Investing

Many student loan borrowers are not finding it easy to resume their payments.
Fortunately, struggling borrowers have options, including continuing to pause their bills or enrolling in a more affordable repayment plan.

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Many student loan borrowers are struggling to resume their payments.
When the bills restarted after a more than three-year-long reprieve, just 60% of people with federal education loans had made a payment by mid-November, U.S. Department of Education data shows.

“The fact that so few borrowers have been able to make a payment is unfortunately unsurprising,” said Persis Yu, deputy executive director at the Student Borrower Protection Center. “[People] were struggling to make payments before the pandemic.”
Outstanding education debt in the U.S. has surpassed $1.7 trillion. In fact, education debt burdens Americans more than credit card or auto debt. The average loan balance at graduation has tripled since the 1990s, to $30,000 from $10,000. Around 7% of student loan borrowers owe more than $100,000.
To help cushion the blow of resuming payments, the Biden administration is implementing a 12-month “on ramp” to repayment, during which borrowers are shielded from the worst consequences of falling behind. President Joe Biden also said his administration is still trying to figure out a way to cancel student debt after the Supreme Court struck down its first plan.
Here are the other options for borrowers unable to pay their bills.

1. Deferments

Struggling borrowers should first see if they qualify for a deferment, experts say. That’s because their loans may not accrue interest under that option, whereas they almost always do in a forbearance.

If you’re unemployed when student loan payments resume, you can request an unemployment deferment with your servicer. If you’re dealing with another financial challenge, meanwhile, you may be eligible for an economic hardship deferment.
Those who qualify for a hardship deferment include people receiving certain types of federal or state aid and anyone volunteering in the Peace Corps, said higher education expert Mark Kantrowitz.
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With both a hardship and an unemployment deferment, interest generally doesn’t accrue on undergraduate subsidized loans. Other loans, however, will rack up interest.
The maximum amount of time you can use an unemployment or hardship deferment is usually three years, per type.
Other, lesser-known deferments include the graduate fellowship deferment, the military service and post-active duty deferment, and the cancer treatment deferment.

2. Forbearances

Student loan borrowers who don’t qualify for a deferment may request a forbearance.
Under this option, borrowers can keep their loans on hold for as long as three years. However, because interest accrues during the forbearance period, borrowers can be hit with a larger bill when it ends.
Kantrowitz provided an example: A $30,000 student loan with a 5% interest rate would increase by $1,500 a year under a forbearance.

If a borrower uses a forbearance, he recommends they at least try to keep up with their interest payments during the pause to prevent their debt from increasing.
“A deferment or forbearance should be a last resort, but they are better than defaulting on the loans,” Kantrowitz said.
Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit, recommends borrowers only use a forbearance or deferment for a short-term hardship, including a sudden big medical expense or period of joblessness.
Borrowers are best off finding a payment plan they can afford, Mayotte said. 

3. Income-driven repayment plans

Income-driven repayment plans can be a great option for borrowers who are worried they won’t be able to afford their bills, experts say.
Those plans cap your monthly payments at a percentage of your discretionary income and forgive any of your remaining debt after 20 or 25 years.
The Biden administration recently introduced a new repayment option under which borrowers could pay just 5% of their discretionary income toward their undergraduate student loans, with some people having a $0 monthly bill.
Some of the benefits of the Saving on a Valuable Education (SAVE) plan, however, won’t fully go into effect until the summer of 2024 because of the timeline of regulatory changes. More

ETF Strategist

Investors await approval for the first U.S. spot bitcoin exchange-traded fund, which would be a milestone for cryptocurrency investors.
Discussions between the Securities and Exchange Commission and asset managers with pending spot bitcoin ETF applications have advanced.
Still, bitcoin “remains an extremely volatile and speculative asset,” said Bryan Armour, director of passive strategies research for North America at Morningstar.

Marco Bello | Reuters

The price of bitcoin has surged in 2023 as investors await approval for the first U.S. spot bitcoin exchange-traded fund, which would be a milestone for cryptocurrency investors, experts say.
In early December, the digital currency topped $44,000 for the first time since April 2022, and year-to-date gains were above 160%, as of Dec. 21, mostly fueled by optimism for a spot bitcoin ETF.

