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Treasury Secretary Janet Yellen said the U.S. would likely hit its $31.4 trillion debt ceiling on Thursday.
The debt ceiling is the amount of money the U.S. is authorized to borrow to pay its bills. Since the cost of government operations generally exceeds federal tax revenues, the U.S. must raise money by selling Treasury bonds. The government can’t do this after hitting the debt ceiling.
If the U.S. ultimately can’t pay its bills, it will default on its debt. That’s only happened once in U.S. history — and seemingly by mistake. Another default would mean likely recession and financial crisis, economists said.

The U.S. may be about to hit its debt ceiling.
Treasury Secretary Janet Yellen said last week that the U.S. would likely hit the ceiling Thursday. Absent steps taken by Congress, the event may “cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” she wrote in a letter to new House Speaker Kevin McCarthy, R-Calif.

Here’s what the debt ceiling is, and what makes it so important for consumers.

What is the debt ceiling?

The debt ceiling is the amount of money the U.S. Treasury is authorized to borrow to pay its bills.
Those obligations include Social Security and Medicare benefits, tax refunds, military salaries and interest payments on outstanding national debt.
The current ceiling is about $31.4 trillion. Once it’s hit, the U.S. is unable to increase the amount of its outstanding debt — and paying its bills becomes trickier.
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“Not unlike many households, the government is reliant on debt to fund its obligations,” said Mark Hamrick, a senior economic analyst at Bankrate. “And like many households, it doesn’t have sufficient income to fund its expenses.”
The debt ceiling wouldn’t be an issue if U.S. revenues — i.e., tax proceeds — exceeded its costs. But the U.S. hasn’t run an annual surplus since 2001 — and has borrowed to fund government operations each year since then, according to the White House Council of Economic Advisers.

Why is the debt ceiling an issue right now?

While the U.S. is expected to reach its $31.4 trillion borrowing cap on Thursday, this in and of itself isn’t the major issue.
The Treasury has temporary options to pay bills: It can use cash on hand or spend any incoming revenues, such as those during tax season, which starts Jan. 23.
It can also use so-called “extraordinary measures,” which free up money in the short term. The Treasury will start using such measures this month, Yellen said. They include a redemption or suspension of investments in certain federal retirement and disability funds. The funds would be made whole later.
These maneuvers are meant to prevent a potential calamity: a default.

A default would occur if the U.S. runs out of money to meet all its financial obligations on time — for instance, missing a payment to investors who hold U.S. Treasury bonds. The U.S. issues bonds to raise money to finance its operations.
The U.S. has defaulted on its debt just once before, in 1979. A technical bookkeeping glitch resulted in delayed bond payments, an error that was quickly rectified and only affected a small share of investors, the Treasury said.
However, the U.S. has never “intentionally” defaulted on its debt, CEA economists said. This outcome is the one Yellen warned would cause “irreparable harm.” The scope of negative shockwaves is unknown since it hasn’t happened before, economists said.  
“The fallout is serious,” said Mark Zandi, chief economist at Moody’s Analytics.
“It would create chaos in financial markets and completely undermine the economy,” he added. “The economy would go into a severe recession.”

Fallout: Frozen benefits, a recession, pricier borrowing

An exact default date is difficult to pinpoint, due to the volatility of government payments and revenues. But it’s unlikely to happen before early June, Yellen said.
Congress can raise or temporarily suspend the debt ceiling in the interim to avert a debt-ceiling crisis — something lawmakers have done many times in the past. But political impasse calls their ability or willingness to do so into question this time around.   

[A default] would create chaos in financial markets and completely undermine the economy.

