Investing

When was the last time you purchased something and you weren’t asked for a tip?
Not only are requests to tip on purchased goods and services increasingly common, but the amount of the traditional tip also has been on the rise for decades.

During the 1950s, people commonly tipped 10% of the bill. By the 1970s and 1980s, that percentage had jumped to 15%.
In 2023, people typically tip anywhere from 15% to 25%. Consumers on average said they tipped more than 21%, according to a Creditcards.com survey in May 2022.
“What we’re seeing now nationwide is something that is known as ‘tipflation’ … at every opportunity we’re being presented with a tablet that’s asking us how much we’d like to tip,” said etiquette expert Thomas Farley, also known as “Mister Manners.”
The coronavirus pandemic put more upward pressure on tipping. During the height of those days, consumers started tipping for things they never had before to service industry workers.
In February 2020, just before the pandemic began, in food and drink specifically, the share of remote transactions when tipping was offered was 43.4%, according to Square. In February 2023, that share was 74.5%.

Meanwhile, if people were willing to give the person delivering food to their home a 30% tip for service, why not ask if they’d like to tip when they come to pick up? Restaurants started doing that more often — and that practice hasn’t ebbed.
Another reason people are tipping more is because of newer and cooler-looking technologies — kiosks and tablets with three large tipping suggestions that pop up on the screen in front of you. Business owners typically pick those options, and they can also disable the feature if they want to.
To that point, 22% of respondents said when they’re presented with various suggested tip amounts, they feel pressured to tip more than they normally would, according to Creditcards.com.
“They use those options as an indication of what the normative range is and feel compelled to tip within that range. So the more you ask, the more you get,” said Mike Lynn, a professor of consumer behavior and marketing at Cornell University’s School of Hotel Administration.
The three prominent companies with that trendy and sleek look are Square, Toast and Clover. The companies launched about a decade ago to help businesses run smarter, faster, and easier.
In some cases, they charge fewer fees so it’s less of a burden to accept multiple credit cards, don’t require long-term contracts, and offer multiple other useful tools including inventory and employee management.
“They got credit card processing into the hands of individuals and very small merchants,” said Dave Koning, a senior research analyst at Baird. “Square did a great job … it’s been a tremendous growth story. That’s half of the business today,” he added.
But, with customers tipping more, where’s the tipping point?
“I have to believe tips are going to go up from where they are today. But I also think there’s got to be a logical ceiling somewhere. I just don’t know where it is,” Lynn said.
Watch the video above to learn more. More

Djelics | E+ | Getty Images

Company: FleetCor Technologies (FLT)

Business: FleetCor is a business payments company that helps businesses spend less by enabling them to manage their expense-related purchasing and vendor payments processes. The company operates through six segments: fuel, corporate payments, tolls, lodging, gift and other. It offers corporate payments solutions, such as accounts payable automation; vehicle and mobility solutions, including fuel solutions to businesses and government entities that operate vehicle fleets, as well as gift card program management and processing services. The company also provides other products, including payroll cards, vehicle maintenance service solutions, long-haul transportation solutions and prepaid food vouchers or cards.
Stock Market Value: $15.5B ($210.85 per share)

Activist: D.E. Shaw & Co.

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Percentage Ownership:  n/a
Average Cost: n/a
Activist Commentary: D.E. Shaw is a large multi-strategy fund that is not historically known for activism. The firm is not an activist investor, but it uses activism as an opportunistic tool in situations when it’s deemed useful. The firm seeks solid businesses in good industries, and if it identifies underperformance that is within management’s control, it will take an active role. D.E. Shaw places a premium on private, constructive engagement with management and as a result often comes to an agreement with the company before its position is even public.

What’s happening?

On March 15, D.E. Shaw Group and FleetCor Technologies entered into an agreement pursuant to which the company agreed to appoint Rahul Gupta (former CEO of RevSpring, a health-care billing and payments company) to the board, and agreed to add another, mutually agreed-upon director to the board. Additionally, the company agreed to form an ad hoc strategic review committee to assist the board as it considers various strategic alternatives. D.E. Shaw agreed to abide by certain voting and standstill restrictions.

