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An estimated 7 out of 10 people will require long-term care in their lifetime, according to a report from Health and Human Services.
About 38 million family caregivers in the U.S. provide unpaid care valued at about $600 billion a year, according to AARP.
Medicare provides very limited coverage for long-term care — and it is vital to check your plan to find out what, if any, services may be covered.

Maskot | Maskot | Getty Images

People living longer and in poor health has become a costly trend. An estimated 7 out of 10 people will require long-term care in their lifetime.
The median cost for a private room in a nursing home is more than $100,000 a year — and it’s $60,000 or more a year for a home health aide, according to a Genworth survey. The median cost for an assisted living facility is $54,000.

“In some cases, residents and their families don’t know their total costs until they receive their monthly bill,” Sen. Bob Casey, D-Pa., who chairs the Senate Special Committee on Aging, said in a hearing Thursday on costs and transparency in assisted living facilities.
“These substantial costs and hidden fees make it nearly impossible for older adults and their families to accurately budget for long-term care,” he added.
The alternative — caring for aging family members on your own — can also come with hefty expenses.
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About 38 million family caregivers in the U.S. provide unpaid care valued at about $600 billion a year, according to a 2021 AARP report. That figure doesn’t include out-of-pocket costs related to looking after a loved one. 

“The average family caregiver spends about 26% of their income [on caregiving activities], which nationally averages out to about $7,000,” said AARP’s family and caregiving expert Amy Goyer, referring to the 2021 AARP analysis. “Some spend much more and some spend much less,” depending on their location and the care they provide, she added.
Knowing a few key terms can help you understand the services an aging parent or relative may need — and plan ahead for how to afford them.
Here are five essential terms you should know: 

Activities of daily living

Long-term care involves various services to meet a person’s health or personal care needs when they can no longer perform everyday activities independently and require assistance. These everyday tasks are often called “activities of daily living” — and can include bathing, dressing, eating, taking medications, using the bathroom and transferring from standing to a chair or bed. 

Continuous care retirement communities

There are many choices for where your loved one can live as they grow older and receive long-term care when needed. “Aging in place” while living at home or going to a nursing home are not the only two options. 
“Not everyone is going to qualify for nursing home care — not everybody needs it,” said Abbe Udochi, founder and CEO of Concierge Healthcare Consulting, a New York-based geriatric care management practice. “Nursing home care is like living in a hospital … you’re going to find people with serious functional issues and cognitive issues.” 
Continuous care retirement communities run the gamut and can be an alternative to aging in one facility or group of facilities. “The idea is to have these all on the same campus so that you can go between the levels of care as you need,” said AARP’s Goyer.

Starting with “independent living,” older adults can live in a house, condo or apartment and receive several services — two or three meals daily, housekeeping and/or laundry services. 
When they need more care, they can move to “assisted living,” where they may get help with some activities of daily living, such as bathing, dressing or eating. The level of assistance can vary and costs rise as more help is needed. 
The highest level of care is “skilled nursing care” for those who are chronically ill or disabled and can no longer care for themselves. This could be a particular unit or nursing home within the community. Some communities also offer “memory care” units or facilities for residents with dementia or Alzheimer’s disease, providing more secure and specialized care. 

Within these communities, costs can vary greatly depending on the type of care and geographic location.
Some continuing care residential communities offer a monthly rental option. Others require residents to “buy in” by paying a sizeable entrance fee — more than $442,000 on average, according to the National Investment Center for Seniors Housing & Care. Then they refund a percentage of that fee when the resident leaves the community. Monthly fees may also be charged. 
Within these communities, average monthly rent for independent living is about $3,900, assisted living costs about $6,700 a month, and memory care costs about $8,400 a month, according to the National Investment Center.

Medicare and Medicaid

When it comes to paying for long-term care services and facilities, many people believe that Medicare will cover the cost, as long as you’re 65 and older and have that federal health insurance. They’re wrong. 
Medicare provides very limited coverage for long-term care — and it is vital to check your plan to find out what, if any, services may be covered. Some Medicare Advantage plans may cover specialized care, including skilled nursing, respite and hospice care.  
Medicaid pays for most long-term care services — but only for people with low incomes and little savings. 

