Investing

For 2025, you can defer up to $23,500 into 401(k) plans, up from $23,000 in 2024, and workers age 50 and older can save an extra $7,500.
But starting next year, the catch-up contribution for workers ages 60 to 63 will rise to $11,250, which brings their total deferral limit to $34,750.
Experts suggest boosting 401(k) contributions now to maximize higher limits for 2025.

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If you’re eager to save more for retirement, it’s not too early to boost 401(k) plan contributions for 2025, financial experts say.
For 2025, you can defer up to $23,500 into 401(k) plans, up from $23,000 in 2024. For workers age 50 and older, the 401(k) catch-up contribution remains at $7,500 for 2025.

But there is a “super funding” opportunity for 401(k) catch-up contributions for a subset of savers, according to Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
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Enacted via Secure 2.0, the 2025 catch-up contribution limit will increase to $11,250 for employees ages 60 to 63, which brings the 401(k) deferral total to $34,750 for these investors.  
“Probably no one knows about the extra increase,” and it could take time before the general public is aware of the new opportunity, said Boston-area CFP and enrolled agent Catherine Valega, founder of Green Bee Advisory.
However, boosting contributions later could still be beneficial for savers in this age range, experts say.

Increase 401(k) deferrals for 2025 now

If you plan to adjust 401(k) deferrals for 2025, “now is the time to be doing it,” Valega said.
Typically, it takes a couple of pay periods for 401(k) contribution changes to go into effect, and you could miss some higher contributions in January by waiting, she said.
If you miss bigger deposits early, you can still max out your plan by boosting deferrals later in the year. But higher percentages can “impact cash flow more than people are typically willing to do,” Valega said. 

Lucas said he updated next year’s 401(k) contributions for his clients in early December.
“It’s already set for next year,” he said. “We’re on pace, starting with the first payroll.”

Of course, many workers cannot afford to max out their 401(k) plan every year.Roughly 14% of employees maxed out 401(k) plans in 2023, according to Vanguard’s 2024 How America Saves report, based on data from 1,500 qualified plans and nearly five million participants. More

With the Federal Reserve’s recent cuts to interest rates, more federal student loan borrowers are wondering if they should refinance.
The Consumer Financial Protection Bureau has new warnings for borrowers about the federal loan forgiveness opportunities they’ll forfeit.

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With the Federal Reserve’s recent moves to lower interest rates — and further cuts on the horizon — some federal student loan borrowers are wondering if now is a good time to refinance.
“We are already seeing more borrowers tempted to refinance their federal loans,” said Betsy Mayotte, president of The Institute of Student Loan Advisors.

Refinancing your federal student loans turns them into a private student loan and transfers the debt from the government to a private company. Borrowers usually refinance in search of a lower interest rate.
But the Consumer Financial Protection Bureau has new warnings about refinancing student debt.
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In a report published Monday, the CFPB said that private lenders use “deceptive” practices in their marketing and disclosure materials, misleading student borrowers about a key pitfall of refinancing: those who do so lose access to federal student loan forgiveness options.
“Companies break the law when they mislead student borrowers about their protections or deny borrowers their rightful benefits,” said CFPB Director Rohit Chopra. “Student loan companies should not profit by violating the law.”

Federal forgiveness chances dashed with refinancing

Some private lenders give the wrong impression “that refinancing federal loans might not result in forfeiting access to federal forgiveness programs, when, in fact, it was a certainty,” the CFPB report says.
The federal government offers a range of student debt forgiveness programs, including Public Service Loan Forgiveness and Teacher Loan Forgiveness.
PSLF allows certain not-for-profit and government employees to have their federal student loans cleared after 10 years of on-time payments. Under TLF, those who teach full time for five consecutive academic years in a low-income school or educational service agency can be eligible for loan forgiveness of up to $17,500. These options are not available to private student loan borrowers.
Borrowers refinancing would also not be eligible for one-off forgiveness efforts like President Joe Biden’s Plan B.
Private student loan borrowers who are struggling to pay their bills don’t have a right to an income-driven repayment plan, either.
IDR plans allow federal student borrowers to pay just a share of their discretionary income toward their debt each month. The plans also lead to debt forgiveness after a certain period.