Behind the scenes

FleetCor is a business payments company with four main business lines: fuel, corporate payments, tolls and lodging. Fuel has traditionally comprised almost 50% of its revenues, and there is a perception in the market that as the world transitions toward electric vehicles, this will become a business with no terminal value as revenue gradually declines. However, revenue in this business increased 14% from last year, and FleetCor has been working to incorporate the transition toward EV fleets into its future business strategy. Moreover, revenue in the other three businesses is growing at 20% to 47% for an aggregate total revenue growth rate of 20.9%. Earnings before interest, taxes, depreciation and amortization margins in all four businesses are close to or over 50% with an overall EBITDA margin of 51.6%. Despite this, the company is trading at a discount to peers because of the perception that it is mainly a fuel-reliant business with secular headwinds.

The best way to realize the full value of each business is to explore a separation of the fuel business, removing any stain on the other high growth and high EBITDA business, which should get a re-rating from the transaction. This could be an attractive asset to private equity, which can analyze and value the fuel business’s expected cash flow and work on a transition plan as EV penetration increases all without having to deal with the misperceptions and biases of a public market.
FleetCor is already on this trajectory and is working amicably with D.E. Shaw. On March 20, D.E. Shaw settled for two board seats and the company agreed to undertake a strategic review, including the possible separation of one or more businesses. Moreover, CEO Ron Clarke is liked and respected by shareholders and perfectly aligned to create shareholder value. Not only does he own 5.6% of FleetCor’s common stock, but his equity compensation plan is out of the money below $350 per share by the end of 2024 and pays him handsomely if the stock price is over $350 by then.
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

Social Security’s combined funds that pay retirement, disability and family benefits will be able to pay scheduled benefits until 2034, according to the program’s annual trustees report released on Friday.
At that time, the program will be able to pay 80% of scheduled benefits.
The new projection date is one year earlier than the forecast from last year, prompting retirement advocates to call on Congress to fix both Social Security and Medicare.

A Social Security Administration office in San Francisco.
Getty Images

The Social Security trust funds that about 67 million Americans rely on for benefits are scheduled to be depleted in 2034, one year earlier than was projected last year, according to the annual trustees’ report released by the Treasury Department on Friday.
Unless Congress takes action, at that time, 80% of scheduled benefits will be payable from the combined funds for old age and survivors insurance and disability insurance.

The new depletion date comes as the trustees updated their projections for the U.S. economy to include recent output and inflation data. The expected levels of gross domestic product and labor productivity were revised down by about 3% for the projected time period, which worsened the outlook for Social Security’s combined funds, according to the report.
Meanwhile, Medicare’s hospital insurance trust fund will be able to pay 100% of scheduled benefits until 2031, three years later than projected last year.
More from Personal Finance:How to prioritize retirement and emergency savingsRoth IRAs don’t require withdrawals — unless they’re inheritedNew tool lets you play at fixing Social Security woes
The new estimates prompted renewed calls for fixes to the programs, which Treasury Secretary Janet Yellen referred to as “bedrock programs that older Americans rely upon for their retirement security.”
“The Biden-Harris Administration is committed to ensuring the long-term viability of these critical programs so that retirees can receive the hard-earned benefits they’re owed,” Yellen said in a statement Friday.

The White House earlier this month laid out a plan to extend the solvency of Medicare’s hospital insurance trust fund, also known as Medicare Part A, which covers hospital, nursing facility and hospice services for eligible beneficiaries.
The proposal aims to extend the hospital insurance fund for 25 years by increasing the Medicare tax rate for incomes over $400,000 while closing loopholes that enable income to be shielded from that tax.
However, the White House has not put forth any specific proposal for resolving Social Security’s funding woes, though President Joe Biden has called for protecting and strengthening the program with his budget.
“Congress must take its responsibility to protect Social Security and Medicare seriously, by developing a comprehensive plan and doing so in a way that is accountable and fully transparent to the American public,” AARP CEO Jo Ann Jenkins said in a statement Friday.