Mark Zandi
chief economist at Moody’s Analytics

If the U.S. were to default, it would send several negative shock waves through the U.S. and global economies.
Here are some of the ways it could affect consumers and investors:
1. Frozen federal benefits
Tens of millions of American households might not get certain federal benefits — such as Social Security, Medicare and Medicaid, and federal aid related to nutrition, veterans and housing — on time or at all, the CEA said. Government functions such as national defense may be affected, if the salaries of active-duty military personnel are frozen, for example.
2. A recession, with job cuts
Affected households would have less cash on hand to pump into the U.S. economy — and a recession “would seem to be inevitable” under these circumstances, Hamrick said. Recession would be accompanied by thousands of lost jobs and higher unemployment.
3. Higher borrowing costs
Investors generally view U.S. Treasury bonds and the U.S. dollar as safe havens. Bondholders are confident the U.S. will give their money back with interest on time.
“It’s sacrosanct in the U.S. financial system that U.S. Treasury debt is risk-free,” Zandi said.
If that’s no longer the case, ratings agencies would likely downgrade the U.S.’ sterling credit rating, and people will demand much higher interest rates on Treasury bonds to compensate for the additional risk, Zandi said.
Borrowing costs would rise for American consumers, since rates on mortgages, credit cards, auto loans and other types of consumer debt are linked to movements in the U.S. Treasury market. Businesses would also pay higher interest rates on their loans.
4. Extreme stock market volatility
Of course, that’s assuming businesses and consumers could get credit. There might also be a “severe” financial crisis if the U.S. government is unable to issue additional Treasury bonds, which are an essential component of the financial system, Hamrick said.
“A default would send shock waves through global financial markets and would likely cause credit markets worldwide to freeze up and stock markets to plunge,” the CEA said.
Even the threat of a default during the 2011 debt ceiling “crisis” caused Standard & Poor’s (now known as S&P Global Ratings) to downgrade the credit rating of U.S. and generated considerable market gyrations. Mortgage rates rose by 0.7 to 0.8 percentage points for two months, and fell slowly thereafter, the CEA said.

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With most pandemic-era eviction protections having expired and rents rising, the number of tenants coming home to find notices on their doors is picking up.
Behind on your rent or facing displacement? Here’s what housing experts recommend you do.

Ed Jones | Afp | Getty Images

Between rents rising and most pandemic-era eviction bans having expired, the number of tenants coming home to find notices on their doors is picking up.
In just the first week of January, the Eviction Lab at Princeton University has counted more than 9,300 evictions in the nine states and the 32 cities it monitors.

In New York City alone, nearly 4,400 families and tenants have been removed from their apartments since January 2022, when a ban on evictions lifted.
“We’ve seen in recent months an increase in eviction filings in the areas we track, sometimes back towards pre-pandemic averages and sometimes worse,” said Jacob Haas, research specialist at the Eviction Lab. “Eviction can be a traumatic, destructive experience for the families that face it.”
If you are behind on your rent or facing displacement, here’s what housing experts recommend you do.

Familiarize yourself with tenant rights

Although it’s a tough time for tenants with rents soaring, the pandemic has also ushered in a new set of protections. It’s worth researching and familiarizing yourself with any rights to which you may be entitled, experts say.
In certain cities, for example, landlords are now limited in how much they can raise your rent. If you’re facing eviction because of an increase that was illegal, it’s worth knowing: You may be able to bring this up in housing court, or with your landlord.

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In some places, you’re entitled to a set amount of notice with an eviction, such as at least 90 days in specific cases in Portland, Maine. During the school year, educators and families with school-age children recently got new eviction protections in Oakland, California.
Meanwhile, if your landlord has raised your rent above a certain amount, you could be eligible in a few cities, including Seattle and Portland, Oregon, to get some of your moving costs covered.

Work with a lawyer

If your landlord has moved to evict you, housing advocates recommend that you try to get a lawyer as soon as possible.
One study in New Orleans found that more than 65% of tenants with no legal representation were evicted, compared with just 15% of those who had a lawyer with them at their hearing.
You can find low-cost or free legal help with an eviction in your state at Lawhelp.org.

In a growing number of cities and states, including Washington, Maryland and Connecticut, tenants facing eviction have a right to counsel. You can find a longer list of those places at civilrighttocounsel.org.

Consider your options for rent

Most rental assistance programs that opened during the pandemic are now closed, but some are still accepting applications.
On the National Low Income Housing Coalition’s website, you can find a state-by-state guide of relief options and their status.
It’s not a strategy experts recommend, but some tenants are using their credit cards to cover their rent. Few landlords or property managers accept plastic, so you’d have to find a third-party processor, such as Plastiq or PayPal.
But this option should only be used in dire situations, said Ted Rossman, a senior industry analyst at CreditCards.com.
“The biggest potential issue is carrying a balance and paying interest on your rent,” Rossman said. “This can make an already sizable expense much more substantial.”
Instead, he recommends tenants ask their landlord for an extension or payment plan. Other ways to come up with rent can include borrowing from family members and friends, or from your retirement plan, Rossman said. 

