Investing

The average 401(k) balance fell 4% in the third quarter while withdrawals and loans rose, according to a recent report by Fidelity.
Most financial experts advise against raiding a 401(k) since you’ll be forfeiting the power of compound interest.
In times of turmoil, here’s what you need to know before tapping your retirement savings.

After falling sharply last year, retirement account balances bounced back in the beginning of 2023 — but slumped again in the most recent quarter.
The average 401(k) balance fell 4% to $107,700 in the third quarter, due, in part, to volatile market conditions, according to a recent report by Fidelity, the nation’s largest provider of 401(k) plans. The financial services firm handles more than 35 million retirement accounts in total.

The average individual retirement account balance was also down nearly 4%, to $109,600 from $113,800, in the second quarter of 2023.
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Despite market turbulence, the total savings rate for the third quarter, including employee and employer 401(k) contributions, held steady at 13.9%, in line with last year. That’s just shy of Fidelity’s recommended savings rate of 15%.
There were, however, other signs of trouble.

‘Last resort’ 401(k) hardship withdrawals rise

In extreme circumstances, savers can take a hardship distribution without incurring a 10% early withdrawal fee if there is evidence the money is being used to cover a qualified hardship, such as medical expenses, loss due to natural disasters or to buy a primary residence or prevent eviction or foreclosure.

The share of participants who tap such hardship withdrawals is on the rise, according to reports by Fidelity Investments and Bank of America — largely to avoid a foreclosure or eviction or to cover medical expenses, Fidelity found.
Bank of America’s recent participant pulse report showed that the number of 401(k) plan participants taking hardship withdrawals was up 13% from the second quarter and 27% compared with the first quarter of the year — with the average withdrawal amount just over $5,000.

Considering record high credit card debt, a declining personal savings rate and more than half of adults living paycheck to paycheck, the uptick is an indication that some households are struggling in the face of inflation and the increased cost of living, said Mike Shamrell, vice president of thought leadership for Fidelity’s workplace investing.  
Still, hardship withdrawals should be “your choice of last resort,” cautioned Joe Buhrmann, senior financial planning consultant at eMoney Advisor.
Most financial experts advise against raiding a 401(k) since you’ll be forfeiting the power of compound interest.
“‘Leakage’ from plan accounts through 401(k) loans and withdrawals can have outsized effects on retirement readiness,” said Sharon Carson, retirement strategist at J.P. Morgan Asset Management.

Explore your options before tapping your 401(k)

From tapping your home equity to taking out a personal loan, households should consider what resources are available in times of financial stress before borrowing against a retirement account.
However, in some cases, a 401(k) loan may be preferable to other alternatives, said Fidelity’s Shamrell. Federal law allows workers to borrow up to 50% of their account balance, or $50,000, whichever is less, without penalty as long as the loan is repaid within five years. There may be other conditions as well, and if you’re laid off or find a new job, most employers will require your outstanding balance be repaid in a shorter time frame.
“There are times where the loans may be a more valid direction, as opposed to putting that on your credit card,” Shamrell said.
And in other situations, especially for cash-strapped consumers living paycheck to paycheck, it may even make more sense to cover the cost of an emergency all at once with a hardship withdrawal, rather than tap a loan that then gets deducted from your take-home pay, he added.  
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If you’re lucky enough to have a financial advisor as a friend or family member, you probably have asked them a financial question or two.
These are the top questions advisors say they were asked this Thanksgiving holiday, and how they answered them.

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When it comes to gathering with friends and family over the holidays, etiquette experts usually say that money and politics should be off the table.
That is, of course, unless you’re sitting with a professional financial advisor.

Advisors shared with CNBC the top questions they were asked this Thanksgiving, and how they answered them.
Check out their responses, which may help you, too.

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

Is it still a good time to buy real estate?

The new higher interest rate environment has made the cost of financing a new mortgage more expensive, which has scared off some would-be buyers and sellers. Those who are sitting on the sidelines are wondering when to find the best opportunity.
“I’m a big fan of marrying the house and dating the rate. Given that there is only 3.6 months of inventory across the country, we are in a bit of a logjam for existing home sales because people can’t justify trading up to a more expensive home given that mortgage rates are at 7.5%. But just remember if you love the home, the odds are you won’t be in the higher rate forever as rates should come down to that 5% to 6% over the next 24 months.”
—Ted Jenkin, certified financial planner and the CEO and founder of oXYGen Financial, a financial advisory and wealth management firm based in Atlanta. Jenkin is a member of CNBC’s FA Council.