Long-term care insurance

Depending on the plan, long-term care insurance pays for services from at-home care to assisted living, memory care, skilled nursing care, and hospice.
“There are long-term care insurance policies that will pay for care once you are unable to perform two of six daily living activities without assistance, such as bathing or showering, dressing, getting in and out of bed or a chair, walking, using the toilet and eating,” said certified financial planner Ivory Johnson, founder of Delancey Wealth Management in Washington, D.C. 
Long-term care insurance may have annual premiums that increase over time or may be included as a rider to a life insurance policy. “The latter has a death benefit if you never need long-term care, premiums that cannot be increased, and is more expensive,” said Johnson, a member of the CNBC FA Council. 
According to data from the American Association for Long-Term Care Insurance, the average annual premiums for policies with a 3% growth rate in 2021 ranged from $2,220 at age 55 for a single man to $5,265 at age 65 for a single woman, if both had some health issues. Couples paid less per person.
Employers are increasingly offering long-term care insurance as a workplace benefit. It’s worth checking to see the workplace benefits your employer may offer to help with caregiving for an older spouse, parent or relative.  

Respite care

Family caregivers may spend 20 to 40 hours a week or more caring for their loved ones. Respite care can help alleviate some of the emotional, physical and financial stress.
“It really simply just means a break from caregiving,” Goyer said. “And it’s one of the most crucial things that caregivers need.”
Asking friends and family for caregiving help is often the first step but may be unrealistic depending on their responsibilities. Other options for respite care include finding an adult day care center, paying for professional help in the home, or moving your loved one to an assisted care residence for a short stay. 

Some long-term care insurance plans provide coverage for respite care, but there may be other places to get free or low-cost assistance. Check your loved one’s Medicare plan. Military veterans may be able to get resources from the Department of Veteran Affairs to cover the cost of respite care. 
The U.S. Administration on Aging’s Eldercare Locator can connect you with a local Area Agency on Aging that can offer in-home respite care support, including sitter service and preparing meals. The ARCH National Respite Network can also help you find local respite providers.  
Coverage for respite care can vary depending on your Medicare, Medicaid or health insurance plan. Ask your provider. And ask your employer. Some companies may offer paid time off for workers to provide respite care or senior caregiving. 
If your employer offers a dependent care flexible spending account, you can typically put in up to $5,000 in this account through payroll deductions, to use for respite care and other elder care costs, as long as you claim the qualifying family member as a dependent on your tax return. 
Employers may also offer senior caregiving support by helping employees navigate Medicare and Medicaid, explore in-home and out-of-home care options, and connect them to caregiving resources.  
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— CNBC’s Stephanie Dhue contributed to this report. More

Quiet luxury was one of last year’s biggest viral fashion trends, but unlike other short-lived fads on TikTok or Instagram, this one has made its way into investor portfolios and shown sizable returns.
Luxury stocks have long been regarded by some as an effective hedge against inflation.
Some of the top companies that have benefited from this new quiet luxury trend were Hermes, Prada-owned Miu Miu, Brunello Cucinelli, Compagnie Financière Richemont and Swatch Group, according to DBS.

VIENNA, AUSTRIA – NOVEMBER 25, 2022: Karin Teigl is seen wearing Hermès yellow leather mini Kelly, Baum & Pferdgarten green leather jacket, Lumina beige cropped turtleneck sweater and vintage checked green yellow pants.
Jeremy Moeller | Getty Images

Quiet luxury was one of last year’s biggest viral fashion trends on social media — but unlike other short-lived fads on TikTok or Instagram, this one has made its way into investor portfolios and shown actual returns.
So what is “quiet luxury”?

The trend revolves around understated, subtle displays of opulence and popular shows like HBO series “Succession” have also played a part in boosting its popularity.
Gone are the days of loud, flashy displays of wealth in fashion — it is now all about subtlety and minimalism.
But the trend has not only gained traction in the fashion world, even investors are starting to take notice.

Brand boost

Luxury stocks have long been regarded by some as an effective hedge against inflation. This is largely to do with the segment’s high pricing that seldom deters its affluent customer base and much higher margins than many other consumer discretionary products, such as televisions or phones.
In essence, the segment’s fundamentals have not changed drastically over decades but as the quiet luxury movement takes hold, investors are starting to cherry pick names that largely check those boxes.

Some of the companies and their labels have encapsulated what experts say is the essence of quiet luxury, with data from Southeast Asia’s largest lender, DBS Bank, showing that such names have been able to outperform their “loud” counterparts in 2023.
Some of the top companies that have benefited from this new wave are Hermes, Prada-owned Miu Miu, Brunello Cucinelli, Compagnie Financière Richemont and Swatch Group, according to DBS.

Quiet Luxury’s outperformance over Loud Luxury in 2023.

