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If the Supreme Court decides to strike down President Joe Biden’s student loan forgiveness plan, it’ll be a bigger loss for some groups than others.
Black Americans, women and lower-income families have been especially hard hit by the $1.7 trillion education debt crisis.

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Low- and middle-income individuals

According to an analysis by the White House, 87% of the dollars forgiven under its plan would go to those making less than $75,000 a year.

Meanwhile, any individuals earning more than $125,000 would be excluded from the relief all together.

Those who stand to get the most debt cancellation under the president’s plan — $20,0000 — received a Pell Grant in college, meaning they also came from low-income families. Most recipients are from households with incomes of less than $60,000, says higher education expert Mark Kantrowitz.
“This plan really helps low-income people across the board,” Andre Perry, a senior fellow at Brookings Metro, said in a recent interview on The Current, a Brookings Institution podcast.

People of color

The student debt crisis is cited as a main factor for the wide racial wealth gap in the U.S. today. As of the second quarter of 2022, Black families have 25 cents for every dollar of white family wealth, according to the Federal Reserve Bank of St. Louis.
Black college graduates owe an average $7,400 more than their white peers, a Brookings Institution report found. And that inequity only gets worse with time: Black college students owe more than $52,000 four years after graduation, compared with around $28,000 for the average white graduate.

Wisdom Cole, the national director of the youth and college division at the NAACP, recently told Politico that if student loan forgiveness doesn’t come to fruition, it “would be an atrocity for borrowers all across the nation and impact Black borrowers at a higher level.”

Women

Women were widely recognized as the biggest winner of Biden’s student loan forgiveness plan, since they owe two-thirds of the country’s outstanding student debt.
Research from the Education Data Initiative found that women student borrowers have an average debt almost 10% higher than their male peers one year after graduation, and that, because of the persistence of the gender pay gap, women take two years longer than men to pay off their student loans, on average.
“Women will be the most affected if loan forgiveness fails,” Kantrowitz said.

Older Americans

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In recent years, due to the fact that more people are returning to school later in life and that student debt has become more burdensome and therefore harder to pay off, more people continue to have the loans into their 50s, 60s and beyond.
In 1989, just 3% of families headed by someone 50 and over carried student loan debt, and their average balance was around $10,000, according to AARP. By 2016, nearly 10% of these older households still owed on student loans, and their typical balance ballooned to more than $33,000.
As a result, the problem of student debt for older Americans is likely to only worsen without the cancellation, experts say.

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Federal conservation easements enable property owners to take a charitable deduction when they give up certain rights to develop land.
But the abuse of those tax deductions has been a persistent problem.
Now, new legislation is aimed at allowing some schemes to access those deductions. “It will drive a stake through the heart of this abuse,” one expert says.

The $1.7 trillion federal spending bill includes a new change that will curb the abuse of tax incentives for land conservation. Pictured, Montana.
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The $1.7 trillion federal spending bill includes a change designed to curb the abuse of tax incentives for land conservation.
Federal conservation easements enable property owners to take a charitable deduction when they give up certain rights to develop land. The incentives, which were made permanent by Congress in 2015, help offset the owners’ financial loss for other potential uses for the property.

However, misuse of those deductions has been a persistent problem, whereby groups of investors may obtain inflated land appraisals and receive higher tax deductions.
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The appropriations bill includes language that would put a stop to those abuses. The change is inspired by the Charitable Conservation Easement Program Integrity Act, which was first introduced in 2017. The original bill was introduced in the House by Reps. Mike Thompson, D-Calif., and Mike Kelly, R-Pa., and in the Senate by Sens. Steve Daines, R-Mont., Debbie Stabenow, D-Mich., and Chuck Grassley, R-Iowa.
“This is a great victory for conservation,” said Lori Faeth, senior director of government relations at the Land Trust Alliance, a national land conservation organization that has advocated for the bill since it was first introduced.

‘A stake through the heart of this abuse’

The bill will halt the abuse of the conservation easements going forward because it takes away the ability for participants in abusive syndicated transactions to even file for a deduction, she said.

The move will save the IRS and government both time and money, Faeth said, as the tax agency’s audits often lead to court battles.

“It will drive a stake through the heart of this abuse,” Faeth said.
“It will save the taxpayers literally billions of dollars and it will ensure that the thousands of transactions and conservation donations that happen each year in the name of true charity and true philanthropy will continue to go on,” she said.
Notably, the IRS will still continue to pursue enforcement of the cases that are already in the tax courts. The number of those cases is well over 450, Faeth said.

Earlier this year, a group of seven individuals were indicted for a tax scheme involving syndicated conservation easements with more than $1.3 billion in fraudulent tax deductions.
“Those who contemplate promoting fraudulent tax shelters involving syndicated conservation easements — and the accountants, appraisers and tax preparers who create and execute strategies to assist them — should know that the Tax Division and IRS will unravel even the most elaborate schemes,” Stuart M. Goldberg, acting deputy assistant attorney general of the Justice Department’s Tax Division, said in a statement.

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The money heading to consumers comes from a $425 million consumer restitution fund, according to Equifax, which said last week that payments have started going out.
While individuals could file a claim for up to $125, the payment amount may be far less than that, according to the settlement administrator.
The form of payment depends on how you chose to receive it when you filed the claim as part of the settlement.

