Investing

YOUR GUIDE TO NAVIGATING YOUR FINANCIAL FUTURE

The Biden administration has a new proposal to forgive student debt for millions of Americans.
At the same time, this fall’s incoming college students could end up borrowing $37,000, on average, a new study finds.
As problems with the new FAFSA persist, families are even more worried about how they will pay the tab.

Every year, millions of new students are pumped into the student loan system while current borrowers struggle to exit it.
This year, the Biden administration’s new student loan forgiveness plan could start clearing debt for millions of borrowers as soon as this this fall — just as incoming college freshmen start racking up new balances on their path to a degree.

In fact, 2024 high school graduates going on to a four-year school will rely on loans even more, a new report shows.
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These college hopefuls could take on as much as $37,000, on average, in student debt to earn a bachelor’s degree, according to a NerdWallet analysis of data from the National Center for Education Statistics. The analysis was conducted before recent problems with the Free Application for Federal Student Aid.
Once families hit their federal student loan limits, they often turn to parent student loans and private financing to be able to send their children off to college, the report also found.

How student loan debt became a crisis

Tuition and fees have more than doubled over the past 20 years, reaching $11,260 at four-year, in-state public colleges, on average, in the 2023-24 academic year. At four-year private colleges, it now costs $41,540 annually, according to the College Board, which tracks trends in college pricing and student aid.

“Tuition has been going up faster than inflation for decades and incomes have not kept up,” said Sandy Baum, senior fellow at Urban Institute’s Center on Education Data and Policy. “It’s a serious problem.”

Without financial aid, the price tag at some four-year colleges and universities — after factoring in tuition, fees, room and board, books, transportation and other expenses — is now nearing $100,000 a year.
Because so few families can shoulder the rising cost, they increasingly turn to federal and private aid to help foot the bills.
“Tuition and fees is less than half of the total cost of college,” said Ellie Bruecker, interim director of research at The Institute for College Access and Success. “Students will still need financial aid to pay for other needs.”

How families pay for college

As of last year, the amount families actually spent on education costs was $28,026, on average, according to Sallie Mae’s annual How America Pays for College report — up more than 10% from a year earlier.
While parent income and savings cover nearly half of college costs, free money from scholarships and grants accounts for a more than a quarter of the costs and student loans make up most of the rest, the education lender found.
Scholarships are a key source of funding, yet only about 60% of families use them, Sallie Mae found. Those that did, received $8,149, on average.
The vast majority of families who didn’t use scholarships said it was because they didn’t even apply.

Why fewer students are filling out a FAFSA

To get college aid, students must first file a FAFSA.
The FAFSA serves as the gateway to all federal aid money, including loans, work study and scholarships and grants, which are the most desirable kind of assistance.
This year, problems with the new FAFSA have discouraged many high school seniors and their families from completing an application.

As of April 12, only 29% of the high school class of 2024 had completed the FAFSA, according to the National College Attainment Network, a 36% decline compared to a year ago.
With enrollment deadlines approaching, fewer students have figured out how they will pay for college next year.
“Even if all of this had gone perfectly, the financial aid system doesn’t have the same buying power it had years ago,” Bruecker said.
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It can be difficult to comprehend risk, but getting a grasp on it is critical to making good decisions.
Know the facts behind common misconceptions about investing and managing finances that stump many Americans.

Witthaya Prasongsin | Moment | Getty Images

Many U.S. adults are making financial decisions with a generally poor level of financial literacy, a new report finds. Part of the problem: People continue to believe common misconceptions about managing and investing their money.
The TIAA Institute-GFLEC Personal Finance Index gauges an individual’s knowledge of their personal finances. The index, which has been conducted annually since 2017, asks respondents questions about borrowing, saving, earning, investing and other money-related areas.

In the latest version, most people got the correct answers only about half the time. 
Comprehending risk consistently proves to be the most difficult concept for adults to grasp, said economist Annamaria Lusardi, who founded the Global Financial Literacy Excellence Center in 2011 and is a senior fellow at the Stanford Institute for Economic Policy Research. Yet, “when we’re trying to look at the basis of financial decision-making, a key question is the relationship between return and risk,” she said.