“With the quiet luxury movement underscoring growing consumer preference for subtlety in luxury consumption, companies that focus on understated elegance and timeless quality will resonate with consumers, benefitting from this trend,” said Hou Wey Fook, chief investment officer of DBS Bank.
“Hence, in 2023, quiet luxury companies notably outperformed their loud peers by 23% points. We expect this ongoing shift in the industry’s dynamics will help sustain this bifurcation in performance.”
According to DBS, a company fall under its categorization of “quiet luxury” if it’s understated and focused on high quality, while maintaining exclusivity and scarcity.
Some of the bank’s top picks include Hermes, Moncler, LVMH Moët Hennessy Louis Vuitton, Richemont, Swatch, Brunello Cucinelli and Ermenegildo Zegna.

Go long on quiet luxury

Unlike viral trends that come and go, investors are looking at these companies with a much longer term view.
“There’s this element of: ‘I’m tired of all the big logo stuff,'” said Markus Hansen, portfolio manager at Vontobel Quality Growth Boutique, noting that consumers and investors now want a higher quality product.
“It comes back to the heritage of these houses, which are the ones that are the most successful … and what we invest in are the ones that take a very long term view,” he told CNBC.

In Asia-Pacific, the demand narrative for luxury goods could be shifting due to China’s uneven post-pandemic recovery and lackluster domestic demand.
Though Chinese consumers’ appetite for luxury goods may not have completely dried up, luxury brands are broadening their horizons to cater to other big markets in Asia.
In Asia, mature markets like South Korea and Japan are seeing growing demand for luxury goods, Hansen said.
He added: “India is the last big market, not just the population, but in terms of the growing wealth of the population.”
A recent Goldman Sachs report predicted around 100 million people in India will become “affluent” by 2027 — defined by the U.S. investment bank as those earning an annual income exceeding $10,000. Currently, 60 million people in the world’s fifth-largest economy earn more than $10,000, the report said.

Loud luxury not in vogue

Quiet luxury stocks were bumped up in portfolios last year, pushing down brands that were considered too “loud.”
As a result, Kering-owned Gucci & Burberry were pushed lower in global rankings of luxury stocks, Bank of America Securities research showed.
“We believe that throughout the year brands should focus back on fashion content and newness in order to re-engage customers and drive traffic,” said BofA research analyst Ashley Wallace, noting that companies that are geared toward quiet luxury are better positioned this year.
BofA said it preferred companies like LVMH and Hermes over Gucci-owner Kering and Burberry. More

Managing Partner and the Head of Research at Fundstrat Global Advisors, speaking on CNBC’s The Exchange on Oct. 31st, 2023. 
Adam Jeffery | CNBC

Investors are embarking on a hectic week with key tech companies reporting and a big Federal Reserve meeting – and it could shape the next steps for the stock market’s rally, said Fundstrat’s Tom Lee.
Microsoft and Alphabet are posting their latest results on Tuesday after the closing bell, while Meta Platforms, Apple and Amazon are due on Thursday afternoon.

Alphabet, Amazon, Meta and Microsoft popped to fresh highs during Monday’s session. The surge in Big Tech helped carry the S&P 500 to a fresh record – and its first close above 4,900. The Dow Jones Industrial Average also closed at a new high.  
“We expected new highs by late January, which was on schedule,” Lee told CNBC’s Contessa Brewer on “Last Call.” “And I think this week is going to tell us how much further we go.”
“We were penciling in 5,000 [on the S&P 500], and we could maybe go higher,” he said. “But from there, I think an air pocket forms.”
That’s because investors will be grappling with another key catalyst: The Fed’s two-day policy meeting, which culminates with a rate decision on Wednesday.
Lee said that investors will get nervous about the Fed and its path forward on rates. “I don’t think the Fed is in the position to cut rates, but what’s going to be important is how their views around that are evolving,” he said.

He also noted that parabolic market moves, which we have had since October 2023, tend to end in “a pretty big retracement.”
“I do think we continue to be strong, but then after that, there’s a big air pocket,” Lee added.
His year-end target for the S&P 500 is 5,200. More

Smart Tax Planning

Tax season officially kicked off for individual filers on Jan. 29, and the IRS has started to process 2023 returns.
If you’re expecting a refund this filing season, there are a few ways to get the money faster, experts say.

D3sign | Moment | Getty Images

Tax season has kicked off and the IRS has started to process 2023 returns. If you’re expecting a refund, there are a few ways to get the money faster, experts say.
Often, “self-inflicted mistakes” cause refund delays, according to Mark Steber, chief tax information officer at Jackson Hewitt.

