Investing

Year-end Planning

Year’s end is a good time to take stock of investment-related tax strategies that may have been left on the table.
Here are three potential tax moves recommended by advisors with firms on CNBC’s annual Financial Advisor 100 list.

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The page has almost turned on 2023 — and that means time is running out to make certain tax moves by year’s end, or else risk missing out on their benefits.
Here are some tax strategies to consider before ringing in the new year, according to advisors from CNBC’s FA 100, an annual ranking of the nation’s top financial advisory firms.

1. Take your RMDs

Investors who own certain retirement accounts — like pretax individual retirement accounts and 401(k)s — must take “required minimum distributions,” or RMDs, after reaching a certain age.
Basically, they need to withdraw a minimum amount of money from those accounts or risk a tax penalty.
That penalty is 25% of the RMD amount that wasn’t withdrawn, though it can be reduced in some cases.
“Put RMDs on your calendar every year,” said Michelle Perry Higgins, principal and financial advisor at California Financial Advisors, which ranked No. 30 on CNBC’s FA 100 list. “You just can’t forget to take it.”

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Savers must generally start taking RMDs by a specific age. A recent law, Secure 2.0, raised the age to 73 from 72, starting in 2023. (Those who turned 72 in 2023 must take their first RMD in 2024.)

Secure 2.0 also eliminated RMDs from Roth 401(k) and 403(b) accounts. However, that provision doesn’t kick in until 2024.

2. ‘Harvest’ investment losses

Nobody likes losing money on investments.
But such losses can help reduce investors’ tax bill, said J. Luther King Jr., founder and president of Luther King Capital Management, No. 1 on CNBC’s FA 100.
“Tax-loss harvesting” entails selling investments that are in the red and using those losses to offset profits on winning investments sold during the year. Why? Because investors owe capital gains tax on their profits.
Losses offset profits dollar for dollar. By taking enough losses, investors can potentially eliminate their capital gains tax bill outright. They can carry over any unused losses into future tax years.
Stocks are the typical candidates for such investment losses, advisors said. However, “this is probably the first time in my 40 years of doing this that you can [also] have significant losses in bonds,” said David Rea, president of Salem Investment Counselors, No. 27 on CNBC’s FA 100.
Of course, you should only sell investments if it makes sense to do so. And anti-abuse measures — known as “wash sale” rules — prevent investors from claiming a loss if they buy back the same or a similar security within 30 days.
But if there’s a big cumulative loss in an investment and no strategic reason to keep it for the next 30 days, consider a sale, Rea said.

3. Give to charity to reduce tax bills, RMDs

“As we end the year and reflect on what’s important to us, it’s a great time to orient our wealth with purpose and meaning,” said Fatima Iqbal, a certified financial planner and senior investment strategist at Azzad Asset Management, No. 73 on CNBC’s FA 100.
Doing so might involve charitable giving — and there are tax-efficient ways to do so, advisors said.

For example, people can make a big upfront donation to a donor-advised fund. These allow donors who itemize their taxes to claim a big tax write-off in the year of the donation, but then choose how that money will be doled out to charity in future years.   
This let some taxpayers “amplify their giving by accelerating [tax] deductions to high-income years when deductions are more valuable,” Iqbal said.
Older Americans can also use a “qualified charitable distribution” to give. This involves donating directly from an IRA — and that payment counts toward an annual RMD.
“For people who really give to charity, this is a sweet way to [do it],” Higgins said. More

Renters burdened by unaffordable housing costs may be at a higher risk of dying sooner, according to a new study published in the journal Social Science & Medicine.
An individual paying 50% of their income toward rent in 2000 was 9% more likely to die over the next 20 years compared with someone paying 30% of their income toward rent, the researchers found.

