Investing

Target-date funds can take much of the guesswork out of retirement planning. 
But fund holdings are sometimes too conservative for younger investors.
While passively managed target-date funds usually have reasonable pricing, actively managed ones can be expensive.

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If you have a 401(k) plan — and about 60 million Americans do — chances are you are invested in a target-date fund. In fact, they are the default option for many plans, helping to explain why they make up nearly a quarter of 401(k) plan assets, according to the Plan Sponsor Council of America.
Of course, target-date funds are not limited to retirement plans. Financial advisors use them and so do many do-it-yourself investors. 

Undoubtedly, such funds can be a handy tool, helping to make retirement planning easier. Yet, they aren’t a cure-all for everyone, with some investors likely finding themselves wanting more.
Here’s what you need to know.

Why target-date funds work for many investors

Target-date funds tend to mature over five-year intervals, such as 2040, 2045 or 2050. The end date approximates when an investor plans to retire. They can take much of the guesswork out of retirement planning, with managers helping to ensure each fund has an age-appropriate mix of stocks and bonds by rebalancing the holdings over time.  
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Besides the simplicity, another potential advantage is the fee structure. Passively managed target-date funds can have expense ratios as low as 0.08%. Admittedly, that’s higher than many exchange-traded funds and mutual funds that track indexes, but less expensive than actively managed options within the same fund family. 

At their best, target-date funds are like a good meal kit service. Many people don’t know how, don’t want to or have the time to cook. So, they rely on a company to send them all the pre-portioned ingredients and directions they need to make a good dish.  
Similarly, savers often have straightforward needs but neither the time nor know-how to construct a portfolio of investments that remain compatible with their risk profile throughout their adult life. For them, target-date funds can be a good option. 
There are, however, some important caveats. 

When target-date funds don’t work so well 

First, target-date holdings are sometimes too conservative for many younger investors. Consider that Vanguard and Fidelity’s version of a 2060 target-date fund is relatively bond-heavy — 9.7% and 13.32%, respectively — given they are intended for investors now in their 20s.
When you’re that young, the diversification benefits of fixed income — lower volatility and more consistent reinvestment rates — are largely theoretical. In reality, fixed income may only mute potential gains.
Secondly, the management approach may be too formulaic for many investors. For one thing, the composition of target-date funds and the reallocations that occur over time suggest the only thing determining an investor’s risk profile is how old they are. Many other factors go into that, including their assets and liabilities.  
The other issue here is diversification. Vanguard’s 2060, 2050 and 2040 target-date funds devote at least 30% of their holdings to international investments, an area of the market that has underperformed U.S. equities for almost a decade and a half. Diversification is good, but diversification just for the sake of it can weigh on performance. 

Finally, while passively managed target-date funds usually have reasonable pricing, actively managed ones can be expensive. For example, the Fidelity Freedom 2060 fund has an expense ratio of 0.75%, even as most planning-based financial advisors can come close to replicating its approach using less costly and potentially better-performing mutual funds and ETFs. 

‘A mixed bag’ for investors

In the end, target-date funds are a mixed bag. For those with somewhat straightforward needs who perhaps don’t have a ton of investible assets nor the inclination to work with a financial advisor full time, they can be an economical way to invest and build wealth.
At the same time, target-date funds have some shortcomings, many of which highlight the value of a financial advisor — ironic given that asset management companies tout target-date funds’ ability to take some of the guesswork out of retirement planning.
Indeed, while no financial advisor can time the market to perfection and lock in outsize gains year after year, they can typically top the formulaic, rigid and somewhat uninspired approach many target-date fund managers tend to take.
— Andrew Graham, founder and managing partner of Jackson Square CapitalDon’t miss these stories from CNBC PRO: More

President Joe Biden called for protecting Social Security and Medicare in last year’s State of the Union.
As the program’s face imminent insolvency dates, experts this year say they hope to see action.

President Joe Biden delivers the State of the Union address to a joint session of Congress on Feb. 7, 2023
Pool | Getty Images

How Democrats propose tackling Social Security’s woes

Rep. John Larson, D-Conn., and other lawmakers discuss the Social Security 2100 Act, which would include increased minimum benefits, on Capitol Hill on Oct. 26, 2021.
Drew Angerer | Getty Images News | Getty Images

That includes Rep. John Larson, D-Conn., who has led a Democratic bill aimed at expanding benefits for the first time in more than 50 years.
His bill — Social Security 2100 Act — would include a 2% across-the-board benefit increase, as well as more generous benefits for low-income seniors, and other enhancements. Those benefit boosts would be paid for by making it so earnings over $400,000 are subject to Social Security payroll taxes. Currently, up to $168,600 in earnings are subject to those levies.
In addition, the bill would also add a 12.4% net investment income tax for taxpayers earning more than $400,000.
Larson’s Social Security proposal currently has almost 200 House co-sponsors, with companion legislation in the Senate. But it has yet to be voted on.

