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With days to go before a debt ceiling deadline, the U.S. may be at risk of a default.
If that happens, the oldest and poorest Social Security beneficiaries may be the first who are at risk not receiving their payments, one expert warns.

President Joe Biden and House Speaker Kevin McCarthy, R-Calif., meet in the Oval Office on May 22, 2023.
Saul Loeb | AFP | Getty Images

As President Joe Biden and House Speaker Kevin McCarthy, R-Calif., continue to negotiate ahead of a June debt ceiling deadline, experts are warning that Social Security checks could be at risk if there is a default.
Based on the payment schedule for those monthly payments, the oldest and poorest beneficiaries could be the first who may have their payments affected, according to Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities.

“That would be devastating for those people, because they rely on their benefits so much,” Romig said.
If lawmakers fail to reach an agreement, U.S. could default on its debt as soon as June 1, according to Treasury Secretary Janet Yellen. That, in turn, would interfere with the Social Security benefits slated to go out the first week of June, Romig said.
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Beneficiaries scheduled to receive payments that week include those who started receiving Social Security before May 1997 who are age 88 or older, noted Romig.
In addition, Supplemental Security Income benefits are paid that week for those who receive benefits either exclusively through that program or in combination with Social Security. Supplemental Security Income, or SSI, provides monthly checks to adults and children with disabilities or blindness, as well as people age 65 and up with limited financial resources. To qualify for SSI, beneficiaries generally must have income and resources below certain thresholds.

Because SSI beneficiaries face a $2,000 asset limit including all their financial resources, they do not have a cushion to fall back on if they do not receive their checks, Romig noted.
“They are the most immediately at risk in a default scenario,” Romig said. “They really don’t have a fallback.”

Other beneficiaries’ checks may be affected if the situation continues. Benefit payments are scheduled for the second, third and fourth Wednesday for other Social Security beneficiaries based on their birth dates.
Some experts say it’s unlikely the debt-ceiling debate will reach that point.
“If there is a scenario where seniors are not getting their Social Security checks, there would be a near immediate resolution of this fight,” Ed Mills, Washington policy analyst at Raymond James, previously told CNBC.com.
The National Committee to Preserve Social Security and Medicare has warned that Social Security, Medicare, Medicaid and other payments “may not be made on time and in full” without a debt limit increase.

If there is a scenario where seniors are not getting their Social Security checks, there would be a near immediate resolution of this fight.

analyst at Raymond James

“Even if all we’re talking about is a delay, you could end up with significant hardship on a large number of people,” said Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare.

‘Best educated guesses’ on what could happen

The debt ceiling is the maximum amount of money the U.S. government can borrow to pay its bills. While Washington has been up against the debt ceiling before, it has never defaulted on its financial obligations.
“There is not a road map for a default,” Romig said.
There is, therefore, much debate as to what could happen with Social Security benefits and other federal payments that Americans rely on, including whether Washington would be able to prioritize certain categories.

“We’re all taking our best educated guesses based on what the laws say and what we know Treasury is capable of doing,” Romig said.
The government relies on payroll taxes and Social Security’s trust funds, which include $2.8 trillion in Treasury bonds, to pay benefits.
If the U.S. were to default, that would include those government bonds, Romig said. More

College enrollment remains well below pre-pandemic levels, although associate’s degrees and shorter-term credential programs are gaining steam.
High schoolers are more interested in career training and post-college employment.
Still, earning a bachelor’s degree is almost always worthwhile, research shows.

Three years after the Covid pandemic, there are more than 1 million fewer students enrolled in college.
“Overall, undergraduate enrollment is still well below pre-pandemic levels, especially among degree-seeking students,” said Doug Shapiro, executive director of the National Student Clearinghouse Research Center.

Only community colleges notched enrollment gains in the current semester, while enrollments in bachelor’s degree programs fell, according to the Research Center’s new report.
As students look for a more direct link to the workforce, there’s a shift “toward shorter term programs,” Shapiro said.
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Concerns over rising costs and large student loan balances are causing more young adults to reconsider their plans after high school, a separate report by Junior Achievement and Citizens also found. 
More than 75% of high schoolers now say that a two-year or technical certification is enough, and only 41% believe they must have a four-year degree to get a good job.