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Inflation peaked in 2022 at its highest levels since the early 1980s.
However, consumers saw prices fall for certain items, largely in consumer electronics, used cars and beef.
Prices for rental cars and trucks have followed a similar trajectory.

Zachary Zirlin / Eyeem | Eyeem | Getty Images

In a year of soaring inflation across the broad U.S. economy, some corners of the consumer market did the opposite: They deflated in price.
The largest declines, on a percentage basis, were concentrated in categories like consumer electronics, beef, and cars and trucks, according to the consumer price index.

Here are the goods that deflated the most in 2022.

Consumer electronics

Anita Kot | Getty

Several consumer electronics topped the list: smartphones; televisions; “other” video goods excluding TVs; and computers, peripherals, and smart home assistants. Their respective prices fell by 22.2%, 14.4%, 8.6% and 5.8% in 2022.
Consumer electronics generally fall in price over time, as measured by the CPI and other inflation metrics. That’s largely been the trend since 2006, according to CPI data for information technology, hardware and services, for example.
The pandemic era was an exception, as households upgraded and bought new tech devices amid stay-at-home orders, thereby buoying demand while important parts like semiconductor chips were in short supply.
Consumers might find the idea of this broad deflation trend odd, though, when sticker prices for popular items like smartphones, televisions and computers don’t seem to have fallen.

The deflationary dynamic is more a measurement quirk than a reflection of what consumers pay out of pocket, according to economists. The U.S. Bureau of Labor Statistics adjusts technology prices for quality — improvements in microchips, software and screen resolution, for example — that gives the illusion of a falling price on paper.
In other words: Better quality for the same money yields deflation in the eyes of federal statisticians.
“You’re getting more bang for your buck,” said Tim Mahedy, senior economist at KPMG. “You’re still paying $800 for an iPhone, but your iPhone is a lot better.”
This economic modeling is known as a “hedonic quality adjustment.” The BLS uses this method for consumer appliances, electronics and apparel items, for example.
That measurement dynamic coincides with weaker demand, which is partly a function of consumers not having to stay indoors as they did during the pandemic era, and the easing of supply shortages.
“It has been the same story for past 20 years,” Andrew Hunter, senior U.S. economist at Capital Economics, said of the general deflationary trend for consumer electronics. “It now looks to be returning over the past six months or so.”
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Used cars and trucks, rental vehicles

A used car dealership in New York on Jan. 19, 2022.
Pablo Monsalve | View Press | Corbis News | Getty Images

Prices for used cars and trucks were among the first to spike as inflation took hold in early 2021. The category inflated by 37.3% that year — the most of any item outside of energy commodities like gasoline and fuel oil, according to the consumer price index.
Now, used car and truck prices are in retreat. They deflated by 8.8% in 2022. Only prices for smartphones and TVs fell at a faster rate.
Prices for rental cars and trucks have followed a similar trajectory. They declined 4.9% in 2022, after spiking 36% the prior year.
A shortage of semiconductor chips — a key vehicle component — brought the global production of new vehicles to a halt during the pandemic. Car inventories collapsed to record lows, sending vehicle prices soaring in 2021.

You’re getting more bang for your buck. You’re still paying $800 for an iPhone, but your iPhone is a lot better.

Tim Mahedy
senior economist at KPMG

The supply shortage pushed more buyers into the used vehicle market, driving up prices. Those buyers included rental car companies, which needed to restock fleets they had culled earlier in the pandemic as consumer demand tanked.
Supply shortages ran headlong into burgeoning demand from American travelers who wanted to hit the road in 2021 as Covid vaccines rolled out but travel outside U.S. borders was somewhat constrained.
Now, however, global auto production has increased as supply chains are normalizing, economists said. That’s led prices for used vehicles to decline.
“Rental car companies were buying — and now completely stopped buying — used vehicles,” said Mark Zandi, chief economist at Moody’s Analytics.
Higher interest rates have also crimped consumer demand.