“The fact that there hasn’t been votes on something as critically important to 70 million Americans as Social Security is … why isn’t there a vote?” Larson said in an interview with CNBC at his Washington, D.C., office last week.
It’s a question Larson has faced as he touts his plan at town halls.
“The honest answer is because they did health care,” Larson said, referring to the Affordable Care Act, which was signed into law by President Barack Obama in 2010.
At the time, there was a question as to whether to focus on Social Security instead.
“Did I advocate it? Absolutely. Was I as disappointed as you? Absolutely,” Larson said he recently told a town hall attendee. “But do you give up? Do you just say, ‘Oh well, it can’t be done?'”
To help make his case with fellow Democrats and Republicans across the aisle, Larson hands out copies of Social Security cards to each member with the number of benefit recipients in their district and the total amount of monthly benefits they receive. In Larson’s district, there are around 147,662 beneficiaries, most of whom are retirees, receiving $270 million in monthly benefits.

As the U.S. population hits “peak 65” — with the most Americans in history expected to turn 65 through 2027 — Larson is hoping that will help inspire lawmakers to act.
“The Republicans are going to say we’re raising taxes,” Larson said.
But Larson said the focus instead should be on the size of the benefits that Social Security beneficiaries may receive that they won’t be able to match elsewhere on the private market. “Look at the benefit that they receive for this,” he said.
Another proposal led by Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., similarly aims to make benefits more generous, raise taxes on the wealthy (this time on those earning more than $250,000) and extend Social Security’s solvency. 
The report comes as a Senate report found nearly half of Americans 55 and older have no retirement savings. Meanwhile, 52% of those ages 65 and older are living on less than $30,000 per year.

Why raising payroll taxes may not be enough

Republican Sen. Bill Cassidy of Louisiana speaks to the press on Capitol Hill on Feb. 10, 2021.
Nicholas Kamm | AFP | Getty Images

House Republicans are focusing on other efforts to create a bipartisan fiscal commission that would evaluate Social Security, Medicare and other government spending.
Democrats and advocacy groups representing retirees worry that could lead to detrimental cuts to benefits.
But Republicans and fiscal experts contend there are not a lot of other choices.
“If you wanted to tax people who make over $400,000, you really can’t fill the hole,” Sen. Bill Cassidy, R-La., said during a retirement industry event in Washington, D.C., last week.
Those tax thresholds are going to create such high tax rates that it becomes “self-defeating,” said Cassidy. The Louisiana senator is working on his own “big idea” fix to create a separate investment fund to help remedy Social Security’s shortfall.
Social Security may only pay full benefits until 2034, at which point there may be 23% benefit cuts. That would amount to a $17,400 cut for a typical couple who retires in 2033, according to the Committee for a Responsible Federal Budget.
Social Security is not the only program that may require tax increases. The Medicare hospital insurance trust fund may only pay full benefits until 2031, based on recent projections. Shoring up that program’s finances may require payroll tax increases in addition to those proposed for Social Security.
“You can only raise [taxes] so many times,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
Lawmakers should carefully weigh the best use of the country’s resources, she said.
“I probably wouldn’t put pension benefits for people who don’t need them at the top of my list,” MacGuineas said. “At the top of my list, I would put pensions for people who do.”
As voters head to the polls in November, they will be choosing a leader who influences the program’s fate.
AARP plans to continue to put pressure on the candidates by asking each one, “What’s your position on Social Security?” Nancy LeaMond, executive vice president and chief advocacy and engagement officer, said on a recent press call.
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Women and Wealth Events
Your Money

Married couples can choose to file taxes jointly or separately every year.
While the tax code generally favors joint returns, some spouses may benefit from filing apart, experts say.
For 2021, roughly 3.9 million taxpayers chose “married filing separately” and more than 54 million picked “married filing jointly,” according to IRS estimates.

Mapodile | E+ | Getty Images

Married couples have an important choice every year: filing taxes jointly or separately. While the tax code generally favors joint returns, some spouses may benefit from filing apart, experts say.
“Married filing jointly” combines income, credits and deductions on a single return, whereas “married filing separately” creates two returns with individual earnings and tax breaks.

