaged in the sales promotion for its products, as well as the general affair-related and manpower dispatching businesses.

Stock Market Value: $2.6B ($31.02 per share)

Activist: ValueAct Capital

Percentage Ownership: 5.01%
Average Cost: n/a
Activist Commentary: ValueAct has been a premier corporate governance investor for over 20 years. ValueAct principals are generally on the boards of half of the firm’s core portfolio positions and have had 56 public company board seats over 23 years. ValueAct has been a pioneer of U.S.-led international activism, primarily in Japan. ValueAct’s co-CEOs, Rob Hale and Mason Morfit, are also co-portfolio managers of the firm’s Japan fund. A significant amount of the portfolio is invested internationally. Hale is on the boards of Japanese companies, which is somewhat of an unprecedented and industry-leading action for U.S. activist funds. ValueAct has had 26 prior international activist investments and has had an average return of 36.19% versus an average of 4.04% for the MSCI EAFE index over the same periods. Moreover, two of their best international investments have been two Japanese companies where Hale is on the board – Olympus (109.48% versus 7.68% for the MSCI EAFE) and JSR (116.86% versus 38.57% for the MSCI EAFE).

What’s happening

On Dec. 25, ValueAct reported holding 5.01% of Nihon Kohden.

Behind the scenes

ValueAct has been a pioneer of U.S.-led activism in Japan. A significant amount of the firm’s portfolio is invested internationally. Two of its best international investments have been a pair of Japanese companies where ValueAct co-CEO Rob Hale is on the board: Olympus and JSR. Nihon Kohden is a Japanese medical devices manufacturer and distributor with a dominant market presence at home and an excellent reputation internationally for on-time delivery, service and product quality.
This is the third Japanese medical device company ValueAct has invested in. Notably, the firm invested in Olympus in 2017, received a board seat in 2019 and remains on the board today. Both Olympus and Nihon Kohden are global medical device companies. However, Olympus derives 80% of its revenue from outside of Japan, whereas Nihon Kohden gets approximately 40% of its revenue from outside of Japan. However, both companies have excellent products and an ambition to be global, and Nihon Kohden could follow a path to globalization that’s like the one Olympus has taken.
There are three primary levers for value generation at Nihon Kohden: operating margin expansion, optimizing the mix of equipment versus consumables and services revenue, and disciplined capital allocation. First, despite having 51% gross profit margins, Nihon Kohden’s operating margins are only at 10%, whereas competitors in both Japan and abroad are in the mid to high teens. With approximately 60% market share in Japan, where some of its revenue comes from distributing third-party products, and 10% market share in the U.S., where the company has proprietary products, the growth and margin potential is greater in the U.S. Nihon Kohden can use its reputational strength to capitalize on the U.S. market. The company has an opportunity to quickly get to 15% operating margins within a few years and can see incremental improvement in following years.  
Second, Nihon Kohden has historically been focused on hardware sales and its revenue is split approximately evenly between hardware and consumables and services. However, there is an opportunity for value creation if the company pursues a strategy to increase its revenue from consumables and services due to the recurring nature and higher margins of that type of revenue. From these two strategies alone, Nihon Kohden can drive 20% profit growth over the next three years.
Third, the company is currently sitting on net cash equivalent to about 15% of its market cap. Like many Japanese companies, Nihon Kohden could create value from an accretive capital deployment strategy that evaluates returning capital to shareholders or disciplined M&A. Historically, buying back shares hasn’t been a popular tactic in Japan, but share repurchases have been increasing over recent years. The Tokyo Stock Exchange has been encouraging them as part of a process to get companies to trade over one times book value.  
ValueAct has an earned reputation as a collaborative and amicable activist, and there is no reason why this situation should be any different. Before building up such a position, ValueAct likely has been getting to know management over the past year and spent considerable time with CEO Hirokazu Ogino. Moreover, ValueAct would not have made this investment if the firm did not have a high degree of respect for Ogino and the rest of the management team. We expect that ValueAct and management are aligned on their views, particularly with respect to margin improvement and capital allocation.
ValueAct does not take board seats through fear or force, but organically via dialogue and harmony. Accordingly, we would expect the firm to continue to support management as an active shareholder and only take a board seat at a time that both ValueAct and management feel the investor could add value. At Olympus, that took two years. At JSR, it took over a year. Both companies have been incredibly successful engagements for them, returning 109.48% at Olympus versus 7.68% for the MSCI EAFE, and 116.86% at JSR versus 38.57% for the MSCI EAFE. ValueAct is still on the board at both companies. A similar outcome here can result in almost a doubling of the stock in two to three years.
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