More from Your Money:

Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

Here are the facts behind three common misconceptions about investing and managing finances that stump many Americans: 

1. Diversification

MISCONCEPTION: Investing in a single company’s stock usually provides a safer return than a stock mutual fund or exchange-traded fund.
FACT: Investing in one stock is like putting all your eggs in one basket. It exposes your savings to significant loss if the company is in trouble. 

Many mutual funds and exchange-traded funds — especially ones that track a broad market index like the S&P 500 — hedge this risk through diversification, by buying the stock of many different companies.
When it comes to your retirement savings, target-date funds can be another smart option.
“You don’t have to be an investment guru, you can always start with the target-date fund that’s in most retirement plans to get you in the game for a young person,” said Paul Yakoboski, a senior economist with the TIAA Institute.  

Target-date funds have become the most popular investments in workplace retirement plans, such as 401(k)s. As investors approach retirement, the fund’s mix of investments becomes more conservative, decreasing the portion of stocks and increasing the portion of bonds or cash.

2. Return and risk

MISCONCEPTION: Over time, stocks generally give the highest return with little risk when compared with savings accounts and bonds.
FACT: The U.S. stock market is considered to offer the highest investment returns over time, but there is a higher risk as stocks are more volatile than bond prices or cash in a savings account. 

Young couple managing finance and investment online, analyzing stock market trades with mobile app on laptop and smartphone.
D3sign | Moment | Getty Images

“An asset that brings a higher return also has a higher expected risk,” said Lusardi, who is also a member of the CNBC Global Financial Wellness Advisory Board. “People feel like, I can get a higher return with no risk … but basically, a higher return is always a reward for higher risk.”
Investors with a longer timeline toward their goal often have greater opportunities to weather that risk. But if you have a short-term goal, experts typically advise keeping the money out of the market.
For savers and short-term investors looking for a steady return, high-yield savings accounts can be an attractive option, with top interest rates currently hovering between 4% and 5%, according to Bankrate. There’s almost no risk to money in federally insured deposit accounts, unlike investments that are subject to the daily changes in the stock, which can result in much higher risk. 

3. Compound interest

MISCONCEPTION: If you had $100 in a savings account and the interest rate was 4% a year, you’d have $104 after 5 years if you left the money to grow.
FACT: A $100 deposit left in a savings account earning an interest rate of 4% per year over 5 years would total $121.67 with compound interest.
Compound interest can make your savings grow faster since you’re earning interest on the original amount of money deposited plus the interest earned. Check out the Securities and Exchange Commission’s compound interest calculator to calculate the interest you’re earning on your savings. 
Compounding can be one of the greatest gifts for savers and investors, many financial advisors say. You’re not necessarily rewarded for complexity when it comes to your portfolio, said certified financial planner Preston Cherry, a member of the CNBC FA Council and the founder of Concurrent Financial Planning in Green Bay, Wisconsin.
“You’re rewarded for commitment, consistency, and compounding,” he said.
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YOUR GUIDE TO NAVIGATING YOUR FINANCIAL FUTURE

If you work for a publicly traded company, you may have access to discounted company shares via an employee stock purchase plan, or ESPP.
While the benefit can be valuable, you need to know the rules and risks before opting into your company’s plan, financial experts say.

Morsa Images | E+ | Getty Images

If you work for a publicly traded company, you may have access to discounted company shares via an employee stock purchase plan, or ESPP.
While the benefit can be valuable, you need to know the rules and risks before opting into your company’s plan, financial experts say.

In 2020, roughly half of public companies offered an ESPP, according to a 2021 survey from the National Association of Stock Plan Professionals and Deloitte Tax.
If you have access to one, it’s worth considering because “there’s free money to be had,” said certified financial planner Matthew Garasic, founder of Unrivaled Wealth Management in Pittsburgh. 
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But whether and to what extent you decide to participate depends on other short-term priorities and “how comfortable you are sacrificing cash flow” during the offering period, Garasic said.
With limited income, yearly goals like investing up to your employer’s 401(k) match should come before your ESPP, said CFP Kristin McKenna, president of Darrow Wealth Management in Boston.