“I would say 99% of the time, it’s better to file a joint return,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

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For 2021, roughly 3.9 million taxpayers chose “married filing separately” and more than 54 million picked “married filing jointly,” according to IRS estimates.
Generally, married filing jointly is more generous due to wider tax brackets and a bigger standard deduction, Lucas said. For example, the 10% bracket kicks in with $22,000 in taxable income for joint filers, versus only $11,000 for couples filing separately for 2023.
However, there are scenarios when filing separate returns can pay off, he said.

Avoid the ‘phantom tax’ for student loans

Income-driven student loan repayment plans are one reason to consider separate returns, according to Marianela Collado, a CFP and CEO of Tobias Financial Advisors, based in Plantation, Florida. She is also a certified public accountant.

Here’s why: Income-driven student loan payments factor in earnings from your most recent tax return. That means a lower-earning spouse with student debt could see significantly higher monthly loan payments by filing taxes jointly, she said.
With lower earnings and higher student loan balances, this could be particularly important for women.
While you may owe extra taxes by filing separately, you could avoid the “phantom tax” of higher monthly student loan payments, Lucas said.

Maximize itemized deductions

Another reason to file separately could be to maximize itemized deductions, such as the tax break for medical expenses or charitable gifts, Lucas said.
Every year, taxpayers choose the standard deduction or itemized deductions, whichever is greater. For 2023, the standard deduction is $13,850 for filing separately, which is easier to exceed than $27,700 for filing jointly.
However, if one spouse itemizes, the other can’t take the standard deduction, which can increase their tax liability, Lucas warned.

You could be ‘penalized’ for filing separately

While filing separately may offer savings in certain scenarios, there could be other unexpected tax consequences, said Collado.
“You basically get penalized [by the tax code] for filing separately,” she said.
For example, separate filers typically can’t make Roth individual retirement account contributions because the modified adjusted gross income limit is $10,000. 
Plus, you may lose credits such as the tax break for child and dependent care, education and student loan interest, among others.   More

Gold does well when other assets — and the world, are in trouble.
And so even those who join the rally should do so with caution, and root against the yellow metal, experts say.

Andriy Onufriyenko | Moment | Getty Images

One helpful way to think about the recent gold rally: it’s a case of schadenfreude. The yellow metal does well when other assets — and the world — are in trouble.
As a result, prospective buyers should proceed with caution, experts say. Be prepared to root against your investment, said William Bernstein, author of “The Four Pillars of Investing.”

“You buy gold and hope it doesn’t go up,” he said.
Earlier this week, the gold contract for April gained $30.60, or 1.46%, to settle at $2,126.30 per ounce, the highest level dating back to the contract’s creation in 1974. On Wednesday, the metal was trading at $2,158.40.
The safe-haven asset has risen for two consecutive months amid ongoing wars in Ukraine and Gaza, the upcoming presidential election, and uncertainty around interest rates and inflation.
Russian President Vladimir Putin recently warned of nuclear conflict and “the destruction of civilization” if other countries sent group troops into Ukraine. Meanwhile, experts are concerned that Donald Trump would try to pull the U.S. out of NATO if he was reelected, which could raise security risks across the world.
Among the other previous good times for gold: The Great Recession and the start of the Covid outbreak.

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Some Wall Street experts forecast the current rally to continue, anticipating the metal’s value to rise to $2,300 or higher over the next 12 to 16 months.
Should investors take part in the doomsday holding? Here’s what financial experts said.

Gold returns over time are paltry, experts say

Despite brief rallies, the average annual returns for gold far lag stocks and bonds, according to experts.
“When things get volatile, [investors] believe their money will be better positioned there,” said Doug Boneparth, a certified financial planner and the founder and president of Bone Fide Wealth in New York. He is also a member of CNBC’s Advisor Council.
But, Boneparth said, “Gold hasn’t always been the store of value people hoped it would be.”
Indeed, over the last century, gold has risen around just 1% a year, on average.
A $10,000 investment in the S&P 500 on March 5, 2014 — a decade ago — would be worth around $32,700 today. Over that same time frame, an equivalent investment in gold would have only grown to roughly $14,700, according to data provided by Morningstar Direct.

Meanwhile, the gold exchange-traded funds SPDR Gold Shares and iShares Gold Trust produced an average annual return of close to 4% since 2014, compared with around 13% by the S&P 500, Morningstar Direct found.
As a result, Boneparth said, “Gold isn’t really a part of our client portfolios.”

