Investing

Realpeoplegroup | E+ | Getty Images

Company: OCI NV (OCI-NL)

Business: OCI produces and distributes hydrogen-based and natural gas-based products to agricultural, transportation, and industrial customers. It operates through the following segments: Methanol U.S., Methanol Europe, Nitrogen U.S., Nitrogen Europe and Fertiglobe. The company offers anhydrous ammonia, granular urea, urea ammonium nitrate solution, calcium ammonium nitrate, ammonium sulphate, aqueous ammonia, nitric acid, urea solution, bio-methanol, methanol, melamine and diesel exhaust fluid, as well as other nitrogen products. OCI also owns and operates an ammonia terminal at the port of Rotterdam. The company has operations in Europe, the Americas, the Middle East, Africa, Asia and Oceania.
Stock Market Value: ~6.3 billion Euros (29.93 Euros per share), according to FactSet

Activist: Inclusive Capital Partners

Percentage Ownership:  ~5.0%
Average Cost: n/a
Activist Commentary: Inclusive Capital Partners is a San Francisco-based investment firm which partners with companies that enable solutions to address environmental and social problems. Founded in 2020 by Jeff Ubben, who previously founded ValueAct Capital in 2000, Inclusive seeks to leverage capitalism and governance in pursuit of a healthy planet and the health of its inhabitants while creating long-term value for shareholders. As a pioneering activist ESG (“AESG”) investor, Inclusive seeks long-term shareholder value through active partnership with companies whose core businesses contribute solutions to this pursuit. The firm’s primary focus is on environmental and social value creation, which leads to shareholder value creation.

What’s happening?

Inclusive sent a letter to Nassef Sawiris, executive chairman of OCI, expressing the firm’s belief that OCI is worth approximately 90% more than its current stock price and calling on the board to explore strategic options to unlock the company’s value.

Behind the scenes

The majority of OCI’s business relates to fertilizer for agricultural purposes and other nitrogen products with approximately 12% of revenue generated through methanol fuel products. This business does $9.7 billion in revenue and $3.6 billion in earnings before interest, taxes, depreciation and amortization. However, the opportunity here is what the future brings.

OCI is presently embarking on a $1 billion development of the largest blue ammonia facility in the United States located in Beaumont, Texas. It will be a state-of-the-art facility at the forefront of blue ammonia production and is expected to come online in 2025 and produce 1.1 million tons of blue ammonia annually. This facility will combine nitrogen with blue hydrogen to create blue ammonia. It is considered “blue” ammonia because the carbon emissions produced from the hydrogen production process are captured and stored. Blue ammonia has a number of product applications in OCI’s existing product lines as a sustainable and low carbon input for fertilizer, fuel and feed. Moreover, liquefied blue ammonia can be sold domestically or shipped to OCI’s ammonia import terminal in the port of Rotterdam, as they see European demand for hydrogen and ammonia as a major growth area fueled by the energy transition and decarbonization.
Because of the recently enacted Inflation Reduction Act in the U.S. and carbon taxes in Europe, the production of blue ammonia will have several financial benefits. First, the IRA increased the tax credit for each ton of carbon stored to $85 per ton, up from $50. OCI’s plan will produce 1.1 million tons of ammonia that generates 1.7 million tons of carbon, virtually all of which is captured and stored. Second, this blue ammonia will be sold through an ammonia terminal at the port of Rotterdam that OCI owns and operates. Because it is low-carbon fuel, it will not be subject to the $100 per ton carbon tax on competing products, allowing OCI to sell at a market price and reap an additional $100 per ton of margin. This is expected to lead to $350 million of annual EBITDA from the $1 billion of capex required. Moreover, ammonia is easier to ship than hydrogen because it can be transported at a temperature of  -33°C versus -253°C for hydrogen. For these reasons, blue ammonia can serve as an important source of decarbonized hydrogen, is poised to be a large part of a green energy future, and it has several secular tailwinds.
Inclusive believes that OCI’s methanol business, combined with its low carbon ammonia project in Beaumont, has significant strategic value and could generate interest from large energy players looking to accelerate their energy transitions. As a reference, Inclusive cited BP’s acquisition of biogas producer Archaea Energy for $4.1 billion (29x EV/’22 EBITDA) in December 2022; Chevron’s acquisition of Renewable Energy Group for $3.1 billion in June 2022; and Shell’s $2 billion acquisition of Nature Energy Biogas, which was announced last November and completed in February. Additionally, Inclusive noted that OCI’s modern, strategically located Iowa Fertilizer Company plant would be of great value to pure-play fertilizer companies, such as Nutrien, seeking nitrogen production in the U.S. corn belt. Further, Inclusive noted that Fertiglobe’s successful IPO showed the value within OCI’s portfolio, with OCI’s stake in Fertiglobe worth nearly its entire market capitalization in the past year. It is important to note that Inclusive’s Jeff Ubben sits on the board of Fertiglobe with Nassef Sawiris, executive chairman of OCI.
Ubben has always liked companies that he thought were misunderstood by the market, and Inclusive always has an impact element as a primary investment thesis. In this case, generally capex in a commodity business is viewed negatively by investors. But for all of the reasons mentioned above it could very well be a huge positive for not only OCI shareholders, but also the environment.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. More