Social Security isn’t ‘going bankrupt’

In its report, the Social Security trustees also issued separate depletion dates projections for the program’s two funds.
The old age and survivors insurance trust fund, which pays benefits to retired workers, their spouses and children and survivors of deceased workers, will be able to pay full benefits until 2033, also one year earlier than reported last year. At that time, 77% of benefits will be payable.
That depletion date is 10 years away — fewer years than projected by the trustees since reforms were implemented in 1983, noted the Peterson Foundation, a nonpartisan organization focused on raising awareness of the nation’s fiscal challenges.
In a statement, Jason Fichtner, chief economist at the Bipartisan Policy Center, a think tank promoting bipartisanship, called the 2033 depletion date “particularly alarming.”
The disability trust fund will be able to pay full benefits through at least 2097, the last year of the report’s projection period.
Yet experts also emphasized there are signs of strength for the program, which had $2.83 trillion in combined trust fund reserves as of the end of 2022.
“Social Security is not ‘going bankrupt’; the program will always be able to pay benefits because of ongoing contributions from workers and employers,” said Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
The insolvency dates have stayed roughly the same despite the onset of the Covid-19 pandemic and economic upheaval, he noted.
To shore up the funds, lawmakers may generally choose between raising taxes, cutting benefits or a combination of both.
“Congress should act immediately to restore a sense of confidence, both in the government and in the program,” said Nancy Altman, president of Social Security Works, an organization advocating for expansion of the program through more generous benefits and higher taxes.

Don’t claim benefits out of fear

While headlines about closer depletion dates may inspire people to want to claim their benefits earlier, it is generally still best to wait until full retirement age or later, according to Joe Elsasser, a certified financial planner and founder and president of Covisum, a Social Security claiming software company.
“Don’t elect benefits out of fear,” Elsasser said.
Even if a benefit cut does happen, most people will still be better off if they delay, which increases the size of their monthly benefit checks throughout retirement, Elsasser said. Couples especially may benefit from delaying one person’s benefit, he said.
By consulting a financial advisor or Social Security claiming software, you can see how a benefit cut may impact your Social Security claiming decision.
“Many people are surprised that delay is still the best choice,” Elsasser said.
As you plan for retirement, testing your projected income against a full benefit cut is wise as you consider all of the what ifs, he said.
“If your assets are not enough to support your lifestyle even in the presence of a cut, then consider smaller lifestyle cuts now, save more or postpone retirement by a year or two to make up the gap,” Elsasser said. More

Smart Tax Planning

The deadline to file a federal tax return is Tuesday, April 18, for most Americans.
The IRS had issued about 54 million refunds worth roughly $158 billion as of March 17.
Here’s what late filers should know about common mistakes, tax extensions and penalties.

Songsak Rohprasit | Moment | Getty Images

This is an excerpt from the Personal Finance team’s weekly Twitter Space, “This week, your wallet.” Check out the latest episode here.
Tax Day is fast approaching. The deadline to file a federal tax return for most Americans is just over two weeks away, on Tuesday, April 18.

Here’s what late filers need to know, according to CNBC’s Kate Dore, a personal finance reporter and certified financial planner.

1. You may be able to get free help preparing your return

Certain taxpayers can leverage free resources when filing a return.
For example, the IRS Free File program offers free, guided tax preparation online. The program, delivered via a public-private partnership, is available to taxpayers with an annual adjusted gross income of $73,000 or less in 2022.
Free File is available to 70% of taxpayers, but few use it — and they may inadvertently pay to file a return.

2. Your tax refund may be smaller this year

The IRS had issued 54 million refunds as of March 17. About 75% of the processed tax returns have gotten a refund.

The average refund was $2,933, compared with $3,305 at the same point last year. The reduction is tied to expired pandemic-era aid such as boosted child tax credit and earned income tax credit payments, for example.

More from Smart Tax Planning:

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

3. Common mistakes may trip you up

Common mistakes on a tax return might delay processing of the return or a refund you’re owed.
Among the biggest: Missing tax forms.
That might occur, for example, if you’re a gig economy worker who received a 1099 form but didn’t report that income on your tax return. Or perhaps you didn’t report investment income because you didn’t get a copy of your form in the mail — though it’s likely available online.
However, the IRS receives copies of those tax forms and knows if that information is missing on your return.
Other common mistakes include incorrect spelling or digits for your name, birthdate, Social Security number, or bank account and routing number information.
Not filing electronically and not asking for direct deposit may also delay your tax refund.