Think of gold as insurance

In some ways, investors should think of buying gold the way they might home insurance, Bernstein said.
The yellow metal typically does well when other financial assets are in the red, and especially when people are losing faith in banks and money.

“When everything else is going down the tubes, gold is the one thing that’s likely going to do well,” he said. “Home insurance also has a high return when you have a fire.”
And just as you pay for the protection of home insurance, you pay a cost for owning gold, he said: those paltry returns in normal times.
Still, some investors may decide to allocate a small portion of their portfolio to gold — experts recommend keeping it under 5% — as insurance against an economic catastrophe, Bernstein said.
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The national average credit score fell to 717, according to a new report from FICO.
Credit scores had steadily improved for a decade, but increases in missed borrower payments and rising consumer debt levels are starting to take a toll.
As of October, the average credit card utilization was 35%, up from 33% a year earlier, and the share of borrowers with a 30-day past-due missed payment against their credit accounts was also higher.

Consumers have been increasingly relying on credit cards to make ends meet, and it may be finally catching up with them.
The national average credit score, which has steadily increased over the last decade, fell to 717 from a high of 718 in the beginning of 2023, according to a report from FICO, developer of one of the scores most widely used by lenders. FICO scores range between 300 and 850.

“It’s a notable milestone,” said Ethan Dornhelm, FICO’s vice president of scores and predictive analytics. “This is the first time in well over a decade that the score went down.”

Average nationwide credit scores bottomed out at 686 during the housing crisis more than a decade ago, when there was a sharp increase in foreclosures. They steadily ticked higher until the Covid-19 pandemic, when government stimulus programs and a spike in household saving helped scores jump to a historic high in April 2023.

Consumers are falling deeper in debt

High interest rates and higher prices have weighed on most Americans’ financial standing. Consumers as a whole are falling deeper into debt, causing an increase in credit card balances and an uptick in missed payments, FICO found.
As of October, the average credit card utilization was 35%, up from 33% a year earlier, and just over 18% of borrowers had a more than 30-day past-due missed payment against their credit accounts, up from 16.5% the year before.
“Another likely driver is that savings rates have trended back down to zero and those savings cushions that many consumers had have disappeared,” Dornhelm said.

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During the pandemic, most Americans benefited from a few government-supplied safety nets, including the large injection of stimulus money. That left many households sitting on a stockpile of cash that enabled some cardholders to keep their credit card balances in check.
But that cash reserve is largely gone after consumers gradually spent down their excess savings.
“We are pretty far removed from pandemic-level mitigation programs, so consumers are very much confronted with making good on their credit obligations with little in the way of stimulus checks or government defined accommodation programs,” Dornhelm said.

What is a ‘good’ credit score?

Generally speaking, the higher your credit score, the better off you are when it comes to getting a loan. You’re more likely to be approved, and if you’re approved, you can qualify for a lower interest rate.
Alternatively, “the lower the credit score the less likely you could get approved for financing and the higher your interest rate is going to be,” said Ann Kaplan, founder of iFinance, based in Toronto, Canada.
Already, the average credit card charges over 20%, a record high, but borrowers with lower credit scores pay even more. “It’s difficult in this current economy not to have a good credit score,” Kaplan said.

A good score generally is above 670, a very good score is over 740 and anything above 800 is considered exceptional.
An average score of 717 by FICO measurements means most lenders will consider your creditworthiness “good” and are more likely to extend lower rates.
Some of the best ways to improve your credit score come down to paying your bills on time every month and keeping your utilization rate, or the ratio of debt to total credit, below 30% to limit the effect that high balances can have, Kaplan said.
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The Consumer Financial Protection Bureau finalized a rule that would cap the late fees that banks charge customers after finding that cardholders paid a record $130 billion in interest and fees, as of their latest tally.
But that’s not the only cost, the CFPB found.
Late fees are often layered on top of other punitive measures credit card companies impose on consumers who miss payments, including negative credit reporting, which can hurt their credit score.

The consequences of missed credit card payments

The CFPB found that late fees are often layered on top of other punitive measures credit card companies impose on consumers who miss payments, including negative credit reporting, which can hurt their credit rating.

“When consumers don’t make required payments, they can face a long list of consequences. They pay extra interest, their credit report gets hit, their credit line can get cut, and, of course, they can face a late fee,” Rohit Chopra, director of the Consumer Financial Protection Bureau, said in a statement Tuesday.