“People get really excited about them,” she said. “And it doesn’t always make sense.”

How employee stock purchase plans work

During an “offering period,” which is often six months, ESPPs collect after-tax contributions from each of your paychecks and use the money to buy discounted company stock on a specific date. Tax-qualified plans have a $25,000 yearly limit.
The best ESPPs offer a 15% discount with a “lookback provision,” which bases the stock purchase price on the value at the beginning or end of the offering period, whichever is lower, Garasic explained.
For example, with a $20 starting price and $22 ending price, you could get a 15% discount on $20 and pay $17, for total savings of $5 per share, which is a roughly 22.7% discount off the current market price.
Depending on your plan rules, it could be possible to sell quickly after purchasing to “lock in that immediate gain,” Garasic said. But you’ll owe regular income taxes on the discount, plus levies on the gain after the purchase date.
However, there’s no guarantee of future stock performance. If you hold it for longer, “you’re gambling on the stock price cooperating over that period,” Garasic said.

In 2023, some 85% of qualified ESPPs offered a 15% discount, up from 70% of ESPPs in 2020, according to a recent survey from the National Association of Stock Plan Professionals.  
The percentage of ESPPs with lookbacks has also increased, the same survey found. In 2023, 83% of plans offered a lookback, compared to 64% in 2020. 
Still, you should carefully read the plan documents before opting in. It’s important to know whether the plan is “qualifying,” which changes the tax treatment, the length of the offering period, purchase dates, how to make changes and what happens if you leave the plan, experts say.
The rules can be “overly complicated,” said McKenna from Darrow Wealth Management. “It just seems like killing a fly with a sledgehammer.”
“But it can certainly be a lever that some people want to consider,” she added. More

Women and Wealth Events
Your Money

TikTok’s latest “tradwife” and “stay-at-home girlfriend” trends show an idealized view of adhering to very traditional gender roles.
Staying at home necessitates a degree of privilege that fewer young adults have these days.
If anything, women are working more, not less, and forgoing paid labor comes at a steep economic cost.
Some men are scaling back at work, a recent study shows.

If TikTok is any guide, more women are taking a traditional approach to romantic partnerships: Some say they are even opting out of the workforce entirely in favor of the so-called “soft life,” centered around their home, their family and their own wellbeing.
(Re-)enter the “tradwife,” one of social media’s growing trends. It shows a curated look at women embracing domesticity as the antithesis of what other young women are experiencing, who are “working hard and barely scraping by,” said Casey Lewis, a social media trend forecaster.

“The thing about tradwives is that it feels very different; it is an escape from a lot of people’s reality,” she said.
Experts say it’s a facade. Evidence shows this is something few women are actually doing, and it’s not a realistic lifestyle to aspire to.

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Here’s a look at more coverage in CNBC’s Women & Wealth special report, where we explore ways women can increase income, save and make the most of opportunities.

When it comes to women and money, the data largely isn’t favorable.
Although women are achieving increasing levels of education and representation in senior leadership positions at work, they still earn just 84 cents for every dollar earned by men — a dynamic that has shown no significant signs of improvement in decades. As a result, women are more likely to be financially vulnerable and have less saved for retirement and other long-term goals.
Even as women’s economic standing improves, they still lag their male counterparts by almost every financial measure. “I can understand individuals that say it’s just too much,” said Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York.

‘There’s nothing new here’

These are old ideas with fresh taglines, “Fair Play” author Eve Rodsky says of tradwives and the related social media trend of stay-at-home girlfriends, or SAHGs: “That is the definition of patriarchy — there’s nothing new here.”
“Tradwives are pretending they have agency over their choices,” Rodsky said. But forgoing paid labor comes at an economic cost. “The tradwife or stay-at-home girlfriends are taking huge economic risks,” she added. “What that really means is that you don’t have economic security.”