“Timing the real estate market, or any market for that matter, is very difficult. And there’s also a difference between buying a home versus buying an investment property. If we’re talking about a roof over your own head, I don’t view it as an investment. Then it comes down to what you can afford to do. Homes might be ‘overpriced,’ but if you can afford to comfortably live in one, who is to say it was a bad decision? … Affording a home is a matter of mapping out what you can afford to save for a down payment and your monthly payment.”
—Douglas Boneparth, CFP and president, Bone Fide Wealth in New York. Boneparth is a member of CNBC’s FA Council.

How will the 2024 election affect the economy?

As the 2024 presidential election approaches, some investors are getting jitters. A recent survey found nearly half of investors — 45% — believe those political contests will have a bigger impact on their portfolios than market performance.
“The election results are unknowable, so my thoughts are to do all the financial fundamentals well and control what you can (debt levels, spending, savings rate, taxes). Regarding the government debt and spending, I am counseling that economic growth will be hindered, taxes will be increased (income, payroll-related taxes and Medicare premiums.) Get spending under control and increase savings where possible.”
—Donald M. Roy, CFP and founder, New England Wealth Advisors in Bedford, New Hampshire.

Are we headed for a recession?

The question as to whether or not an economic downturn is on the horizon has dominated headlines over the past year. That may be a formal recession, defined as two consecutive quarters of falling GDP, or a soft landing.
“It is important to look at the expected severity; not all recessions are severe. This recession upcoming looks to be mild as employment is solid and corporate profits are decent. Recession will be due to Fed making money expensive, not corporate center being week.”
—Donald M. Roy

Is bitcoin a scam?

As headlines show high profile cryptocurrency executives taking the fall for regulatory violations, that has left many investors wondering whether crypto assets, namely bitcoin, are still a good investments.
“Like any new type of technology, bitcoin reminds me of the volatility you take on when you buy an early technology stock. I don’t think bitcoin is a scam, but I do think there are scammers as evidenced with Sam Bankman-Fried when it comes to cryptocurrency. Nobody should have more than a 1% to 3% allocation in crypto, in my view, and it is a seven- to 10-year hold time if you put money in this asset category.”
—Ted Jenkin

Why invest now, with so many geopolitical issues around the world?

As conflict in between Israel and Palestine, as well as Ukraine and Russia, continues, some investors are tempted to stick to the sidelines. Experts say fears about what may happen should not influence your investment strategy.
“Although geopolitical events may introduce uncertainty and market volatility, diversification remains a key strategy for mitigating these risks. We have been through these types of issues many times before. Geopolitical challenges can create investment opportunities, and historical market resilience underscores its adaptability to geopolitical changes. While short-term fluctuations may occur due to specific events, markets generally adjust over time, often experiencing upward trends, particularly for long-term investors.”
—Ashley Folkes, a certified financial planner and managing director at Inspired Wealth Solutions in Birmingham, Alabama.

Is Social Security going bankrupt?

The trust funds that Social Security relies on to pay benefits are running low on funding. In the next decade, benefits may be reduced if nothing is done to fix the situation. But that does not necessarily mean the program is going broke entirely.
“The issue related to the solvency of [Social Security] will need to be addressed as the current path isn’t sustainable. It could be a combination of raising the maximum the maximum limit on earnings for withholding of Social Security (it is $160,200 for 2023 and $168,600 for 2024), increasing the rate of Social Security taxes (currently 6.2% for employees & employers) or delaying the age. I explained to my mom (who is currently retired, and her friends and relatives are, too) that her benefits would not just disappear.”
— Marguerita Cheng, CFP and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland. Cheng is also a member of the CNBC’s FA Council.

Is there still hope for student loan forgiveness?

The Supreme Court struck down President Joe Biden’s plans to forgive up to $20,000 in debt for federal student loan borrowers. Since then, the White House has worked to identify other ways to provide debtors with flexibility, though those plans may look different this time around. Now that federal student loan repayment has started, some have received inaccurate bills.
“Even if you disagree with the billing, pay as requested then seek an adjustment. It isn’t worth damaging credit and then working to get it fixed. Keep records of all phone calls and chat transcripts.”
—Rob Schultz, CFP and senior partner at NWF Advisory Group in Encino, California.

Are extended warranties worth it?