Smart Tax Planning

The IRS released a plan for the nearly $80 billion in agency funding authorized by Congress, including expected boosts for customer service, technology and enforcement.
The plan also aims to close the tax gap, with an initial focus on tax returns for wealthy families, large corporations and complex partnerships, IRS Commissioner Danny Werfel said.

IRS Commissioner Daniel Werfel testifies before a Senate Finance Committee hearing on Feb. 15, 2023.
Kevin Lamarque | Reuters

The IRS on Thursday released a plan for the nearly $80 billion in agency funding enacted through the Inflation Reduction Act in August — including expected boosts for customer service, technology and enforcement.
“Now that we have long-term funding, the IRS has an opportunity to transform our operations and provide the service that people deserve,” IRS Commissioner Danny Werfel told reporters on a press call.

Aligned with priorities outlined by Treasury Secretary Janet Yellen in August, the plan aims to improve several areas of taxpayer service, including a five-year timeline to digitize the filing process and the ability to respond to all IRS notices online. 

More from Smart Tax Planning:

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

The IRS has already started to deploy part of the funds earmarked for customer service by hiring 5,000 phone assistors before the 2023 filing season, and taxpayers have been able to respond to certain IRS notices online since February.
Currently, the agency is answering 80% to 90% of calls, compared with only 17% during the fiscal year 2022, according to Werfel.
Similarly, phone wait times have dropped to an average of four minutes compared with 27 minutes at the same point last year. “This additional staffing made an immediate difference,” he said.

Plans to boost technology

The plan also seeks to improve outdated technology. IRS tools will help taxpayers identify their mistakes before filing returns, and upgrades may help resolve filers’ errors more quickly.

“That’s a departure from the organization’s traditions,” said Mark Everson, a former IRS commissioner and current vice chairman at Alliantgroup. “It’s also a recognition of how badly things got out of whack during the pandemic.”

Further, the agency aims to eliminate its paper backlog within five years by moving to a “fully digital correspondence process,” Deputy Treasury Secretary Wally Adeyemo said during the call.

IRS to focus on ‘wealthy individuals’

The agency’s plan also aims to reduce the budget deficit by closing the tax gap, with an initial focus on tax returns for wealthy families, large corporations and complex partnerships, Werfel said.
Boosting the experienced staff needed for more complicated audits will take time, Everson said.
“The IRS has no plans to increase the most current audit rate we have for households making less than $400,000,” he said, noting the audit rate for filers below these thresholds “won’t come close” to reaching or exceeding historic averages.

Questions remain about higher audit rates among Black Americans, which Werfel committed to investigating during his confirmation hearing.
“That strikes me as a much more challenging question to resolve than the $400,000 threshold,” said Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, noting there are several unanswered questions for the IRS to explore.
The earned income tax credit, a tax break targeted at low- to moderate-income filers, is a contributing factor to the higher audit rate among Black Americans, research shows. More

Women & Wealth: A CNBC Your Money Event April 11 – Register at CNBCevents.com

Don’t let stock market volatility and talk of a possible recession dissuade you from trying to build wealth and ensure a comfortable retirement, financial advisors say.
How you approach building wealth and a retirement nest egg depends on your age, of course.
Here’s a decade-by-decade look at how to get started, or keep going, with wealth building.

Carlos Barquero | Moment | Getty Images

Stock market volatility and talk about a possible recession may have people anxious about investing.
However, that shouldn’t dissuade anyone from trying to build wealth, whether you are just starting out in your career, are middle-aged or are nearing retirement.

“We can’t predict the future, but by thoughtful spending and saving throughout your lifespan, you can create financial peace and resiliency for whatever the world and markets throw your way,” said certified financial planner Carolyn McClanahan, an M.D. and founder and director of financial planning at Life Planning Partners in Jacksonville, Florida.
Of course, how you go about building wealth depends on your age. Here is a decade-by-decade guide to growing your money.