Meanwhile, discussions between the Securities and Exchange Commission and asset managers hoping to list bitcoin ETFs have advanced to technical details, signaling to some experts that an approval could be imminent.
More than a dozen firms — including BlackRock, WisdomTree, Valkyrie and others — are waiting for the green light from the SEC, which could come in early January.

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“For ETF investors, this would be the best product on the market,” said Bryan Armour, director of passive strategies research for North America at Morningstar. “All the other options right now have flaws to varying degrees.”
Currently, U.S. investors can buy bitcoin futures ETFs, which own bitcoin futures contracts, or agreements to buy or sell the asset later for an agreed-upon price. The long-awaited bitcoin spot ETF would invest in the digital asset directly.

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If the SEC signs off on a spot bitcoin ETF, Armour anticipates a “batch approval,” with multiple ETF listings on the same day. “I would expect them to rule on spot ETFs holistically because most issuers are taking similar approaches” with applications, he said.

“There are a lot of good signs that the SEC is taking the most recent batch of filings more seriously,” Armour said. “I’m more optimistic about a bitcoin ETF than ever before.”
Some crypto investors expect a bitcoin rally upon approval, but it’s also possible the price will dip as investors sell to collect profits, Armour said.

Cryptocurrency remains an ‘extremely volatile’ asset

While SEC approval of a spot bitcoin ETF may make the asset class more accessible to the masses, experts urge investors to consider their risk tolerance and goals before piling in.
“I think it depends on the investor,” said certified financial planner Ben Smith, founder of Cove Financial Planning in Milwaukee. If you’re a more aggressive investor with an appetite for higher risk, a spot bitcoin ETF could fit into a diversified portfolio, he said.

Still, experts often suggest limiting cryptocurrency exposure, such as 1% to 5% of your allocation, to minimize downside exposure. “It still remains an extremely volatile and speculative asset,” Armour added.
Some 72% of financial advisors said they would be more likely to invest in crypto if spot ETFs were approved in the U.S., according to a 2022 Nasdaq survey of 500 advisors. More

Your Money

As a personal finance reporter at CNBC, most days of the year, I’m at my desk talking to people about money.
Here’s some of the advice that has stuck with me.

Jack Hollingsworth | Tetra Images | Getty Images

As a personal finance reporter at CNBC, most days of the year, I’m at my desk talking to people about money.
Although the general topic stays the same, so many of the conversations I have with sources leave me with a new perspective.

When I got the idea to do a roundup of some of the most interesting and helpful money insights I’d heard in 2023, I knew right away the points I wanted to bring back. Maybe that’s one definition of good advice? Guidance you may ignore but can’t forget?
Well, here are some of the ideas and recommendations that stuck.

1. ‘When we don’t talk about money, we’re shielding ourselves from knowing reality’

“I find people are more private about money than their sex life,” psychoanalyst Orna Guralnik, who stars on the Showtime documentary series “Couples Therapy,” told me in May.
It can take years of therapy sessions, Guralnik said, for people to get around to the subject. I was amazed by that! Money is an unavoidable daily part of our lives, and so how could we not talk about it?

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Even more interesting was how Guralnik articulated the dangers of this avoidance.

“Money is a very important point of contact with reality,” she said. “People can have all sorts of fantasies and ideas about themselves. But money is feedback from the real world. So, when we don’t talk about money, we’re shielding ourselves from knowing reality.”
This really resonated. I’ve heard friends say they’ve gone months without checking their credit card balances, and I’ve noticed how I always underestimate my spending when I draw up a budget.

Psychoanalyst Orna Guralnik, who stars on the Showtime documentary series “Couples Therapy.”
Source: Showtime

Guralnik pushes people to be more real.
“You can’t take care of yourself if you don’t deal with reality,” she said. “We learn from reality. We grow from reality.”

2. How to still have $1 million at 100

Bill Stovall is a stellar example of how keeping expenses in line with income can pay off.
At 100, he still has more than $1 million saved. What’s more, throughout his career in the steel industry, he said he never had an annual salary beyond $40,000. But each year he salted away 2% of his income for his old age — and his employer usually matched that.
“That compounded over the years,” Stovall said in our November interview.

Bill Stovall and his wife, Martha.

The only debts he ever took on, he said, were for his mortgages. To this day, he looks for discounts at the grocery store and orders the cheaper dishes on restaurant menus. He enjoys following the stock market but almost never buys or sells individual stocks.
His life story illustrates the benefits of consistency and frugality, two of the most effective financial habits.
“I always lived within my means,” Stovall said. “I’m not a gambler.”