Social Security retirement benefits provide guaranteed income for your lifetime.
Here’s how that money may benefit your family after you die.

Tanya Constantine | Getty Images

Once you start Social Security retirement benefits, you are generally guaranteed to receive monthly checks for life.
But that will stop once you die — with some exceptions for your loved ones.

A one-time lump-sum death payment of $255 may be available, provided your survivors meet certain requirements.
For example, a surviving spouse may be eligible for the death payment if they were living with the person who passes away. If the spouse was living apart from the deceased, but was receiving Social Security benefits based on their record, they may also be eligible for the $255 sum.
If there is no surviving spouse, children of the deceased may instead be eligible for the payment, so long as they qualify to receive benefits on their deceased parent’s record when they died.
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The Social Security Administration should be notified as soon as possible when a beneficiary dies to cancel their benefits. Funeral homes often report a death to the agency. But it would be wise for survivors to also report it, according to Jim Blair, vice president of Premier Social Security Consulting and a former Social Security administrator.

Other benefit payments may need to be returned

Though a one-time death payment may be available, any benefit payments received by the deceased in the month of death or after must be returned, according to the Social Security Administration.
However, how this rule is handled depends on the timing of the death.
Social Security checks are paid for the benefits earned the month before. The schedule of the monthly Social Security payments depends on a beneficiary’s date of birth, and mostly fall on either the second, third or fourth Wednesday.
If someone receives their monthly Social Security payment and then dies, the Social Security Administration may not take the money back, according to Blair.
But if instead the beneficiary dies and then receives their monthly Social Security check, it may have to be paid back, he said.
The Social Security Administration cautions against cashing any checks or keeping direct deposits received in the month of death or later.
If a deceased beneficiary was due a Social Security check or a Medicare premium refund when they died, a claim may be submitted to the Social Security Administration.

Plan ahead for survivor benefits

But financial planning should not stop there.
“People need to take into account how important Social Security is in their estate planning,” Blair said.
For example, if you claim retirement benefits at age 62, your benefits are reduced, and so are the survivor benefits that become available when you die, Blair said. If you wait to claim benefits until age 70, the maximum age until which you can delay monthly Social Security retirement checks and see your benefits increase, the survivor benefit is also increased.
What’s more, that added income may help you preserve other assets that you can leave behind.
“Your other wealth you can pass on to your spouse and other children and your loved ones,” said Bruce Tannahill, a director of estate and business planning with MassMutual.

‘One of the most frequently missed benefits’

Certain family members may be eligible to receive survivor benefits based on the deceased beneficiary’s earnings record starting as soon as the month they died, according to the Social Security Administration.
That may include a surviving spouse age 60 or older.
When both spouses have claimed Social Security benefits and one dies, the rule of thumb is the larger benefit continues and the smaller benefit goes away, according to Joe Elsasser, a certified financial planner and president of Covisum, a Social Security software claiming company.
But there can be pitfalls, particularly for couples who have been together for years but never married, he noted.