Starting out in your 20s

The first thing to do is make sure you have enough cash stashed away for an emergency. If your job is secure, set a savings goal of three to six months’ worth of expenses. If it is insecure, such as a commission-based sales job, strive for six to 12 months, said McClanahan, a member of CNBC’s Advisor Council.
You should also start planning for retirement. If your employer has a 401(k) plan and offers a match, contribute enough to get that match.
After that, open a Roth individual retirement account, if your income qualifies, McClanahan said. You can contribute a maximum of $6,500 in 2023. Then, if you still have money to invest after maxing out your Roth, contribute more to your 401(k) plan, she said. In 2023, you can put as much as $22,500 into the account.

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

When it comes to the balance of your portfolio, you can have more equities than fixed income since you have more time to recover from any down markets.
In addition, make sure you are insured appropriately, especially with auto and disability insurance, since one accident or health issue could wipe out any savings you may have.
This is also a good time to take on a side hustle, said Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California, and a member of CNBC’s Advisor Council.
“It may not be generating a lot of income, but it is something they can create more income from,” she said.

In your 30s

As your career grows and you begin to earn a higher salary, don’t fall victim to the “lifestyle creep” and start spending that newfound money, warned CFP Matt Aaron, founder of Washington, D.C.-based Lux Wealth Planning, an affiliate of Northwestern Mutual.
Instead, put that extra money into your 401(k) plan.
The rule of thumb is to put aside about 10% of your income, if you start young, but a financial professional can help you work out the numbers, he said.
After you max out those contributions, start investing outside of your retirement account. Your portfolio should be diversified, with a mix of stocks and bonds.

You may also be thinking about buying a house, getting married or having children.
CFP Elaine King strongly recommends considering a home purchase in your 30s. It’s OK to start small, she said.
“It doesn’t need to be a big house, just something that in your future can be your rental income to diversify your assets,” said King, founder of Family and Money Matters in North Miami, Florida.
When you start saving for those events, don’t invest in stocks — unless your time horizon is longer than five years, McClanahan advised.

Instead, she recommends a money market account. These days, money market fund rates have soared as the U.S. Federal Reserve hiked interest rates. The average yield on Crane Data’s list of the 100 largest taxable money funds is 4.62%. Similarly, certificates of deposits, or CDs, have also seen their interest rates rise.
If anyone is counting on your income, such as a spouse or child, it’s also time to buy life insurance. For those with kids, you may want to start putting money aside for college.

The busy 40s

Maskot | Maskot | Getty Images

You may now be in your peak earning years and may also be raising children.
If possible, try to start a college savings account if you haven’t done so already. If you can’t afford to, don’t divert savings from your retirement account.
“You can borrow for college, but you can’t borrow for retirement,” McClanahan said.
For those who haven’t begun saving for retirement yet, setting aside 15% to 20% of your income is considered a general rule of thumb at this age, Aaron said.

You can borrow for college, but you can’t borrow for retirement.

Carolyn McClanahan
director of financial planning at Life Planning Partners

You may also have aging parents, so be sure to check on their financial planning, McClanahan said. If they aren’t prepared, it is another financial obligation that may be suddenly thrown on your lap.
Sun said she’s had many clients in their 40s start to inquire about long-term care, with Covid pushing care concerns to the forefront. Traditional long-term care insurance is expensive, but there are other policies that are a hybrid — combining life insurance and long-term care coverage.
“It is really figuring out how much you can afford, and if you can’t afford it right now, at least have the discussion so you are prepared,” Sun said. “You may have to self-insure, or look for it through work.”

Getting serious in your 50s

Retirement is potentially a decade away, so it’s time to get serious about how much you are truly spending, and whether you are on track to save enough to support you throughout your life, McClanahan said.
Once you hit 50, you can also set more aside into your 401(k) or IRA with so-called catch-up contributions. In 2023, the limit is $7,500 for 401(k) plans and $1,000 for IRAs.

If you don’t use a financial planner, at least get an hourly one to determine if you are on track to support your lifestyle in retirement, McClanahan recommended.
Assess your assets and make sure your portfolio is balanced to your needs. As you approach retirement age, experts typically recommend reducing risky assets, such as stocks, and increasing fixed income, such as bonds.
However, it’s important to maintain stock exposure since it gives you a greater return, Aaron said.