Francis, who is a member of CNBC’s Financial Advisor Council, advises her female clients to consider that they “at some point in their life are going to be solely responsible for making financial decisions on their own.”
Social media portrays a glamorized view of what that life looks like but “that is not realistic,” Francis said. Financial dependence can also mean a loss of power or control, she added.
For SAHGs, creating an imbalance in a relationship at the outset is more troubling, said Heather Boneparth, co-author of The Joint Account, a money newsletter for couples. “For the stay-at-home girlfriend, the power dynamic is even more skewed in favor of their partner because they really have everything to lose.”

Staying at home also necessitates a degree of privilege that fewer young adults have these days. In reality, most people are living paycheck to paycheck. More than three-quarters, or 78%, of millennials in the U.S. are in a “dual career couple,” compared with baby boomers at 47%, according to the Berkeley Haas Center for Equity, Gender and Leadership.
Two partners working full-time is increasingly necessary to achieve the American dream — which for many people involves some combination of owning a home, getting married, having kids and making enough after expenses to save for retirement and spend on leisure.
Today’s young adults are having a harder time reaching those key milestones, at least compared with their parents a generation ago, according to a recent report by the Pew Research Center.

‘Step back and do less’

There is a disillusionment taking hold among younger Americans, studies show. Generation Z is increasingly less motivated by the daily grind and adopting a more relaxed approach to their long-term financial security, according to a recent Prosperity Index study by Intuit. 
In the current climate, newly minted adults between the ages of 18 and 25 are more interested in experiences that promote personal growth and emotional well-being, the report found.
Young women, whether they’re married or not, are expressing a desire to “take a step out of the professional rat race,” Lewis said.
“There’s a lot of pressure on young women,” she said. Being a stay-at-home girlfriend or tradwife is “an excuse to step back and do less.”

But if anything, women are working more now, not less.
“Prime-age women, including mothers, are participating in the labor force more than ever before,” said Julia Pollak, chief economist at ZipRecruiter.
By 2023, women’s employment had recovered from pandemic-era losses. In 2024, the labor force participation rate for women ages 25-54 neared an all-time high, according to the Bureau of Labor Statistics.

In other words, you can choose to be a tradwife if you have a tradhusband.

Julia Pollak
Chief economist at ZipRecruiter

Of course, even in households where both partners work, many marriages still adhere to traditional gender roles. In cases where men are the primary breadwinners, it’s more often women who take on the bulk of the caretaking responsibilities, experts say. 
“In other words, you can choose to be a tradwife if you have a tradhusband,” Pollak said.

‘A big change happening’

In at least some marriages or partnerships, couples are reevaluating ideas about work and family and striking a balance between the two.
Recently, it’s actually men who are choosing to scale back at work, particularly high earners with higher levels of education, according to a 2023 working paper published by the National Bureau of Economic Research.
“The pandemic may have motivated people to re-evaluate their life priorities and also gotten them accustomed to more flexible work arrangements (e.g., work from home), leading them to choose to work fewer hours, especially if they can afford it,” the researchers wrote.
“There’s a great new set of men who are saying that overwork is not their first priority anymore,” Rodsky said of those men who may have already logged long hours and are now dialing back.
“The dark side of the pandemic was this ‘banana-bread-tradwife’ recycling of old ideas; the exciting side is this big change happening.” More

YOUR GUIDE TO NAVIGATING YOUR FINANCIAL FUTURE

Young adults are more likely than older cohorts to say that “owning my own business” is key to their financial security, according to a CNBC-SurveyMonkey poll.
CNBC, in partnership with Junior Achievement, brought together business leaders in the Denver area to speak with students about their journey in founding a company.
Successful entrepreneurs work through challenges, learn quickly from failure and surround themselves with people who support them.

The Junior Achievement Free Enterprise Center located in Greenwood Village, Colorado, is where high school students can explore careers and develop a plan to pursue their goals. The center aims to inspire the next generation of entrepreneurs.
Entrepreneurship is a common goal for younger people.