3. Money struggles aren’t just on you

When I interviewed Pulitzer-prize winning author Matthew Desmond in March about his new book “Poverty, by America,” we talked about a story from his own childhood. When his father lost his job and the bank took their house, Desmond originally blamed his family for their struggles.
“When you’re in the middle of something, you often grasp at the explanation that is closest to you, which is often about shame and guilt,” Desmond said. When he interviewed people facing evictions for his first book, he said they often believed it was their fault they were losing their homes.

Arrows pointing outwards

“But I think it’s the sociologist’s job, to quote C. Wright Mills, to turn a personal problem into a political one,” Desmond said. “Millions of people are facing this every year. This is not on you.”
Desmond’s wisdom applies to so much of the financial hardship people endure today in the U.S.
Whether it’s a layoff or food insecurity, understanding when your struggle is the product of a larger societal problem helps you to be less hard on yourself — and hopefully more compassionate with others.

4. Tiny financial changes are powerful

I’ll end at the beginning.
In January, I interviewed financial experts about the money moves people should make at the start of a new year. I told my sources that I didn’t believe people could make big changes overnight. And so, I asked them, were there small things they could do that would still make a difference?
They had a lot of ideas.

Rita Assaf, vice president of retirement with Fidelity Investments, provided one example. For someone age 35 who is making $60,000 a year, upping their retirement saving contribution by 1%, or less than $12 a week, could generate an additional $110,000 by retirement, assuming a 7% annual return.
More recently, as student loan payments restarted, higher education expert Mark Kantrowitz illustrated the same lesson with paying down debt. If a borrower owed $10,000, and had a 5% interest rate, an additional $50 a month would shave nearly four years off a 10-year repayment timeline.
Those numbers have stayed with me, as a reminder of the power of tiny changes we can work toward in the new year.
Good luck! More

ETF Strategist

ETFs have kicked open the door to opportunities for countless investors who have typically remained on the margins of lucrative asset management.
Diversification is a cornerstone of sound investment strategies, and ETFs naturally lend themselves to this principle.
ETFs’ liquidity and transparency also offer investors the flexibility they need to react to market movements.

Westend61 | Westend61 | Getty Images

As we stand on the cusp of the new year, one trend on the investment landscape that has brought significant changes in past years appears unshakeable: exchange-traded funds.
The ongoing popularity of ETFs is no coincidence. Historically speaking, stock portfolio and asset management were much like exclusive clubs, since investing in diverse assets, such as stocks, commodities or bonds, required hefty capital.

However, ETFs, which are traded on exchanges just like individual stocks, have kicked open the door to a myriad of opportunities for countless investors who have typically remained on the margins of lucrative asset management.
Beyond accessibility, ETFs boast many other merits. Diversification, for one, is a cornerstone of sound investment strategies, and ETFs naturally lend themselves to this principle.

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ETFs also offer price updates throughout the trading day, allowing people to make informed decisions based on present market conditions. Finally, ETFs’ liquidity and transparency are two more feathers in their cap, allowing individuals to buy or sell them throughout the trading day. This offers investors the flexibility they need to react to market movements.
The versatile ETF spectrum, covering various sectors, regions and strategies, provides investors with extensive opportunities to customize investments to their financial goals and risk levels. As we move into 2024, the potential for growth and innovation within the ETF space is substantial, presenting exciting opportunities for portfolio diversification and capitalizing on ETF benefits.

Growth ETFs have the potential for higher returns

Let’s start simple: growth ETFs.

As a fund that focuses on companies expected to grow at an above-average rate compared to others in the market, growth ETFs provide multiple benefits for investors. Number one is the potential for higher returns.
Second, many growth ETFs are invested in sectors such as technology, health care and renewable energy, which are the driving forces of innovation. Investing in these sectors can provide exposure to emerging trends and technologies.
Growth ETFs are great at diversifying a portfolio. By including them, individuals can balance other investments that may have different risk and return characteristics, such as value stocks or bonds, and improve the overall performance of their portfolio.