In your 60s and beyond

At this point, you need to have a retirement distribution strategy. That means understanding the different income streams you’ll have coming in.
“We need to build an investment strategy based on a proper asset allocation, taking on only as much risk that is needed for the income you require and your legacy goals,” Aaron said. More

Certain luxury features may help sell your home for more money or faster than expected, according to new research from Zillow.
As homeowners stay in place after locking in low interest rate mortgages, they are focusing on improvements that bring more joy from their living spaces.
Certain renovations may bring more value than others when it comes time to sell.

A prospective home buyer is shown a home by a real estate agent in Coral Gables, Florida.
Joe Raedle | Getty Images

Today’s home sellers may be able to command higher prices due to recent increases.
Certain luxury features may help sell your home for more money or faster than expected, according to new research from Zillow.

“If you have these features in your home already, you should definitely flaunt them in your listing description,” said Amanda Pendleton, Zillow’s home trends expert. “That is going to set you ahead of the competition.”
The real estate website evaluated 271 design terms and features included in almost 2 million home sales in 2022. Those that came out on top may add up to about $17,400 on a typical U.S. home.
More from Personal Finance:Don’t fall for these 9 common money mythsU.S. passport delays are months long and may get worseHow to work remotely indefinitely, according to a digital nomad
Two chef-friendly features topped the list of those that helped sell homes for more — steam ovens, which helped push prices up 5.3% over similar homes without them, and pizza ovens, which increased prices by 3.7%.
Other features that rounded out the top 10 included professional appliances, which had price premiums of 3.6%; terrazzo, 2.6%; “she sheds,” 2.5%; soapstone, 2.5%; quartz, 2.4%; a modern farmhouse, 2.4%; hurricane or storm shutters, 2.3%; and mid-century design, 2.3%,

Zillow also looked at which features helped sell homes faster than expected.
Doorbell cameras topped that list, helping to sell homes 5.1 days faster. That was followed by soapstone, with a 3.8 day advantage; open shelving, 3.5; heat pumps, 3; fenced yards , 2.9; mid-century, 2.8; hardwood, 2.4; walkability, 2.4; shiplap walling or siding, 2.3; and gas furnaces, 2.3.

To be sure, homeowners should not necessarily add these features with the idea they will see sale premiums, Pendleton said.
Moreover, some more unique features — like she sheds, spaces dedicated specifically to female home dwellers and their hobbies — may make it so it takes a bit longer to find a buyer who appreciates the amenities.
However, the features are signals of perceived qualify a buyer associates with a nice home right now.
“These personalized features kind of add that wow factor to a home,” Pendleton said.

Emphasis on improvements that spark joy

The current housing market is “anything but traditional,” Pendleton notes.
For buyers, there’s not as many listings to choose from as homeowners do not want to give up their ultra-low interest rates, she noted.
“Homes that are well priced and well marketed are going to find a buyer very quickly today,” Pendleton said.
Existing homeowners are now more likely to be thinking of different ways to re-envision their space, according to Jessica Lautz, deputy chief economist at the National Association of Realtors.

Personalized features kind of add that wow factor to a home.

Amanda Pendleton
home trends expert at Zillow

“There are a lot of people who want to remodel because they are locked into low interest rates and have no intention of leaving their property,” Lautz said.
At the top of homeowners’ wish lists are ways to maximize the square footage of their home, Lautz said, such as basement remodels or attic or closet conversions. Adding home offices is also very popular as people continue to live hybrid lifestyles.
Some improvements also stand to provide a 100% or more return when a home is put on the market.
The top of that list includes hardwood floor refinishing, according to Lautz, which not only makes a home look more beautiful but also makes it more marketable.

“It brings a lot of joy, and it has a lot of bang for the buck when you go to sell your home,” Lautz said.
Putting in new wood flooring or upgrading the home’s insulation also tend to provide returns of 100% or more, she said.
Zillow’s research found certain features may actually hurt a home’s resale value. That includes tile countertops or laminate flooring or countertops. Walk-in closets may also negatively impact a home’s value, as buyers may prefer to use the space for other purposes. More

In Nicole Chung’s new memoir, “A Living Remedy,” she tells the story of watching her aging parents get sicker from illnesses they couldn’t afford to treat.
Chung blames the country’s broken health-care system for the fact that her father died at 67, and her mother at 68.