Consumers making big ticket purchases this holiday season face many choices, including whether they want to opt for an extended warranty. But is the extra protection worth it? Not always.
“In general, I’m not a big fan of extended warranties and not a big fan of trip insurance. In the law of large numbers, less than 1 out of 10 people ever ‘cash in’ or ‘use’ the extended warranty, so you would just be better off skipping it on the whole.”
—Ted Jenkin More

South Korea’s markets have been plagued by what is commonly called the “Korea discount,” where stocks are valued lower or assigned a higher risk premium than their global peers.
While this may seem like a market opportunity to investors to sink money into South Korea so as to take advantage of the undervaluation, analysts think it is not that simple.

A cameraman takes video footage of a stock index board showing South Korea’s benchmark stock index (L) after a ceremony celebrating the New Year’s opening of the South Korea stock market at the Korea Exchange in Seoul on January 2, 2023. (Photo by Jung Yeon-je / AFP) (Photo by JUNG YEON-JE/AFP via Getty Images)
Jung Yeon-je | Afp | Getty Images

South Korea’s stock market, despite being home to Asia’s fourth largest economy, is often considered undervalued by analysts, leading to what is sometimes referred to as the “Korea discount.”
Data from the Korea Exchange showed that the Kospi benchmark index as a whole has a price-to-book ratio of 0.92, and its price-to-earnings ratio stood at 18.93. A price-to-book ratio measures whether a company’s share price is undervalued, with a number below 1 indicating the stock may be below fair value.

The “Korea discount” refers to a tendency for South Korean securities to be assigned lower valuations or bear an inflated risk premium by investors, explained Vikas Pershad, portfolio manager for Asian equities.
For investors who subscribe to the idea that prices will gravitate toward fair value, an undervalued market could be a great investing opportunity.
But it may be more complex than that.
If stocks continue to be undervalued, what appears to be a value buy for investors could quickly turn into a so-called value trap — where investors buy what appears to be a relatively cheap stock, only for the stock price to continue falling or remain stagnant.
So, why is there the “Korea discount”?

There are a number of reasons for this, according to Jiang Zhang, head of equities at investment firm First Plus Asset Management. They include geopolitical risks involving North Korea, corporate governance, limited foreign investor participation and most notably, the company’s management or corporate structure, he told CNBC.

Chaebol challenge

In South Korea, most market heavyweights are corporations called “chaebols,” large family-owned global conglomerates that are usually controlled by the founder’s family. These may consist of a group of companies or several groups of companies.
Notable chaebols include market heavyweights such as Samsung Electronics, LG, SK and Hyundai.

Chaebols make up a huge part of the South Korean economy. One such example is Samsung and its affiliated companies, which contributed 22.4% to South Korea’s GDP in 2022.
However, these very same companies are part of the reason behind the Korea discount phenomena.
Chaebols “often have complex corporate structures which have resulted in poorer governance, transparency, and shareholder rights,” said Jeremy Tan, CEO of Tiger Fund Management, the fund management arm of online brokerage Tiger Brokers.
Zhang pointed out that under the family-owned structure of chaebols, investors hold little sway over the company’s strategic direction.
He highlighted that family owners, by virtue of having a dominant stake in the company, may pursue businesses that are unrelated to the core business or are loss-making, which will destroy shareholder value.

Dividend dilemma

Some investors may take the position that a lack of capital gains is acceptable for their portfolio because they plan to hold stocks for dividend payouts.
However, IHS Markit highlighted in June last year that in South Korea, the ex-dividend date comes before the companies’ dividend announcement dates.
As such, shareholders of South Korea stocks face a unique set of risks and opportunities as they are expected to hold their share through the ex-dividend date without knowing how much dividend will be distributed.
The ex-dividend date refers to the date that an investor needs to own a stock in order to receive the dividend. This is unlike companies in most other advanced markets, which announce their dividend payout and ex-dividend date before the ex-dividend date passes.

Zhang also said South Korean companies historically “do not have a habit of returning money to the shareholder because they view the money to be theirs, rather than that of the shareholder.” Those that do have an average dividend payout ratio of about 15% to 20%, he added.
In comparison, Chinese and Japanese companies have a payout ratio of 30% to 40%, while those in Southeast Asia have a ratio of 40% to 50%, according to Zhang.

Sink money or stay away?