Demonstrators gather during a protest against the expiration of the eviction moratorium outside of the U.S. Capitol in Washington, D.C., U.S., on Sunday, Aug. 1, 2021.
Stefanie Reynolds | Bloomberg | Getty Images

Renters burdened by unaffordable housing costs may be at a higher risk of dying sooner, according to a new study published in the journal Social Science & Medicine.
An individual paying 50% of their income toward rent in 2000 was 9% more likely to die over the next 20 years compared with someone paying 30% of their income toward rent, according to the study from researchers at Princeton University and the U.S. Census Bureau’s Center for Economics Studies. Someone paying 70% of their income toward rent, meanwhile, was 12% more likely to die.

“We were surprised by the magnitude of the relationship between costs and mortality risk,” said Nick Graetz, a postdoctoral research associate at Princeton University and the study’s lead author. “It’s an especially big problem when we consider how many people are affected by rising rents. This isn’t a rare occurrence.”
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Rising rents have far outpaced wages, leaving the typical renter in the U.S. paying 30% or more of their income for housing. In 2019, 4 in 5 renter households with incomes below $30,000 were rent-burdened.
The Princeton researchers collaborated with the Census Bureau to create a dataset that allowed them to follow individual renters from 2000 on. They analyzed millions of records to understand the link between rent burden, eviction and mortality for people.
In addition to the consequences of unaffordable rent, they found that even being threatened with eviction was associated with a 19% increase in mortality. Receiving an eviction judgment was associated with a 40% increase in the risk of death.

CNBC interviewed Graetz about the study findings. The interview has been edited and condensed for clarity.

‘As rents go up, families cut back on other spending’

Annie Nova: What is it about being rent-burdened that increases mortality?
Nick Graetz: We know housing is the primary cost for American families, and as rents go up, families cut back on other spending, including on essentials that affect their health.
For example, poor households with children who are moderately rent-burdened, devoting 30% to 50% of their income to rent, spend 57% less on health care and 17% less on food compared to similar unburdened households.

AN: Why is eviction, even more than being rent-burdened, linked to higher mortality?
NG: Eviction is a really traumatic event that leads to disenrollment from social safety net programs, such as Medicaid. It can also lead to job loss and a host of other negative consequences.
Eviction can compromise a person’s physical and mental health by exposing them to prolonged periods of intense housing precarity, including homelessness and acute stress.
In addition, eviction can increase exposure to infectious disease, as seen during the Covid-19 pandemic. Even just having an eviction filing on your record can limit your ability to secure future safe and stable housing, which can have impacts on health outcomes.

Current system makes it ‘difficult to retain housing’

AN: What efforts for change do you hope to see in response to your findings?
NG: We demonstrate in this new paper that as rent burdens hit record highs today, we should be considering policies to reduce evictions and guarantee affordable housing as not just housing policy, but as critical health policy.
In general, we live under a system that makes it really difficult to retain our housing whenever we experience a problem. A sudden health issue in your family, a car crash or any other unexpected problem can lead to an eviction in a short time.
It’s especially important to act now: eviction filings are increasing in every city and state that we track.

AN: Are there any policies currently in effect that are making the problem better?
NG: Across the U.S., cities and states are trying different and sometimes overlapping policies to promote housing stability and avoid evictions.
Some important legal aid programs include the right to counsel. When tenants are provided legal counsel, the odds of them remaining in their homes increase dramatically. Under New York City’s right to counsel in eviction court, 84% of represented renters facing eviction remain housed. In Cleveland, 93% of represented renters facing eviction avoid displacement.
Many states and cities, such as Rhode Island and DC, are considering programs like rent control and social housing, characterized by being mixed-income, mixed-use and with more resident involvement in governance than traditional public housing.
We need to create a country where quality housing is affordable to everyone.
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Life Changes

Companies are shedding employees, even as figures still point to low unemployment.
If you’ve been let go, experts say taking these eight steps can help you start to regroup.

Srdjanpav | E+ | Getty Images

When it comes to the holidays, there’s one thing most workers don’t want to receive: a pink slip.
But that’s exactly what some employees are getting this year. Citigroup is in the midst of layoffs as part of a corporate overhaul. Other companies to recently shed workers include e-commerce company Etsy and toy maker Hasbro.