Borrowers who refinance their student loans lose access to these federal relief options, the CFPB said.
And this has cost borrowers.
“The lenders profited from borrowers paying the full amount of their loans, when the borrowers otherwise potentially could have had some or all of those loans forgiven,” the bureau wrote in its report.
Lenders do inform borrowers of what benefits they may give up by making moves like refinancing, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for student loan servicers.
Buchanan said the government’s changing promises around student loan forgiveness has led to a lack of clarity. (Republican-led legal challenges have stymied the Biden administration’s efforts to deliver wide-scale student loan forgiveness to borrowers.)
“That volatility and confusion is something the Bureau needs to take up with the Department of Education,” Buchanan said.
But the federal government’s long-standing student loan forgiveness programs and other relief measures are reasons alone to think twice before refinancing, Mayotte said.
“We almost always very strongly recommend against it,” she said.

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Crypto has soared since the November presidential election.
Many financial advisors are reluctant to recommend crypto.
A July survey found 59% of advisors do not use cryptocurrency or plan to in the future.
Most financial advisors agree that whether to have crypto investments in your portfolio depends on your risk tolerance, financial goals and time horizon.

Digital assets have rallied since the November U.S. presidential election — with bitcoin notching a new high above $107,000 on Monday — and continue to gain ground as President-elect Donald Trump details his pro-cryptocurrency policy plans. 
Still, many financial advisors remain wary. 

“As traditional long-term planners, we currently do not incorporate crypto in our portfolio allocations,” said certified financial planner Marianela Collado, CEO of Tobias Financial Advisors in Plantation, Florida. She is also a certified public accountant. “We always advise our clients to put in crypto what you’re not necessarily needing for retirement, what you’re comfortable losing.”

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Here’s a look at other stories offering insight on ETFs for investors.

Regulatory uncertainty remains a clear area of concern for financial advisors when it comes to recommending crypto investments to clients.
In April, when crypto prices were lower, an annual survey of 2,000 financial advisors by Cerulli Associates found that 59% do not currently use cryptocurrencies or plan to in the future. Another 26% said they do not use it now but expect to in the future. 
Meanwhile, about 12% of advisors said they use cryptocurrencies based on clients’ requests, according to the Cerulli report, and less than 3% of advisors said they use crypto based on their own recommendations.

ETFs are an ‘easy solution’ to add crypto

If investors are interested in crypto, CFP Ashton Lawrence at Mariner Wealth Advisors in Greenville, South Carolina, advises many clients to use exchange-traded funds.

“It’s truly depending upon what the client is looking to achieve and how easy they feel in navigating this market,” he said. “If they’re looking for an easy solution, ETFs might be the best way to go.”
Spot bitcoin ETFs, first available in January, now have more than $100 billion in assets under management, which is about 1% of the overall ETF market.
“Bitcoin ETFs have become the vehicle of choice for bitcoin holders,” Brian Hartigan, global head of ETFs at Invesco, said during CNBC’s “Halftime Report” on Dec. 9.

Lawrence recommends clients interested in crypto limit the allocation to no more than 1% to 5% of their overall portfolio.
Most financial advisors agree that whether to have crypto investments in your portfolio depends on your risk tolerance, financial goals and time horizon. More

The Federal Reserve may announce another interest rate cut this week.
It’s a smart time for cash savers to check whether they’re getting the best available yields, experts say.

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With the Federal Reserve expected to cut interest rates again this week, it’s a great time to earn competitive returns on cash, experts say.
“The best offers on savings accounts, money markets and CDs [certificates of deposit] are still well above inflation, and that’s likely to persist well into 2025,” said Greg McBride, chief financial analyst at Bankrate.

The Fed may cut interest rates by one-quarter of a percentage point on Dec. 18 at the end of its two-day meeting, experts predict. If it does, that would mark the third time the central bank has lowered rates since September, for a total reduction of 1 percentage point.
“There’s an urgency to act now,” McBride said. “You won’t get better yields by waiting.”

Yields may be lower by January

Consumers who are tempted to hold out may miss an opportunity to lock in better returns on their cash.
“If you’ve got money to put to work, there’s a good chance yields are going to be lower next month than where they are today,” McBride said.
By putting that money to work now, you can lock in yields that compare very favorably to inflation, he said.