With such challenges, should investors be putting their money into South Korea stocks — or should they stay away?
Most analysts say South Korean equities are attractive for long-term investors, as long as the country continues its proposed reforms. South Korea’s Financial Services Commission claimed this year that it had made “notable progress” in capital market reforms.
Efforts include improving foreign investors’ access to capital markets, improving dividend distribution practices and including English language disclosures.
Hebe Chen, market analyst at IG International is of the view that the South Korean market “unquestionably merits more attention from global investors.”
If the proposed reform increases accessibility to global investors and resolves corporate issues, it will draw more attention to South Korean equities, Chen said, adding it will “hopefully consign the ‘Korea discount’ to history.”
However, she advocates that before any meaningful changes take effect, investors should exercise more patience for the time being.
South Korea’s inclusion to the MSCI World Index could be another factor. The country is currently part of of the MSCI Emerging Markets index, but has expressed interest in being recognized as a developed market, which could lead to being included in the MSCI World Index.
Efforts by Korean authorities to promote investment are good signals, said Ryota Abe, economist from Sumitomo Mitsui Banking Corporation’s global markets and treasury department.
“If authorities continue to improve the investment environment further, the chances for the South Korean stock index to be included in the [MSCI World Index] will grow,” he said.
However, improvements will take a long time, he pointed out, adding that should it materialize, more inflows will be expected, which will be “optimal” for the South Korean market.

Where to invest

Nonetheless, not all sectors are equal.
While South Korean companies are prominent in sectors like semiconductors, automotive and finance, there are also other bright spots.
There are promising long term opportunities in sectors such as defense, battery supply chain and infrastructure, M&G Investments’ Pershad said.
He pointed out that “the strengthening partnerships between South Korea and West Asian countries, particularly Saudi Arabia, are creating additional investment opportunities.”
Zhang, from First Plus, said investors should look for small- and mid-cap companies that are subject to less family influence, are better positioned for change in corporate governance, and open to a more friendly shareholder return policy.
On the other hand, large cap companies that are have extensive family influence may not be willing to change the existing status quo.
Zhang suggested looking at small- and mid-cap companies that have “global exposure, a proven business model, consistent revenue and earnings growth.”
When the global economy shifts into recovery mode, he said, these companies can easily capitalize on the broader opportunities. Such companies also have a higher likelihood of delivering generous payouts, he added.
“Investors will be ultimately rewarded with both attractive dividend returns and stock price appreciation.” More

When federal student loan borrowers refinance their debt, they often forfeit a number of consumer protections, experts warn.
Here’s what to know.

Recep-bg | E+ | Getty Images

Now that federal student loan payments have restarted after a three-year reprieve, some borrowers may be wondering if it’s a good time to refinance.
And companies haven’t been shy in pushing the option, said higher education expert Mark Kantrowitz.

“Some lenders seem desperate for origination and refinancing volume, so they are spending a lot on advertising,” Kantrowitz said.
Refinancing is when one or more loans are rolled into another, and borrowers often refinance to obtain a lower interest rate or new repayment terms. But converting federal student loans into private debt can lead to the loss of a number of consumer protections, experts warn.
Refinancing can be a great option for those in a solid financial situation, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for the lenders.
“Borrowers should definitely shop around for the best rate, and educate themselves on benefits they could gain or lose,” Buchanan said.
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Outstanding student loan debt in the U.S. has tripled over the last decade, and it burdens Americans more than auto and credit card debt. Average debt at graduation is currently around $30,000, up from $10,000 in the early 1990s.
Here’s what to know before you refinance.

Federal loans have more safeguards

The most important thing to keep in mind when considering refinancing your federal student loans is that, should you move forward, your debt will be transferred to a private company, and become a private student loan. As a result, you’ll no longer be eligible for the government’s relief options.
“Private student loans don’t have the same benefits as federal student loans,” Kantrowitz said.
For example, the U.S. Department of Education allows borrowers to put their loans into forbearance for up to three years. You can also pause your payments during periods of economic hardship and unemployment.
Private student loans, on the other hand, typically extend just a one-year forbearance, Kantrowitz said.
Borrowers can also repay their federal student loans through an income-driven repayment plan, which caps the monthly bill at a share of the borrower’s discretionary income, with some borrowers ending up paying nothing. Such affordable plans are rare among private lenders.

Refinancing eliminates forgiveness eligibility

Getting a lower interest rate is harder today

Given the loss of consumer protections, borrowers should refinance only if they can save money by getting a lower interest rate, Kantrowitz said.
“But that is harder these days,” he said, pointing out that the Federal Reserve has repeatedly raised interest rates over the last few years.
While federal student loan rates reset annually for new loans, the rate is fixed once the loan is disbursed. Private student loans, meanwhile, have either fixed or variable rates that depend on current lending conditions.
As a result of the rising-rate environment, Kantrowitz said, “opportunities for savings are more limited, even for borrowers with excellent credit.”
Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit, agreed.
“I am seeing a lot of high rates compared to what I’ve seen in recent history,” Mayotte said.