Nicole Chung
Source: Carletta Girma

In author Nicole Chung’s new memoir, “A Living Remedy,” she tells the story of watching both her parents die in the span of two years. It was all the more painful because of her mother and father’s inability to afford the medical treatments they needed.
Chung blames the country’s broken health-care system, at least in part, for the fact that her father died at 67, and her mother at 68. By the time her father finally sought help at a low-cost health clinic, a doctor told him that his kidneys had lost more than 90% of their function. “It is still hard for me not to think of my father’s death as a kind of negligent homicide, facilitated and sped by the state’s failure to fulfill its most basic responsibilities to him and others like him,” Chung writes.

She also chronicles how her parents’ illnesses could never be processed and grieved over for what they meant alone; they always set off financial setbacks and fears, too. While her parents’ health deteriorates, Chung tries to become a writer and take care of her own two daughters, but these efforts are often mixed with frustration that she can’t do more to help the people who raised her. She writes of the “hollow guilt of those who leave hardship behind, yet are unable to bring anyone else with them.”
More from Personal Finance:Don’t fall for these 9 common money mythsU.S. passport delays are months long and may get worseHere’s how to work remotely indefinitely, according to a digital nomad
Chung’s story is likely to resonate with many. In 2022, a record-high share of Americans (38%) said they or a family member had delayed medical treatments because of costs, according to a Gallup poll.
I spoke with Chung about her grief and the state of American health care. (This interview has been edited and condensed for clarity.)
Annie Nova: Your parents experienced a lot of job insecurity. I’m curious, how much as a child did you understand what was going on for them?

Nicole Chung: It’s hard because, when you’re a child, you’re obviously not privy to financial discussions between your parents. It would not have been appropriate for them to put that on me at that age. But at the same time, definitely by the end of elementary school, I had become used to periods of them being unemployed, and I could really see the strain on their faces.
AN: The scenes of your father managing different pizza shops as he gets older are really upsetting because he’s often mistreated. Was retirement something they ever talked about? Or did they just know they wouldn’t be able to stop working?
NC: It was really difficult to plan for the future, in particular because my parents didn’t know when someone might lose a job, or when somebody would get sick. There wasn’t even an acknowledgment that my father wouldn’t be able to work in the service industry forever.
AN: So both your mother and father, because of worries around money, delayed going to doctors. How did this worsen their conditions?
NC: By the time my father finally got into a community health clinic and got the tests and care he needed, they said, ‘We should have seen you a year ago. Your kidneys have lost over 90% of their function.’ He knew he was getting sicker, but my parents just didn’t have a way to pay for the extensive care he needed.
AN: And with your mother?
NC: With my mother, it’s a little harder to pin down. I write in the book about her battle with cancer. By then, she was on Social Security and disability, and so she had adequate medical care. But when I was in high school, there was a period when we weren’t insured, and she had health problems. I wound up having to drive her to the hospital one night, and it turned out that she had endometriosis. She hadn’t been to a doctor in months. She never told me, ‘I didn’t go because we didn’t have insurance,’ but the fact is we didn’t. And it was partly because things had gotten so bad that the doctors weren’t actually able to remove everything, and that’s where her cancer grew many years later, and what ultimately killed her.
AN: This all happened relatively recently. Was it hard to write about it so soon?
NC: After my father died, I spent months trying to figure out why I was so enraged. Why wasn’t I just sad? Why was I so angry? And it’s the injustice of how he died, the fact that he died younger than he probably would have or needed to, because of years of precarity and lack of access to health care. It suddenly felt very important to talk about.

Arrows pointing outwards

AN: Going to the community health clinic was such a turning point for your father. I got the sense that you thought the entire health-care system should be more like these clinics.
NC: I think it was hard for my mother to accept that they needed to go to a free clinic. And, of course, it didn’t save him. But it prolonged his life. He was diagnosed with kidney failure and got on dialysis. He was approved for disability. There was all kinds of assistance, even a medical shuttle to bring him to his appointments. So that visit to the clinic unlocked all of these other services and support. That’s often not the case with how health care operates in this country. Instead, it’s hard to access and very expensive.

He knew he was getting sicker, but my parents just didn’t have a way to pay for the extensive care he needed.