“Teens are really starting to question the value of the four-year degree,” said Ed Grocholski, chief marketing officer at Junior Achievement.
For his part, Chris Ebeling, head of student lending at Citizens, said “it’s not surprising, given that the price of college has dramatically outpaced household income over the past two decades, which puts further pressure on families.”

Teens are really starting to question the value of the four-year degree.

Ed Grocholski
chief marketing officer at Junior Achievement

At the same time, between online credits and certifications, there are more options available at a lower cost, according to Grocholski. “There are a lot of opportunities out there that didn’t exist before,” he said.
Federal data also shows that trade school students are more likely to be employed after school than their degree-seeking counterparts — and much more likely to work in a job related to their field of study.

Getting a degree still pays

For decades, research found that earning a degree is almost always worthwhile.
Bachelor’s degree holders generally earn 75% more than those with just a high school diploma, according to “The College Payoff,” a report from the Georgetown University Center on Education and the Workforce — and the higher the level of educational attainment, the larger the payoff.

Finishing college puts workers on track to earn a median of $2.8 million over their lifetimes, compared with $1.6 million if they only had a high school diploma, the report found. 
Over time, occupations as a whole are steadily requiring more education, according to another recent report by Georgetown’s Center on Education and the Workforce. And the fastest-growing industries, such as computer and data processing, still require workers with disproportionately high education levels compared with industries that have not grown as quickly.

In 1983, only 28% of jobs required any postsecondary education and training beyond high school. By 2021, that had jumped to 68%, the report also found. In another decade, it will climb to 72%.
What’s more, a growing number of companies, including many in tech, recently decided to drop degree requirements for middle-skill and even higher-skill roles.
“A four-year a degree has value, but not everybody needs to go to college,” Grocholski said. “There are a lot of things you could do to gain skills and get out there in the world.”
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Young adults in the U.S. are taking longer to reach “key life milestones” that impact finances compared to four decades ago, according to a Pew Research Center analysis.
In 2021, adults who were 21 were less likely to have a full-time job; be financially independent, living on their own or married; or have children than their predecessors from 1980.
Here’s how parents can navigate the challenge of financially supporting their adult children, according to experts.

Young adults in the United States are taking longer to reach “key life milestones,” including financial independence from parents and living on their own, compared to four decades ago, according to a Pew Research Center analysis released on Tuesday.
In 2021, adults who were 21 were less likely to have a full-time job; be financially independent, living on their own or married; or have children than their predecessors from 1980.

Today’s young adults are closer to full-time employment and financial independence by age 25, the analysis of Census Bureau data shows. Financial independence is defined as having a single income of at least 150% of the poverty level.
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In 2021, some 39% of 21-year-olds were working full-time, compared to nearly two-thirds in 1980. And only one-quarter were financially independent of their parents, versus more than 40% in 1980, the analysis found.
There are a couple of reasons for differences between each group, including higher college enrollment over the past 40 years, said Ted Rossman, senior industry analyst at Bankrate. Today, nearly half of 21-year-olds are in college, while only 31% were enrolled in 1980, according to the Pew Research report.
Today’s cohort may also face other challenges.

“I would argue that young adults now are facing much higher costs for housing,” buying a car, food and gas, Rossman said. “So, I think there’s a strong inflation component.”

‘Examine your own situation’ first

While many parents are eager to help their offspring, it can come at a high cost. More than two-thirds of parents have made or are currently making financial sacrifices — such as not saving more for retirement or their emergency fund, or paying down debt — to assist their adult children, the Bankrate report found. 
“A big theme of our survey was this idea that you need to put your oxygen mask on before helping others,” Rossman said.  
It’s important to “examine your own situation” before offering to help adult children, said Paul Golden, managing director of the National Endowment for Financial Education.

Before giving your child a loan or allowing him or her to move back into your house, work together to decide exactly how long the situation will last.