Borrowers most likely to save money through refinancing are those holding federal student loans from several years ago, when interest rates were higher, Kantrowitz said. Rates on some federal student loans were around 7% or higher between 2006 and 2008. Undergraduate federal student loans disbursed last summer had an interest rate of 5.5%.
Federal student loan borrowers don’t need to refinance to get a slightly better rate, Kantrowitz pointed out: Most student loan servicers will offer a 0.25% interest rate deduction when you sign up for automatic payments.
It can’t hurt for people who already have private student loans to see if they can pick up a better rate, Mayotte said. If your current interest rate on your private student loan is, say, 12%, you may be able to refinance for a rate around 7%, she said, if you have a good credit profile.

Revising loan terms can add to your overall costs

Borrowers shouldn’t get excited too quickly about a refinancing offer with a lower monthly payment, Kantrowitz said.
In some cases, a lender may extend your repayment timeline to get you a lower monthly payment but increase the total amount you’ll need to pay.
Kantrowitz provided an example: A borrower with a $30,000 loan and a 5% interest rate will have a monthly bill of around $320 on a 10-year repayment term, and with interest they’ll pay a total of roughly $38,000. Refinancing their loan to a 20-year-term will result in their monthly payment dropping to around $198, but in the end they’ll have shelled out closer to $47,000.
In addition to that math, those considering a refinance should carefully read all the terms and conditions, Mayotte said.
“Is the interest rate variable, and if so how high can it go?” she said. “Are there options for temporary reduced or paused payments?”
Borrowers should also understand any fees associated with the origination of the refinance, she added. More

If happiness has a price tag, the average person believes the magic number is $1.2 million, according to a recent financial happiness report.
As it stands, most people don’t think they have enough money saved to achieve their long-term goals, such as retirement.

Young adults put the price of happiness even higher

When broken down by generation, millennials put the number much higher — more than $500,000 — according to the report. Millennials and Gen Z were also more likely to say money can buy happiness.
A prolonged period of high inflation has made it harder for those just starting out. More than half, or 53%, of Gen Zers said the rising cost of living has been a barrier to their financial success, according to a separate survey from Bank of America.
In addition to soaring food and housing costs, millennials and Gen Z face other financial challenges their parents did not as young adults. Not only are their wages lower than their parents’ earnings when they were in their 20s and 30s, but today’s young adults are also carrying larger student loan balances.

Retirement is the biggest obstacle

Regardless of age, retirement is often the biggest obstacle when it comes to financial security.
Increasingly, even doctors, lawyers and other highly paid professionals — often already considered “rich” — who benefit from stable jobs, homeownership and even a well-padded retirement savings account, said they don’t feel financially comfortable either.
While most people in the Empower report said they would need $1.2 million in the bank, other studies have found that high-net-worth individuals put the bar even higher. More than half said they would need more than $3 million, and one-third said it would take more than $5 million, according to a report by Edelman Financial Engines.
Often, “people think they need a lot more than they do — that’s because they haven’t zeroed into their right number,” said Jason Friday, head of financial planning at Citizens Wealth Management. “It’s always going to be a moving target.”

Although everyone has different needs and expectations, some age-based guidelines can help, according to Mike Shamrell, vice president of thought leadership for Fidelity’s Workplace Investing.
“Target date funds are one way to get a sense of your age-appropriate risk tolerance,” he said. “You want to make sure you are not losing out on possible growth opportunities or, alternatively, exposing yourself to unnecessary risk.”
Experts recommend working with a financial advisor to get a handle on where you stand relative to your long-term goals.
However, there are also plenty of online tools that can get you started, Friday said. “That gives people a simple entry into the planning process.”
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Year-end Planning

The Matthew Perry Foundation is using a donor-advised fund to create a legacy in the late actor’s name.
Experts say the strategy is not just for the rich and famous.
A donor-advised fund may help provide immediate tax benefits and lasting estate planning.

Matthew Perry attends the GQ Men of the Year Party 2022 at The West Hollywood EDITION on November 17, 2022 in West Hollywood, California.
Phillip Faraone | Getty Images

A new foundation has been established in the late actor Matthew Perry’s name to help others who struggle with addiction.
“Addiction is far too powerful for anyone to defeat alone,” the foundation’s website quotes the late actor saying. “But together, one day at a time, we can beat it down.”