Fixed-income ETFs can diversify bond holdings

Fixed-income ETFs have been garnering significant interest from investors, with inflows expected to continue the 2023 trend well into 2024.
Fixed-income ETFs offer an effective way to diversify portfolios. They provide exposure to different types of bonds, such as corporate or municipal bonds, helping reduce overall portfolio risk. They also offer the flexibility of being traded on stock exchanges, which allows for liquidity and lets investors buy or sell shares easily.
Moreover, with expectations that the Federal Reserve may be nearing the end of its rate hiking cycle, it might be a great time to consider fixed-income ETFs, more so for those with an overweight cash position.

Alternative ETFs offer exposure to new asset classes

Alternative ETFs are ETFs that provide exposure to alternative asset classes or investment strategies, ranging from hedge fund tactics to antiques and collectibles. They offer unique chances for diversification by exposing people to asset classes that may have low correlations with traditional investments such as stocks and bonds. This way, they can help reduce overall portfolio risk.
Moreover, they generally have lower expense ratios, unlike actively managed alternative options, such as private equity funds. This cost efficiency can result in improved net returns for investors.

As with any other investment security, it’s important to thoroughly research and understand alternative ETFs before considering them for one’s profile, but it’s hard to deny their potential in safeguarding a portfolio against market volatility while ensuring investors remain on their paths to prosperity.
From high returns and exposure to cutting-edge sectors to stability and robust diversification, the potential ETFs carry is immense — and this sphere is only expected to keep evolving, presenting a wealth of brand-new opportunities. As we welcome the next year, investors would greatly benefit from harnessing the power of ETFs to meet — exceed even — their financial goals.
After all, a well-diversified strategy is key to successful risk management and achieving long-term financial success.
— Christopher J. Day, founder of Days Global Advisors, a Houston-based advisory firm that offers wealth management and private portfolio services. More

Year-end Planning

While tax breaks are not the main reason for charitable giving, some strategies can help investors optimize their donations.
“We encourage people to start thinking about charitable giving in June,” said Julie Goodridge, founder and CEO at NorthStar Asset Management, which ranked No. 44 on the 2023 CNBC FA 100 list.
It might be too late to execute some of these money moves as the end of 2023 approaches, but now is a smart time to start planning for the 2024 tax year.

Sdi Productions | E+ | Getty Images

While tax breaks are not the main reason for charitable giving, some strategies can help investors optimize their donations.
It’s too late to execute some strategies with the end of 2023 just days away.

“We encourage people to start thinking about charitable giving in June,” said Julie Goodridge, founder and CEO at NorthStar Asset Management, which ranked No. 44 on the 2023 CNBC FA 100.
But now is a smart time to start planning for 2024.
“You might benefit from taking care of these things sooner rather than later. It gives you more time to think about what you’re doing, be more thoughtful and make sure you’re not missing opportunities,” said certified financial planner Stephen Cohn, co-president and co-founder of Sage Financial Group, ranked No. 22 on the FA 100 list.

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Your early planning can also benefit the nonprofits you want to aid.
“It really helps a lot of organizations spread out and get [donations] earlier in the year anyway,” said CFP Shaun Williams, partner and private wealth advisor of Paragon Capital Management. The firm ranked No. 57 on CNBC’s FA 100.

Here are three strategies to optimize your charitable contributions from some of this year’s top advisors:

1. Open a donor-advised fund 

One of the most common strategies for increasing deductions for charitable donations is to open a donor-advised fund, said Cohn.
These accounts let a taxpayer donate a lump sum upfront to claim the deduction in that tax year, and then dole out the money to nonprofits over time. A significant contribution can enable the taxpayer to itemize deductions, rather than take the standard deduction, and receive a tax benefit for their charitable giving, he said.
Consider opening a donor-advised fund within your last working years and contribute enough money to donate throughout your early retirement.
“A tax deduction is more powerful the higher the bracket you’re in,” said Williams. 

Mladenbalinovac | E+ | Getty Images

2. Donate appreciated stock

Investors can do “significant charitable giving by looking at your portfolio and giving away appreciated stock,” Goodridge said.
Donating appreciated stock gives investors the opportunity to shelter the gains from taxes, Cohn said. If you have held the stock for at least a year, you can generally take its fair market value as a deduction.
“That’s a significant opportunity and benefits people that are looking to donate funds to a charity,” he said. 
Donating appreciated stocks also complements use of a donor-advised fund.
“Give those shares either to a donor-advised account or directly to a nonprofit organization,” Goodridge said.