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More than 147 million people’s data was compromised

In the wake of Equifax’s 2017 data breach, which compromised the personal information of more than 147 million consumers — including names, birthdates and Social Security numbers — the company became the target of multiple lawsuits and reached a settlement in 2019 with the Federal Trade Commission, the Consumer Financial Protection Bureau and all U.S. states and territories.
As a result, consumers who were affected by the breach had the option of signing up for either up to $125 or free credit monitoring at all three of the largest credit reporting firms: Equifax, Experian and TransUnion.
After implementation was delayed due to legal challenges, the settlement received final court approval early this year.

Amount you receive will likely be far less than $125

While consumers who sought up to $125 began receiving payments last week, the amount they end up getting will likely be far less, according to the settlement administrator. On Twitter, users have reported receiving small payments, with amounts ranging from $2.64 or $5.21 to $21.06 and $40.44.
Additionally, although the initial deadline to file a claim was Jan. 22, 2020, consumers are still permitted to file a claim for expenses incurred after that date but before Jan. 22, 2024, due to the data breach. That could include losses from unauthorized charges to your accounts, as well as fees paid or expenses incurred as part of recovering from identity theft.
However, “there remains no evidence that the data obtained during the 2017 cyber attack … has been sold or used,” according to Equifax’s announcement about the cash payments being sent out.

Freezing your credit is ‘still the best practice’

Whether you filed a claim for a cash payment or free credit-monitoring — or neither — it’s worth protecting your credit from criminals trying to use your personal information. 
The best way is to “freeze” your credit report, Ulzheimer said. “That’s still the best practice, and it’s free,” he said.
Freezing your report essentially blocks a lender from checking your report, which means a fraudster would be unable to open an account using your personal data. Once the freeze is in place, you have to “thaw” it — either temporarily or permanently — if you apply for credit or a loan so the bank can check your report.

However, you would need to contact all three of the credit reporting firms to cover all your bases.
You also can put a short-term fraud alert on your report, which lasts one year. Under a fraud alert, a lender seeking to approve an application must first contact you to verify the request is not from an imposter.
Additionally, you only need to contact one of the credit firms to initiate a fraud alert, which in turn is legally obligated to share your notice with the other two. It also is free. However, it generally does not provide the same level of protection as a freeze.

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Retirement savers generally must pay a 10% tax penalty on withdrawals from an individual retirement account or 401(k) before age 59½.
There are exceptions to the rule.
New legislation known as Secure 2.0 is poised to add a few more exceptions for both IRA and 401(k) account holders, in cases of domestic abuse, terminal illness, financial emergency and natural disaster.

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Retirement accounts are a tax-advantaged way to build your nest egg — but tapping them too soon typically comes with a penalty.
However, the tax code waives that penalty in some circumstances. And federal lawmakers are about to add a few more waivers — for example, when people need money in the event of terminal illness, domestic abuse, natural disaster or another financial emergency.

The changes are among a slew of retirement reforms — collectively known as “Secure 2.0” — that President Joe Biden is set to sign into law as part of a $1.7 trillion federal spending package. Congress passed the legislation last week.
Americans should try to avoid pulling money from retirement accounts early despite looser rules, financial experts said.
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“The worst thing you can do is take from your retirement account before its intended purpose, because then what will be there for your retirement?” Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York, previously told CNBC. “I would only do this if it was the last resort and this was the only money you had.”

New exceptions to the 10% tax penalty

Savers generally incur a 10% tax penalty if they withdraw money from a retirement account before age 59½. This is on top of any income taxes resulting from the withdrawal.

The following list outlines rules in the new legislative package that waive the 10% early withdrawal penalty for IRA owners. These measures also apply to savers with a workplace retirement plans like a 401(k).
1. Terminal illness
A terminally ill person wouldn’t be penalized for withdrawing retirement funds before age 59½.
The law defines “terminally ill” as an illness or physical condition that can reasonably be expected to result in death within 84 months of a physician’s assessment.
The rule takes effect upon enactment of the new law.
2. Domestic abuse
Victims of domestic abuse from a spouse or domestic partner may withdraw up to $10,000 in retirement funds within a year of the incident. The rule takes effect in 2024.
Individuals may need to access that money to help escape an unsafe situation, for example, the Senate Finance Committee said in a summary document.

The law defines domestic abuse as “physical, psychological, sexual, emotional, or economic abuse, including efforts to control, isolate, humiliate, or intimidate the victim, or to undermine the victim’s ability to reason independently, including by means of abuse of the victim’s child or another family member living in the household.”
The victim can withdraw the lesser of $10,000 — an amount that will get adjusted upward according to inflation — or 50% of their account balance.
3. Financial emergency
Starting in 2024, taxpayers won’t get penalized for withdrawing retirement funds for certain emergency expenses. These are “unforeseeable or immediate” costs related to personal or family emergencies.
Savers can make one financial emergency withdrawal of up to $1,000 a year. However, they can’t take an additional withdrawal within three years unless they repay the initial distribution or make regular deposits that at least match the withdrawn amount.
4. Natural disasters

Heavy rainfall caused severe damage and 335 deaths in the Hazard, Kentucky, area on Aug. 8, 2022.
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Savers can withdraw up to $22,000 without penalty in the case of a federally declared disaster.
The federal government sometimes issues one-off waivers associated with certain disasters, but the new law entrenches a permanent rule.
In addition, the funds can count as gross income over three years instead of one. Distributions can also be repaid to the retirement account.