More consumers are falling behind

Collectively, consumers are having a harder time managing debt amid high interest rates and higher prices. Americans now collectively owe $1.13 trillion on their cards, and the average balance per consumer is up to $6,360, both historic highs.
Not only are more cardholders carrying debt from month to month but more are also falling behind on payments, recent reports also show.
Credit card delinquency rates surged in 2023, the Federal Reserve Bank of New York found.
“Serious” card delinquencies — payments that are 90 days or more overdue — jumped more than 50%, which “signals increased financial stress,” the New York Fed reported.

Why credit scores are so important

Generally, the higher your credit score, the better off you are when it comes to getting a loan. You’re more likely to be approved, and if you’re approved, you can qualify for a lower interest rate.
Alternatively, “the lower the credit score the less likely you could get approved for financing and the higher your interest rate is going to be,” said Ann Kaplan, founder of iFinance, based in Toronto.
Already, the average credit card charges over 20%, a record high, but borrowers with lower credit scores pay even more. “It’s difficult in this current economy not to have a good credit score,” Kaplan said.

For the most part, consumers are still faring well. The national average credit score now stands at 717, according to FICO, developer of one of the scores most widely used by lenders. FICO scores range between 300 and 850.
However, that national average is down 1 point from where it stood in the beginning of 2023, marking the first decrease in credit scores in more than a decade.
“We are starting to see the increases in missed payments and debt levels weigh down on that overall aggregate measure,” said Ethan Dornhelm, FICO’s vice president of scores and predictive analytics.
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According to College Data, the average annual cost of private college tuition is $41,540 in 2024.
More parents are going to work for schools to tap tuition benefits that have existed for years but now have growing appeal amid the skyrocketing cost of a college degree.
One Ohio family with multiple children estimates they are in line to receive as much as $500,000 worth of private college tuition for a fraction of the cost.

Ariel Skelley | Digitalvision | Getty Images

Meghan Heater, 46, heads to the commissary at the University of Dayton in Ohio most weekday mornings to start assembling sandwiches and tossing salads for hundreds of hungry college kids.
“It’s a lot of time on your feet and hard work,” Heater said.

But that effort yields more than a paycheck. As a college staff member, Heater gets deeply discounted tuition at the private Marianist Catholic college with approximately 8,000 undergraduate students.
Tuition at the university is around $47,000 a year, plus board, although 96% of the students receive some financial aid.
Heater has now been working at the school for four years, enough to qualify for the highest tuition benefit — 95% off — by the time her eldest daughter, now 15, graduates from high school. Her two youngest daughters, 13 and 10, are waiting in the wings.

Employee tuition perks draw parents

The price tag of college can be daunting, but less so at some schools if parents work there — and that is what appeals to Heater and a growing number of parents.
“I had been a stay-at-home mom for several years, so I didn’t have a professional career. I was trying to think of a way to have a job that I could still be with my kids a lot of the time, like during the summer, and work the same hours as they are in school and still make good money,” Heater said.

That’s when Heater, whose husband works at a local steel mill, thought about working at a college. She compared universities in her area and their benefits and decided on University of Dayton, which offers tuition benefits for staff workers and their dependents.

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Troy Washington, the University of Dayton’s vice president for human resources, said that about 616 of the school’s nearly 2,900 full-time employees take advantage of its tuition remission for themselves or their dependents.
Washington said that workers and their dependents can also use a tuition exchange program, which allows them to transfer their tuition benefits within a pool of participating schools.

How college employee tuition benefits work

Jacob Channel, senior economist at LendingTree and a student aid expert, says that while these employee benefits have existed for years, with the spiraling cost of higher education, working for a college has growing appeal.
“With how expensive college has gotten, it is something that probably a lot of people are trying to take advantage of,” Channel said.
In fact, 90% of colleges and universities offer tuition benefit to children of full-time employees, according to the College and University Professional Association for Human Resources.
Half of those institutions have a waiting period to get that benefit, with the median waiting period being one year of service for the employee. Most institutions, 73%, don’t limit the number of credit hours children can apply the benefit to, so there is no ceiling on the number of classes they can take.