Some states will treat those unions as common law marriages, which are recognized by the Social Security Administration. However, other states may have no such arrangements, which means survivor benefits would not be available to the living partner should their significant other die.
In many cases, Elsasser said he would recommend those couples get married, particularly when one member of a couple has a very high Social Security benefit and the other doesn’t.
Of course, marriage does not always make sense financially for all couples, he said.
Another pitfall may emerge for younger widows or widowers who remarry by age 59, for example.
“That could be a very bad thing, because it can prevent you from accessing the widow benefit under your ex,” Elsasser said.
If instead someone remarries after age 60, they are still entitled to a survivor benefit from a deceased spouse, according to Blair.

Others who may be eligible for benefits on a deceased beneficiary’s record include:

A surviving spouse 50 or older who has a disability

A surviving divorced spouse if they meet certain qualifications

A surviving spouse who is caring for a deceased’s child under age 16 or who has a disability

An unmarried child of the deceased who is under 18, or up to 19 if they are a full-time elementary or secondary school student, or age 18 and older with a disability that began before age 22.

“Divorced widow benefits are actually one of the most frequently missed benefits by people because they don’t know they’re available,” Elsasser said.
For example, if you’re 70 and were divorced 20 years ago, you may not know that your ex has died, nor think to check with the Social Security Administration to see if their benefit would be higher than yours, he said.
Importantly, the Social Security Administration will not notify you those benefits are available, Elsasser said.

Note the family maximum, and other tips for survivors

In certain circumstances, other family members may be eligible for survivor benefits, including adopted children, stepchildren, grandchildren or step-grandchildren.
Parents age 62 or older may also be eligible for benefits if they were a dependent of the deceased for at least half of their support.
A family maximum limits how much can be collected when there are multiple family members claiming on one record, such as a surviving mother and three children, according to Elsasser. However, this rarely affects retirees, because exes do not count as part of a family maximum, he noted.
Additionally, in some cases an earnings test threshold may offset the amount of benefits you receive if you also have earned income.
Here are some important tips for survivors to keep in mind:

Claimants may want to file a restricted application. It is possible to claim a widow’s benefit while letting your own retirement benefit grow, or vice versa, according to Elsasser. For example, you may claim a widow’s benefit at 60, and then switch to your own retirement benefit at age 70.

Social Security can provide a “benefit matrix” comparing benefit options. The document may show you how your monthly benefit and your survivor benefits compare. “We always tell folks, if they’re looking to determine the best course of action between their own benefit and or a surviving spouse benefit, contact SSA and get the benefit matrix report that will give you the information you need to make a decision,” said Marc Kiner, president of Premier Social Security Consulting.

Social Security will not tell you what strategy will give you maximum lifetime benefits. While Social Security personnel may tell you how to get the highest benefit on the day you visit an office or call, they will not necessarily tell you how to get the maximum benefits over your lifetime, Elsasser said. Consequently, it is best to seek more personalized outside advice to identify the best strategy for your situation.

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Your paycheck could be slightly bigger in 2024 due to federal income tax bracket adjustments, experts say.
However, you should still review your federal and state withholdings throughout the year to avoid a surprise tax bill.

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As the new year kicks off, some workers could see a slightly bigger paycheck due to tax bracket changes from the IRS.
The IRS in November unveiled the federal income tax brackets for 2024, with earnings thresholds for each tier adjusting by about 5.4% higher for inflation.

While it’s lower than the tax bracket changes for 2023, “it’s still a pretty handsome increase,” said certified financial planner Roger Stinnett, managing director of wealth planning for First Foundation Advisors in Irvine, California.
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If your wages are similar to last year, the 2024 tax bracket adjustment could result in a small paycheck increase, depending on your withholding, experts say.
Of course, prolonged higher costs can chip away at tax savings.
Annual inflation declined slightly in November, but many Americans are still feeling the pinch of elevated prices for housing, motor vehicle insurance and other day-to-day expenses.

Keep a ‘running total’ of your income

“You always want to keep a running total in your mind of how your income is changing, because it’s complex,” said Stinnett, who is also a certified public accountant.
The federal income tax brackets show how much you owe on each portion of your “taxable income,” which is calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
For 2024, the standard deduction also increased for inflation, rising to $14,600 for single filers, up from $13,850 in 2023. Married couples filing jointly may claim $29,200, up from $27,700. That change could reduce taxable income for some filers.