Beef, bacon

Black Angus cows at a farm in Pleasureville, Kentucky.
Bloomberg | Bloomberg | Getty Images

Uncooked beef steaks, beef roasts, and other types of beef and veal fell in price last year — 5.4%, 3.5% and 6.7%, respectively.
Meanwhile, bacon prices declined 3.7%.
That occurred as consumers saw overall grocery prices move the opposite way, swelling by nearly 12% in 2022, according to CPI data.
The beef pricing trend is largely a result of U.S. drought conditions and the associated economics of beef production, said Amy Smith, vice president at Advanced Economic Solutions, a consulting firm specializing in food economics.
Over 78% of the U.S. was experiencing some level of drought as of Dec. 6, according to the U.S. Department of Agriculture. About 69% of the U.S. cattle herd is in those drought-stricken areas, an increase of 33 percentage points over a year earlier, the USDA said.  
This is important because drought shrinks pasture and forage areas; at the same time, corn and wheat prices have been high, making it expensive to supplement pasture feeding with animal feed, Smith said.  
As a result, many farmers have opted to slaughter cows early for beef production, increasing the available supply of beef and reducing prices at the grocery store, Smith said.
The USDA described cattle slaughter in the first half of 2022 as an “aggressive culling,” predominantly due to “pasture conditions and increased operating costs.” The pace of beef-cow slaughter in July was the fastest recorded since the USDA started tracking data in 1986.
Meanwhile, lower bacon prices are partly due to a higher domestic supply of pork amid reduced exports to other nations, Smith said. The USDA estimates total U.S. pork exports at 6.3 billion pounds in 2022, down 10% from 2021.

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Even with plentiful free checking options, some consumers are still paying fees, a new Bankrate.com survey finds.
Here’s how much you stand to lose and steps you can take to save.

Even with broad availability of free checking services, more than a quarter of checking account holders — 27% — are paying fees every month.
For consumers who aren’t taking advantage of free checking, those fees add up to an average of $24 per month, or $288 per year, according to a new survey from Bankrate.com. The personal finance site conducted its online survey Dec. 7-12 and included 3,657 adults, of whom 3,069 have a checking account.

The charges come from routine services or ATM and overdraft fees, the research finds. The average overdraft fee costs $29.80, Bankrate’s research has found, while the average nonsufficient funds fee is $26.58.
The annual sums may not sound like a lot, said Sarah Foster, analyst at Bankrate.com, but can add up to a hefty $5,000 if you stick with your checking account for 17 years, as the average consumer tends to do.
Nixing bank fees is an easy way to free up a little more money in your budget, especially amid high inflation and with expectations of a recession on the rise. Paying those extra costs may weaken consumers’ budgets and make them more vulnerable if a downturn does happen.
“It’s just an important and really an easy way to make sure you’re not spending more money than you have to,” Foster said.
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Which generations spend the most on checking fees

Younger people are most susceptible to paying fees, Bankrate.com’s survey found.
Gen Z, who range in age from 18 to 26, comes in at the top of the list, with 46% of that generation’s checking account holders paying monthly fees. That cohort pays about $25 per month, Bankrate.com found.
Millennials, who are ages 27 to 42, come in next, with 42% of account holders paying monthly checking fees, Bankrate.com found. They typically pay the most compared with other generations, at $28 per month, the study found.
Older cohorts — Gen Xers, who are between 43 and 58, and baby boomers, ages 59 to 77 — are less likely to pay checking account fees. That includes just 22% of Gen X and 14% of baby boomer checking account holders, who pay $17 and $22 per month, respectively.
More than half of Gen Z — 56% — and millennial — 52% — account holders say they are sacrificing recession preparedness due to the monthly fees they pay. In comparison, 46% of Gen X and 35% of baby boomers said the same.
The monthly fees are setting consumers back on goals including paying down debt, saving for emergencies or for major goals such as buying a house or car or paying for college, or setting money aside for retirement, the survey found.

Gauge the true cost of your checking account

To know what you’re truly paying for your checking account, you should keep tabs on your statements at least monthly, according to Bruce McClary, senior vice president at the National Foundation for Credit Counseling.
Start with the basics — looking at your transactions to make sure they’re accurate, he said. Then evaluate your transactions and withdrawals and any account maintenance fees that come up.
If you feel that you’re being charged in error, that should prompt a conversation with your bank, McClary said.
Keep in mind there may be adjustments your bank or credit union may be willing to make. If you let your financial institution know about your personal situation, they may be willing to forgive certain fees, particularly a first-time charge, Foster said.
“There’s no guarantee it will work, but it just never hurts to reach out,” Foster said.