4. You can get an extension to file — but not to pay

Taxpayers can request a six-month extension to file their federal return.
This might make sense if you’re missing a tax form, for example. Taxpayers can request an extension for free online via IRS Free File regardless of their income.
The kicker: You can’t get an extension to pay your federal tax bill. You must pay that bill by the April 18 deadline. You can estimate that bill by going through the process on tax software and using estimates for missing forms.
Another caveat: Taxpayers who ask for a federal extension must request one separately for their state tax return.

5. There are penalties for not filing and not paying

The IRS levies financial penalties for failing to file a return, and for failing to pay your taxes.
Not filing a return results in a penalty of 5% of your unpaid balance per month or part of a month, up to 25%, plus interest, which is currently 7%.
Failing to pay a tax bill results in a lesser 0.5% penalty of your unpaid balance per month or part of a month, up to 25%, plus interest.
If you can’t afford to cover your full balance, you may apply for an installment agreement, a long-term monthly payment plan. More

Ask an Advisor

We’re in a period of high uncertainty and many “people are pretty afraid right now,” said Brad Klontz, a psychologist and certified financial planner.
That fear can lead people to make money moves they’ll regret.

With high inflation, the threat of a recession and ongoing market volatility, we’re in a period of high financial uncertainty. Understandably, many investors “are pretty afraid right now,” said Brad Klontz, a psychologist and certified financial planner.
And when we’re stressed, our frame of reference tends to become short, said Klontz, who is also a member of CNBC’s Financial Advisor Council. In other words: The uncomfortable moment feels like the only thing that matters.

While that tendency is a survival mechanism that’s helped us act in stressful situations, Klontz said, it can make us do the “absolutely wrong thing when it comes to investing.”
Instead of acting impulsively with your money, take these two steps, Klontz said.

1. Remind yourself why you’re investing

Most of us are long-term investors, Klontz said. “Does looking at a really narrow frame of reference make sense for you?” he asked.
If you’re investing for retirement, you may not need that money for decades, and so the answer is no. What’s happening with the S&P 500 over a few months, or even a few years, shouldn’t matter too much.
Zooming out, the average annual return on stocks was around 8% between 1900 and 2017, after adjusting for inflation, according to Steve Hanke, a professor of applied economics at Johns Hopkins University in Baltimore.

More from Ask an Advisor

Here are more FA Council perspectives on how to navigate this economy while building wealth.

Simply put, if you can’t withstand the bad days in the market, you’ll also lose out on the good ones, experts say.
Over the last roughly 20 years, the S&P 500 produced an average annual return of around 6%. If you missed the best 20 days in the market over that time span because you became convinced you should sell, and then reinvested later, your return would shrivel to just 0.1%, according to an analysis by Charles Schwab.

2. Ask yourself: What is the money for?

Of course, most people aren’t saving and investing only for long-term goals like retirement. If market volatility is causing you a lot of stress, you may need to make adjustments.
If you’re investing in the market for a shorter-term goal like buying a car or house, “there’s a good chance you’re going to get hurt,” Klontz said. “When you need that money, it might be down 10%, 20% or more.”

Ivan Pantic | E+ | Getty Images More

Nearly one quarter of all couples are primarily staying in their current relationships due to financial dependency, according to a new report.
There can be varying degrees of financial entanglements, but couples should be on the same page and on equal footing, experts say.

Marriage is a union of love, but it’s also an economic arrangement.

Stacy Francis
CEO of Francis Financial

“Marriage is a union of love, but it’s also an economic arrangement,” Francis said, “and we don’t think about the money part until there are issues and problems.”