More than half, or 54%, of Gen Z adults say that they think they’d be happier owning their own business than working a normal day job, according to CNBC and SurveyMonkey’s new Workforce Survey. The survey polled 5,993 U.S. adults in the workforce in early April — including 770 Gen Z respondents age 27 and younger.

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“There’s a recipe for finding your path to purpose,” said Robin Wise, the president and CEO of Junior Achievement Rocky Mountain. “It’s seeing people do things that you might want to do. It’s knowing yourself.” 
In partnership with Junior Achievement, CNBC brought together business leaders in the Denver area to speak with students about their journey in founding a company. Here are five key pieces of advice that they shared:

‘Embrace what makes you different’ 

Mowe Haile, Founder of Sky Blue Builders, Darian Simon Cofounder of Be a Good Person, and Robin Thurston, Founder and CEO of Outside Interactive, Inc. speak with students about entrepreneurship.
Caitlin Steuben | CNBC

Darian Simon co-founded the clothing company Be a Good Person in 2015 to inspire positivity. He advises young people to “embrace what makes you different.”
Simon was diagnosed with autism and ADHD, or attention-deficit/hyperactivity disorder, at age 28. Now 30, he said he rejects the “disorder” part of the diagnosis and embraces it as his superpower.

“My greatest strengths are my neurodivergence because I have less inhibitive space in my brain, therefore I can ideate better,” he said. “Therefore the box doesn’t really exist in the same ways.”

Value adaptability

Robin Thurston sold his digital fitness technology start-up to Under Armour for $150 million in 2013. He recently founded Outside Interactive, a network of media brands in endurance sports, the outdoors and healthy living.
He compares starting a business to going on a difficult hike and advises keeping that analogy in mind as you embark on the journey — you’ll need to embrace the unknown, recognize that things are unlikely to go according to plan and work through inevitable difficulties, he said.
“That’s what great entrepreneurs do,” Thurston said. “They’re resilient, and they work their way through those challenges.” 

Recognize challenges ‘as opportunities’

Camila Uzcategui co-founded Vitro3D, a company that uses 3D printing-like technology in advanced manufacturing spaces, in 2020. She said her background in physics and interest in experimenting with technology taught her the value of failure. 
“In all of those challenges, I like to see them as opportunities to either pivot into a potentially new direction or pivot into a better way of understanding something,” Uzcategui said.

Expect excellence from your team

Mowa Haile founded Sky Blue Builders, a construction company, during the Great Recession in 2009. He said it’s important to surround yourself with people who share your passion — and always expect excellence from them.  
“When you’re an entrepreneur and you have a team, you’re there to coach them and lead them and encourage them,” he said. 

Surround yourself with the right people

Lara Merriken founded Larabar, a company that makes vegan, gluten-free, plant-based bars, in 2000 after a career in social work.
“A lot of people were literally naysayers,” she recalled. “They were just like, why would you do this? Why would you get into a category that’s oversaturated?” 
She said that identifying and working with trusted confidants who were supportive and encouraging were critical to the company’s success. She sold Larabar to General Mills in 2008 for about $55 million. 
Another recipe for success is to learn from other entrepreneurs’ stories, Merriken said. “While we have our companies, we still need inspiration every day.”
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YOUR GUIDE TO NAVIGATING YOUR FINANCIAL FUTURE

Health care, long an ailing stock market sector, has recovered over the past six months.
Several analysts are projecting strong performance for this year.
Health care is a defensive redoubt for investors because demand isn’t affected by the economy.

The Good Brigade | Digitalvision | Getty Images

Health care, long an ailing stock market sector, has recovered over the past six months, with currently robust vital signs and strong growth projections.
The recovery comes after the sector failed to make good on positive expectations for 2022 based on estimates of pent-up demand for physician office visits and elective procedures after the pandemic.

Health care was basically flat in 2022 and again for most of 2023, a year when its overall performance was the third-worst among the market’s 11 sectors and the S&P 500 grew 26%.