If you’re among those affected, you’re likely just starting your job search amid the holiday rush.
“Companies are hiring right now and in the new year, that’s the good part,” said Vicki Salemi, career expert at Monster.

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It can work in your favor to start looking for a new job now, said Salemi, who noted she extended job offers during the holiday season when she worked as a recruiter.
Or you may decide you need to regroup and table your job search for the new year.
The good news is getting laid off no longer has the same stigma it once did.

“Being let go from a job is not as taboo as it once was years ago,” said Scott Dobroski, career trends expert at Indeed.
“There’s a variety of changes going on in the world of work; there have been a number of layoffs across the nation,” he said.
Experts say there are some steps you should consider to kick-start your job search and shore up your finances.

1. Give yourself permission to grieve

“Losing a job can be tough at any point during the year, especially during the holidays when it’s supposed to be joyous and celebratory,” Salemi said.
As your holiday event calendar fills up, it helps to have a statement ready if you do not want to talk about your job loss.
Alternatively, you may view those gatherings as opportunities to network, Salemi said.

2. Tally how much money may be coming to you

You may receive a severance package from your employer, or get paid for unused time off.
Find out when you might get your last paycheck, and how the pay schedule works to better gauge the size of that deposit, advised Ted Jenkin, a certified financial planner and CEO of Oxygen Financial, a financial advisory and wealth management firm based in Atlanta. Jenkin is also a member of the CNBC FA Council.
If you’re able to find a new job quickly, you may be able to bank the severance pay, he noted.
Also be sure to file for unemployment benefits right away, because getting approved can take weeks.

3. Consider enlisting professional help

If your company wants you to sign a noncompete clause, you may want to negotiate for that language to be removed from your severance agreement, Salemi said, as that may free you up to entertain more companies as prospective employers.
An employment lawyer may help you negotiate those terms.
Additionally, if you’re looking to better manage the tax implications of the money you receive, you may want to talk to an accountant, Salemi suggested.

4. Book medical appointments now

Because it’s the end of the year, you’ve likely met all your medical deductibles.
Consequently, now is a great time to get in any doctor’s appointments you need to make while you still have your employer-provided plan and flexible spending account, and before a new deductible or COBRA kicks in in the new year.
That should include dental and vision care, if possible, Jenkin said.

5. Keep tabs on any 401(k) loans you’ve taken

If you have taken a loan from your 401(k), check with your retirement plan provider to see what will happen to that balance after a job loss, Jenkin said.
Some plans may require the loan be paid back within 90 days, while others may allow you to roll the loan to a new 401(k), for example.
“If that loan is not paid back, it can become taxable income,” Jenkin said.

6. Use technology to your advantage

The amount of work it takes to find a new job can be greatly reduced if you use technological tools, according to Dobroski.
Let your social media connections know you are looking for work. Also be sure to update profiles on job search sites with your skills, experience and what you want in a new role.
Using those tools may help you discover roles you may not have otherwise considered, said Dobroski, who has seen bank tellers transition to sales executives after finding the role was also a fit for their skill set.
“We’ve seen some people get jobs quicker and earn salaries of upwards of $30,000, $35,000 or more because they’re finding a job that way,” Dobroski said.

7. Do at least job-hunting task every day

Searching for a job can admittedly be an exhausting and frustrating process.
To keep yourself on track, a good rule of thumb is to commit to doing one thing every day, Dobroski said.
That may include updating your resume, applying for a specific job, creating a new profile on a job search website or talking to a mentor.

8.  Perfect your sales pitch

As you revise your resume, be sure to include any new achievements or skills that could put you at the top of an employer’s list of job candidates.
Be sure to highlight transferable skills, Salemi said, such as ability to lead with empathy, handle deadline-driven work and operate under a company’s budget.
Looking at past performance reviews can help jog your memory, she suggested.
As news of layoffs continues to make headlines, keep in mind that new opportunities are still abundant.
“With the unemployment numbers at 3.7%, clearly there are still a lot of jobs that are out there,” Jenkin said. More

As the holiday season kicks into high gear, 62% of adults said they are living paycheck to paycheck, according to a new LendingClub report.
Households that are stretched too thin are also more likely to have revolving credit card debt and feel financial distress, the report found.