Check your paycheck withholding

Your federal and state paycheck withholdings affect how much taxes you pay throughout the year. You can expect a refund when you’ve overpaid or a tax bill when you haven’t paid enough.
Even if your paycheck increased in 2024, “new tax changes could still place you in a lower or higher bracket,” warned CFP Ashton Lawrence, director at Mariner Wealth Advisors in Greenville, South Carolina.

It’s important to keep track of tax law and life changes that may affect your situation and adjust your paycheck withholding via Form W-4 with your employer as needed, he said.
Life changes that can affect your taxes may include marriage, divorce, the birth or adoption of a child, retirement, buying a home, filing for bankruptcy and more, according to the IRS.
One “quick check” could be last year’s tax return, Stinnett said. If you had a large refund or owed a sizable balance, that may signal it’s time to review your withholding.

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U.S. companies aim to reduce their average raises for workers in 2024.
The job market has cooled from its torrid pace in 2021 and 2022, when businesses increased pay significantly to attract talent.

Ezra Bailey | The Image Bank | Getty Images

Workers are poised to get smaller raises in 2024 — and their annual pay bumps are unlikely to increase again anytime soon amid a cooler job market, labor experts said.
U.S. companies plan to give salary increases of 4%, on average, this year, down from 4.4% in 2023, according to a survey by Willis Towers Watson.

Similarly, a Mercer poll indicates companies’ total salary budgets, which include money for all pay increases, such as raises and promotions, will be 3.8% in 2024, on average. That’s down from the 4.1% paid out last year.
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“We certainly think it will continue to come down,” said Lauren Mason, senior principal in Mercer’s career group. “But how much it does is a big open question at this point.”
That said, the current forecast isn’t paltry by recent historical standards. Raises averaged about 3% a year following the 2008 financial crisis, experts said.

How supply and demand affect raises

Supply and demand of labor is the No. 1 driver of company decisions regarding raises, said Lori Wisper, who leads Willis Towers Watson’s work and rewards global solutions unit.

The demand for labor exploded in the spring of 2021 as the U.S. economy reopened from its pandemic-era doldrums. But the labor supply (i.e., available workers) was limited.
Workers had ample opportunity as businesses clamored to fill jobs. Companies raised wages at the fastest pace in decades to compete and attract talent.

During this era, known as the “great resignation,” workers had the luxury of being able to easily quit their jobs and get new ones with much higher pay. Companies also doled out more generous raises to existing workers to retain them.
“We had people changing jobs like wildfire,” Wisper said. “Retention was everything.”
“That might be a once-in-a-lifetime labor market,” she added. “We might not see that again.”
Now, the job market has cooled from its torrid pace in 2021 and 2022. However, data suggests it remains strong relative to pre-pandemic norms.

Companies generally must balance two competing priorities when choosing how to boost pay, experts said. That means being conservative enough so as not to overextend one’s budget — in which case future layoffs are likely — but generous enough that the company remains competitive and doesn’t lose workers due to poor pay.
The former dynamic was on display in 2022 and 2023 when some of the nation’s biggest technology firms announced mass layoffs. Some of those represented an unwinding of overzealous hiring early during the Covid-19 pandemic.
Companies don’t often increase their average raises, making 2022 “notable” when it breached 4%, Wisper said. For multinational companies, going from 3% to 4% on average might represent tens or hundreds of millions of dollars, she added.
Of course, annual raises exceeded 4% — and even approached 5% — before the 2008 financial crisis, but then declined after the economic downturn, she said.  Don’t miss these stories from CNBC PRO: More

The Consumer Financial Protection Bureau outlined recent errors by student loan servicers, and the U.S. Department of Education announced it would withhold payments to three companies.
“Today’s actions make clear that the Biden-Harris Administration will not give student loan servicers a free pass for poor performance and missteps that jeopardize borrowers,” U.S. Secretary of Education Miguel Cardona said in a statement.