Why this year may be different

Late in 2023 and in the first quarter of 2024, health-care stocks turned around, advancing about 5%, about half of the gain of the S&P 500. In mid-April, as the S&P 500 pulled back, the health-care sector gave up its first-quarter gains.
Yet, like the S&P 500, health care has gained since the market’s October low, catching some wind after two years of doldrums for the sector. 
Several analysts are projecting strong performance for this year. BlackRock’s view is particularly sanguine: “Health care’s 12-month forward earnings growth is expected to lead all other sectors on a year-over-year basis.”

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One factor driving investment is the broadening of market performance from big tech stocks into other sectors. Amid this perennial sector rotation, health-care stocks are a natural place for money to flow now because they’re defensive, having historically done well in slowing and growing economies alike.

This defensive advantage has been drawing investment from institutional investors expecting slowing economic growth at this late stage of the business cycle, as the Federal Reserve estimates growth of 2.5% for the first quarter compared with 3% in 2023.  

Constant demand

Health care is a defensive redoubt for investors because demand isn’t affected by the economy. People will always need health care, and insured people will usually seek it, regardless of what the economy’s doing.
For many individuals, a slowing economy may lead to less job security, prompting them to spend less. This may mean putting off buying a new car or remodeling the kitchen, but not medical care.
Further, demand is unflagging from baby boomers on Medicare, including those with supplemental plans with relatively low deductibles and co-pays.
Also driving the sector has been a shift in investor sentiment, with buzz surrounding new pharmaceuticals, such as GLP-1 drugs for treating diabetes and effecting weight loss, and robotic technology enabling minimally invasive techniques for complex surgeries.

GLP-1 drugs have doubled Eli Lilly’s share price over the past 12 months, bringing its trailing price-earnings, or P/E, ratio for that period to a lofty 129. Over the same period, Intuitive Surgical’s robotic da Vinci Surgical System helped the company grow its stock 42%, bringing its trailing P/E ratio to 75.
Though these two stocks may continue to do well this year, health-care companies that probably have more room to grow, as indicated by their lower valuations, aren’t scarce. They can be found in various subsectors, including biotech, providers/services, equipment/supplies and life science tools/services.

Six stocks to watch

Here are six stocks with attractive valuations, low-risk fundamentals, good earnings and strong growth projections:

Abbvie (ABBV). This well-known biotech company has an unusually high dividend yield — currently, 3.83%. Products include drugs for treating psoriatic arthritis, plaque psoriasis, Crohn’s disease, depression and some cancers. Market cap: $286 billion. Trailing 12-month P/E ratio: 16.3.

Vertex Pharmaceuticals (VRTX). This biotech company is a dominant player in the market for cystic fibrosis therapies. After announcing largely positive results from a clinical trial of a non-opioid acute pain drug in January, the company said it would apply for regulatory approval at midyear. The goal is to capture some of the huge market share of opioids, which carry the risk of addiction. Market cap: about $102 billion. Trailing P/E: 28.

Stryker Corp. (SYK). This medical device company manufactures various implants for spinal conditions and joint replacements for knees, hips and shoulders. Stryker benefits from sustained demand from aging boomers with deteriorating joints. Market cap: $129 billion. Trailing P/E: 33.

Medpace Holdings (MEDP). At 43, Medpace’s trailing P/E may seem high, but the share price has risen 63% over the last six months. A contract research organization, Medpace provides client companies with expertise and services to help them shepherd new drugs and medical devices through the different phases of development. Market cap: $12 billion.

Iqvia Holdings (IQV). This biotech company operates at the intersection of health care and technology, providing analytics, tech solutions and clinical research services to inform decision-making at hospitals and R&D organizations. P/E: 31. Market cap: $42 billion.

Cencora (COR). Though Cencora’s share price has risen more than 27% over the last six months, earnings growth gives this provider of pharmaceutical supply-chain solutions and services for the human and animal markets a relatively low trailing P/E — 26. Market cap: $47 billion.