The IRS is planning for more than 146 million individual tax returns this season, and the deadline for most filers is April 15.

More from Smart Tax Planning:

Here’s a look at more tax-planning news.

Typically, you get a refund when you overpay taxes throughout the year. As of Dec. 29, the average refund for last year’s filings was $3,167, which was 2.6% smaller than 2022.

‘The best way to get your refund fast’

With many Americans relying on tax refunds, there are a few ways to speed up the process, experts say.
“Filing electronically and selecting direct deposit is the best way to get your refund fast,” IRS Commissioner Danny Werfel told reporters during a media briefing Friday. During fiscal 2022, some 93.8% of individual taxpayers filed electronic returns, according to the IRS.

Filing electronically and selecting direct deposit is the best way to get your refund fast.

Danny Werfel
IRS Commissioner

When selecting direct deposit, it’s important to double-check your banking details such as routing and account numbers. If those are wrong, the IRS may have to mail your payment by check, experts say.

Don’t ‘guesstimate’ on your taxes

Tax return mistakes are another reason for delayed refunds.
“You need to be accurate,” Steber said. “You can guesstimate on horseshoes” but not on your taxes, Steber added. You’ll need all the necessary tax forms to file a complete and error-free return. Otherwise, the IRS systems may flag your return for missing information.
Some common tax return errors are “surprisingly simple,” such as missing or inaccurate Social Security numbers, misspelled names, entering information wrong and math mistakes, according to the IRS.

When to expect your tax refund

Most taxpayers will receive their refund within 21 days of submitting their return, “and many people will see it faster than that,” Werfel said Friday. Of course, paper-filed returns or filings with errors may take longer.
There’s also a longer timeline if you’re claiming the earned income tax credit or child tax credit. By law, those filers won’t see refunds until Feb. 27 at the earliest, according to the IRS.
You can check your payment status via the Where’s My Refund tool, which provides more details this season, including actions needed from taxpayers, Werfel said.
You can use the tool to check your refund status within 24 hours of filing a current-year, electronic return and the IRS updates it overnight every day. More

In advance of the Federal Reserve’s first meeting of the year, inflation continues to drift lower, increasing the possibility of securing a sought-after soft landing.
There’s also a chance the central bank could achieve a ‘no landing’ scenario, one economist says.
In that case, the economy would continue to grow and inflation would remain high.

The Federal Reserve is expected to announce it will leave rates unchanged at the end of its two-day meeting this week, after recent reports showed the economy grew at a much more rapid pace than expected and inflation eased.
“In many ways, we already have a soft landing,” said Columbia Business School economics professor Brett House. “The Fed has threaded the needle of the economy very artfully with a kind of ‘Goldilocks’ scenario.”

Gross domestic product grew at a much faster-than-expected 3.3% pace in the fourth quarter, fueled by a solid job market and strong consumer spending. However, inflation is still above the central bank’s 2% target, and that also opens the door to a “no-landing scenario,” according to Alejandra Grindal, chief economist at Ned Davis Research.

What a ‘no landing’ scenario means

“No landing means above-trend growth, and also above-trend inflation,” Grindal said, describing an economy that is “overheating.”
Inflation has been a persistent problem since the Covid pandemic, when price increases spiked to their highest levels since the early 1980s. The Fed responded with a series of interest rate hikes that took its benchmark rate to its highest in more than 22 years.
As of the latest reading, the current annual inflation rate is 3.4%, still above the 2% target that the central bank considers a healthy annual rate.
The combination of higher rates and inflation have hit consumers particularly hard. A “no landing” scenario also means more strain on household budgets and those with variable-rate debt, such as credit cards.

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While still elevated, inflation is continuing to make progress lower, possibly giving the Fed a green light to start cutting interest rates later this year.
“That looks like the soft landing has been more or less achieved and is likely to be sustained,” House said.
For consumers, this means relief from high borrowing costs — particularly for mortgages, credit cards and auto loans — may finally be on the way as long as inflation data continues to cooperate.

The alternative: A hard landing

Some experts still haven’t ruled out a recession altogether.
“The real danger here is that the Fed loosens prematurely, which is exactly what they did in the late 1960s,” said Mark Higgins, senior vice president for Index Fund Advisors and author of the upcoming book “Investing in U.S. Financial History: Understanding the Past to Forecast the Future.”
“The risks of allowing inflation to persist still far outweighs the risk of triggering a recession,” he said. “Their failure to do this in the late 1960s is one of the major factors that allowed inflation to become entrenched in the 1970s.”