Rohit Chopra, director of the Consumer Financial Protection Bureau, speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C., Dec. 15, 2022.
Ting Shen | Bloomberg | Getty Images

When student loan servicers make errors by cutting corners or sidestepping the law, it can “pose serious risks to individuals and the economy,” said Consumer Financial Protection Bureau Director Rohit Chopra.
Chopra’s comments are part of an “issue spotlight” released by the bureau Friday, outlining a number of problems borrowers faced when their payments resumed in October after the pandemic-era pause of more than three years expired.

Borrowers experienced long phone hold times with their servicers, significant delays in the processing of their repayment applications, and inaccurate and untimely billing statements, the bureau found.
The U.S. Department of Education announced Friday that it would withhold payments to three student loan servicers as part of its efforts to hold the companies accountable.
The federal government contracts with different companies to service its student loans, and pays the servicers a total of more than $1 billion a year to do so, according to higher education expert Mark Kantrowitz.
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Aidvantage, EdFinancial and Nelnet “all failed to meet contractual obligations to send timely billing statements to a combined total of 758,000 borrowers for the first month of repayment,” the department said.

As a result, it is withholding $2 million from Aidvantage, $161,000 from EdFinancial and $13,000 from Nelnet, it said, based on the number of borrowers affected by each company’s errors.
“Today’s actions make clear that the Biden-Harris Administration will not give student loan servicers a free pass for poor performance and missteps that jeopardize borrowers,” Secretary of Education Miguel Cardona said in a statement.

Affected borrowers will be placed in an administrative forbearance until the issues are resolved, the department said. In the meantime, they shouldn’t owe any payments and will not face interest charges.
The Education Department said in October that it held back $7.2 million from Mohela for failing to send timely billing statements to 2.5 million borrowers. As a result of Mohela’s errors, more than 800,000 borrowers became delinquent on their loans, the department said.
Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, blamed the errors on a lack of resources and notice from the government.
“Time and effort spent by Federal Student Aid and the CFPB on their press strategy would be better put to use in trying to solve the actual problems by coordinating on advocating for more resources and executing better operational planning by the government,” Buchanan said.
Outstanding education debt in the U.S. exceeds $1.7 trillion, burdening Americans more than credit card or auto debt. The average loan balance at graduation has tripled since the ’90s, to $30,000 from $10,000. Around 7% of student loan borrowers are now more than $100,000 in debt.

Wait times with servicers exceeded an hour, CFPB finds

During the last two weeks of October 2023, the average student loan borrower who called their servicer waited 73 minutes to speak to a live agent, the CFPB found. “One consumer reportedly waited 565 minutes to speak with a customer service representative,” it added.
As a result of the struggles to reach their servicers, borrowers are at risk of missing their payments and not learning of their options, it warned.
Borrowers have also run into walls trying to enroll in income-driven repayment plans, it said. These plans aim to make repayment more affordable for loan holders by capping their monthly bill at a share of their discretionary income.
By the end of October, the bureau found, “over 450,000 income-driven repayment applications had been pending with a servicer for more than 30 days.”
“Across all servicers,” it said, “each employee tasked with processing income-driven repayment applications had on average 1,335 outstanding applications.”
Incorrect and untimely bills were another issue borrowers experienced, including “inflated monthly payment amounts” and “premature due dates.”
More than 21,000 people were billed “very high” and “potentially incorrect” amounts, CNBC reported in November. One borrower was told they owed $108,895.19 for the month. More

High earners and all 401(k) savers have new maximum thresholds for 2024.
If your goal is to save the most money possible toward retirement this year, these tips can help.

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To live your best life in retirement, it helps to make the most contributions while you’re working.
Employees who participate in 401(k) plans can put up to $23,000 in pretax or post-tax Roth contributions in 2024.