Holiday spending is expected to reach new record

This year, holiday spending from Nov. 1 through Dec. 31 is expected to increase between 3% and 4% over last year to a record total of $957.3 billion to $966.6 billion, according to the National Retail Federation.
Even as credit card debt tops $1 trillion, almost all — or 96% — of shoppers said they expect to overspend this season, a separate TD Bank survey found.
Half of consumers plan to take on more debt to cover those holiday expenses, according to another report by Ally Bank. Only 23% have a plan to pay it off within one to two months.

“Not only is sticking to a budget harder today,” said Sarah Foster, a Bankrate analyst, “but it’s all the more imperative, too.”
“Credit card financing rates have hovered at the highest levels ever recorded since last fall, meaning carrying a balance could cost a heavy price,” she said.

Credit card debt causes financial distress

Because of the high interest rate, revolving debt can be a particularly hard cycle to break.
“Credit cards can be an important financing option that credit-savvy consumers use to better manage their cash flows, though it’s concerning that many consumers revolved their credit card balances regardless of financial lifestyle,” said Alia Dudum, LendingClub’s money expert.
“Credit cards keep many in debt,” Dudum said.
Cardholders who carry a balance are also more likely to feel financial distress, LendingClub found.

Some 74% of Americans say they are stressed about finances, according to a separate CNBC Your Money Financial Confidence Survey conducted in August. Inflation, rising interest rates and a lack of savings contributed to those feelings.
That CNBC survey found that 61% of Americans are living paycheck to paycheck, up from 58% in March.
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Building wealth is a top priority for “hardworking” Americans, according to a new survey from investing app Stash.
Despite political and social issues, money was the No. 1 concern for most respondents, who were polled during the first two weeks in October.
What’s more, nearly two-thirds of respondents said they thought “sometimes” or “all the time” about how wealthier people make money.

Klaus Vedfelt | Digitalvision | Getty Images

As the new year approaches, building wealth is a top priority for “hardworking” middle-class Americans, according to a new survey from investing app Stash.
Despite political and social issues, money was the No. 1 concern for most respondents, who were polled during the first two weeks in October amid House leadership uncertainty in Congress and the start of the Israel-Hamas war.

What’s more, nearly two-thirds of respondents said they thought about how wealthier people make money either “sometimes” or “all the time.”

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Money is “such a primary source of anxiety” and everyday Americans want to know how higher earners “achieved that financial security,” said Stash CEO Liza Landsman. 
The survey polled 2,000 Americans who work at least 30 hours per week and have an annual income between $50,000 and $150,000.
Those polled meet Pew Research Center’s definition of “middle class,” which is Americans making between two-thirds and twice the median American household income, or $74,580 in 2022, according to the U.S. Census Bureau.

How America’s top earners make money

The bottom 80% of U.S. households receive more than 93% of their adjusted gross income from wages and retirement income, according to a Brookings Institution analysis of the latest IRS data.

By comparison, the top 0.1% of households receive less than 25% of their earnings from wages or retirement income. These top earners receive most of their income from investments — such as interest, dividends and capital gains — and businesses, which often provide better tax treatment, experts say.

The tax code “incentivizes you to invest in yourself,” said Sheneya Wilson, a certified public accountant and founder of Fola Financial in New York. She encourages her salary and wage-earning clients to “diversify income.”
While most Americans pay regular income taxes on wages from each paycheck, with the top rate at 37% for 2023, long-term capital gains, applying to assets owned for more than one year, have more favorable rates, she said. Those top out at 20% for 2023.

“The more diversification you have in income, the more favorable the tax code becomes for you,” Wilson said.