Existing exceptions to the 10% tax penalty

In addition to the new rules, the tax code has several existing exceptions for those under 59½.
(Note: The first three apply only to IRAs. The others may apply to both IRAs and workplace retirement plans.)
1. Higher education expenses
You may be exempt from the penalty if IRA funds are used to pay qualifying higher-education costs for you, your spouse, or children or grandchildren of you or your spouse.
Eligible costs include tuition, fees, books, supplies, equipment required for a student’s enrollment or attendance and expenses for certain special-needs services. Room and board also qualify for students who attend school at least half-time.
Students must attend a college, university, vocational school or other institution that can participate in U.S. Department of Education student aid programs. (These include “virtually all” accredited, public, nonprofit, and privately owned for-profit institutions, according to the IRS.)
2. ‘First-time’ homebuyer

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Contrary to what the IRS title might suggest, IRA owners don’t necessarily have to be first-time homebuyers to avail themselves of this exception. The IRS generally defines a first-time buyer as someone who hasn’t owned a home in the last two years.
Such IRA owners can withdraw up to $10,000 without penalty. This dollar threshold is a lifetime maximum.
The funds must be used for “qualified acquisition costs.” These are: the costs of buying, building or rebuilding a home, and “any usual or reasonable settlement, financing, or other closing costs,” according to the IRS. The money must be used within 120 days of receipt.
The IRA withdrawal can be used for you, a spouse or your child, among other qualifying family members. If both you and your spouse are first-time homebuyers, each can take distributions up to $10,000 without penalty.
The two-year limitation period starts on the “date of acquisition”: the day on which you enter into a binding contract to buy, or on which the building or rebuilding begins.
3. Health insurance if unemployed
Distributions to cover health insurance premiums for you, a spouse and dependents may not be subject to a penalty if you lost your job.
To qualify, you must have received unemployment compensation (via a federal or state program) for 12 consecutive weeks. The IRA withdrawal must also occur the year you received unemployment, or in the following year. Further, you must take the withdrawal within 60 days of being reemployed.
4. Death

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Beneficiaries who inherit an IRA upon the owner’s death generally aren’t subject to a penalty if they pull money from the inherited account before age 59½.
5. Unreimbursed medical expenses
A distribution to cover medical costs may not be subject to penalty.
The exception applies to unreimbursed medical expenses that exceed 7.5% of your annual adjusted gross income. The applicable income is that during the year of withdrawal.
For example, if your AGI is $100,000 in 2022, you can use a withdrawal this year to cover unreimbursed medical expenses over $7,500.
You don’t need to itemize tax deductions to get this benefit. (In other words, you can still get it if you take the standard deduction.)

Slott cautioned against one year-end snag. If you put a medical bill on your credit card this week or next, that medical expense would count for the 2022 tax year — even if the credit-card bill itself isn’t paid until 2023.
That means an IRA withdrawal linked to that medical expense would have to occur in 2022, not 2023, to get the tax benefit.
6. Birth or adoption
Each parent can use up to $5,000 per birth or adoption from their respective retirement accounts. The funds would cover associated expenses.
The account withdrawal must be made within the year after your child was born or the date on which the legal adoption of your child was finalized.
7. Disability
Certain disabled retirement savers under age 59½ aren’t beholden to the tax penalty.
To qualify, they must be “totally and permanently disabled.” The IRS defines this as being unable to do “any substantial gainful activity” because of physical or mental condition. A physician must certify the condition “can be expected to result in death or to be of long, continued, and indefinite duration.”
In all, it’s a rigid definition that’s hard to meet, Slott said. In practice, someone must generally be near death or bedridden and unable to work, he said.
8. IRS levy
You won’t incur a penalty if the distribution results from an IRS tax levy (i.e., if the IRS takes your retirement funds to satisfy a tax debt).
9. Active reservists

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Reservists in the Army, Navy, Marine Corps, Air Force, Coast Guard or Public Health Service may be exempt from penalty.
They must have been ordered or called to active duty after Sept. 11, 2001, and in duty for 180 or more days or for an indefinite period.
Their account distribution can’t be made earlier than the date of the call to active duty and no later than the close of the active-duty period.
10. Substantially equal periodic payments
This exemption for IRA owners is “very complicated” and likely requires the help of an accountant or advisor, Slott said.
In basic terms, a taxpayer can avoid a penalty by sticking to a formula that outlines an amount of periodic account distributions (at least one per year). These “substantially equal periodic payments” are like an annuity, and are also known as 72(t) payments.
Not only must the saver determine the right amount to withdraw, but they must also stick to the schedule until age 59½ — leaving ample room for error, depending on the time scale, Slott said.
Getting it wrong can be costly. Taking the wrong amount one year, for example, would void the exception, and the taxpayer would owe the 10% penalty for each year of withdrawals that already occurred.
“It’s a very harsh penalty,” Slott said.

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With high inflation and rising interest rates, carrying holiday debt will likely be more expensive this year.
These five strategies can help reduce how much you pay.

Pedestrians view the holiday windows at a store in New York on Dec. 2, 2021.
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High inflation and rising interest rates mean holiday shoppers who turned to credit cards and other methods of borrowing are left with bigger balances this year.
Slightly more than a third, or 35%, of shoppers took on debt this holiday season, down from 36% last year, according to a new survey from LendingTree. But the average debt borrowers took on climbed to $1,549 in 2022, a 24% increase from last year’s average of $1,249.

Most people — 63% — who took on debt were not planning to do so, up from 54% last year.
More than a third of shoppers — 37% — will take five months or longer to pay those balances off, up from 28% last year, LendingTree found.
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The online survey was conducted between Dec. 16 and 19 and included 2,050 consumers ages 18 to 76.
“It’s not surprising, given that the cost of seemingly everything has risen by the day for the past year,” said Matt Schulz, chief credit analyst at LendingTree.