But there’s another limit, $69,000, including employee and employer contributions, that may let workers set aside even more. If the 401(k) plan allows for it, workers may add post-tax contributions beyond the $23,000 limit for 2024 up to $69,000, provided their salary is more than that threshold.
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That goes up to as much as $76,500 when including a $7,500 catch-up contribution for savers age 50 and older.
“If you want to save more for retirement, the best place to do it is to start with, does your plan allow for after-tax contributions?” said David Blanchett, a certified financial planner and head of retirement research at PGIM DC Solutions.

How a Roth may help you ‘save more effectively’

To maximize your post-tax savings, you may do an annual in-plan rollover to a Roth, he said, provided your employer offers this option.

“Then, if you wanted to save more effectively, you could then save your regular deferrals as Roth as well,” Blanchett said.
Having 100% Roth retirement savings could be a “smart move” for someone interested in maximizing retirement savings, he said.

For most people, traditional pretax contributions to retirement plans such as a 401(k) make sense because their tax rates will likely decline once they retire, Blanchett said.
However, Roth investments allow for the potential opportunity for savings by paying taxes at current rather than future rates, which tend to increase, he said.
That helps make Roth savings more valuable. When deferring 6% to traditional pretax retirement savings or 6% to post-tax Roth money, the Roth is actually worth 7% or 8%, Blanchett said.

Few investors max out their 401(k) contributions

Just reaching the $23,000 maximum 401(k) contribution — or $30,500 with the $7,500 catch-up contributions for those age 50 and older — is a feat for most workers.
In 2022, 15% of retirement plan participants saved the highest amount of $20,500 for that year, or $27,000 for those age 50 and older, according to Vanguard research.
Participants who successfully met those maximum thresholds tended to have high incomes, have longer tenures with their employers, are older in age and already have higher balances, according to Tiana Patillo, a CFP and financial advisor manager at Vanguard.

Principal Financial Group, a provider of 401(k) and other retirement plans, has defined “super savers” as those who contribute at least 15% of their pay toward retirement or 90% or more of the maximum allowed.
Beyond having high incomes, this cohort tends to share certain characteristics, according to Chris Littlefield, president of retirement and income solutions at Principal.
As of November, less than 3% of participants in retirement plans serviced by Principal had maxed out their 401(k) contributions for the year.

What workers can learn from ‘super savers’

Investors who do meet those thresholds tend to be very disciplined, have clearly defined goals for their retirement plans, are optimistic and excited about the future and tend to live modestly and below their means, Littlefield said.
When inflation prompted consumer prices to climb, super saver retirement investors still prioritized increasing their retirement contributions, Principal’s research found.
“You want to be fairly disciplined and try to take the emotion out of it, not being scared or overwhelmed,” Littlefield said.
Not all retirement savers can push their contributions to the maximum thresholds allowed. But experts say there are several tips that can help to push their savings levels higher.
1. Start with small steps
“We all need to start somewhere,” Littlefield said.
By setting aside what you can now, you’re giving that money time to compound, or earn returns on both your original principal and returns.
2.  Build in automatic increases
If you’re due to get a raise of 2% to 4% of your base salary from your employer this year, increase your retirement deferral rate ahead of that bump to your paycheck, Littlefield suggested.
Your retirement plan may even allow you to make it so those increases happen automatically, say with a 1% increase to your deferral rate that sets in at the beginning of January.
3. Contribute enough to get your employer match
Many employers will match your contributions up to a certain deferral amount, such as 4% or 6%.
“You don’t want to necessarily miss out on the free money that’s in store from your employer,” Patillo said.
4. Budget wisely to preserve your retirement funds
To make room in your budget to maximize your retirement savings, cut down on any high-interest debts, Patillo recommends.
Also plan to set aside money toward an emergency fund, such as $25 to $50 per paycheck, with the goal of eventually reaching three to six months’ expenses, she said.Don’t miss these stories from CNBC PRO: More