3.Make qualified charitable distributions

A “qualified charitable distribution,” or QCD, is a direct distribution from a pretax individual retirement account or a 401(k) to a charity, Cohn said.
Retirees who must take required minimum distributions, or RMDs, from such retirement accounts can benefit from fulfilling a portion with a QCD. Doing so helps satisfy the RMD, and the transfer isn’t counted toward their adjusted gross income.

Make sure to take advantage of these breaks in 2024. Most laws around charitable giving may change as provisions in the Tax Cuts and Jobs Act “sunset” by the end of 2025, Williams said.
“Next year’s election is a pretty pivotal year. Whatever happens with these elections would have very long-term effects on taxes overall and charitable giving,” he added. More

The logo of Uber is seen at a temporary showroom at the Promenade road during the World Economic Forum 2023, in the Alpine resort of Davos, Switzerland, on Jan. 20, 2023.
Arnd Wiegmann | Reuters

The Federal Reserve’s forecast for three rate cuts in 2024 has lifted investor sentiment, but macro uncertainty can weigh on investment decisions.
Wall Street’s analysts can dig into the details to find out which stocks are most resilient heading into the new year.

Here are three names favored by Wall Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.

Uber Technologies

Shares of ride-hailing platform Uber Technologies (UBER) have rallied this year, with investors appreciating the improvement in the company’s profitability and its recent inclusion in the S&P 500.
Recently, JPMorgan analyst Doug Anmuth called Uber one of his top picks for 2024. He reaffirmed a buy rating and raised the price target to $76 from $62. The analyst highlighted that Uber has a leading position in two secular growth industries: ridesharing and food delivery.
The analyst expects the company to navigate the ongoing macro challenges and emerge stronger, backed by its dominant position in the ridesharing market and growing food delivery adoption. He is also optimistic about Uber’s ability to expand into other areas with huge total addressable markets like grocery, convenience and alcohol delivery.
Anmuth also sees the possibility of significant earnings before interest, taxes, depreciation and amortization and free cash flow generation, driven by incremental margins on gross bookings of 10% for the mobility business and more than 5% for the delivery business.

“In terms of profitability, supply tailwinds should persist & support continued efficiency gains, further aided by ramping advertising, product improvements, defect leverage, and tighter headcount,” said Anmuth.
Anmuth holds the 100th position among more than 8,600 analysts on TipRanks. His ratings have been successful 61% of the time, with each delivering a return of 17.5%, on average. (See Uber Hedge Funds Trading Activity on TipRanks).

CyberArk

We now move to cybersecurity company CyberArk (CYBR), which specializes in identity security. Last month, the company reported better-than-anticipated third-quarter results, with annual recurring revenue (ARR) increasing 38% to $705 million.   
On Dec. 15, Mizuho analyst Gregg Moskowitz picked CyberArk, along with Microsoft (MSFT) and Adobe (ADBE), as his top picks in the software space for 2024. The analyst expects these companies to gain from key trends like digital transformation, generative artificial intelligence, next-gen security, contact center cloud migrations and more.
The analyst said that he is impressed with CyberArk’s solid and consistent execution despite a challenging macro backdrop. The analyst is optimistic that CYBR’s successful shift to a recurring revenue model would drive even stronger financials in the times ahead. 
“We also view CYBR as the primary beneficiary of a heightened threat landscape that has amplified the need for privileged access, and identity and secrets management,” said Moskowitz.  
In line with his bullish stance about CyberArk’s growth prospects, Moskowitz boosted his price target for the stock to $250 from $195 and reiterated a buy rating.
Moskowitz ranks No. 95 among more than 8,600 analysts tracked by TipRanks. His ratings have been profitable 63% of the time, with each delivering an average return of 16.9%. (See CyberArk Financial Statements on TipRanks) 