“But it’s really troubling, considering how high interest rates are and the fact that they’re only likely to continue to rise for the next few months,” he added.
Even in the best economic conditions, most people have a tiny financial margin for error, according to Schulz. With rampant inflation, that shrinks their financial wiggle room down to nothing, he said.

But there are five proactive steps you can take now to help whittle down those balances faster and reduce the total interest you pay as interest rates continue to climb.
“If you don’t do anything, that debt is only going to grow,” Schulz said.

1. Ask for a lower interest rate

The annual percentage rate — or APR — your credit card company charges you is not set in stone.
Oftentimes, it can be lowered simply by asking. About 70% of requests for lower credit card APRs are granted, according to a LendingTree survey from earlier this year.
But the key is you have to request a reduction, Schulz said.

2. Look for 0% balance transfer credit card offers

By transferring your outstanding credit card balance to a card offering a 0% introductory rate, you may be able to go a year or more without accruing interest on your balance, Schulz noted.
To be sure, you need to pay attention to the fine print, including any fees, limits and deadlines before you apply, he said.
“If you use a 0% balance transfer credit card wisely, it can be a really, really powerful tool against credit card debt,” Schulz said.

3. Consider a personal loan

Alternatively, a low interest personal loan may offer a lower interest rate than your current credit cards.
Personal loans typically won’t offer the 0% introductory interest rate balance transfer cards provide. But they will allow you to consolidate multiple types of debt into one loan, Schulz noted.

4. Pay attention to tax withholdings

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If you’re expecting a tax refund next year, that may provide a notable sum to put towards paying down your debts, said Thomas Scanlon, a financial advisor at Raymond James Financial Services in Manchester, Connecticut.
If you’re expecting a big lump sum back from the IRS or your state, also consider adjusting your tax withholdings, which will make more funds available in your paychecks throughout the year, he said. That way, you will have more money available to apply to your debts.
“This should, over time, lighten your debt load,” Scanlon said.
Be sure to do a tax projection and adjust your withholding carefully, he noted, in order to avoid owing money at tax time the following year.

5. Pare back your spending

As you’re focused on paying off your balances, it would be wise to put your credit cards “on ice,” or refrain from using them altogether, Scanlon said.
Even if you’re tempted to still charge for points or other rewards, it may not be worth it, he said. Interest charges easily eclipse the value of those rewards — especially at current rates.

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Retirement reforms contained in a $1.7 trillion omnibus federal spending bill would tweak rules related to emergency expenses.
The “Secure 2.0” rules would waive a 10% early-withdrawal tax penalty for savers who pull up to $1,000 from a 401(k) or individual retirement account for a financial hardship. They would also let savers self-certify they need the funds.
Hardship distributions from 401(k) plans hit an all-time high in October amid high inflation.

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It will soon be easier for cash-strapped Americans to tap their retirement savings for emergency expenses.
President Joe Biden is poised to sign a $1.7 trillion bill that amends rules related to so-called hardship distributions from 401(k) plans.

The measures are tucked into “Secure 2.0,” a collection of retirement reforms attached to the overall legislative package, which will fund the federal government for the rest of the fiscal year through next September. The House and Senate passed the bill last week.
Current rules around hardship withdrawals allow workers to access their 401(k) savings plans before retirement for an “immediate and heavy” financial need. Workers may owe income tax on that withdrawal, and those under age 59½ generally owe a 10% tax penalty for early withdrawal.
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New rules let savers make one withdrawal of up to $1,000 a year for personal or family emergency expenses. The measure — which takes effect in 2024 and also applies to individual retirement accounts — waives the 10% tax penalty. Americans can self-certify in writing that they need the funds for an emergency.
Taxpayers have the option to repay the funds within three years. They can’t take more emergency withdrawals within three years unless they repay the initial distribution or they make regular deposits that at least match the withdrawn amount.

The legislation also lets 401(k) savers self-certify that they meet the condition for a typical hardship distribution, which is the case under current rules in some but not all 401(k) plans.

The measures will help Americans who are struggling and don’t have other cash stockpiles to support them in crisis, retirement experts said. But they said the rules also amount to another source of so-called “leakage” that run contrary to the overall goal of retirement savings: to build a nest egg for the future.
“I think it’s a theme you find in the [overall] retirement package: to allow retirement savings to be used for non-retirement purposes more easily,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center
“It’s such a departure from the original notion of offering [tax] benefits for retirement, to make sure you have sufficient assets to get through those [later] years,” Rosenthal added.

Hardship withdrawals hit a record high

The share of retirement savers who withdrew money from a 401(k) plan to cover a financial hardship hit a record high in October, according to data from Vanguard Group.
That dynamic — when coupled with other factors like fast-rising credit card balances and a declining personal savings rate — suggests households are having a tougher time making ends meet amid persistently high inflation and need ready cash, according to financial experts.
Nearly 0.5% of workers participating in a 401(k) plan took a new “hardship distribution” in October, according to Vanguard, which tracks 5 million savers. That’s the largest share since Vanguard began tracking the data in 2004.

Put another way, roughly 25,000 workers took one of these distributions.
Meanwhile, savers have been dipping into their nest eggs via other means — loans and “non-hardship” distributions — in higher numbers throughout 2022, according to Vanguard data.
“We are starting to see signs of financial distress at the household level,” Fiona Greig, global head of investor research and policy at Vanguard, previously told CNBC.
That said, the overall monthly share of people taking a hardship withdrawal is relatively small and not indicative of the “typical” 401(k) saver, she added.