Paul Golden
Managing director of the National Endowment for Financial Education

And if you decide to assist, you need to make a plan with a time limit.
“Before giving your child a loan or allowing him or her to move back into your house, work together to decide exactly how long the situation will last,” he suggested.  
Golden added that “one of the best ways to help your adult children live a healthy financial lifestyle is by demonstrating the behavior you’d like them to emulate.” More

Overall, 61% of Americans now say they are living paycheck to paycheck, according to a recent report.
Aside from income, where you live is the most important factor in determining whether you are stretched too thin.
City dwellers are much more likely to feel financially strained.

Even as inflation cools, consumers still show signs of strain.
As of April, the share of adults feeling stretched too thin held nearly steady at 61%, according to a new LendingClub report.

However, high-income earners are increasingly under pressure, LendingClub found. Of those earning more than six figures, 49% reported living paycheck to paycheck, a jump from last year’s 42%. 
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Alternatively, the percentage of those earning less than $100,000 who reported living paycheck to paycheck remained steady or fell over the same period — moving slightly to 63% from 64% of those earning $50,000 to $100,000, and dropping to 73% from 80% of those earning less than $50,000.

Where you live determines your financial standing

Depending on where you live, a $100,000 income may not stretch that far, according to Anuj Nayar, LendingClub’s financial health officer.
A separate report by SmartAsset analyzed how far six figures will go in America’s 25 largest cities. In New York, for example, $100,000 amounts to just $35,791 after accounting for taxes and the high cost of living. 

In contrast, a six-figure salary is worth much more in Memphis — roughly the equivalent of $86,444 due to a lower cost of living and no state income tax. Here’s a breakdown of how much you need to earn to afford to live in the country’s most popular cities.

Colorful cafe bars at the iconic Beale Street music and entertainment district of downtown Memphis, Tennessee.
benedek | iStock | Getty Images

In general, 69% of city dwellers live paycheck to paycheck, 25% more than their suburban counterparts, LendingClub found.
“While income is obviously a major factor, where you live appears to be almost equally important in factoring whether a consumer is living paycheck to paycheck,” Nayar said.
Along with surging mortgage rates and home prices, rents are still higher in many cities across the country, according to the latest data from rental listings site Rent.com. 

As of last month, 29 of the 50 most populous U.S. cities notched year-over-year rent increases, Rent.com found.
Compared with two years ago, rents have jumped more than 16% — that’s the equivalent of a $275 increase in monthly rent bills, according to Jon Leckie, researcher for Rent.com.
“That kind of growth over such a short period of time is going to put a lot of pressure on pocket books.”

How to break the paycheck-to-paycheck cycle

High earners and urbanites are often susceptible to “lifestyle creep,” said CFP Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida. 
As consumers earn more, they spend more, she said, particularly on eating out or deliveries through DoorDash, as well as additional subscription services. It’s easy to “fall into the trap of too much convenience spending.”
To break the cycle, “the first thing to do is look at convenience spending and figure out ways to cut the spending that is not bringing them value,” said McClanahan, who also is a member of CNBC’s Advisor Council. 
“Immediately divert that money to savings to create an emergency fund.” Once you have three to six months of expenses set aside, “start saving more for other goals.”
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As the clock ticks to resolve the country’s debt ceiling issues, House Democrats on Tuesday moved to renew a Social Security reform proposal.
“This tactic of holding the economy hostage hurts seniors the most,” said Rep. John Larson, D-Conn., of the debt ceiling drama.
Larson also re-upped his bill to expand Social Security benefits through higher taxes on the wealthy.

Rep. John Larson, D-Conn., leaves the Capitol after the final votes of the week on Feb. 28, 2019.
Bill Clark | CQ-Roll Call Group | Getty Images

At the Tuesday event, House Minority Leader Hakeem Jefferies, D-N.Y., called it “dangerous default gamesmanship” that could put benefits for millions of retirees across the nation at risk.