The Matthew Perry Foundation is structured as a donor-advised fund, according to its website, a charitable investment fund that experts say offers certain advantages.
Perry may have chosen to have the donor-advised fund as a beneficiary of his estate, which would have let him donate anonymously, according to Charlie Douglas, a certified financial planner and president at HH Legacy Investments in Atlanta.
Donor-advised funds allow donors to choose how much personal information may be shared when making grants from the funds and how they are acknowledged, according to the website of the National Philanthropic Trust, which sponsors and maintains the Matthew Perry Foundation’s donor-advised fund.
“Among celebrities, the best plans are plans of privacy,” Douglas said.
National Philanthropic Trust, through a spokesman, declined to be interviewed for this article.

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How donor-advised funds work

Donor-advised funds allow donors to receive immediate tax deductions for their contributions to the fund.
However, they may choose to grant the money to nonprofits over time, giving them more flexibility when choosing the causes and amounts to which they would like to dedicate their funds.
Many clients and their financial advisors establish donor-advised funds during the estate planning process, which allows for the distribution of the money per their wishes when they pass away, according to Brandon O’Neill, a certified financial planner and vice president and charitable planning consultant at Fidelity Charitable.
Donor-advised fund charitable assets represent 20% of those in private foundations, according to National Philanthropic Trust’s 2023 annual report.

While wealthy donors may have both a foundation and a donor-advised fund, many are moving to just donor-advised funds, according to Douglas. A donor-advised fund comes with fewer restrictions than a foundation, which requires filing of certain tax forms, annual charitable payouts of at least 5% of the value of its endowment and payment of an excise tax on net investment income.
“With a donor-advised fund, what it does is more streamlined,” O’Neill said. “There’s not as much of an administrative burden or oversight that happens with a foundation.”
Donor-advised funds are not limited to just wealthy donors. Some firms may allow for an account to be opened with $0 in initial contributions.
The average size of individual donor-advised accounts was an estimated $117,466 in 2022, according to National Philanthropic Trust, down 3.8% from $122,162 in 2021.

Advantages of using a donor-advised fund

For all donors, regardless of income, there may be benefits to using a donor-advised fund.
For one, if you donate checks throughout the year, it may be difficult to keep track of all the money you have given away during the year when it comes time to report it on your tax return, Douglas noted.
Donor-advised funds offer a way to keep a “running tally,” that lets you see exactly who you donated to, when and where, Douglas said.
A second advantage is that instead of writing checks to give money, donors may instead choose to give to the fund appreciated assets such as stocks, bonds or mutual funds that would otherwise incur capital gains tax when sold, O’Neill said.
“These accounts do have the ability to provide the opportunity for tax-free growth,” O’Neill said. “So that also creates additional funds for charity.”

Another perk is the ability to use a tax strategy known as bunching donations, which allows for the consolidation of donations in a single year in order to maximize itemized deductions.
This tactic has become more valuable since the Tax Cuts and Jobs Act increased the standard deduction until 2025, raising the bar to meet thresholds to qualify for itemized deductions. In 2023, the standard deduction is $13,850 for single filers and $27,700 for those who are married and file jointly.
Although it’s already late November, it is possible to get donor-advised funds open, established and funded by year-end, O’Neill said. But how fast that can happen may vary, particularly depending on where the assets come from, he said.
At Fidelity, O’Neill said, the vast majority of contributions come in the last few weeks of the year. However, it is best to get the process started as early as possible, he said. More

Climate change costs the U.S. about $150 billion a year. That toll is expected to worsen.
Extreme weather events may lead people to evacuate, causing costs related to transportation, lodging and employment, for example.
Health costs, insurance rates, food prices and property damage will also likely increase.
There are some steps to take to prepare, experts said.

Andrew Merry | Moment | Getty Images

The following is an excerpt from “This week, your wallet,” an audio program produced by CNBC’s Personal Finance team. Listen to the latest episode here. [Editor’s note: Audio clip begins at the 2:33 minute mark.]
Climate change has been described as a ticking time bomb, the threats of which extend beyond ecosystems and biodiversity to big financial impacts on households and the U.S. economy.