Households need more cash amid high inflation

Nearly all 401(k) plans allow workers to take hardship withdrawals, but employers may vary in their rationale for allowing them.
More than half of plans let workers tap funds to “alleviate major financial pressures,” according to the Plan Sponsor Council of America, a trade group. But they more frequently allow withdrawals to cover medical expenses, housing (to buy a primary residence, or prevent eviction or foreclosure), funeral costs or loss due to natural disasters, for example.
Participants can also access 401(k) savings via loans or non-hardship withdrawals. The latter are for workers over age 59½, and sometimes for workers in other circumstances not related to financial hardship (for instance, rolling over assets to an IRA while working).
Non-hardship distributions also hit an all-time high in October — almost 0.9% of participants took one that month, according to Vanguard. And the share of workers taking 401(k) loans rose to 0.9% in October from 0.8% at the beginning of 2022.

Overall, it’s a sign that more households need liquidity.
“People are feeling the pinch from inflation,” Philip Chao, principal and chief investment officer at Experiential Wealth in Cabin John, Maryland, previously told CNBC.
Savers aren’t always prudent in their financial decision-making, and many times think of a 401(k) “more like a piggy bank,” he said.
The inflation rate has declined in recent months from its pandemic-era peak this summer but is still hovering near its highest level since the early 1980s. The prices consumers pay for a broad swath of goods and services — like groceries and rent — are still rising quickly. Wage growth hasn’t kept pace for the average person.

Meanwhile, federal pandemic-era financial supports have dwindled. A student loan payment pause — among the last vestiges of support — could end sometime next year. Many households have spent down at least some savings amassed from stimulus checks and enhanced unemployment benefits. The personal savings rate has been trending downward; in October, the rate hit a pandemic-era low of 2.2%, though increased slightly to 2.4% in November.
Household debt soared at its fastest rate in 15 years in the third quarter. Debt delinquency in that quarter increased for nearly all types of household debt, though remains low by historical standards, according to the Federal Reserve Bank of New York.
In 2020, Congress authorized Covid-related withdrawals of up to $100,000 from 401(k) plans as part of the CARES Act. About 1% of participants took such withdrawals each month in 2020, and other types of withdrawals slightly declined during that time. Employees could self-certify for those coronavirus distributions, which lawmakers used as a rationale for loosening rules in new legislation.
“This is a logical step in light of the success of the coronavirus-related distribution self-certification rules and the current hardship regulations that already permit employees to self-certify that they do not have other funds available to address a hardship,” according to a Senate Finance Committee summary of retirement provisions.

Why tapping retirement savings early is a ‘terrible idea’

However, it’s generally “a terrible idea to take money out of your 401(k),” said Ted Jenkin, a certified financial planner and co-founder of oXYGen Financial, based in Atlanta.
The recent uptick in hardship distributions is especially concerning, financial advisors said. Beyond the apparent acute financial need among households, hardship withdrawals carry negative repercussions like tax penalties.
Unlike a 401(k) loan, savers generally can’t pay themselves back when they take a hardship distribution — meaning the savings and its future investment earnings is permanently lost, unless workers can somehow make up for it later with higher savings rates. And many employers disallow workers from contributing to their 401(k) for six months after taking a hardship distribution.

There was an uptick in hardship distributions after Congress passed the Bipartisan Budget Act of 2018, which eased access, Greig said. The law erased the requirement that participants first take a 401(k) loan before being able to make a hardship withdrawal.
Households should weigh all their options for cash before resorting to tapping a 401(k) plan, said Jenkin, a member of CNBC’s Advisor Council.
For example, households without an emergency fund might be able to free up money for a relatively small short-term cash need by canceling or reducing membership plans, or by selling little-used or unneeded items on Facebook Marketplace or a garage sale, he said. A short-term loan or home equity line of credit would generally also be better than tapping a 401(k).

We are starting to see signs of financial distress at the household level.

Fiona Greig
global head of investor research and policy at Vanguard Group

Selling investments in a taxable investment account may also be a better option than raiding a retirement account or taking on debt, Greig said. While the stock market is down this year, investors may still be in the black when looking over the past two to three years, she said. They’d owe capital gains tax if they sell winning investments, though; even if they sell those investments for a loss, they can use those losses to derive a tax benefit via tax-loss harvesting.
Consumers should also examine the root cause of their financial need, especially if it isn’t due to a one-time, unexpected need, Jenkin said.
“Taking a hardship withdrawal is an effect,” said Jenkin. “It’s the end product of needing money today.
“Like a business, you have to ask yourself, do I have an income problem, an expense problem, or both?”

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On Feb. 28, the Supreme Court will hear legal arguments on President Joe Biden’s plan to cancel hundreds of billions of dollars in student debt.
Here are the key issues the court is likely to consider, according to experts.

Protesters calling for student debt relief demonstrate outside the Republican National Committee’s Washington, D.C. offices on Nov. 18, 2022.
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With President Joe Biden’s sweeping student loan forgiveness plan on hold, tens of millions of Americans who borrowed for their college education remain in the dark about the future of their debt.
It’s hard to overstate the consequences of that uncertainty: Student debt makes it harder for people to buy houses, start families and businesses, and save for their old age.