Costco Wholesale

Warehouse chain Costco (COST) recently announced better-than-expected fiscal first-quarter earnings, as customers continued to look for value deals on groceries and essentials. Moreover, the company saw improvement in non-food categories.
Baird analyst Peter Benedict noted that while Costco’s earnings per share exceeded Wall Street’s consensus estimate, it lagged his expectations due to lower interest and other income and a higher tax rate.
That said, the analyst highlighted that member engagement KPIs, or key performance indicators, remain robust, with paid membership growing 7.6%. Also, management said that a membership fee hike remains a matter of “when, not if,” he added.
Benedict also drew attention to the improvement in the company’s core e-commerce growth to 6.1% compared to a decline of 0.6% in the sequentially prior quarter, thanks to omni-channel initiatives that continue to fuel higher digital engagement. The analyst added that Costco’s solid balance sheet has plenty of room for funding its nearly $1 billion debt maturity (scheduled in May) with cash even after paying the special dividend of $15 per share. 
“When combined with encouraging commentary around holiday sales trends, COST’s model continues to resonate with consumers and shareholders alike,” said Benedict and reiterated a buy rating on COST stock with a higher price target of $675, up from $600. 
Benedict holds the 84th position among more than 8,600 analysts on TipRanks. His ratings have been successful 68% of the time, with each delivering a return of 13.9%, on average. (See Costco Technical Analysis on TipRanks) More

It’s never too early to start planning for the upcoming tax season by getting organized.
Before filing, it’s important to know 2023 changes that could affect your tax liability.
“You really need to be your own advocate,” said certified financial planner Edward Jastrem, chief planning officer at Heritage Financial Services.

Artistgndphotography | E+ | Getty Images

1. Tax brackets got wider

When comparing tax year 2022 to 2023, there was a big adjustment to the federal income tax brackets, according to experts.
While the rates didn’t change, there was roughly a 7% increase in the brackets, which expanded the amount of taxable income you can have in each tier. You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.

“That was a larger increase than usual,” Kyle Pomerleau, senior fellow and federal tax expert with the American Enterprise Institute, previously told CNBC. “And that is because inflation has been higher than usual.”

2. There’s a bigger standard deduction

Inflation also boosted the standard deduction for 2023, which reduces your taxable income, but makes it harder to claim itemized tax breaks for charitable giving or medical expenses.
For 2023, the standard deduction increased to $27,700 for married couples filing jointly, up from $25,900 in 2022. Single filers may claim $13,850 for 2023, an increase from $12,950.
Enacted via the Tax Cuts and Jobs Act of 2017, the higher standard deduction is slated to sunset in 2026, along with lower tax rates. Some filers may have tax planning opportunities in the meantime, such as accelerating income or making Roth individual retirement account conversions, said CFP Nicholas Gertsema, CEO and wealth advisor at Gertsema Wealth Advisors in St. Joseph, Missouri.

3. Form 1099-K reporting changes are delayed

The IRS in November delayed a 2023 reporting change for business payments made via apps such as PayPal or Venmo.
Prior to the change, even a single payment of $600 would have triggered Form 1099-K, which reports business payments to the IRS.

Referring to 2023 as a “transition year,” the IRS said 2023 would have the old limit of more than 200 transactions worth an aggregate above $20,000.
However, business income is still taxable, warned Tommy Lucas, an Orlando, Florida-based CFP and enrolled agent at Moisand Fitzgerald Tamayo. “If you want to follow the law, you [have] still got to report it, even if a third party is not.”

4. Energy tax credits are in play

If you purchased a vehicle in 2023 or made energy improvements to your home, you could qualify for tax breaks, according to the IRS.
The clean vehicle tax credit caps the break at $7,500, while eligible eco-friendly home improvements could be worth thousands more.
With more complicated tax breaks, it’s critical to “have your ducks in a row” prior to meeting with a tax preparer, Jastrem said.Don’t miss these stories from CNBC PRO: More

Retirement savers in their 40s should have between three to six times their salary set aside, according to one guideline from Fidelity.
But workers who have not yet met those thresholds should not be discouraged.
“It’s never too late to start, never too late to start saving,” one expert says.

Clemens Porikys | Getty Images Entertainment | Getty Images

If you’re in your 40s, you probably have seen articles on how much you should have saved by now to comfortably retire.
One guideline from Fidelity Investments calls for having three times your starting salary saved by 40, with the aim of growing that to six times by age 50.

If you’re not confident with the progress you’ve made to date, the good news is there’s still time to get on track.
“If you’re in your early 40s, you could have 20, 25, possibly 30 years to save,” said Mike Shamrell, vice president of workplace thought leadership at Fidelity.
“It’s never too late to start, never too late to start saving,” he said.