According to Higgins, history suggests there could likely still be a recession before this is over.
To that point, 76% of economists said they believe the chances of a recession in the next 12 months is 50% or less, according to a December survey from the National Association for Business Economics.
“It’s normal for an economy to go through periods of expansion and contractions,” Higgins said. “In the short term it will be painful, in the long term we are better off doing what is necessary to return to price stability.”
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“Loud budgeting” emphasizes being vocal about wanting to save money.
“It’s not ‘I don’t have enough,’ it’s ‘I don’t want to spend,'” writer and comedian Lukas Battle said in a TikTok video spurring the trend.
For loud budgeting to be effective rather than gimmicky, experts suggest that people practice moderation with their spending changes. 

Medium shot of smiling woman trying on sunglasses while shopping in boutique during vacation
Thomas Barwick | Digitalvision | Getty Images

Currently trending on TikTok: digital cameras, Jellycat plush toys and lip oils.
But the bigger trend? Not buying any of it.

“Loud budgeting,” which emphasizes being vocal about wanting to save money, is a contrast to last year’s quiet luxury trend, where people attempted to recreate the old money look. But the idea isn’t completely new: for the past few months, self-proclaimed de-influencers have been talking their followers out of buying certain viral products.
Writer and comedian Lukas Battle first posted about loud budgeting on his ins and outs list on TikTok in late December, declaring loud budgeting to be part of the “in” category for the new year. According to Battle, he came up with loud budgeting after spending too much during a night out.
“It’s not ‘I don’t have enough,’ it’s ‘I don’t want to spend,'” Battle explains in a video, which has received more than 1.4 million views and some 175,000 likes.
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Some ways Battle plans on loud budgeting include participating in Dry January, going grocery shopping instead of dining out and hanging out with friends during the day instead of going out at night. 

‘Everything is hyper-commercialized’

Lukas Battle
Credit: Steven Sierra

In an interview with CNBC, Battle noted that for him, the term loud budgeting started out as a joke. But he sees the very real financial consequences that influencers and TikTok trends like quiet luxury have, especially on younger consumers.
“I think that now, everything is hyper-commercialized,” Battle said. “I don’t think that anybody in our generation has a lack of control. I just think it’s in our face all the time.”
Sophia Bera Daigle, a certified financial planner and founder of Gen Y Planning, agreed, saying that nowadays, people are frequently exposed to celebrity purchases like a Chanel handbag that costs thousands of dollars. But what social media often lacks is nuance.
“There was this idea of keeping up with the Joneses,” said Daigle, a member of the CNBC Financial Advisor Council. “Now people are trying to keep up with celebrities. That’s just not sustainable.”
She points to high interest rates, higher prices and the return of student loan payments as other possible reasons for loud budgeting’s popularity. Nearly two-thirds, 62%, of Americans are living paycheck to paycheck, according to LendingClub.

How to make the most of loud budgeting

Daigle has observed a lot of financial trends over the years, including extreme behavior like turning off the oven light to save on energy costs, a trick some frugal bloggers promoted a decade ago.
For loud budgeting to be effective rather than gimmicky, Daigle suggests that people focus on their financial priorities and practice moderation with their spending changes. 

To help stay on track, she recommends using a budgeting tool like YNAB, also known as You Need a Budget. Stash the money saved in a high-yield savings account so it’s working on your behalf. 
What she has seen so far seems promising.
“I think it’s really exciting to see a trend moving towards, ‘Hey, I could go out, but I’m not going to go out right now because this is what I value,'” Daigle said.

‘A different way to think about money’

Loud budgeting’s impact has begun to expand beyond social media.
When Battle shopped at Trader Joe’s recently, he was approached by a person who said he should be loud budgeting instead. After Houston-based marketer Taylor Busse saw Battle’s TikTok video on her For You feed, she told her boyfriend about loud budgeting and he similarly liked the concept.
“I think it’s awesome, chic and a different way to think about money,” Busse, 26, said. 
This year, Busse plans on thrifting instead of buying something new if there’s a style she likes on TikTok. And instead of spending hundreds with friends on dinner and drinks, Busse is thinking of inviting them over to her home.
Battle has leaned into the positive reaction to his TikToks, even joking that he’s practically an economist now. Ultimately, he hopes that by explaining that they’re loud budgeting, people can normalize not wanting to spend money in pursuit of achieving their financial goals.
“I think it’s all about financial autonomy,” Battle said. More

Smart Tax Planning

The standard deduction for married couples filing jointly for 2023 is $27,700, up $1,800 from 2022. For single taxpayers and married individuals filing separately, it’s $13,850, up $900 from the year before. 
Missing estimated tax payments and failing to pay enough tax over the year has become extra costly.