‘Shop around for opportunities’

Also evaluate whether there are fees you can avoid, such as by eliminating out-of-network ATM withdrawals or by maintaining a required minimum balance.
Where you can, try to find free savings and checking services, McClary said.
“Shop around for opportunities,” McClary said. “If your bank or credit union isn’t offering them, this could be an opportunity to move your business elsewhere where it might be more affordable.”
Opening a new account at another institution may seem arduous, particularly if it requires an in-office visit and physically moving cash, Foster said. But the savings over time may more than make up for the hassle.
“While switching a bank can be a pretty annoying step, it can help you build wealth in the long run if it means not paying for a service that you can get for free elsewhere,” Foster said.
And if you find you’re not happy with your new account, you can always move your money somewhere else, she said.

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In the new student loan repayment proposal rolled out by the Biden administration, certain borrowers could see their monthly payments drop significantly.
Some borrowers will have $0 monthly payments.

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In the new student loan repayment plan proposal rolled out Jan. 10 by the Biden administration, more borrowers could see their monthly payments drop to $0.
The new option revises one of the four existing income-driven repayment plans, which cap borrowers’ bills at a share of their discretionary income with the aim of making the debt more affordable to pay off.

Instead of paying 10% of their discretionary income a month, under the proposal, the Revised Pay As You Earn Repayment Plan, or REPAYE, borrowers would be required to pay 5% of their discretionary income toward their undergraduate student loans.
The new REPAYE plan could officially be available July 1, 2024, according to higher education expert Mark Kantrowitz. That estimate accounts for a 30-day public comment period on the proposed regulation and then a window before new rules can go into effect. But some parts of the plan could be implemented sooner, he said.
Here’s what borrowers need to know.

More people will have $0 payments

Under the current REPAYE plan, discretionary income is calculated as money earned over 150% of the federal poverty guideline. And so, single borrowers begin to make payments based on income over roughly $21,900, based on 2023 guidelines, said Kantrowitz.
Under the new plan, borrowers wouldn’t need to make payments based on income earned until it hit 225% of the federal poverty guideline, or about $32,800, Kantrowitz said.

He provided an example of how monthly bills could change with the overhauled option.
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Previously, a borrower who made $40,000 a year would have a monthly student loan payment of around $151. Under the revised plan, their payment would drop to $30.
Someone who earned $90,000 a year, meanwhile, could see their monthly payments shrink to $238 from $568, Kantrowitz calculated.
Those who earn under around $32,800 will have $0 monthly payments.

Undergraduate borrowers benefit most from the change

The new option should be available to borrowers with undergraduate and graduate student loans, although undergraduate borrowers will have lower payments.
Those with Parent Plus loans won’t be eligible to enroll in the overhauled plan.

Defaulted loans are typically ineligible for income-driven repayment plans.
Yet under the new proposal, those who have fallen behind may be able to sign up for the income-based repayment plan, another one of the income-driven repayment plan options.

Borrowers will need to enroll

Once the new REPAYE plan is available, borrowers can call their student loan servicer to enroll in the option, or apply at StudentAid.gov.
“Any new plan will likely take quite some time to implement, so borrowers will have plenty of time to learn about how it might work,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

There’s a 10- or 20-year payment timeline

After 20 years of payments on undergraduate student loans, any leftover debt is forgiven on the current REPAYE plan. The revised option preserves that timeline.
Plus, under the Biden administration’s proposal, those with original student loan balances of $12,000 or less may get their loans forgiven after just 10 years.

Forgiven student debt may come with a tax bill

It’s unclear whether debt forgiven at the end of the repayment timelines will be taxable at the federal level.
Debt forgiveness used to trigger a tax bill under income-driven repayment plans. But a recent law ended that policy until at least 2025, and experts expect it to become permanent.
It’s also possible that some states will consider the forgiven debt taxable.

What’s going on with the payment plan pause?

The pandemic-era relief policy suspending federal student loan bills and the accrual of interest has been in effect since March 2020. 
For now, the Education Department is leaving things a little open-ended when it comes to the timing of payments resuming.

It has said the bills will be due again only 60 days after the litigation over its student loan forgiveness plan resolves and it’s able to start wiping out the debt.
If the Biden administration is still defending its policy in the courts by the end of June, or if it’s unable to move forward with forgiving student debt by then, the payments will pick up at the end of August, it has said.
The Supreme Court will start hearing arguments on legal challenges to the plan Feb. 28.

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Whether they’re leaving due to layoffs or in search of greener pastures, there’s a good chance some departing workers will be leaving a 401(k) behind.
While you generally have three options for handling an old 401(k), some are better than others, experts say.
Here are the rules to know if you’re leaving your job and were participating in a 401(k).