Now, the nine justices of the Supreme Court have agreed to weigh in on the policy. The nation’s highest court will hear legal arguments around the president’s plan, which faces at least six lawsuits, on Feb. 28.
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“The benefit of the Supreme Court ruling is that it will settle, for now, all of the litigation related to the loan forgiveness,” Dan Urman, a law professor at Northeastern University, said in an earlier interview with CNBC.
Here are the three key questions the court is likely to consider, according to experts.

1. Do plaintiffs have legal standing?

The main obstacle for those hoping to challenge student loan forgiveness has been finding a plaintiff who can prove they have been harmed by the policy.

To establish so-called legal standing, the suing parties generally have to prove they’d be injured by the policy in question, said Laurence Tribe, a Harvard law professor.
The Supreme Court has already made clear that it will consider the issue of standing at the end of February, pointing in a brief to standing as a question presented.

In one of the lawsuits the highest court will consider, six GOP-led states argue that forgiveness will hurt the profits of companies in their states that service federal student loans. The other legal challenge contains two plaintiffs who say they’ve been harmed by the policy by the fact that they are partially or fully excluded from the relief.
Higher education expert Mark Kantrowitz doesn’t believe any of the plaintiffs have successfully proven injury by student loan forgiveness. However, he added, that doesn’t mean they’ll fail.
“The U.S. Supreme Court can decide to consider the case on the merits regardless of legal standing,” Kantrowitz said. “That would be a break from standard practice, but this court has demonstrated a willingness to break with precedent.”

2. Does the president have power to cancel student debt?

At an estimated cost of around $400 billion, Biden’s plan to forgive student debt is one of the most expensive executive actions in history. The justices are likely to examine whether the president has the power to implement such a sweeping policy.
The Biden administration insists that it’s acting within the law, pointing out that the Heroes Act of 2003 grants the U.S. secretary of education the authority to make changes related to student loans during national emergencies. The country has been operating under an emergency declaration due to Covid since March 2020.

The U.S. Supreme Court can decide to consider the case on the merits regardless of legal standing.

Mark Kantrowitz
higher education expert

3. Did Congress permit such an action?

Tribe expects that the justices will visit the so-called major questions doctrine in deciding the fate of Biden’s student loan forgiveness plan. Under this doctrine, the Supreme Court looks to see if a government agency acting on an issue with significant national consequences has been clearly supported by congressional law.
And so the justices may examine whether the Heroes Act, which the Biden administration is citing as its legal permission to pass forgiveness, actually allows the president to cancel student debt in the specific way he is hoping to.

The use of the doctrine has become more prominent in recent years, which Tribe finds concerning.
“They’re requiring a level of specificity that’s incompatible with the way the legal process works,” Tribe said. “It reaffirms the notion that the Supreme Court is prepared to expand its own power at the expense of everyone else: the executive branch, the legislative branch, administrative agencies and individual citizens.”

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Traders work on the floor of the New York Stock Exchange (NYSE), December 7, 2022.
Brendan McDermid | Reuters

Selecting a Top Ten list for 2023 feels a bit different this year.
With several historical measures virtually guaranteeing recession, the prospect for stock market gains is meager at best. If a recession occurs, the S&P 500 could decline just over 30% on average from the highs and earnings may contract an average of 20%. The term “average” is a bit misleading, too. The declines could be greater or less than the average and still be considered very normal. At one point, the S&P 500 was down 24% for the year, and it looks to close 2022 down by about 19%. This could mean that the lows have been made. Tony Dwyer from Canaccord Genuity doesn’t think so. He said the data demonstrates that no historical low has ever been made before a recession had begun. To wit, it appears lower market lows await in 2023.

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3 hours ago

The Top Ten for 2023 consist of companies – in my opinion – with fortress balance sheets, downside protection and upside opportunities. Many on the list are well off their highs and some remain out of favor.
Farr, Miller & Washington is a “buy-to-hold” investment manager, which means we make each investment with the intent to hold the position for a period of three to five years.
Nevertheless, in each of the past 15 Decembers I have selected and invested personally in 10 of the stocks we follow with the intention of holding for just one year. These are companies that I find especially attractive in light of their valuations or their potential to benefit from economic developments. I hold an equal dollar amount in each of the positions for the following year, and then I reinvest in the new list. The following is my Top Ten for 2023, listed in random order. This year’s selection represents a nice combination of growth and defensiveness.
Results have been good in some years and not as good in others. I will sell my 2022 names on Jan. 2 and buy the following names that afternoon. The reader should not assume that an investment in the securities identified was or will be profitable. These are not recommendations to buy or sell securities. There is risk of losing principal. Past performance is no indication of future results. If you are interested in any of these names, please call your financial advisor to discuss.
Here are the Top Ten for 2023, with prices as of the close on Dec. 23.

1. Amazon (AMZN)

Amazon is a top player in three areas where we see ample secular tailwinds: the cloud, digital advertising and e-commerce. Perhaps more importantly, each of these businesses has a wide economic moat. Regarding the cloud, AMZN’s Web Services business is the market leader in cloud infrastructure services. This business benefits from high customer switching costs as cloud services are typically one of the last expenses a business might cut during challenging times. Moreover, the scale of AMZN’s web services business provides many cost advantages as very few companies can compete with AMZN’s investment spend and first-mover advantage.
With regard to digital advertising, we believe AMZN should be a relative winner as its business is not as vulnerable to Apple’s App Tracking and Transparency changes as META, SNAP and other digital advertisers. In addition, AMZN has a vast amount of proprietary information and real-time data on its users that it can leverage when selling ads. AMZN’s e-commerce business, its most well-known, benefits from network effects wherein its vast catalogue of buyers and sellers attracts more buyers and sellers. More than half of the total goods sold on Amazon.com are through AMZN’s third-party marketplace, where the company collects a commission in exchange for fulfillment services. Additionally, subscription fees from Amazon Prime generate strong cash flows and the service is very sticky given the value it provides to consumers. After years residing in territory out of our price range, AMZN’s valuation has become reasonable: The current ratio of EV/EBITDA (NTM), at ~12x, compares to a historical average of over 20x. Finally, the company has an excellent balance sheet with a debt rating of AA (S&P) and negligible net debt (debt net of cash). 