The Internal Revenue Services offices in Washington, D.C.
Adam Jeffery | CNBC

Tax filing season officially starts today, Monday, Jan. 29 — marking the first day that you (or your tax preparer) can submit your 2023 federal tax return for the IRS to accept and process. 
To avoid being surprised by new IRS guidelines or how changes in your financial life will impact your taxes, here are a few key points to know:  

You may benefit from taking the standard deduction

A key consideration when filing taxes is whether to claim the standard deduction or itemize deductions. Most taxpayers take the standard deduction, and even more may do so this year, given the increase in the amount. 
The standard deduction for married couples filing jointly for 2023 is $27,700, up $1,800 from 2022. For single taxpayers and married individuals filing separately, it’s $13,850, up $900 from the year before. 

More from Smart Tax Planning:

Here’s a look at more tax-planning news.

“Even though the standard deduction went up, what did not go up on the itemized side are things like the SALT cap rate,” said Sheneya Wilson, a certified public accountant and founder of Fola Financial in New York, referring to the $10,000 limit on what taxpayers can deduct in state and local taxes on their federal returns.
The SALT cap was enacted as part of the 2017 tax overhaul. 
“Some people who found it beneficial to itemize in the past may find it makes more sense to take the standard deduction in 2023,” said IRS spokesman Eric Smith. Before the 2017 tax reform, “the standard deduction, arguably, wasn’t such a big deal for higher-income taxpayers … it now can be for many taxpayers in these brackets.” 

In 2022, about 30% of taxpayers with incomes of $1 million or more took the standard deduction, according to IRS data.

High earners more likely to owe taxes at filing

If you’re like most taxpayers, you’ll get a refund. According to IRS data, only about 26% of filers had tax due with their 2022 returns. However, the percentage was far more significant for high earners, with 46% of those with incomes of $1 million or more owing tax when they filed. 
Missing estimated tax payments and failing to pay enough tax over the year has become extra costly. The Federal Reserve’s interest rate hikes have pushed up rates for interest-based tax penalties, too.
“People can lessen its impact by paying any tax due sooner, rather than waiting until close to the April deadline,” Smith said, adding the “calculation is based on a daily factor, so every day counts.”

Avoid interest and penalties

If you file a return by the April 15 deadline but don’t pay all taxes owed on time — or file for an extension but don’t pay your tax bill by that due date — you’ll have to pay a late payment penalty. The failure-to-pay penalty is 0.5% for each month, or part of a month, up to a maximum of 25% of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full. 

“It really does add up, especially for those taxpayers that have big balances,” Wilson said. If you pay the tax owed when you file your return on or near the Oct. 15 due date for extensions, “your tax bill is significantly more than what you would have paid if you just made some type of payment in April.”
Whether you want to get a refund quickly or you owe tax, tax experts agree it pays to gather and organize your W-2s, 1099s and other tax documents to file your return now.
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So-called “earned wage access” programs allow workers to take a portion of their paychecks before payday, often for a fee.
They’ve grown rapidly: $9.5 billion in wages was accessed early during 2020, triple the $3.2 billion accessed in 2018, according to the latest data by Datos Insights.
However, in some cases, high fees and frequent use can translate to an annual interest rate of more than 330%, according to experts, regulators and consumer advocates.
EWA programs are also known as daily pay, instant pay, accrued wage access, same-day pay and on-demand pay.

Fotostorm | E+ | Getty Images

Millions of American workers are paying for early access to their paychecks. In some cases, it can come with a steep price.
So-called “earned wage access” programs, which operate either directly to the consumer or through employers, let workers tap a portion of their wages before payday, often for a fee. The services have ballooned in popularity.

While there can be various benefits for consumers — like quick access to funds in the event of an emergency — some services share characteristics of high-cost debt such as payday loans that can cause financial harm, according to some experts and consumer advocates.
“When used properly … it’s great,” said Marshall Lux, a banking and technology expert and former senior fellow at Harvard University.
However, Lux said overuse by consumers and high fees that can translate to interest rates up to roughly 400% can turn the services into “payday lending on steroids,” especially since the industry has grown so quickly.