Since 1952, presidential election years have been consistently positive for the overall market, especially when an incumbent is running. But health-care stocks are sometimes an exception because the sector is a political punching bag for candidates pledging to cut costs for consumers. Stock prices may dip from such rhetoric, creating buying opportunities.
Current projections indicate that investors now buying shares of health-care companies with good fundamentals and strong market positions, and holding them into 2025, may be positioned for strong gains.
— By Dave Sheaff Gilreath, a certified financial planner, and partner/founder and chief investment officer at Sheaff Brock Investment Advisors and its institutional arm, Innovative Portfolios. Sheaff Brock Investment Advisors placed #10 in CNBC’s FA100 rankings. More

The U.S. Department of Labor issued a final “fiduciary” rule on Tuesday that aims to raise investment-advice standards in retirement accounts.
The regulation follows an initial Biden administration proposal in October 2023.
President Obama also tried to crack down on conflicts of interest among brokers, advisors, insurance agents and others who give retirement advice. That rule was killed in court.

The U.S. Department of Labor headquarters in Washington.
Al Drago/Bloomberg via Getty Images

The Biden administration issued a final rule on Tuesday that cracks down on the investment advice that advisors, brokers, insurance agents and others give to retirement savers.
The U.S. Department of Labor regulation — which follows a rule proposal in October — aims to ensure that investment recommendations are in savers’ best interests, according to agency officials.

In legal terms, the final rule expands the scope of when a broker, advisor or other intermediary must act as a “fiduciary,” meaning they are required to give advice that puts the client first.
The final rule takes effect on Sept. 23. It takes up the mantle of a prior effort by the Obama administration to rein in conflicts of interest in retirement accounts. That Obama-era “fiduciary” rule, which experts say was broader than Biden’s measure, was killed in court.
Current retirement rules don’t provide adequate protections to savers, Labor Department officials said during a press call Tuesday.
Often, advice is tainted by “significant conflicts of interest” and in many circumstances there’s “no obligation” to act in retirement customers’ best interests, said Lisa Gomez, assistant secretary of the Employee Benefits Security Administration.
“That’s not right,” Gomez said.

The Labor Department is trying to restrain bad actors relative to two big areas of advice: rollovers from 401(k) plans to individual retirement accounts and purchases of insurance products like annuities, according to retirement and legal experts.
In certain instances, conflicts of interest may allow financial professionals to recommend a transaction that pays them a higher fee but isn’t necessarily best for the client. Such a dynamic can “chip away” at Americans’ savings, Gomez said.
The Council of Economic Advisers estimates Americans lose up to $5 billion a year due to conflicts of interest relative to one insurance product, an indexed annuity.
“For too many people, the retirement plan savings they have through their job are by far the single biggest sources of savings they have,” Gomez said. “These important and tax preferred savings deserve protection, and it is the Department of Labor’s job to make sure they are protected.”

The number of 401(k)-to-IRA rollovers is ‘astronomical’

The final rule doesn’t differ significantly from the Biden administration’s initial proposal, Labor officials said.
Its elements kick in over two time periods.
Starting Sept. 23, the financial industry must acknowledge fiduciary status when working with clients and adhere to “impartial conduct standards.”
Those standards mean financial professionals, when giving personalized investment advice to customers, have an obligation to be prudent, loyal and truthful and charge reasonable fees, for example, Labor officials said.
The remaining parts of the rule start a year later, in September 2025, officials said.
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Americans rolled over about $779 billion from 401(k)-type plans into IRAs in 2022, according to data cited in a Council of Economic Advisers analysis. Rollovers are common upon retirement, and the annual rollover dollar sum has grown as more baby boomers enter their retirement years.
“The amount of money being rolled over is astronomical,” said Andrew Oringer, partner and general counsel at the Wagner Law Group.
“That juxtaposition of an enormous amount of money and a compensation system that can incentivize the seeking of the rollover without regard necessarily to the best interest of the participant is something that has concerned the Department of Labor,” Oringer said.   