Treasury bonds and many CDs are offering yields above 4%, with the ability to lock in that return for multiple years at a time, McBride said.
That could be an opportunity for savers who don’t need immediate access to their cash or who are looking to generate interest income or diversify their broader portfolio, he said.
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Another investment — Series I bonds — offers a way to beat inflation, McBride said. I bonds currently pay a guaranteed 1.2% fixed rate above the rate of inflation.
Notably, I bonds have some limitations, including a cap on annual purchases. Moreover, you can’t cash them in in the first year, and you also have to give up three months’ interest if you cash in before the five-year mark, McBride said.
“You’ve got to be pretty sure about your ability to live without the cash in order to get the full bang for your buck,” McBride said.
Alternatively, savers may opt for another government investment that also offers inflation protection — Treasury Inflation Protected Securities. TIPS allow for higher annual investments compared with I bonds, as well as more liquidity, since they can be bought and sold on the secondary market. As of Dec. 16, a five-year TIP yields 1.88% above inflation.

When to prioritize cash liquidity

Whether it makes sense to lock in returns on your cash now largely depends on the outlook for 2025.
With less expectation for additional interest rate cuts in 2025, there may not be as much reason to lock in returns on cash now, said Ken Tumin, founder of DepositAccounts.com.

Moreover, high-yield online savings account rates are generally higher than what CDs now offer, he said. Some online banks are offering over 5% annual percentage yields even on small balances, while the best one-year CD provides 4.65% with a $50,000 deposit.
“One strategy now is just maintaining liquidity in one of the top online savings accounts and not necessarily locking it in,” Tumin said.
Alternatively, savers may hedge their bets, he said, and put half their cash deposits in a high-yield savings account and the other half in longer-term CDs. More

The 4% withdrawal rule is a popular retirement strategy that helps investors withdraw money safely from their accounts, with low odds of running out of money later.
Lower expectations for long-term stock, bond and cash returns means new retirees may need to proceed a bit more cautiously, according to Morningstar.
There are ways retirees can be more flexible with their spending, experts said.

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A popular retirement strategy known as the 4% rule may need some recalibration for 2025 based on market conditions, according to new research.
The 4% rule helps retirees determine how much money they can withdraw annually from their accounts and be relatively confident they won’t run out of money over a 30-year retirement period.

According to the strategy, retirees tap 4% of their nest egg the first year. For future withdrawals, they adjust the previous year’s dollar figure upward for inflation.
But that “safe” withdrawal rate declined to 3.7% in 2025, from 4% in 2024, due to long-term assumptions in the financial markets, according to Morningstar research.
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Specifically, expectations for stock, bond and cash returns over the next 30 years declined relative to last year, according to Morningstar analysts. This means a portfolio split 50-50 between stocks and bonds would have less growth.
While history shows the 4% rule is a “reasonable starting point,” retirees can generally deviate from the retirement strategy if they’re willing to be flexible with annual spending, said Christine Benz, director of personal finance and retirement planning at Morningstar and a co-author of the new study.

That may mean reducing spending in down markets, for example, she said.
“We caution, the assumptions that underpin [the 4% rule] are incredibly conservative,” Benz said. “The last thing we want to do is scare people or encourage people to underspend.”

How the 4% rule works

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In many ways, drawing down one’s nest egg is harder than growing it.
Pulling out too much money early in one’s retirement years — especially in down markets — generally raises the odds that a saver will run out of money in later years.
There’s also the opposite risk, of being too conservative and living well below one’s means.
The 4% rule aims to guide retirees to relative safety.
Here’s an example of how it works: An investor would withdraw $40,000 from a $1 million portfolio in the first year of retirement. If the cost of living rises 2% that year, the next year’s withdrawal would rise to $40,800. And so on.

Historically — over a period from 1926 to 1993 — the formula has yielded a 90% probability of having money remaining after a three-decade-long retirement, according to Morningstar.
Using the 3.7% rule, the first-year withdrawal on that hypothetical $1 million portfolio falls to $37,000.
That said, there are some downsides to the framework of the 4% rule, according to a 2024 Charles Schwab article by Chris Kawashima, director of financial planning, and Rob Williams, managing director of financial planning, retirement income and wealth management.
For example, it doesn’t include taxes or investment fees, and applies to a “very specific” investment portfolio — a 50-50 stock-bond mix that doesn’t change over time, they wrote.

It’s also “rigid,” Kawashima and Williams said.
The rule “assumes you never have years where you spend more, or less, than the inflation increase,” they wrote. “This isn’t how most people spend in retirement. Expenses may change from one year to the next, and the amount you spend may change throughout retirement.”