Earned wage access has gotten more popular

Earned wage access goes by various names: daily pay, instant pay, accrued wage access, same-day pay and on-demand pay, for example.
The programs fall into two general camps: business-to-business models offered through an employer and direct-to-consumer versions.

The B2B model uses employers’ payroll and time-sheet records to track the users’ accrued earnings. When payday arrives, the employee receives the portion of pay that hasn’t been tapped early.
Third-party apps are similar but instead issue funds based on estimated or historical earnings and then automatically debit a user’s bank account on payday, experts said.
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Such programs aren’t new.
Fintech companies debuted the earliest iterations more than 15 years ago. But business has boomed in recent years, accelerated by household financial burdens imposed by the Covid-19 pandemic and high inflation, experts said.
In the employer-sponsored market, $9.5 billion in wages was accessed early during 2020, triple the $3.2 billion in 2018, according to the latest data from Datos Insights, a consultancy firm. The number of transactions also increased threefold over that period, to 55.8 million transactions from 18.6 million, it found.

Branch, DailyPay and Payactiv are among the “most significant” B2B companies, according to a recent paper published by the Harvard Kennedy School and co-authored by Lux and research assistant Cherie Chung.
There are fewer players in the direct-to-consumer market, but the most popular apps “have increasingly large and prominent userbases,” the Harvard paper said. For example, three companies, Dave, EarnIn and Brigit, report a “highly significant” user base of about 14 million combined, it said. MoneyLion is another market leader, according to Datos Insights.

‘It’s another version of payday loans’

Big companies such as Dollar Tree, Kroger, Hilton, McDonald’s, Target, Uber and Walmart now also offer employees early access to paychecks.
Companies in the B2B market often tout themselves as a win-win for employers and for their employees who use the services.
High worker demand for such programs makes them a cost-effective way for businesses to retain and recruit employees, according to consultants and academics. Employees can cover any short-term expenses that might arise before payday — maybe an unexpected car repair or medical bill — perhaps for lower fees than they would incur using credit cards, bank overdrafts or other ways to access quick cash.

The idea that these advances are not loans is a legal fiction.

Monica Burks
policy counsel at the Center for Responsible Lending

Some programs, depending on how consumers use them, may grant that early paycheck access free of charge. Further, 28% of users — who tend to be lower earners, hourly workers and subprime borrowers — said they turned to alternative financial services such as payday loans less frequently than before using earned wage access, according to the Harvard paper.
Meanwhile, 80% of consumer program transactions are between $40 and $100, on average, according to a 2023 analysis by the California Department of Financial Protection and Innovation. Amounts generally range from 6% to 50% of a worker’s paycheck.
“We as human beings incur expenses every day,” said Thad Peterson, strategic advisor at Datos Insights. “But we’re only paid on a periodic basis. That’s a massive inconsistency, especially when there’s technology that allows it to go away.”
However, data suggests the average user can accrue significant costs.

Total fees translate to an annual percentage rate of more than 330% for the average earned wage access user — a rate comparable to payday lenders, according to the California report. It analyzed data from seven anonymous companies across business models and fee structures.
“It’s another version of payday loans,” Monica Burks, policy counsel at the Center for Responsible Lending, a consumer advocacy group, said of earned wage access. “There’s really no meaningful difference.”
However, a recent study by the U.S. Government Accountability Office found that earned wage access products “generally cost less than typical costs associated with payday loans.”
That said, the products pose a few consumer risks, including lack of cost transparency, the study found.

Fees can add up for frequent users

Artmarie | E+ | Getty Images

Fees can add up, particularly for users who frequently access their paychecks early, experts said.
The average user did so nine times a quarter, according to California regulators.
Additionally, 40% of people with employer-sponsored EWA access use the service at least once a week, and more than 75% used money for regular bills instead of emergency expenses, according to the Harvard paper. Liquidity issues most often affect low-income households, which have less savings and less access to traditional credit, it said.
The typical user earns less than $50,000 a year, according to the GAO.
High fees and user dependency “are kind of the darker side of the business,” said Peterson of Datos Insights.
However, it’s “the exception, certainly not the rule,” he added.
Consumer risks are generally greater in the direct-to-consumer rather than the business-to-business market, according to both Peterson and Harvard’s Lux.

We as human beings incur expenses every day. But we’re only paid on a periodic basis. That’s a massive inconsistency.