2. Becton Dickinson (BDX)

Becton Dickinson is a global supplier of medical devices, hospital supplies, diagnostic equipment and medication management systems to hospitals and labs. Management estimates that 90% of patients who enter an acute care setting are touched by at least one BDX product. Becton has faced a variety of company-specific headwinds in recent years that were exacerbated by the pandemic. That said, the company played a key role during the pandemic as the world’s leading manufacturer of syringes and needles and as one of the largest Covid-19 testing providers. Importantly, management has been reinvesting the proceeds from the Covid-19 windfall back into the business. Furthermore, they have divested slower growing businesses and have made several tuck-in acquisitions over the past couple years.
We expect these initiatives to improve the overall growth and margin profile as management works to return to its long-term growth algorithm (mid-single digit organic growth; low-double digit EPS growth). BDX shares currently trade at 20.7x CY23 EPS – a significant premium to the S&P 500 but more in line with its MedTech peers. The dividend yield is 1.4%. 

3. Johnson & Johnson (JNJ)

Johnson & Johnson is one of the world’s largest and most diversified health-care companies with revenue divided between the Pharmaceutical, MedTech and Consumer segments. The company should continue to benefit from an aging global population and rising standards of living in the world’s emerging economies. JNJ’s Pharmaceutical segment appears well-positioned to maintain its above-market growth rate over the next few years, thanks to its diversified product portfolio and promising pipeline. In the MedTech business, we have witnessed a strong recovery following several years of market underperformance as the company has started to see benefits from ongoing pipeline investments. Recent product launches range from surgical robots, minimally invasive surgical tools and innovative contact lenses.
JNJ sports a rare AAA-rated balance sheet, produces ample free cash flow and generates consistent, above-average returns on equity. These attributes support the company’s reputation as being one of the most defensive equities available. Moreover, the stock trades at just 18x estimated CY2023 EPS, which is only a small premium to the S&P 500. This reasonable multiple, the 2.5% dividend yield and our expectation that JNJ should continue to grow faster and in a more stable fashion than the overall market over the next five years, underpin our positive view of the stock at current levels.   

4. Mondelez (MDLZ)

Mondelez International is a leading food and beverage manufacturer that was spun off from Kraft in 2012. The company has broad geographic reach with operations in Europe, North America, Latin America, Asia, the Middle East and Africa. Since taking the helm in 2017, CEO Dirk Van de Put has introduced a variety of strategic initiatives that have improved MDLZ’s competitive position, including: 1) investments in its brands to drive higher market share; 2) a decentralized organizational structure that allows for more efficient decision-making; and 3) investments in the supply chain, which proved to be a competitive advantage during the pandemic. Recently, the company has been able to offset inflationary pressures, thanks to its pricing power and productivity initiatives. Additionally, there is very little private-label competition in sweet snacks and chocolate (80% of total revenues), which means consumers were less likely to trade down as prices have risen.
A strong balance sheet and steady cash-flow generation allow the company to pursue tuck-in M&A as management looks to expand into higher-growth category adjacencies (e.g. cakes/pastries, premium snacks, better for you, etc.). The stock trades at 21.9x CY23E EPS – a discount to other multinational consumer packaged goods companies (e.g. PEP, KO, PG, CL). Over the long term, we would expect MDLZ to generate double-digit total returns, consisting of high-single digit EPS growth and the 2.3% dividend.

5. Microsoft (MSFT)

Microsoft is one of the largest technology companies in the world. It has successfully pivoted from a Windows PC-first world to the cloud. The company has become a strategic partner in enterprise digital transformations through its cloud, app and infrastructure, as well as its artificial intelligence offerings. There is a long runway remaining for cloud growth as companies slowly deal with legacy investments that still drive value but are not cloud-based. MSFT is uniquely positioned to grow its wallet share of corporate IT budgets in this hybrid world. It is also encountering new opportunities in security, compliance and workflow, and the transition to subscription-based sales is no longer a headwind to free cash flow growth. Shares trade at 23x the CY23 EPS estimate. We think the premium valuation is justified given the above-trend growth, exposure to secular trends and strong balance sheet. Moreover, compared to software peers, the valuation is quite reasonable. The dividend yield is 1.1%.

6. Alphabet (GOOGL)

Alphabet is a holding company that owns several subsidiaries with the most visible and profitable being Google, the internet services giant. Google search is the world’s most popular search engine, and Android is the most widely used mobile phone operating software. Moreover, the company has nine products with more than a billion users: Search, Android, Chrome, Gmail, Drive, Maps, Play Store, YouTube and Photos. Search, display and video advertising account for most of the company’s revenue, with smaller, but faster growing Cloud (enterprise services) and Play Store, subscriptions and hardware accounting for the rest. We saw some softness in ad spend on concerns over economic weakness and platform privacy changes, but with advertising dollars continuing to shift to digital formats, the valuation looks compelling. Cloud migration remains a secular growth story and should allow the Google Cloud Platform to sustain its rapid growth in the coming years. The company has arguably the best balance sheet in the world with more than $100 billion in cash and investments net of debt.  Shares trade at 16.9x CY 23 EPS. There are risks around government regulation, but we see that taking several years to play out.