How retirees can tweak the 4% rule

There are some tweaks and adjustments retirees can make to the 4% rule, Benz said.
For example, retirees generally spend less in the later years of retirement, in inflation-adjusted terms, Benz said. If retirees can enter retirement and be OK with spending less later, it means they can safely spend more in their earlier retirement years, Benz said.
This tradeoff would yield a 4.8% first-year safe withdrawal rate in 2025 — much higher than the aforementioned 3.7% rate, according to Morningstar.
Meanwhile, long-term care is a big “wild card” that could increase retirees’ spending in later years, Benz said. For example, the typical American paid about $6,300 a month for a home health aide and $8,700 a month for a semi-private room in a nursing home in 2023, according to Genworth’s latest cost of care study.

Additionally, investors may be able to give themselves a bit of a raise when markets are up significantly in a given year and reduce withdrawals when markets are down, Benz said.
If possible, delaying Social Security claiming to age 70 — thereby increasing monthly payments for life — may be a way for many retirees to boost their financial security, she said. The federal government adds 8% to your benefit payments for each full year you delay claiming Social Security benefits beyond full retirement age, until age 70.
However, this calculus depends on where households get their cash in order to defer the Social Security claiming age. Continuing to live off job income is better, for example, than leaning heavily on an investment portfolio to finance living costs until age 70, Benz said. More

The Biden administration is still taking steps to deliver sweeping student loan forgiveness to millions of Americans.
The final rule for the so-called “Plan B” for student loan cancellation has been submitted to the Office of Management and Budget for review.
“OMB review is the last step,” said higher education expert Mark Kantrowitz, before the policy is published in the Federal Register.

US President Joe Biden speaks during an event in Madison, Wisconsin, US, on Monday, April 8, 2024. 
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With weeks to go before President-elect Donald Trump takes office, the Biden administration is still taking steps to deliver sweeping student loan forgiveness to millions of Americans.
The U.S. Department of Education has submitted its so-called “Plan B” for student loan cancellation to the Office of Management and Budget for review.

“OMB review is the last step” before the policy is published in the Federal Register, said higher education expert Mark Kantrowitz.
Once the rule is published, the Education Department could begin reducing or eliminating people’s loans, Kantrowitz said.
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President Joe Biden began working on his revised student loan relief plan after the Supreme Court blocked its first program in June 2023. The updated policy targets several groups of borrowers for relief, including those who have been in repayment for decades or attended schools that defrauded them.
“The Biden administration continues to seek student debt relief even in the waning days of his tenure as president,” Kantrowitz said.

The Education Department may also try, in the last month under Biden, to clear the loans of those experiencing financial hardship through a second rule also under OMB review, experts say.
That loan cancellation could reach borrowers “with persistent financial burdens that prevent them from repaying their student loans” and for whom the department’s existing aid options don’t fully help, an Education Department spokesperson said earlier this year.
Biden has already forgiven more student debt than any other president, affecting nearly 5 million people. But Republican-led legal challenges have stymied all of Biden’s attempts at delivering wide-scale relief.
His last efforts could face the same fate. Consumer advocates expect new lawsuits to seek an immediate injunction against Biden’s latest forgiveness plans as soon as they are published in the Federal Register.
A spokesperson for the U.S. Department of Education declined to comment.

Even so, consumer advocates and lawmakers are urging Biden to do everything he can to deliver relief to student loan borrowers before the Trump administration takes over.
Trump and Vice President-elect JD Vance are vocal critics of student loan forgiveness.
Meanwhile, just 15% of Republicans find student loan forgiveness important, compared with 58% of Democrats, according to a national poll from mid-May by the University of Chicago Harris School of Public Policy and The Associated Press-NORC Center for Public Affairs Research.
“Time is running out, and what Biden doesn’t do in the next four weeks will mean tens of millions of working people suffer for four years,” said Braxton Brewington, spokesperson for the Debt Collective, a union of debtors.
On Dec. 4, dozens of lawmakers, including Sen. Bernie Sanders, I-Vt., and Ed Markey, D-Mass., wrote a letter to Education Secretary Miguel Cardona, urging the Department of Education to forgive the debt of borrowers who have applied for relief after being defrauded by their colleges.
Among their requests, the lawmakers asked the Education Department to process the pending borrower defense applications of an estimated 400,000 borrowers. Borrowers can be eligible for that discharge if their schools suddenly closed or they were cheated by their colleges.
“Under the previous Trump Administration, borrowers’ applications were allowed to languish for years,” the lawmakers detailed in their letter. “If their application was reviewed, borrowers often were denied and granted no relief.” More

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Nvidia shares slumped on Monday, putting the AI chip darling officially in correction territory even as the rest of the Nasdaq Composite rose to a record.
The chipmaker and de facto artificial intelligence trade has rallied 166% this year amid ongoing excitement for the buzzy technology trend. However, shares have faced a sluggish stretch as of late.