Peopleimages | Istock | Getty Images

Whether you’re leaving your job by choice or not, don’t forget about your 401(k) plan.
As workers continue quitting their jobs at an elevated rate and some companies embark on layoffs — including Amazon, Salesforce and Goldman Sachs — there’s a good chance some departing workers will be leaving an employer-sponsored retirement plan behind.

While not everyone has a 401(k) or similar workplace retirement plan, those who do may want to be familiar with what happens to their account when they leave a job and what the options are — and aren’t.

You have three basic choices for an old 401(k)

Broadly speaking, you have several options for your old 401(k). You may be able to leave it where it is, roll it into your new workplace plan or an individual retirement account, or cash it out — although experts generally caution against the third move.
Cashing out “is the least desirable option,” said Eric Amzalag, a certified financial planner and owner of Peak Financial Planning in Canoga Park, California.
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For starters, he said, you’d face paying taxes on the distribution — unless it’s post-tax money you put in a Roth 401(k). With some exceptions, you’ll typically also pay a 10% tax penalty if you’re younger than age 59½, which is when withdrawals from 401(k)s and other retirement accounts can begin.

“If the account size is large, it could push the individual into a high tax bracket, causing the funds to be taxed at a higher and disadvantageous rate,” Amzalag said.

Keep track of money left in a former employer’s 401(k)

Perhaps the easiest thing you can do is leave your retirement savings in your former employer’s plan, if it’s permitted. Of course, you can no longer contribute to the plan. Nor will you be able to take a loan from that account as you can when you’re an active employee in the 401(k).
However, while this might be the easiest immediate choice if it’s available, it could lead to more work in the future.
Basically, finding old 401(k) accounts can be tricky if you lose track of them. While congressional legislation known as Secure 2.0, enacted in December, includes a provision for a retirement account “lost and found,” the Labor Department gets two years to create it. Some large 401(k) plan administrators — Fidelity Investments, Vanguard Group and Alight Solutions — also have teamed up to offer their own lost and found.

Also be aware that if your account is small enough, you may not be able to keep it at your ex-employer even if you want to.
If the balance is between $1,000 and $5,000, your ex-employer can roll over the amount to an IRA. (Secure 2.0 changed that upper limit to $7,000, effective for distributions made after 2023.)
If the balance is less than $1,000, the plan can cash you out — which can lead to a tax bill and an early-withdrawal penalty.

Consider a rollover to a new workplace plan or an IRA

Another option is to transfer the balance to another qualified retirement plan, such as the 401(k) at your new employer, assuming the plan allows it.
“The main advantage of this option is consolidation of your accounts and less to keep track of,” said CFP  Justin Rucci, an advisor with Warren Street Wealth Advisors in Tustin, California.
You also could roll it over to an IRA, which may provide more investment choices — but also may come with higher fees, which can eat away at your nest egg.

Be aware that if you have a Roth 401(k), it can only be transferred to another Roth account. This type of 401(k) and IRA involves after-tax contributions, which means you don’t get a tax break up front as you do with traditional 401(k) plans and IRAs.
However, the Roth money grows tax-free and is untaxed when you make qualified withdrawals down the road.

Watch out for 401(k) ‘exit costs’

No matter what you choose to do with your old workplace retirement account, be aware of some of the potential “exit costs” related to it.
For example, while any money you put in your 401(k) is always yours, the same can’t be said of employer contributions.
Vesting schedules — the length of time you must stay at a company for its matching contributions to be 100% yours — range from immediately to up to six years. Any unvested amounts generally are forfeited when you leave your company.

Also, if you have taken a loan from your 401(k) and haven’t repaid it when you leave your company, there’s a good chance your plan will require you to repay the remaining balance fairly quickly. Otherwise, your account balance will be reduced by the amount owed — called a “loan offset” — and considered a distribution.
In simple terms, unless you are able to come up with that amount and put it in a qualifying retirement account by the following year’s tax-return deadline, it is considered a distribution that may be taxable. And, if you are under age 59½ when you leave the job, you may pay a 10% early-withdrawal penalty.
About a third of employer plans allow former employees to continue paying the loan after they leave the company, according to Vanguard. This makes it worthwhile to check your plan’s policy.