Social Security already faces funding risks

In order to prevent a Social Security funding shortfall, congressional Democrats and Republicans must agree on a solution.
The latest projections from the Social Security Board of Trustees show the trust fund used to pay retirees, as well as their family and survivors, will be depleted 10 years from now. At that point, 77% of those benefits will be payable.
When combined with the trust fund used to pay disability benefits, the funds are projected to be depleted in 2034, when 80% of benefits would be payable.
The Social Security 2100 Act that was introduced in the last Congress had broad support among House Democrats.

This tactic of holding the economy hostage hurts seniors the most.

John Larson
Democratic Representative from Connecticut

The latest version of the bill will be sponsored by Democratic Sens. Richard Blumenthal of Connecticut and Chris Van Hollen of Maryland, Larson said.
Sens. Bernie Sanders, I-Vt., and Elizabeth Warren, D-Mass., reintroduced their own Social Security proposal earlier this year, which similarly aims to increase benefits while extending the program’s solvency through taxes on the wealthy.
To date, Republican lawmakers have not proposed legislation to address Social Security’s funding woes. Sen. Bill Cassidy, R-La., recently said he is working on a bipartisan “big idea” to address the program’s 75-year shortfall.
“That’s why we’re here, to implore our Republican colleagues to work with us, to sign on to our bill, or produce what they believe is a better plan,” Larson said.

Changes in the Social Security 2100 Act

zimmytws | iStock | Getty Images

The Social Security 2100 Act aims to extend the program’s solvency, though estimates are not yet available for how long it could prolong the program’s funding. The last version of the bill was expected to extend the program to 2038.
In contrast, the Sanders and Warren plan would extend the solvency through 2096.
A key difference between the two plans is how they affect higher taxes. The Sanders and Warren plan calls for reapplying Social Security payroll taxes for incomes of more than $250,000.
In contrast, Social Security 2100 would apply those taxes to earnings of more than $400,000, in keeping with President Joe Biden’s promise not to raise taxes for households with annual incomes below that threshold.
This year, the maximum earnings subject to Social Security payroll taxes is $160,200.

Social Security 2100 also calls for adding an additional 12.4% net investment income tax for taxpayers making more than $400,000.
In addition, the bill would introduce a host of expansions to benefits.
The Social Security 2100 Act would increase all benefits by 2% for the program’s more than 65 million beneficiaries.
It also seeks to make benefits more generous for elderly beneficiaries who have been receiving benefits for 15 years or more, as well as low-income seniors and widows and widowers from two-income households.
It would repeal rules that reduce benefits for some public workers and their spouses, known as the Windfall Elimination Provision and Government Pension Offset.

Congressman Larson offers a common sense, fair and forward-looking plan to ensure that the 88 year-strong promise of Social Security remains fulfilled.

Max Richtman
president and CEO of the National Committee to Preserve Social Security and Medicare

It would also increase access to benefits for children who live with grandparents or other relatives, as well as restore student benefits up to age 26 for children of beneficiaries.
The bill also calls for changing the way annual cost-of-living adjustments are measured, among other changes.
Social Security advocates praised the reintroduction of the bill.
“At a time when the House Majority has taken the country to the brink of default — which could have catastrophic consequences for seniors on fixed incomes — Congressman Larson offers a common sense, fair and forward-looking plan to ensure that the 88 year-strong promise of Social Security remains fulfilled,” Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, said in a statement. More

FA Playbook

Demand for annuities has been rising amid concerns about the economy and the possibility of a recession. 
Now, more than half of retirement savers are considering some type of guaranteed lifetime income, according to a recent report.
Money managers are rolling out new options to help workers reach retirement with a source of steady income for life.

Amid concerns about the U.S. economy and the possibility of a recession, most retirement savers want some sort of assurance they won’t outlive their nest eggs, recent reports show.
As a result, demand for annuities, which offer a guaranteed stream of monthly income like Social Security and pensions, has soared.

Now, more than half, or 54%, of retirement savers are considering a type of guaranteed lifetime income, according to a new survey by Morning Consult for the American Council of Life Insurers, or ACLI.

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“Retirement savers are clearly concerned about inflation and the overall economy,” said Susan Neely, ACLI’s president and CEO.