The stock is down 4.5% in December and officially in correction territory, sitting about 11% off its closing high of $148.88 reached last month. The definition of what comprises a market correction can vary. Many generally regard it as a drop of 10% or more from an all-time high close.
The stock closed down 1.7%.
“You need Nvidia, and you need their chips for infrastructure,” said Keith Lerner, co-chief investment officer at Truist. “But I think what the market’s also saying is that there are other beneficiaries beyond that. There’s a rotation within the Magnificent Seven, which we’ve seen a couple times this year already.”

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Nvidia shares on Monday

The recent underperformance in Nvidia could signal some profit-taking on Wall Street after another marquee year. The maker of graphics processing units underpinning large language models has benefited, as data center demand has swollen since ChatGPT’s late-2022 launch.
But there are some reasons for concern for the market leader and fundamental player among the three major averages. The market has continued powering to new highs as Nvidia underperforms. That could be a warning signal if the pattern continues, with Roth MKM noting that the $125 to $130 level marks a key test for the stock and the overall market.

As Nvidia struggles, other chipmaking stocks have fared well, with Broadcom powering to new highs Monday. The stock surged around 11% during Monday’s session, building on a 24% rally from Friday that pushed the stock above a $1 trillion market capitalization following a strong earnings report.
The Nasdaq Composite hit a record in trading Monday without Nvidia’s help.
“Broadcom’s comments last week probably drove momentum investors to start looking there for even faster growth,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. “Momentum has been driving this stock. I don’t think momentum is going to kill it quite yet, but momentum does what momentum does, which is it seeks the higher flyer.”
Other semiconductor stocks also rallied Monday, with Micron Technology jumping about 6% ahead of its quarterly results this week. Marvell Technology and Lam Research gained 3% and 2%, respectively, while On Semiconductor and Taiwan Semiconductor added around 1% each. More

There is still time to slash your tax bill or boost your refund for 2024, according to financial advisors.
It may be difficult to find assets for tax-loss harvesting or to boost pretax 401(k) employee deferrals.
But you can contribute to your health savings account, make pretax individual retirement account contributions or donate profitable assets to charity.

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As year-end approaches, there’s still time to slash your 2024 tax bill or boost your refund, financial advisors say.  
Typically, you can expect a tax refund when you overpay taxes throughout the year. Alternatively, you get a tax bill when you haven’t paid enough.

Most 2024 tax strategies must be completed by Dec. 31, so there’s limited time to make last-minute moves. 
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After a strong year for the stock market, many investors won’t have tax-loss harvesting opportunities, which can turn portfolio losses into tax breaks.
It could also be too late to boost pretax 401(k) employee deferrals for 2024, which reduces your adjusted gross income.
But there are some key strategies still available, according to financial advisors.

Leverage tax-free ‘compound interest’

If you have a high-deductible health plan, you can funnel money into a health savings account, or HSA, which offers an upfront tax deduction, among other benefits, experts say. 
For 2024, the HSA contribution limit is $4,150 for self-only coverage or $8,300 for family plans. The invested balance grows free of federal taxes and you can withdraw the money tax-free for qualified medical expenses.

You have until the tax deadline to make 2024 HSA deposits, but if you’re investing the balance, starting sooner gives you more time in the market. “You don’t have to wait,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.     
“Get it invested and let the compound interest work for you,” he said.
You also have until the tax deadline for 2024 pretax individual retirement account contributions. But the deduction depends on your filing status, income and workplace retirement plan, so it’s better to wait until you’ve run tax projections for 2024, Lucas said.

Donate profitable assets for a ‘double tax advantage’

When filing your taxes, you take the standard deduction or total itemized deductions, whichever is larger. If you expect to itemize for 2024, you can score a tax break for donations to charity.
Gifting profitable assets offers a “double tax advantage,” because you get a tax break and bypass capital gains taxes, said certified financial planner Rick Nott, managing director at Angeles Wealth Management in Santa Monica, California.
There’s growing interest in the strategy among cryptocurrency investors, with record gains for digital assets such as bitcoin over the past year.
Typically, you can deduct the market value of the investment, as long as you’ve owned it for more than one year. You can claim a deduction capped at 30% of adjusted gross income for public charities. More