There may be reasons to avoid an IRA rollover

It’s worth talking to a financial advisor before moving your old 401(k). In addition to portfolio considerations such as investment choices and fees, there may be planning consequences.
For example, there’s something called the Rule of 55: If you leave your job in or after the year you turn age 55, you can take penalty-free distributions from your current 401(k). If you move the money to an IRA, you generally lose the ability to tap the money before age 59½ without paying a penalty.
Additionally, if you are the spouse of someone who plans to roll over their 401(k) balance to an IRA, be aware that you would lose the right to be the sole heir to that money. With the workplace plan, the beneficiary must be you, the spouse, unless you sign a waiver allowing it to be someone else.
Once the money lands in the rollover IRA, the account owner can name anyone a beneficiary without their spouse’s consent.

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The new year could bring more economic uncertainty and market volatility, but there are still plenty ways to shield yourself from potential headwinds, advisors say. 
Here are a few of the strategies they are using to steer their clients through the ups and downs.

By most measures, the new year is off to a good start. However, economists and business leaders alike predict there are rougher times ahead for the market and the economy.
Year to date, the S&P 500 and Dow Jones Industrial Average have advanced about 4% and more than 2%, respectively, while the Nasdaq Composite is up 5.9%.

Yet inflation remains a persistent problem. The consumer price index for December showed prices cooled 0.1% from the month before but were still 6.5% higher than a year ago.
“The easing of inflation pressures is evident, but this doesn’t mean the Federal Reserve’s job is done,” said Bankrate.com’s chief financial analyst, Greg McBride. “There is still a long way to go to get to 2% inflation.”
Even as the Fed’s battle with inflation is leading to success, it will come at the price of a hard landing for the economy, according to a survey of chief financial officers conducted by CNBC. Economists have been forecasting a recession for months, and most see it starting in the early part of the year.
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To make the best of the current climate, advisors recommend a few key money moves in the year ahead.

Here are their top four strategies to shield yourself from stock market volatility, rising interest rates and geopolitical risk — not to mention fears of an impending recession.  

1. Pay down high-interest debt

“This is a great time to pay down some of those higher interest loans outstanding,” said David Peters, a financial advisor and certified public accountant at CFO Capital Management in Richmond, Virginia.
Credit card rates, in particular, are now more than 19%, on average — an all-time high. Those annual percentage rates will keep climbing, too, as the Fed continues raising its benchmark rate.
“For so long we’ve been pretty spoiled in the markets,” Peters said. In some cases, it used to make financial sense to tap cheap credit for a larger purchase, rather than withdrawing money from a savings or investment account. Now, “we need to reverse our way of thinking.”
Consider this: “If you have a loan with an interest rate of 6% and you pay the principal down on the loan, it is almost the same as getting a 6% return on your money in the markets,” he said.
If you currently have credit card debt, “grab one of the zero-percent or low-rate balance transfer offers,” McBride advised. Cards offering 15, 18 and even 21 months with no interest on transferred balances are still widely available, he said.

2. Put your cash to work

Once you’ve paid down debt, Peters recommends setting some money aside in a separate savings account for emergency expenses.
“Online savings accounts can be a way to earn money in times when other investments may not be returning well,” he said.
However, although some of the top-yielding online high-yield savings accounts are now paying more than 3.6%, according to DepositAccounts.com, even that won’t keep up with the rising cost of living.
Ted Jenkin, CEO at Atlanta-based Oxygen Financial and a member of CNBC’s Advisor Council, recommends buying short-term, relatively risk-free Treasury bonds and laddering them to ensure you earn the best rates, a strategy that entails holding bonds to the end of their term.
“It’s not a huge return but you are not going to lose your money,” he said.
Another option is to purchase federal I bonds, which are inflation-protected and nearly risk-free assets.
I bonds are currently paying 6.89% annual interest on new purchases through April, down from the 9.62% yearly rate offered from May through October 2022.
The downside is that you can’t redeem I bonds for one year, and you’ll pay the last three months of interest if cashed in before five years.

3. Boost retirement contributions

Once you’ve paid down high-interest credit card debt and set some money aside, “putting more into your retirement accounts right now can be a great move,” Peters said. 
You can defer $22,500 into your 401(k) for 2023, up from the $20,500 limit in 2022. The new provisions in “Secure 2.0” will further expand retirement plan access and open up more opportunities to save going forward, Peters said, including making it easier for employers to make contributions to 401(k) plans on behalf of employees paying down student debt.
Even if you’re balancing contributions with short-term goals, you should still contribute enough to take full advantage of company matches, he added, which is like getting an additional return on your investment.