7. Truist Financial (TFC)

Truist is the company that was formed by the recent merger of regional banks BB&T and SunTrust. The merger created the sixth-largest bank holding company in the U.S. (by assets and deposits) while also forming a banking powerhouse in the high-growth Southeastern states. We were supporters of the merger as it will yield a large amount of expense synergies and provide the resources to accelerate investments in transformative technologies. The merger should also lead to significant revenue synergies and enhanced diversification as each legacy bank cross-sells its respective products and services. We are further comforted that the integration was managed well as BB&T integrated numerous acquisitions in a disciplined and conservative manner over the past decade. Now that the integration is largely complete, we expect Truist to be able to generate industry-leading expense efficiency and returns on equity, allowing for a higher valuation multiple on a price-to-book (P/B) basis. 
Finally, the earnings accretion from the integration should act as an engine for earnings growth even if the operating backdrop remains difficult (subdued economic growth, rising credit costs). At less than 8x our current expectation for CY23 EPS and a generous 4.9% dividend yield, we believe the stock is attractively priced, especially given that earnings growth should handily outpace the peer group.

8. FedEx (FDX)

While FedEx benefited from a surge in e-commerce package volume following Covid’s arrival, the company has also endured a series of (mostly unforeseeable) headwinds over the past couple of few years. Unfortunately, these challenges coincided with heavy investment outlays at the company, to include a buildout of its ground network, the modernization of its airplane fleet, and the integration of TNT Express Now, given the ongoing normalization in e-commerce, new CEO Raj Subramaniam’s primary charge is to rationalize the company’s expense bases, raise margins and close the performance gap to competitor UPS. This may prove to be no small feat, and the selection of FDX for inclusion in a top ten list with an investment horizon of just one year is not without risk.  However, the opportunities for improvement are many, and we think that given the trough valuation in the stock, the harvesting of just some of the low-hanging fruit could get the stock going in the right direction again. We are further encouraged that the company maintains significant pricing power as it uses its network capacity to cherry-pick the most profitable delivery services. Finally, as industrial production, global trade and labor availability gradually begin to improve, the company should be able to post solid revenue growth, margin expansion and very strong earnings leverage.  In the meantime, we think the company’s discounted valuation (11.3x CY23E EPS) relative to both the S&P 500 and its major competitor, UPS, provides downside protection. The yield is 2.6%.     

9. CVS Health (CVS)

CVS Health provides health plans and services through its health insurance offerings, pharmacy benefit manager (PBM), and retail pharmacies. The vertically integrated model provides CVS with diversification across the health-care supply chain, thus making it a more defensive company. For the consumer, CVS seeks to improve health care outcomes by integrating medical, lab, and pharmacy data. Over time, this should lead to medical cost savings as the company uses this data to promote better medical management/adherence, improved engagement, and the utilization of lower-cost health-care settings such as CVS’s MinuteClinics and HealthHubs. CVS has enormous scale with about 85% of the U.S. population living within 10 miles of one of its stores. This bodes well in the evolving health-care landscape where trusted brands and a nationwide footprint are essential keys to success.
CVS’s businesses are stable and generate strong cash flow, which has enabled the company to reduce its leverage to the long-term target of 3x net debt-to-EBTIDA. With this newfound balance sheet flexibility, management is looking to expand its offerings into primary care and in-home health through a combination of internal investments and M&A. The stock currently trades at just 11x estimated CY23 EPS and offers investors a 2.4% dividend yield. Management remains committed to its goal of high single-digit EPS growth in 2023, followed by sustained double-digit growth in 2024 and beyond. We believe the risk/reward tradeoff is attractive for long-term focused investors.

10. Raytheon Technologies (RTX)

Raytheon Technologies was formed through the combination of Raytheon Company and the legacy United Technologies aerospace and defense (A&D) businesses. The merger created a powerhouse in the A&D industry, but management’s near-term sales and profit targets for the combined entities have been pushed out as a result of the Covid-19 crisis. The crisis took an enormous toll on the commercial aerospace industry as steep production cuts at Boeing and Airbus were combined with a massive drop in airline passenger miles. Fortunately, the defense side of the new company, which contributed 65% of total company pro forma sales in 2020, picked up the slack during the throes of Covid. The defense side should continue to provide downside protection and steady cash flow as result of geopolitical uncertainty, allowing the company to continue investing in R&D during economic downturns. As conditions continue to improve on the commercial side, the company should start to benefit from aircraft production increases as well as greater aircraft utilization. Furthermore, the growing installed base of the company’s groundbreaking geared-turbofan (GTF) engine, combined with a rebound in aircraft utilization, will contribute to a growing stream of high-margin and high-visibility aftermarket revenue.
Finally, we also expect the company will ultimately reap huge cost and revenue synergies from the ongoing integration of both Rockwell Collins and the Raytheon Company. The synergies will help the company return an expected $20 billion in capital to shareholders in the four years following the Raytheon merger. The stock offers strong value at just 19.5x CY23E EPS – a moderate premium to the market but a well-deserved one. The dividend yield is also attractive at 2.2%. 
— Michael K. Farr is a CNBC contributor and president and CEO of Farr, Miller & Washington.

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