Thad Peterson
strategic advisor at Datos Insights

A chief concern is that consumers can use multiple apps concurrently and take on more debt than they can handle, according to Datos Insights. Among direct-to-consumer app users, 8% had five or more such apps currently on their phone, according to the Harvard paper.
Consumers who overextend themselves “can end up in the black hole of payday lending,” Peterson said.
“You can’t get out of it,” he said.
Since direct-to-consumer companies generally automatically debit user bank accounts, consumers without sufficient funds may also pay unexpected overdraft fees, the GAO said.
Unlike direct-to-consumer apps, the B2B model allows “full transparency” into how much employees have worked and earned, said Stacy Greiner, COO of DailyPay, which has more than 1,000 employer clients.
A MoneyLion spokesperson said direct-to-consumer providers help gig and freelance workers, small business employees, union and public-sector workers and others “smooth out cash flows between pay cycles to gain better control over their finances.”
An EarnIn spokesperson called EWA a “no risk option” that avoids a negative impact to credit scores since it doesn’t require credit checks or credit reporting.
Representatives for Brigit and Dave declined to comment.

There are many types of fees, including tipping

Consumer fees for EWA use can take many forms.
Employer models may charge per transaction, or for “expedited” delivery whereby users get their money faster — maybe $2 for receipt within a day or $10 within an hour, instead of for free within a few days, according to the Harvard paper.
Direct-to-consumer models may also charge subscription fees, which can range from perhaps $5 to $10 a month, the paper said. Users can also tip. While tips are voluntary, apps may default consumers to tip a certain percentage per transaction, it said. 
Among tip-based providers, consumers tipped on 73% of transactions, California regulators found. The average was $4.09.
Those tips can start to add up. For example, about 40% of EarnIn’s annual revenue comes from tips, Ben LaRocco, the company’s senior director of government relations, said in testimony before the Vermont House Committee on Commerce and Economic Development.
An EarnIn spokesperson said its average “voluntary payment” is $1.47.

Some models may be ‘closer to an ATM’

The earned wage access industry doesn’t think it’s fair to use APRs and interest rate proxies to describe their fee structures.
“It is inaccurate to compare an optional $1 or $2 fee — whether that’s a voluntary tip or fee to expedite a transaction — to mandatory fees and compounding interest rates charged by other short-term lenders,” said Miranda Margowsky, a spokeswoman for the Financial Technology Association, a trade group.
And while companies monetize their businesses in various ways, they always offer a free option to consumers, Margowsky said.
Branch, a B2B company, for example, makes most of its money from an optional debit card. The card is free for consumers but levies a transaction, or “interchange,” fee on businesses when consumers make purchases, said CEO Atif Siddiqi.
In addition, workers may pay a $2.99 to $4.99 fee if they opt to more quickly transfer cash to a debit card from a digital wallet that stores their early accessed wages, Siddiqi said. They may also pay to access cash from out-of-network ATMs.

Similarly, Payactiv, another B2B firm, makes a “significant portion” of revenue from interchange fees, said CEO Safwan Shah.
Users who opt not to use Payactiv’s debit card pay a $1.99 or $2.99 flat fee per transaction. Since the worker is tapping wages they’ve technically already earned, such a transaction fee is akin to an ATM fee, Shah said.
“We feel we are closer to an ATM. You deposited money in the bank and are taking it out,” Shah said.
Broadly, the EWA industry doesn’t publicly share the percentage of paid transactions relative to those that are free — “but I suspect it’s a lot” that are incurring a charge, said Harvard’s Chung.
“If someone signs up in an emergency, they might not be able to wait and would want to get the money instantly,” she said. “That would typically cost a fee.”

Are they loans and why does it matter?

The industry is also loath to refer to early paycheck access as a “loan” or “credit.”
“It’s a common misconception,” said Phil Goldfeder, CEO of the American Fintech Council, a trade group. “EWA is not a loan or an advance. It’s access to the money you’ve already earned,” not future earnings, he said.
There also aren’t credit checks, accrued interest, late fees or debt collection associated with such programs, for example, Goldfeder said.
However, some consumer advocates and state regulators have the opposite view.
While such a distinction may seem like unimportant minutiae, the label could have a significant consumer impact. For example, being regulated as a loan would mean being subject to caps on interest rates and more fee transparency via disclosure of how consumer costs translate into an annual interest rate, or APR, experts said.
“The idea that these advances are not loans is a legal fiction,” said Burks, of the Center for Responsible Lending.
“[These] are agreements to receive money now and pay it back in the future, either without — or much more frequently with — an additional fee paid to the lender,” she added. “In every other context, we call such an agreement a loan, and fintech cash advances are no different.” More