4. Buy the dip

“Investors willing to take on additional risk might consider ‘buying the dip’ by looking at sectors that took an especially hard it and could now be undervalued,” said certified financial planner Bryan Kuderna, founder of the Kuderna Financial Team in Shrewsbury, New Jersey, and the author of the upcoming book, “What Should I Do with My Money?”
“Tech took it on the chin, Amazon lost half their market cap, if there was too much of a pullback there may be opportunity,” he said.
Kuderna recommends dollar-cost averaging, which helps smooth out price fluctuations in the market. Investing in set intervals over time can also help you avoid emotional investing decisions.
However, a long-term horizon is critical to this type of approach, Kuderna added, which means being prepared to leave that money alone.
“The overall advice I have is don’t watch the market too closely, that’s when people start to get emotional and that’s when mistakes happen.”
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Longevity can have a greater impact on how long retirement money lasts than today’s record high inflation, according to a new report.
Surya Kolluri, head of the TIAA Institute, recommends a three-pronged approach to savings combining Social Security benefits, a guaranteed lifetime income product and investments.
There are several key age benchmarks after 50 to be aware of in retirement planning.

Given today’s ongoing high inflation, many Americans worry they may not have put away enough money for retirement. They fear that sharp increases in food and energy prices and transportation and medical care costs could significantly affect their retirement savings.
Yet there’s another important factor to consider: your life expectancy.

A new report from the TIAA Institute and George Washington University reveals that more than half of American adults don’t know how long people generally tend to live in retirement, which given their possible longevity could have them failing to save enough money to last as long as they themselves do. 

‘Longevity literacy’ needed in retirement planning

Studies have shown financial literacy among women consistently lags that of men, yet the report found the “longevity literacy” of women is greater than men, with 43% of women demonstrating strong longevity knowledge, compared to 32% of men. 
It’s a “striking result,” said George Washington University economist Annamaria Lusardi, director of the school’s Global Financial Literacy Excellence Center. “We might actually need to provide help to women, because they are aware, for example, of the fact that they live long but they might not know about how to deal with their living long.”
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In consequence, greater education about retirement planning will be especially important for women, she said.

On average, American men and women retire in their mid-60s. Yet many of them may not realize that at age 60, on average, men may live another 22 years and women could live 25 years longer, according to the Social Security Administration’s calculations. 
To make your retirement money last, it is important to use a three-pronged approach, said Surya Kolluri, head of the TIAA Institute. “Some combination of Social Security, a guaranteed lifetime income [product], and then investments on top of that” might be a good way to hedge the risk of inflation and rocky financial markets, he said. 

Inflation adjustments up 401(k), IRA contribution limits

Natalia Gdovskaia | Moment | Getty Images

Inflation adjustments for 2023 have also increased the amount of money that you can save in retirement accounts. This year, you can put up to $22,500 in a traditional or Roth 401(k), plus a $7,500 “catch-up” contribution if you’re 50 or older for a total of $30,000.
You can also put up to $6,500 in a traditional or Roth IRA. With a $1,000 catch-up contribution, you could save a total of $7,500 if you’re 50 or older. 

Here are the key ages in retirement planning

As you near retirement, or if you’re already retired, there are key milestones to keep in mind for accumulating and withdrawing the money you’ll need for your later years. Considering you may live into your mid-80s, here are some other important ages to keep in mind:  

At 50, you can add even more money to your retirement accounts.
At age 59½, you can start to make withdrawal money in IRAs and 401(k) plans. If you take it out earlier, you’ll likely pay a 10% tax penalty.
Between 62 and 70, you can claim Social Security benefits — but if you start taking it at 62 you’ll get 30% less than you would at your full retirement age (which varies depending on the year of your birth). On the other hand, you’ll see an 8% annual increase in your benefit for every year after your full retirement age that you wait to claim your benefits, up to age 70.
At age 65, you should apply for Medicare — or you may have to pay a penalty if you’re not covered by another health plan.
And, turning 73 has become a very important birthday. As of Jan. 1, a new law requires you to start making withdrawals — or taking “required minimum distributions” from IRAs and 401(k)s — by April 1 after the year you reach age 73. The age for taking RMDs will increase to 75 in 2033.

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