Investing is a ‘game of inches’

Stash’s Landsman says that with a large chunk of investment income for top earners, “there’s an important unlock there for low- and middle-income consumers.”
“Access to the equity markets is the single greatest wealth creation engine the country has known for the last several decades,” she said.
Regardless of income, wage earners can leverage the power of investing by starting early. Still, Landsman warns that there’s no “fast pass” to lasting economic security.
“It’s really a game of inches where very small, very tiny behavioral changes can make a huge positive impact in your life,” she said. More

In October, the pandemic-era pause on student loan payments expired, and some 22 million people had their bills due again.
Just 60% of those borrowers had made a payment by mid-November, new U.S. Department of Education data shows.

Bymuratdeniz | E+ | Getty Images

Confusion between on-ramp period, payment pause

Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit, said she was not surprised that so many borrowers hadn’t paid their bill. In the past, default rates among student loan borrowers have skyrocketed when payments resumed after natural disaster-related forbearances.
“I also attribute some of it to some borrowers just not realizing payments have come due,” Mayotte said.
Former President Donald Trump first announced the stay on federal student loan bills and the accrual of interest in March 2020, when the Covid-19 pandemic hit the U.S. and crippled the economy. The pause was extended eight times.

I also attribute some of it to some borrowers just not realizing payments have come due.

Betsy Mayotte
president of The Institute of Student Loan Advisors

Nearly all people eligible for the relief took advantage of it, with less than 1% of qualifying borrowers continuing to make payments on their education debt, according to an analysis by higher education expert Mark Kantrowitz.
Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, said he worried that some student loan holders were confusing the Biden administration’s 12-month “on-ramp” to repayment — during which they’re shielded from the worst consequences of falling behind — for another extension of the payment pause.
“There is a fundamental difference here,” Buchanan said. “Interest is accruing now.”
Throughout the payment pause, the interest rates on most federal student loans were set to zero, but interest began accruing again on Sept. 1. As a result, borrowers who don’t make payments now will see their balances grow.

Borrowers struggle to reenter student loan system

Many borrowers describe challenges trying to get current on their student loans, with long wait times trying to reach their servicers, errors with their bills, lost account information and confusion over new options rolled out over the past three years.
There had been several warnings that borrowers could face problems when their bills resumed.
In a court filing last year, Kvaal wrote that President Joe Biden’s broad student loan forgiveness plan was necessary to stave off “a historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic.”
The Supreme Court rejected the president’s plan in June.

Even prior to the pandemic, when the U.S. economy was in one of its healthiest periods in history, nearly half of student loan borrowers were behind on their payments or enrolled in relief measures for those struggling, including deferments or forbearances, according to Kantrowitz.
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.
The current payment numbers from the Education Department show that the student loan crisis is only worsening, said Astra Taylor, co-founder of the Debt Collective, a union for debtors.
“Faced with the impossible choice of feeding their kids, keeping a roof over their head or throwing an average of $400 a month into the Department of Education incinerator, borrowers are rightly choosing to keep themselves and their families financially afloat,” Taylor said. More

There are steps you can take at the start of the new year to get the most out of your workplace health plan and to avoid surprising bills, experts say.
You’ll want to make sure you know the full cost of your coverage, including co-insurance rates and deductibles.
You may also find your coverage has changed in 2024.

Drs Producoes | E+ | Getty Images

Most employees sign up for the workplace health-care plan during open enrollment and then don’t think much about it afterward.
But there are steps you can take at the start of the new year to get the most out of your coverage and to avoid surprising bills, experts say.

Here are some of them.

Learn all of your plan’s costs

The costs of your health insurance plan go far beyond your premium, or the monthly amount you pay an insurer to participate in a health plan, which your employer typically deducts from your paychecks.
You also need to learn about your deductibles, co-insurance, copays and out-of-pocket maximums.
It’s complicated. So if you are confused, you are most likely not alone.

Deductible: How much you’ll have to shell out before your employer’s plan kicks in. 
Coinsurance: the share you’re on the hook for with covered services. 
Copayments: The fixed amount you’ll pay for certain health-care services after you’ve paid your deductible.