Still, as attractive as the programs are, Channel said, they have drawbacks. For instance, once the tuition benefit exceeds the IRS’ guidelines of $5,250 annually, the rest is generally considered taxable income. The University of Dayton’s Washington recommends checking with a tax preparer, because there can be exceptions and case-by-case variations.
“While the tax won’t offset the benefit of the waiver, it is still something to keep in mind so you aren’t blindsided by a tax bill,” Channel said.
Channel says that students also usually have to make the grade. The tuition waiver often isn’t granted if the student doesn’t meet the school’s admission requirements. With University of Dayton, for instance, students have to satisfy admission requirements.

‘A lot of people don’t know about these programs’

Sherry Kirkland, 71, is retired after a 17-year career as a financial aid and academic advisor at Wilmington University in Delaware. While her husband worked full time, Kirkland started at the school in a secretarial role and leveraged the tuition benefit for herself first.
The mother of four sons only became aware the benefit could be used for her dependents once she got deeper into her time at the college.
By the time Kirkland’s youngest son was old enough for college she was aware of the tuition benefit, so he was able to take full advantage of it, she said.

“Had I known that I would have done that for my other sons,” Kirkland said, adding that the family took out loans for their older children’s education. “If you can get your education free or at a big savings, that is the way to go,” Kirkland said.
She said she thinks a lack of awareness about tuition benefits programs keeps them from being more popular.
While it is a lot of hard work for parents, in the end, she said, it was worth it for her to see her youngest son graduate from college without a pile of bills.
“I can’t tell you the wonderful feeling I had when he graduated, how good it felt,” Kirkland said.

How to make the most of employee tuition perks

Tuition benefit packages for employees’ children vary greatly from school to school, with some offering no benefits, while others, such as Wilmington University, offer 100% tuition benefits.
The amount of time before the benefits kick in also varies. While Heater had to work four years at the University of Dayton to get the maximum tuition break, new hires at Southern New Hampshire University can take full advantage of the tuition benefit for dependents only six months after starting.
“Higher education is extremely expensive and not affordable; as a parent, how do you look to help your children through that?” said Danielle Stanton, SNHU’s chief administrative officer.
Stanton’s daughter is currently using the free tuition benefit at SNHU, but Stanton said there are a lot of factors to consider before taking a job at a college just for the tuition break.
“There are a lot of ‘ifs’ to work out, like trying to find out where your child wants to go, what benefit does the college offer, and are they eligible?” Stanton said.
Meanwhile, Heater will continue to head to the mess hall at University of Dayton each morning, an endeavor she considers very worthwhile. She figures if all three of her daughters attend the college, she and her husband will have snagged $500,000 in education for their daughters at a fraction of the cost.
And if the daughters don’t want to go to University of Dayton? They can look into the tuition exchange program, but Heater said she doesn’t think that will be an issue.
“It’s been drilled into them that they are going to UD,” Heater said. More

Women and Wealth Events
Your Money

Building wealth and saving for retirement can be more difficult for women facing challenges such as lower wages.    
But an early career mentor sparked a mindset shift for Vivian Tu, a self-made millionaire by age 27 and the founder of Your Rich BFF.  

Vivian Tu.
Photo: Heidi Gutman

Building wealth and saving for retirement can be more difficult for women facing challenges such as lower wages despite their increasing levels of education.
An early-career mentor sparked a mindset shift for Vivian Tu, the founder of Your Rich BFF, who became a self-made millionaire by age 27.

“I learned very early on how to budget and how to save,” said Tu, speaking at CNBC’s Women & Wealth event on Tuesday. Before the mindset shift, however, she focused on “scrimping and saving versus creating more wealth” with investing.

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While Tu was working on Wall Street, a mentor helped her develop “healthy money habits” that paid off once she was earning a higher paycheck in the tech industry.
“I was still living below my means and then investing that larger proportional difference,” she said. “Over the years, I continued to ask for more and more money every single year.”
Those raises helped Tu invest and grow her wealth more quickly.

Why both saving and investing are critical

Tu’s mindset shift is one other women can learn from. Lifelong saving and investing are both critical for women, according to Boston-based certified financial planner Catherine Valega, founder of Green Bee Advisory.

“We miss so much time in the market,” she said, noting that women are more likely than men to leave the workforce to care for children or family members.
Indeed, some 14% of women ages 25 to 54 were full-time caregivers in 2022, compared to 1.5% of men, according to the Federal Reserve Bank of Minneapolis.
Leaving the workforce reduces earnings and the chance to save and invest for retirement, Valega said. “That caregiving penalty is a double whammy,” she said.
That’s why she urges women to boost 401(k) savings — aiming to max out contributions every year, if possible — and consider higher stock market fund allocations, depending on risk tolerance. More