More retirement plans to offer annuity options

The passage of the Secure Act also made it easier for employers to offer annuities as one retirement savings plan option.
Going forward, insurance companies, asset managers and employers are moving toward making these guaranteed lifetime income options more broadly available through 401(k) and other defined contribution plans.
Starting in the fall, Fidelity will let plan participants convert some of their retirement savings into an immediate income annuity to provide pension-like payments throughout retirement.

Fidelity Investments is the nation’s largest provider of 401(k) plans. The financial services firm handles more than 35 million retirement accounts in total.
BlackRock and State Street Global Advisors, two of the largest asset managers, also announced target-date funds with retirement income annuity options.
“As Americans are living longer and healthier lives, their risk of outliving their savings is accelerating the ‘silent crisis’ of financial insecurity in retirement,” Mark McCombe, BlackRock’s chief client officer, said in a statement. 

Having an annuity option when you retire is a good thing.

Carolyn McClanahan
founder of Life Planning Partners

“Having an annuity option when you retire is a good thing for people who are not feeling confident,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners, based in Jacksonville, Florida.
But with any annuity, make sure you are comparing the offerings and the fees, added McClanahan, who also is a member of CNBC’s Advisor Council. 

Annuity sales hit a record in 2023

Annuity sales hit an all-time high in the first quarter of 2023, up roughly 50% from a year ago, according to Limra, an insurance industry trade group.
The annuity market has benefited from market volatility, concerns about the banking sector and a potential recession, as well as higher interest rates, which generally translate to insurers paying a better return on investment, according to Todd Giesing, assistant vice president of LIMRA’s annuity research.

“Certainly annuity payouts are so much more attractive now,” said Keri Dogan, senior vice president of retirement solutions at Fidelity.
Dogan said she expects the interest in annuities will continue to grow “because you get so much more for your money.” More

Venmo on Monday unveiled a new teen account that allows parents to open a linked Venmo account for teenagers ages 13 to 17 years old.
A consumer watchdog shares how to protect teams from common peer-to-peer payment issues.

Maskot | Maskot | Getty Images

As new peer-to-peer payment app options emerge for teenagers, experts say it’s an opportunity for parents to teach their kids how to use these financial tools wisely — and educate them on how to avoid common pitfalls.
Venmo on Monday unveiled a new teen account that allows parents to open a linked account with select features for teenagers ages 13 to 17 years old. While some teenagers already use Venmo, individual accountholders must be at least 18 years old (or the age of majority in their state), per the app’s user agreement.

This isn’t the first peer-to-peer payment app to expand to teen users. Cash App, Square Cash and Apple Wallet also offer features for teens, albeit with parental supervision. PayPal, parent company of Venmo, still requires users to be at least 18 years old (or the age of majority in their state).
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The Venmo teen account includes a debit card and can be funded by a parent’s Venmo account through any linked sources. Parents can monitor their teen’s payments and friend requests, as well as control privacy settings.
“We have a zero-tolerance policy on our platform for attempted fraudulent activity, and our teams work tirelessly to protect our customers,” a PayPal spokesperson told CNBC. “We encourage customers to always be vigilant online and to contact customer service directly if they suspect they are a target of a scam.”

Apps are ‘convenient,’ but woes can be ‘difficult to fix’

Peer-to-peer payment apps, also known as P2P apps, are widely used throughout the U.S., used by 64% of adults, including 81% of those ages 18 to 29 years old, according to a 2022 report from Consumer Reports.

Teresa Murray, a consumer watchdog at the U.S. Public Interest Research Group, urges caution when using P2P apps. “There are real consequences if something goes wrong,” she said.
U.S. PIRG examined nearly 9,300 complaints received by the Consumer Financial Protection Bureau between April 2017 and April 2021, and uncovered a pattern of issues among several P2P apps with digital wallets, scams and customer service.

“People use these P2P apps because they’re convenient and they’re easy,” Murray said. “But it’s very inconvenient when something goes wrong.”
Nearly one-quarter of users have reported sending money to the wrong person, a 2022 survey from LendingTree found.
“It’s difficult to fix it, and people just don’t realize that up front,” she added.