Savers in their 40s show ‘encouraging behavior’

Savers between the ages of 40 and 49 have an average savings rate of 9.1% of their annual salary. With average employer contributions of 4.9% for that cohort, the total savings rate is around 14%.
“We encourage people to aim for a 15% savings rate,” Shamrell said. “So that fact that people in their 40s are at 14% is an encouraging behavior.”

Today, 401(k)s and other workplace savings plans are typically the main retirement savings vehicle.
However, the 40-something age cohort may have had access to pensions early in their career, Shamrell noted. Moreover, they may have other investment accounts, which means Fidelity’s 401(k) data may not fully capture how much workers in their 40s have saved.
Other research has found the retirement outlook for people in their 40s, who mostly belong to Generation X, is not necessarily rosy. The typical Gen X household has just $40,000 saved toward retirement, according to the National Institute on Retirement Security. Having student loan debt was one factor likely to deter their progress, the research found.
Fidelity’s savers in their 40s had an average balance of $105,000 at the end of the third quarter.

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Why a long-term approach pays off

Notably, those in their 40s who had been in their plan for 10 years straight — in the same plan, with the same employer — had a higher average balance of $286,300 at the end of the third quarter.
Fidelity regularly tracks the share of its 401(k) participants who reach millionaire status with their accounts.
Most of those accounts do not belong to 30- or 40-year-olds, according to Shamrell, a testament to the long-term dedication it takes to reach retirement savings success.
People in their 40s should keep in mind those savings levels don’t happen overnight, according to Shamrell.
“If you continue to take a long-term approach and consistently save, the hope is that you will gradually see your savings levels increase,” he said.
Money invested can compound, where the earnings generate interest and continue to grow.

When it’s time for a wake-up call

“For those who haven’t really started saving, this is a real fork in the road,” said Winnie Sun, managing director of Irvine, California-based Sun Group Wealth Partners.
Without action now, those investors may have to either make major financial sacrifices or reduce their standard of living when they do retire.
“Most likely, it will be a bit of both,” said Sun, who is a member of the CNBC Financial Advisor Council.
Sun recently met with a client in her early 40s with just $50,000 saved for retirement, well short of the goal of having three to four times her $150,000 annual income in a tax-sheltered retirement account.
Sun advised the client and her husband, who had no retirement savings, to pare back their “spend what they earn” mentality.

By taking out extraneous costs, such as a dozen streaming services subscriptions and annual credit card fees, the couple has found $2,000 a month to devote to retirement savings.
Their budget overhaul also includes getting rid of a third car that is unnecessary for their household, finding ways to earn additional income through side gigs or freelance work and possibly even renting out a room in their home.
Coming up with such a plan to get on track with retirement may be difficult without the help of an experienced financial advisor, Sun said.
“When you’re in your 40s and your important financial goals like retirement are approaching sooner, you don’t have as many years to make mistakes,” Sun said.
Factors that can derail retirement savings include credit card debt, oversized mortgages, lack of savings for children’s college and not having plans for health or long-term care in place, according to Sun.

Tips to get your retirement savings on track

1. Maximize your 401(k) or other retirement plan contributions.
In 2024, the maximum individuals can put in their 401(k), 403(b), most 457 plans or the federal Thrift Savings plan will be $23,000, up from $22,500 this year.
Those who are 50 and older will be able to put an additional $7,500 in those accounts next year.
IRA savings limits will also go up to $7,000 from a cap of $6,500 this year. People ages 50 and older will be able to put an additional $1,000 in those accounts.
2. Pay down high-interest debts.
Carrying debt balances with high interest rates is one of the biggest mistakes Sun said she often sees from investors in their 40s.
As the Federal Reserve has hiked interest rates this year, those balances have become more expensive.
Experts recommend getting rid of those debts as soon as possible, which can be helped with a 0% balance transfer credit card or by working with a nonprofit credit counselor to come up with a plan.
3. Set up an emergency savings account.
Hardship withdrawals, where a retirement plan participant takes money out of their account, have increased as people continue to face cost-of-living pressures, according to Fidelity.
“People are struggling,” Shamrell said.
Unexpected financial emergencies tend to prompt those early withdrawals.
Having emergency savings may serve as a buffer that helps retirement savers keep their money in their 401(k)s or other retirement plans.
Experts typically recommend having at least three months’ expenses set aside, if possible. More