Meanwhile, industry groups say the regulation isn’t necessary and would harm the very retirement savers the Labor Department is trying to protect.
In a statement, the American Council of Life Insurers, a trade group, said the new regulation is “alarmingly similar to the Department’s 2016 regulation” under President Obama.
Before being overturned, that rule caused more than 10 million investor accounts with $900 billion in total savings to lose access to professional financial guidance, the group said.
Additionally, federal and state rules governed respectively by the Securities and Exchange Commission and National Association of Insurance Commissioners already offer “robust” consumer protections for retirement savers, ACLI said.
However, there appears to be concern from the Labor Department that the “reach and substance” of those regulatory schemes are “insufficient” in the retirement content, and it is trying to “level the playing field,” Oringer said.
Labor officials also said Tuesday that the final fiduciary rule differs significantly from the Obama-era regulation.
“We have done our level best to write a rule that takes the teaching of the Fifth Circuit [Court of Appeals], the lessons we learned from the [public] comments,” and draft a rule that protects investors without putting “undue burden” on the financial industry, said Timothy Hauser, deputy assistant secretary for program operations at the Employee Benefits Security Administration.

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After the Supreme Court blocked President Joe Biden’s first plan to forgive student debt, his administration set out to create a relief package that would survive legal attacks.
Here’s why the U.S. Department of Education thinks the revised plan will endure.

US President Joe Biden speaks about student loan debt relief at Madison Area Technical College in Madison, Wisconsin, April 8, 2024. 
Andrew Caballero-Reynolds | AFP | Getty Images

The aid package is narrower

Biden’s 2020 campaign promise to erase student debt was thwarted at the Supreme Court in June.
The majority-conservative court ruled that Biden didn’t have the authority to erase $400 billion in student debt without prior authorization from Congress. Biden had tried to forgive the debt of nearly all 40 million federal student loan borrowers, with many people getting up to $20,000 in cancellation.
This time, the Biden administration has narrowed its aid by targeting specific groups of borrowers, including those who’ve been in repayment for decades or attended schools of low-financial value. It hopes this will help the plan survive in front of a court that is skeptical of broad loan cancellation, experts say.

More than 25 million borrowers still stand to benefit from the program.
As a result, for critics of broad student loan forgiveness, Biden’s new plan looks a great deal like his first.

After the president touted his revised relief program on April 8, Missouri Attorney General Andrew Bailey, a Republican, wrote on X that Biden “is trying to unabashedly eclipse the Constitution.”
“See you in court,” Bailey wrote.

There’s a different legal justification

In addition to the fact that this effort is a more targeted aid program, the U.S. Department of Education is also using a different law — the Higher Education Act — as its legal justification. Biden’s first forgiveness plan was based on the Higher Education Relief Opportunities for Students Act, or HEROES Act, of 2003.
The HEROES Act was passed in the aftermath of the 9/11 terrorist attacks and grants the president broad power to revise student loan programs during national emergencies. The Biden administration initially tried to use this law because, at the time, the country was under national emergency status from the Covid-19 pandemic.

However, the conservative justices didn’t buy that argument.
Chief Justice John Roberts wrote in the majority opinion for Biden v. Nebraska: “But imagine instead asking the enacting Congress a more pertinent question: ‘Can the Secretary use his powers to abolish $430 billion in student loans, completely canceling loan balances for 20 million borrowers, as a pandemic winds down to its end?'”
“We can’t believe the answer would be yes.”
The HEA, which the Biden administration is now using, was signed into law by President Lyndon B. Johnson in 1965 and allows the Education secretary some authority to waive or release borrowers’ education debt.
When Sen. Elizabeth Warren, D-Mass., was running for president in 2020, she pointed to the HEA as a law that would allow her to deliver sweeping loan relief.
“This authority provides a safety valve for federal student loan programs, letting the Department of Education use its discretion to wipe away loans even when they do not meet the eligibility criteria for more specific cancellation programs,” Warren wrote in her student loan forgiveness proposal back then.

Biden administration is using rulemaking process

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