Those financial costs are largely the result of extreme weather events.
The White House issued a report last week — the Fifth National Climate Assessment, issued every four to five years by the federal government — warning that heat waves, heavy rains, drought, hurricanes, floods and wildfires “are becoming more frequent and/or severe,” with a “cascade of effects” in all areas of the U.S.
“It’s no longer just a problem for Florida, or just a problem for Louisiana and New Orleans,” said Andrew Rumbach, senior fellow and co-lead of the climate and communities program at the Urban Institute. “More and more people are experiencing these extreme events and they carry all kinds of different costs, both direct and indirect, for those families.”
Here’s what to know, according to experts interviewed by CNBC during a recent discussion about climate change and its impact on personal finance.

We already feel the impact — and it’s likely to worsen

Tim Wright | Corbis Documentary | Getty Images

Weather-related disasters cost the U.S. at least $150 billion a year, according to the White House report, which calls that estimate “conservative.”

The U.S. now experiences a billion-dollar disaster every three weeks, on average; during the 1980s, that happened every four months, the report notes.

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

The economic toll — due to such things as water stress, agricultural loss, tourism impacts, falling real estate value, and property and infrastructure damage — is expected to grow.
“Over time, each incremental increase in climate change is going to up the economic cost bit by bit,” Rumbach said.
Every additional degree of global warming translates to “increasingly adverse consequences”: Warming by 2°F is projected to more than double the economic harm from 1°F of warming, for example, the report said.

The effects can be ‘weird and unpredictable’

Bloomberg Creative | Bloomberg Creative Photos | Getty Images

Climate change’s impacts can be “weird and unpredictable,” said David Pogue, host of the podcast “Unsung Science” and author of “How to Prepare for Climate Change: A Practical Guide to Surviving the Chaos.”
“I prefer the term ‘global weirding,’ because warming is only just part of it,” Pogue said.

For example, more than 3 million U.S. adults reported being displaced from their home by an extreme weather event just within the past year, Rumbach said, citing data from the U.S. Census Bureau’s Household Pulse Survey.
In other words, 1 in 70 adults were displaced because of events such as hurricanes, floods and fires, according to an Urban Institute report. Many of them were away from their homes for less than a month, but others were away for at least six months.
Even absent property damage, an evacuation leads to transportation costs, hotel costs, and time away from work, which may disrupt pay and workplace benefits, Rumbach said.  
“All those costs really add up,” he said.

I prefer the term ‘global weirding,’ because warming is only just part of it.

David Pogue
author of “How to Prepare for Climate Change: A Practical Guide to Surviving the Chaos”

Further, for every additional “hot day” per year, especially in Western states, the prevalence of workplace injuries increases by 5% to 15%, Rumbach said, citing peer-reviewed scientific analyses. There’s also $10,000 in additional emergency room costs per 100,000 people, especially among the elderly, he said.
Plus, for every 1% decline in crop yields, there’s an estimated 0.1% out-migration of the population — a significant impact both for places losing people and for those receiving them, Rumbach said.
Declining agricultural output may fuel higher food prices, experts said, and greater property damage will likely fuel higher insurance rates.

There are ways consumers can prepare

Justin Paget | Digitalvision | Getty Images

Americans may frequently hear about ways to reduce their carbon footprint. But there are also steps they can take to prepare for the worsening effects of climate change.
“Governments and corporations have been adapting for a long time: That’s why they build sea walls, and Starbucks is finding new mountains to grow coffee on,” Pogue said. “But nobody ever talks about the little guy.”
The first thing to do, Pogue said: Look at your homeowners or renters insurance policy.
“You probably bought it years ago, trying to make it as cheap as possible,” he said. “But things have changed, and I think a lot of people are stunned to find out that homeowner’s insurance does not cover flooding. It just doesn’t.”

It’s no longer just a problem for Florida, or just a problem for Louisiana and New Orleans.

Andrew Rumbach
senior fellow at the Urban Institute

Those with renters or homeowners insurance should make sure they’re not underinsured, Rumbach said.
Prospective homebuyers can consult tools to choose homes in areas with reduced climate risk, he added. For example, Redfin offers climate risk assessments based on geography, he said.
There are also potential ways for investors to bolster their investment portfolio and have a positive impact on the environment, Pogue said.
Supporting an industry or company that’s “green” is “in effect helping everyone,” he said.
The best approach wouldn’t be to invest broadly in solar and wind companies, for example — those are commodities that keep getting cheaper, Pogue said.
Instead, it may involve investing in utility companies that get all their electricity from renewable energy sources, Pogue said. Thirty-eight states now have mandates about getting a certain amount of power from renewable energy, he added.
Investing in the electric-vehicle revolution may include buying into companies that produce electric car batteries or those that mine lithium, a key component in electric car batteries, for example, he said. More

“House hacking” refers to renting out a portion of your home for an additional stream of income.
More than half of millennial and Gen Z homebuyers say house hacking is a “very” or “extremely” important opportunity, according to a report by housing market site Zillow.
That extra money can “help make those dreams of homeownership penciled into reality, given that there’s so many affordability constraints on the current market,” said Manny Garcia, senior population scientist at Zillow. 