Nicole Chung
author of “A Living Remedy”

AN: As you became more financially comfortable, did your parents ask you for help?
NC: I offered my parents what I could, but they were really hesitant to ask for anything because of where I was in my career and because I had two young kids. They knew I didn’t have very much money. And it was kind of devastating to realize that they weren’t asking because they had no expectations. And then, when my mother visited me, she would secretly leave cash behind. I would find it after they left. It was like she was trying to return everything I had given them.
AN: What impact do you hope your book will have on the health-care conversation in the U.S.?
NC: I wanted to write this book, in part, because I wanted to write about my grief. And it felt really important to say that so many people’s experiences of grief are informed by things like what my family went through. Most people who get sick and die in this country aren’t wealthy, because most people in this country aren’t wealthy. These things are going to continue to happen to so many of us at some point. How do we want to meet them as a society? One of the bigger questions that runs through the book is, ‘How do we want to take care of each other?’ More

The latest projections for Social Security and Medicare show two of the three major trust funds may be insolvent in the next decade.
Lawmakers may consider a host of changes to resolve those issues, from raising taxes, cutting benefits or both.
Experts weigh in on what changes would be on their wish lists.

AscentXmedia | E+ | Getty Images

Social Security and Medicare face an uncertain future, based on new annual reports from the programs’ trustees that were released last week.
“Insolvency is in the near horizon,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, during a panel hosted by the non-partisan, non-profit organization on Tuesday.

Two of the three major trust funds are projected to be insolvent in the next decade, he noted.
The Hospital Insurance Trust Fund, also known as Medicare Part A, is now projected to be insolvent in eight years, or 2031 – three years later than was reported last year.
More from Personal Finance:Experts argue Social Security retirement age shouldn’t pass 67Here’s how to earn $65K a year just in interestThe return on waiting to claim Social Security is ‘huge’
Social Security’s Old-Age and Survivors Insurance Trust Fund — which covers benefits for retirees, their spouses and children, and survivors of deceased workers — will be able to pay full benefits until 2033. At that time, just 77% of benefits will be payable.
That is just 10 years from now, Goldwein noted, when today’s 57-year-olds reach normal retirement age and today’s youngest retirees turn 72.

“That’s mainly driven by the fact that we had an 8.7% cost of living adjustment,” Goldwein said. “The trustees were projecting less than half that.”
The Social Security Disability Insurance Trust Fund was a bright spot in the report, with 100% of benefits payable at least through the report’s projection period in 2097.

Yet Social Security’s two funds combined will be able to pay benefits until 2034, one year earlier than was projected last year. At that time, 80% of benefits will be payable.
That is, of course, unless Congress acts sooner.
Social Security’s woes largely come down to demographics. Since 2010, the program has been spending more on benefits than it has been bringing in from payroll tax revenues, Goldwein noted.
By 2030, all baby boomers will be age 65 or older, according to the U.S. Census Bureau.

We’re going way, way beyond a pure safety net program.

Andrew Biggs
senior fellow at the American Enterprise Institute

“While it’s good news that we have a couple of extra years for Medicare, overall the clock is ticking on all of these programs within a decade,” Goldwein said.
To be sure, the projections may change from year to year as the economy fluctuates.
Yet to fix the problem, the solution remains the same. Lawmakers will have to consider a host of changes, selecting from raising taxes, cutting benefits or a combination of both.
Experts were asked on Tuesday what changes they would prioritize. Here is what they suggested.

1. Reduce elderly poverty through Social Security

Social Security successfully lifts more people out of poverty than any other program in the U.S., research from the Center on Budget and Policy Priorities has found.
The research finds 37.8% of adults 65 and over would have incomes below the official poverty line without Social Security benefits.
With Social Security benefits, 9% of older adults have incomes below the poverty line. That goes up to 11.4% when children under age 18 and adults ages 18 to 64 are included.
While the program helps lift 22.5 million people out of poverty, the protections could be better, noted Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities.

For the past 20 years, there has been one go-to minimum benefit proposal that includes a sliding scale based on years of work, Romig noted.
But reducing poverty through and outside of Social Security beyond a sliding scale minimum benefit may be a better approach, she said.
Notably, shoring up minimum benefits has been included in reform proposals on both sides of the congressional aisle.
“There is interest in this across the political spectrum,” Romig said.

2. Cap the maximum Social Security benefit

The maximum benefit for a single person retiring at normal retirement age this year is $43,000, based on the trustees report, noted Andrew Biggs, senior fellow at the American Enterprise Institute.
That is well above the poverty threshold of $21,000, he noted. Moreover, the maximum Social Security retirement benefit is two to three times higher than what countries like the United Kingdom, Canada or Australia pay.
“We’re going way, way beyond a pure safety net program,” Biggs said.
Congress may opt to cap the maximum benefit, which is projected to rise to $59,000 by 2030, Biggs suggested.
Those benefits are far beyond what anyone needs to stay out of poverty, he said. Such a change may be a “modest fix” that would reduce 10% to 15% of the program’s long-term funding gap, Biggs said.