Why a ‘yours, mine and ours’ account setup is smart

Experts say there’s generally not a right or wrong way for couples to manage their assets, as long as they are on the same page.
There can be varying degrees of financial entanglements. About 62% of couples who are married, in a civil partnership or living together share at least one account, LendingTree found. Fewer — roughly 41% — completely combine funds. 
Francis recommends “having yours, mine and ours,” so each person has their own money in additional to a joint account that they each contribute to — “typically as a percentage of your salary that goes to joint expenses.”
Co-mingling an account may lead to less frequent fights about money, LendingTree also found. Of those who share at least one account, only 12% said financial issues caused problems with their partner, compared to 15% of those who don’t have a shared account.
“By sharing an account, it gives each partner equal visibility into what’s going on in that account,” said Matt Schulz, LendingTree’s chief credit analyst. “That can help grow trust within the relationship.”
Further, 58% of those who share at least one bank account said they stayed together after a financial argument, compared to only 47% of those who don’t have a shared account.

Those who choose to pool their money together could still benefit from setting aside time to discuss where they are with their finances and where they would like to go.
“Openness, honesty and transparency are crucial for a relationship’s success, and that’s certainly true when it comes to money,” Schulz said.
Francis recommends “financial date nights,” a routine she still adheres to in her own home, to discuss savings goals, big expenses and future plans.
Subscribe to CNBC on YouTube. More

Smart Tax Planning

If you’re a freelancer or gig economy worker, there’s still time to reduce your tax bill by opening a solo 401(k) plan and making a 2022 contribution.
Secure 2.0 improved these plans, allowing you to establish and fund one after the tax year ends.

Marko Geber | DigitalVision | Getty Images

If you’re a freelancer or contract worker, there are still ways to lower your 2022 tax bill — including contributions to a retirement plan improved by legislation passed in December.
One of the provisions from Secure 2.0 included a change to solo 401(k) plans, designed for self-employed workers (and possibly spouses) or business owners with no employees. 

Like standard 401(k) plans, there’s a deduction for pretax solo 401(k) contributions. But since solo 401(k) account owners can make deposits as both the employee and employer, there’s a chance to save more. 
Before 2022, you needed to open a solo 401(k) by Dec. 31 for current-year deposits. But Secure 2.0 extended the deadline, allowing you to establish a plan after the end of the taxable year and before your filing due date.
“It was a huge game changer for us when we saw that come through,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

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Previously, when single-employee businesses wanted to open a retirement plan after the calendar year, Lucas may have opted for simplified employee pension plans, also known as SEP individual retirement accounts, or SEP IRAs, another option for self-employed workers.
However, since the recent legislative change, his company “almost always” picks the solo 401(k) because clients may have the ability to contribute more.

Solo 401(k) contribution limits

For 2022, you can contribute the lesser of up to $20,500, or 100% of compensation into a solo 401(k) as an employee. (You can save $6,500 more if you’re 50 or older.) Plus, on the employer side, you can contribute up to 25% of compensation, for a plan maximum of $61,000.
By contrast, SEP IRA contributions can’t exceed 25% of the employee’s compensation or up to $61,000 for 2022.

Previously, you could make employer contributions after the tax year ended if the solo 401(k) was already open. Secure 2.0 approved retroactive solo 401(k) account openings in 2023 while still allowing employer contributions by the tax deadline.
By the 2024 tax season, you’ll also be able to make 2023 employee deferrals into your solo 401(k) after the tax year ends, according to John Loyd, a CFP and owner at The Wealth Planner in Fort Worth, Texas. He is also an enrolled agent. 
Of course, picking the right retirement plan may depend on other factors, such as future employees or plan rules. “But it’s mostly dependent on their net income,” he said. More

Recent banking woes have made a recession more likely, while lenders will make it more difficult to borrow money, personal finance expert Suze Orman told CNBC.com.
That means having cash set aside for an emergency is “absolutely vital,” she said.

Suze Orman
Nathan Congleton | NBC | Getty Images

The recent failures of Silicon Valley Bank and Signature Bank have made a recession more possible — and that means it’s more important than ever to have emergency savings set aside, according to personal finance expert Suze Orman.
“Because of what is happening with banks, it is obvious that a recession is more likely coming than not,” Orman told CNBC.com in an interview.

Moreover, creditors will most likely tighten their lending standards, which may make it harder for consumers to access new loans or lines of credit, she said.
“Everything is going to tighten up,” Orman said.
Evidence that a shift is underway can already be seen with companies such as Amazon announcing mass layoffs, she said.
To prepare for the new economic reality, there is one crucial step individuals should take, she said.