Protecting teens from common P2P payment issues 

Whether your teen is using Venmo or another P2P app, Murray said it’s important for both parent and child to be familiar with the possible risks.
For example, she suggests that users fund P2P accounts with a credit card rather than a checking account because there a greater protections under the Truth In Lending Act and Fair Credit Billing Act if something goes wrong. And if you do link to your bank account or a teen’s, keep the majority of your cash elsewhere.

Murray also suggests only paying “people you know well” via P2P apps and asking them to send you a request via the app before making a payment for the first time. “Once you have completed a transaction, it’s done,” she warned. “You’re not getting your money back.”
Teens should also make transactions private, add extra authentication to access the app from their phone, and be vigilant when sharing their device with others, she said. They may also thwart scammers by never sharing authentication codes with anyone.

Talk to your teens about money 

As your teen learns about budgeting and payment apps, experts urge parents to discuss these topics at home.
“The best tip I can offer is to keep that communication going with your teen about money,” said certified financial planner Desiree Kaul at Main Street Planning in Satellite Beach, Florida. “As long as your child feels comfortable asking you questions, they will always have someone to turn to when they want an answer.”  More

A certificate of deposit ladder, or CD ladder, can capture higher yields amid interest rate uncertainty.
Typically, a CD ladder involves splitting equal amounts of cash among multiple CDs with different maturity dates.
However, a diversified portfolio is still essential for long-term investing goals, financial experts say.

Monthirayodtiwong | Istock | Getty Images

If you’re boosting your emergency fund or saving for a short-term goal, a certificate of deposit ladder, or CD ladder, may help you capture higher yields amid interest rate uncertainty.
After a series of interest rate hikes from the Federal Reserve, options for cash, such as high-yield savings, Treasury bills and money market funds have become more competitive.

However, experts say a CD ladder may be worth considering as the Fed weighs an interest rate pause or more rate hikes.
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“It’s always a tried-and-true strategy,” said Ken Tumin, founder and editor of DepositAccounts.com, a website that tracks the most competitive options for savings. “You don’t have to worry about trying to guess where interest rates are headed.”
Typically, a CD ladder involves splitting equal amounts of cash among multiple CDs with different maturity dates. As the shorter terms expire, you can invest the proceeds into longer-maturity CDs.
“A CD ladder gives someone an opportunity to harvest a variety of yields over varying timelines,” said Bankrate senior economic analyst Mark Hamrick. “And if you’re searching for the highest yields, that can be quite rewarding.”

For example, investors may purchase five CDs, with maturities ranging from one to five years, freeing up 20% of their original investment every year.
Alternatively, you may build a ladder with shorter-term CDs, such as three-month to one-year terms, which provides more flexibility.
While shorter-term ladders offer faster access to cash without a penalty, the trade-off may be missing the opportunity to lock in higher rates for longer-term CDs, Tumin said.

A CD ladder gives someone an opportunity to harvest a variety of yields over varying timelines.

Mark Hamrick
Bankrate senior economic analyst

Of course, the decision ultimately hinges on your goals and how soon you’ll need access to the money, he said.

What to know about shorter-term CDs

Typically, investors can expect higher yields from longer-maturity CDs than from shorter-term CDs.
But currently, the opposite is true because of the inverted yield curve, with long-term government bonds paying lower yields than shorter-term bonds, Tumin said.
As of May 22, top one-year certificates of deposit were paying an average of 5.26%, according to DepositAccounts. These rates are the highest 1% average. By contrast, most five-year CDs are paying below 5% on average.

Investors still need a ‘diversified portfolio’

While CD rates have recently been higher, Hamrick pointed out that some still aren’t beating inflation.
Annual inflation rose by 4.9% in April, down slightly from 5% in March, the U.S. Bureau of Labor Statistics reported in May.
“Over the long-term, one needs to have a diversified portfolio, particularly when saving for retirement,” Hamrick said. More