3. Make Medicare spending more efficient

Owen Franken | Corbis Documentary | Getty Images

One of the factors that has helped reduce Medicare spending in recent years is the shift of hip and knee replacements from in-patient hospital procedures to outpatient and ambulatory settings, noted Joe Albanese, policy analyst at the Paragon Health Institute, a health policy research institute.
The development comes after regulatory restrictions that required those services to be provided in in patient settings were lifted, he noted.
“These are the types of flexibilities and innovations that we should be seeking throughout the Medicare program,” Albanese said.
The savings not only helps with Medicare Part A hospital insurance solvency, but also may contribute to the fiscal sustainability of the program as a whole, he said. More

Ramona Persaud is the portfolio manger of the Fidelity Equity-Income Fund (FEQIX). She’s a veteran of the asset manager, having been there since 2003.
The strategy held its own against the broader market, as Persaud’s value tilt and preference for dividend-paying stocks kept losses down.
Her inclination toward value strategies ties back to her childhood. “Value investing is like having a low budget and seeing how much you can buy,” she said.”

Ramona Persaud
Source: Fidelity

The broader market suffered in 2022 as the Federal Reserve embarked on its rate-hiking campaign. Amid the tumult, the Fidelity Equity-Income Fund (FEQIX) outperformed the broader market with a total return of -5.07% – the result of portfolio manager Ramona Persaud’s search for value and quality.
“It was such a hard year for everyone,” she said. “I do think last year was a good example of highlighting the process.”

The fund shone as the Nasdaq Composite – whose Big Tech components were routed by higher interest rates – cratered 33.1%, and the S&P 500 shed more than 19%.
“Value is proven out through data over time,” she said. “We didn’t truly see it in the last decade, but value over long periods of time is your best alpha factor.”
The fund posted 3-year trailing returns of 18.71%, through April 4, according to Morningstar. The fund’s 5-year and 10-year trailing returns were 9.27% and 9.13%, respectively.
“She is looking for stocks with low expectations baked into them,” Robby Greengold, strategist for Morningstar Research Services, said of Persaud’s approach.
“A lot of the companies she buys have relatively high or stable profits and strong free cash flow generation,” he added. “She thinks that a portfolio of companies that are inexpensive, high quality dividend paying stocks should outperform on a risk-adjusted basis.”

In search of a good deal

FEQIX’s allocation toward blue-chip names that pay dividends such as JPMorgan Chase and Johnson & Johnson, as well as Exxon Mobil – which benefited from higher energy prices last year – protected it from the most severe price declines in 2022.

Arrows pointing outwards

The market rout also presented plum buying opportunities for Persaud, who has an eye for quality names on sale.
She spotted good discounts in the consumer discretionary sector – particularly apparel and retailers that stumbled as their inventory piled up. Large cap, low beta health-care stocks also made for a solid opportunity. Cyclical tech also became interesting, but “none of the high-flying tech,” she said.
“When the market panics, you get this sweeping effect when everything gets sold off,” Persaud said. “There’s a lot of cyclical tech, things like semiconductors, that sold off really hard because of the fear around long duration. Those are extremely high-quality businesses.”

Part of the immigrant experience

Persaud’s focus on value and quality are more than just a management style. It’s a tendency that ties back to her childhood in New York City as the daughter of parents who emigrated from Guyana.
“When I thought about why I like low-expectation investing, it goes back to the frugality of the immigrant background: You have to make a lot of a little,” she said. “Value investing is like having a low budget and seeing how much you can buy – that’s how I grew up.”
At one point, Persaud, a self-described “math and science kid,” was on track to follow in her father’s footsteps and become an engineer. In particular, she wanted to work toward a PhD in environmental engineering. A part-time job at Morgan Stanley to help pay for books while she was attending the Polytechnic Institute of New York University — now NYU’s Tandon School of Engineering — introduced her to the world of capital markets.
At Morgan Stanley, she built systems to digitize the firm’s trade clearing operations and became hooked. “It was the pace of the capital markets business, even though it was a back office – the pace completely matched,” she said.
It was enough to sway Persaud into a life-changing decision: She had won a fellowship from the National Science Foundation to get her PhD, and she ultimately passed on it to pursue a career in finance.
“My dad wasn’t happy,” she said. “The National Science Foundation fellowship as a brown immigrant woman is a really big deal. We had only been in the country for less than 10 years, so he was like, ‘What are you doing?’ That was very heartbreaking for him.”
Persaud found a way to combine her love of research and the excitement of capital markets, this time deciding she’d make a move from the back office to become a research analyst. She earned her master of business administration at the University of Pennsylvania’s Wharton School, interned at T. Rowe Price and made her way to Fidelity – where she has been since 2003.
At Fidelity, Persaud manages an array of strategies aside from FEQIX, including the Fidelity Global Equity Income Fund (FGILX) and Fidelity Advisor Global Equity Income Fund (FBLYX). She also co-manages the sub-portfolio of the Fidelity Advisor Multi-Asset Income Fund (FWATX) and the equity sleeve of the Fidelity and Fidelity Advisor Strategic Dividend Income funds (FSDIX and FASDX).
Income is a common theme for the offerings – and that’s not an accident. The search for steady income is also a keystone of her style and her upbringing.
“I like to balance price return with income in order to dampen overall volatility because what I’m really looking for is risk-adjusted return,” she said. “In a way, that’s an extremely natural concept to me, because I do think it comes from the immigrant history of trying to do a lot with a little.” More