Your out-of-pocket maximum is a limit on the total amount you’ll have to pay during the year — including copays, co-insurance and deductibles. After you’ve hit this ceiling, your insurer can’t ask you to pay any more.

Remember, these charges reset every year.

Check for changes from 2023 to 2024

It’s likely that your employer-sponsored health plan is a little different in 2024. As a result, you should review your coverage come January.
“Usually, when you sign up for a plan, you receive in the mail a full plan benefit guide,” said Caitlin Donovan, a spokesperson for the National Patient Advocate Foundation.

You should also be able to learn about your covered benefits on your plan’s website. If you don’t know how to access this information, contact your human resources department.
On the positive side, you might find your coverage has expanded.
For example, 15% of large companies offered menopause benefits in 2023 or planned to do so in 2024, compared with 4% in the years before, according to benefits consulting firm Mercer. More firms are also extending pet insurance and elder caregiving benefits to workers, it found.
Meanwhile, Donovan said she’s seen a “rapid expansion” in the coverage of alternative services, “like doulas, acupuncturists, reiki and massage therapists.”
Many health-care plans will cover all or part of a gym membership, Donovan said.
“Others may cover certain types of wellness apps, from Weight Watchers to meditation,” she said.
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On the flip side, you may discover that your plan has rolled back its coverage in a way that affects you. Still, that’s important to know.
“You don’t want to go to a doctor and find out they are not in your insurance network, as that can get very costly,” said certified financial planner and physician Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida. 
You should be able to check if a certain provider is covered under your plan on their website or portal. If you see a doctor is in-network, Donovan recommends taking a screenshot.
If the information turns out not to be accurate, you shouldn’t be held liable for out-of-network charges under the No Surprises Act, she said.

Plan your care for the year

In January, you want to make a list of your medical needs for the upcoming year, said McClanahan, who also is a member of CNBC’s Financial Advisor Council.
“If it is enough to hit the deductible, I go ahead and get it done, knowing that the rest of the year will be deductible free,” she said. “Then towards the end of the year, I get as much done as possible so I can hopefully decrease my utilization the next year. This includes filling up on all my prescription medications as much as can be allowed.”
It’s also best to schedule any particularly expensive treatments or procedures once your deductible has been met.

Remember that your health insurer likely must cover preventive services, including mammograms, colonoscopies and wellness visits, at no charge to you, whether or not you’ve hit your deductible. More

The Powerball jackpot has jumped to an estimated $543 million without a winner from Saturday night’s drawing.
There are two grand prize options: a lump sum of $272.2 million or an annuitized payout of $543 million.
The next Powerball drawing is on Monday at 10:59 p.m. ET.

Scott Olson | Getty

Lump sum distribution may be ‘a mistake’

“Virtually everybody who wins the lottery picks the lump sum distribution,” said Andrew Stoltmann, a Chicago-based lawyer who has represented several lottery winners. “And I think that’s a mistake.”
In many cases, the annuity is a better option because “the typical lottery winner doesn’t have the infrastructure in place to manage such a large sum so quickly,” he said.

The typical lottery winner doesn’t have the infrastructure in place to manage such a large sum so quickly.

Andrew Stoltmann

Stoltmann said the annuity protects winners from first-, second- or third-year financial mistakes while keeping the majority of the proceeds safe. 

Make a long-term plan for the windfall

“Flexibility and control over assets is a really good thing, but it’s not necessarily for everybody,” said certified financial planner and enrolled agent John Loyd, owner at The Wealth Planner in Fort Worth, Texas.
While the lump sum payout could be a good financial move for some winners, he said that others may benefit from the spending guardrails of annuitized payments.

However, some winners may later decide to sell the annuity to a third-party company for a lump sum payment. “The issue is they don’t get the best bang for their buck on that payoff,” Loyd warned.
Monday’s Powerball drawing comes roughly two months after a single ticket sold in California won the game’s $1.765 billion jackpot. Meanwhile, the Mega Millions jackpot is back down to $41 million, and the odds of winning that prize are roughly 1 in 302 million. More