“There has never been a time that as much as right here and right now in the recent past that an emergency savings account is vital, absolutely vital,” Orman said.

Experts generally recommend setting aside at least three to six months’ expenses in case of an emergency.
Orman has made it her mission to get more people to save money in case of emergencies. In 2020, she co-founded SecureSave, a company working with employers to provide emergency savings accounts to employees.
The focus, she said, is not new.
“If you go back through my entire history of almost 40 years now, I’ve been [saying] emergency savings, emergency savings, emergency savings,” Orman said.
But now is the first time that goal is as urgent as it was in 2008, she said.

How your emergency fund deposits are insured

An important part of emergency savings is easy access, which means most people are looking at some kind of high-yield savings account. The recent bank failures have inspired a new focus on whether deposits — including your emergency fund — are insured.
Generally, the Federal Deposit Insurance Corporation guarantees up to $250,000 per depositor, per insured bank, per account ownership category.
For deposits at federally insured credit unions under the National Credit Union Administration, the terms are similar. The typical coverage amount is $250,000 per share owner, per insured credit union per account ownership category.
Consumers should be mindful there are eight categories of accounts to which the $250,000 coverage applies, according to Orman. That includes individual deposit accounts, such as checking, savings and certificates of deposit; some retirement accounts, such as individual retirement accounts; joint accounts; revocable trust accounts; irrevocable trust accounts; employee benefit plan accounts; corporation, partnership or unincorporated association accounts; and government accounts.
Of note, you do have to have your money in bank or credit union accounts to which the federal coverage applies, according to Orman. Investments such as stocks, bonds, mutual funds or annuities are generally not covered by federal insurance, even if you purchase them from a bank or credit union.
The $250,000 limit was established by post-financial crisis legislation in 2010.
However, uninsured deposits above that threshold were guaranteed for the recent bank failures. Both President Joe Biden and Treasury Secretary Janet Yellen have said that could be adjusted again, if the situation calls for it.
More from Personal Finance:How to prioritize retirement and emergency savingsRoth IRAs don’t require withdrawals — unless they’re inheritedNew tool lets you play at fixing Social Security woes
In the meantime, you do not necessarily have to move your money to another financial institution to have deposits over $250,000 insured, Orman emphasized.
Because the coverage is per account category, you may also amplify the amount of insured balances by having different kinds of accounts, such as savings, IRA or trust accounts, she said. Generally, deposit accounts are eligible for $250,000 coverage for the sum of accounts at an institution in this category, which includes checking accounts, savings accounts, certificates of deposit or money market deposit accounts.
However, if you have a joint account where you are a 50% owner, you may get another $250,000 of protection. The same goes if you have a trust account or an IRA account that invests in savings vehicles such as CDs or money markets. IRAs invested in stocks, bonds or mutual funds do not qualify.
Additionally, by adding two or more beneficiaries, you can get an additional $250,000 in coverage per beneficiary, as long as the account’s deposits are eligible for protection, she said. The maximum per account is five beneficiaries, or $1.25 million. This applies to revocable or irrevocable trust or custodial accounts, she noted.
Online tools can help you assess your FDIC and NCUA coverage.

Who needs to worry now

The bigger concern people should worry about is what financially may happen as time goes on, Orman said.
“For those people who don’t have any savings at all, they now really, really need to be worried,” Orman said.
We are now living in a “very, very, very precarious time — almost more precarious than the pandemic,” she said.
As expenses have gone up, people’s savings have diminished. Meanwhile, people have taken on more debt, and there are signs that some lenders are starting to tighten standards.
But today’s banking woes are “very, very different than 2008,” Orman said.
“In 2008, you had all those loans that nobody knew how to value,” she said.
Today, most people have their money insured.
“So individuals with money in a bank or credit union, I would not be afraid,” Orman said.
But you do need to remember the only person who can save you is you, she said.
That goes for making sure your money is safe and sound, that you are saving for emergencies, that you are investing for retirement, that you are getting out of debt, that you are living below your means and that you are getting more pleasure from saving than spending.
“Who is going to do that for you? Nobody but you,” Orman said. More