A couple assembling furniture.
Drazen_ | E+ | Getty Images

Gen Z and millennials are “hacking” the housing market as high prices and interest rates make affordability difficult.
The term “house hacking” refers to the practice of renting out a portion of your home or an entire property for an additional stream of income.

Almost 4 in 10, 39%, of recent homebuyers say the practice represents a “very” or “extremely” important opportunity, according to a new report by housing market site Zillow. That share is up eight percentage points in the past two years.
Younger generations are especially keen on the idea. In Zillow’s survey, more than half of millennial, 55%, and Gen Z home buyers, 51%, expressed positive views on house hacking.
Zillow polled more than 6,500 recent homebuyers between April 2023 and July 2023. Respondents were adults who moved to a new primary residence they purchased in the past two years.
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The additional income from house hacking can “help make those dreams of homeownership penciled into reality, given that there’s so many affordability constraints on the current market,” said Manny Garcia, senior population scientist at Zillow. 

The median sale price for a house in the U.S. was $413,874 in October, up 3.5% from a year ago, according to a report by real estate site Redfin.
The average rate for 30-year mortgages hit 8% in October, the highest level seen in 23 years, according to Bankrate. To compare, rates bottomed out slightly below 3% in January 2021.
While renting out portions of a newly owned property can help offset higher costs of a home, potential buyers will need to make a few considerations beforehand.

‘You need to earn six figures to afford a starter home’

As home prices and interest rates have risen, potential homebuyers need a salary of $114,627 to afford a median-priced house in the U.S., a recent report by Redfin found. Redfin’s analysis used the median home price of $420,000 in August.
“In many places, you need to earn six figures to afford a starter home, so it makes sense for young people who are seeing how expensive homeownership is to want options,” said Daryl Fairweather, chief economist at Redfin. 

With few small starter homes available, a millennial or Gen Z buyer may have to jump on a more expensive home than they would have wanted, Fairweather said.
“Having the option to rent or have a roommate is important in an environment where there just aren’t that many small homes for sale,” she said. 
House hacking may help those homeowners by providing them additional income for expenses or even help cover the mortgage.

More apartment buildings are available

The opportunity to house hack may be short lived. In some markets, new apartment buildings are under construction that will have available units next year, especially smaller, one bedrooms. 
Rental market inflation, which had been stubbornly high for much of 2023, has cooled due to new inventory, pushing the rental vacancy rate up to 6.6% in the third quarter, the highest level since the first quarter of 2021, according to Redfin data. 
“We’ve already seen rent prices stabilize, especially for single occupancy rentals,” Fairweather said. It’s going to be harder to rent out a room as more rentals become affordable, she added.
Despite the growth in available apartments, the U.S. is facing a “massive shortage of housing, especially affordable housing options,” said Zillow’s Garcia. 
“If you’re pricing your home competitively, renting out can be a reliable source of income because there’s no shortage of people looking for a place to live,” he said. 

What to consider before ‘house hacking’

While renting out a portion of your home can serve as an additional income, interested buyers would still need to gather a sufficient down payment and proof of income to show they can already afford the monthly payments.
“If you’re going to rely on rental income in order to qualify, you’ll have a problem,” said Melissa Cohn, mortgage banker and regional vice president of William Raveis Mortgage.
“They need to prove they can afford the mortgage without the rent,” she said.
Banks won’t consider potential rental income and they will require the buyer to be able to qualify for the financing without the support of potential rental income, she said.

There is another risk to buying a bigger house with the intention of renting out part of it: You could wind up stuck with an expensive mortgage and a room you can’t rent out.
If renting out part of your home — or the entire property — is optimal for you, do your research on what the current rate is for your type of home. Consult with rental managers who can help draft leases and give you a good estimate on the going rate in your area, said Garcia. 
“There’s a lot of homework to be done to make sure that you’re pricing correctly when you’re posting your unit for rent,” Garcia said. 
Additionally, keep in mind that there is a big chance the house you are considering may be subject to local ordinances on renting or homeowners association regulations.Don’t miss these stories from CNBC PRO: More