Women & Wealth: A CNBC Your Money Event April 11 – Register at CNBCevents.com

Black families face barriers to wealth creation due to a system of inequities, which has resulted in a growing disparity in retirement savings, according to Thasunda Brown Duckett, president and CEO of TIAA, a Fortune 100 financial services organization.
To address the racial retirement gap and work toward building generational wealth for Black Americans, Duckett said access to a workplace retirement plan is not enough. “We have to make sure that everyone is participating.”

The disparity in wealth between Black and white households in the U.S. — referred to as the racial wealth gap — has paved the way for a significant retirement savings shortfall that is only growing, according to Thasunda Brown Duckett, president and CEO of TIAA.
“There is a real problem,” she said Tuesday in a conversation with CNBC senior personal finance correspondent Sharon Epperson during CNBC’s Equity and Opportunity summit. TIAA is a Fortune 100 financial services organization serving some 5 million workers in the academic, cultural, governmental, medical and research fields.

Many older Americans are concerned about their retirement security. However, Black households are at a greater risk of being unable to maintain their standard of living in retirement compared with their white counterparts, several studies show.

As part of its National Financial Literacy Month efforts, CNBC will be featuring stories throughout the month dedicated to helping people manage, grow and protect their money so they can truly live ambitiously.

According to the U.S. Federal Reserve’s latest Survey on Consumer Finances, 57% of white families had savings in retirement accounts, compared with only 35% of Black families and 26% of Hispanic families.
And while white families had, on average, a retirement account balance of $168,000, not including pensions, the average balances for Black and Hispanic families were $38,300 and $27,300, respectively.
“All Americans run the risk of running out of money, and as you look at minorities or women, that number is even more pronounced,” Duckett said.

How to overcome structural and systemic issues

For starters, fewer Black and Hispanic households have or use employer-sponsored retirement plans. About 64% of Hispanic workers, 53% of Black workers and 45% of Asian-American workers have no access to a workplace retirement plan at all, according to AARP. 

Tax breaks for retirement plans, such as 401(k) plans and individual retirement accounts, may be further widening the gap, according to a separate analysis from the Tax Policy Center.  
All employers, including small business owners, must provide access to a workplace plan to make it easier to save, Duckett said, so employees are “taking the necessary steps to have a secure retirement, while managing the high-stress environment we are dealing with today.”

For those who are in business for themselves and don’t have a 401(k) or other workplace retirement plan, it’s important to use alternative savings tools such as an IRA, she said.
“We have to make sure that everyone is participating.”

Financial education is ‘critical’

To further address the racial retirement gap and work toward building generational wealth for Black Americans, Duckett said, financial literacy “absolutely is critical.”
“When you know better, you do better,” she added.
There is an important role for schools to play, she said, but a financial education should continue in the workplace.
And “it can’t stop there,” she added. “It’s not enough to just have it; it is our responsibility to make sure that our employees are engaging with the information in a way that they are taking action.”

Auto-enrollment and auto-escalation features can also help ensure all workers can take full advantage of matching contributions, when available, and stay on track with their long-term goals.
Finally, Duckett said, families should meet with a financial advisor to fine-tune their balance sheet so they are able to divert a portion of their salary every month to a separate rainy day fund. This will prevent having to tap retirement accounts in case of an unexpected financial shock or emergency expense.
“It’s not what you make, it’s what you keep,” she said.
Ultimately, that’s what will allow Black households to “transfer wealth, and not debt, to future generations,” Duckett said. More