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    ETFs have been ‘a huge growth engine in the fund universe,’ expert says. What to know before you invest

    ETF Strategist

    While investors have many asset options to choose from, ETFs may offer a distinct advantage, experts say.
    Here’s what to consider before adding these funds to your investment portfolio.

    Thomas Barwick | DigitalVision | Getty Images

    It’s tempting to follow the crowd when it comes to investing.
    While that may not always be wise, experts say one investment vehicle — exchange-traded funds — might be worth a second look now.

    “It’s been a huge growth engine in the fund universe,” said Bryan Armour, director of passive strategies research for North America at Morningstar, a provider of investment research.

    More from ETF Strategist

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

    “That’s led to more products, more strategies, more active managers moving into the ETF space than ever before,” Armour said.

    ETFs offer ‘the best of both worlds’

    Year over year, more money has gone into ETFs than mutual funds. In 2022, the range was widest, Armour said.
    ETFs, which first debuted in the 1990s, are much younger than mutual funds. They also offer certain distinct characteristics.
    “Our research has shown over the years that cost is one of the best predictors of future success,” Armour said. “And ETFs are a lot cheaper than mutual funds.”

    ETFs are priced, and can be traded, throughout the day. Mutual fund orders, in contrast, are typically executed once a day, with all investors receiving the same price.
    “It’s a mutual fund that trades like a stock,” Todd Rosenbluth, head of research at VettaFi, said of ETFs.
    Rosenbluth, a former stock and mutual fund analyst, today focuses specifically on ETFs, which he said “offers the best of both worlds.”
    To be sure, while ETFs offer distinct advantages, they also have their downsides.

    What you will pay to invest in ETFs

    Jerry 2313 | Getty Images

    ETFs offer several advantages when it comes to costs. There’s no investment minimum, as long as you can pay for a share, Armour said. And, in some cases ,you may be able to buy fractional shares, or a portion of a share.
    ETFs also come with lower average expense ratios, fees investors pay for the management of a fund, Armour said. Plus, there are no distribution fees to compensate brokers who sell fund shares or pay for advertising, and there are no sales loads, or commissions to the professional selling you the fund.
    ETFs also do not have to hold as much cash, which keeps their money invested in the strategy you’re buying, Armour said. Mutual funds, in contrast, hold cash to pay for redemptions, whereby investors are returned the money they paid for their shares.
    “ETFs are just generally less expensive,” Rosenbluth said.
    Of note, ETF investors may have to pay a flat commission fee to trade.

    Tax consequences of investing in ETFs

    Mutual funds have yearly distributions where they pass down capital gains and dividends to shareholders.
    Mutual fund investors may owe either short- or long-term capital gains on those distributions, depending on how long they have been invested in the fund.
    Because long-term capital gains come with lower rates, they’re preferable. However, if an investor has held the fund for a year or less, they will have to pay higher short-term capital gains rates.
    While some mutual funds were down substantially in 2022, that prompted investors to redeem their shares, which also triggered capital gains, Armour noted.

    Our research has shown over the years that cost is one of the best predictors of future success. And ETFs are a lot cheaper than mutual funds.

    Bryan Armour
    director of passive strategies research for North America at Morningstar

    “As a fund holder in a mutual fund, you’re at the whims of other fund holders,” Armour said. “If they start selling, that might mean a taxable event for you.”
    With ETFs, there’s no such similar taxable event, he noted.
    “They’re much, much more tax-efficient than a mutual fund,” Armour said.
    Of course, ETF investors will not be able to completely avoid taxes. They will have to pay taxes on their own capital gains. But because they get flexibility to choose that timing, they can hold off until they are eligible for the lower long-term rates.

    ‘It’s just an easier way to invest’

    ETFs are a more efficient way of accessing a stock, bond or any other market asset class, according to Rosenbluth.
    “You get the benefits of trading on an exchange; you get the benefits of diversification,” Rosenbluth said. “It’s just an easier way to invest.”
    By investing in a fund rather than a single name stock, investors can hedge their risks.

    “Stock picking can be very challenging, even for the pros,” Armour said.
    ETF investors can also pick from a broad array of strategies, whether it be active or passive, or focused on emerging trends like artificial intelligence, cannabis or clean energy.
    To be sure, there are limits. Generally, 401(k) plans do not offer ETFs in their investment lineup.
    Moreover, investors interested in cryptocurrencies will still get the purest exposure by trading cryptocurrencies directly. But that may be poised to change, with spot Bitcoin ETFs in the works provided the SEC approves them. More

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    Spot bitcoin ETF approval by the SEC is approaching, experts say. What that means for investors

    ETF Strategist

    Bitcoin investors are waiting for regulators to approve the first U.S. spot bitcoin exchange-traded fund, which could be significant for investors, experts say.
    The Securities and Exchange Commission has not yet signed off on spot bitcoin ETF applications, but experts say the first approval could come early in 2024.
    “It still remains an extremely volatile and speculative asset,” said Bryan Armour, director of passive strategies research for North America at Morningstar.

    Wael Alreweie | Istock | Getty Images

    Bitcoin investors are eagerly waiting for regulators to approve the first U.S. spot bitcoin exchange-traded fund, which could be significant for cryptocurrency investors, experts say.
    Last week, the price of bitcoin notched an 18-month high, climbing to $37,970, after BlackRock took first steps toward an ether ETF. The price of bitcoin has more than doubled since the start of 2023, but it’s still well below its November 2021 peak.

    At least nine asset management firms — including BlackRock, WisdomTree, Valkyrie and others — are waiting for Securities and Exchange Commission approval to issue a spot bitcoin ETF. Experts say the first approval could come early in 2024.
    More from ETF Strategist:3 big reasons exchange-traded funds went ‘mainstream’Here’s how to use ETFs in 3 popular investing strategiesETFs among top 3 products more popular since 2020
    “For ETF investors, this would be the best product on the market,” said Bryan Armour, director of passive strategies research for North America at Morningstar. “All the other options right now have flaws to varying degrees.”
    Currently, U.S. investors can buy bitcoin futures ETFs, which own bitcoin futures contracts, or agreements to buy or sell the asset later for an agreed-upon price. The long-awaited bitcoin spot ETF would invest in the digital asset directly.

    Loading chart…

    If the SEC signs off on a spot bitcoin ETF, Armour anticipates a “batch approval,” with multiple ETF listings on the same day. “I would expect them to rule on spot ETFs holistically because most issuers are taking similar approaches” with applications, he said.

    “There are a lot of good signs that the SEC is taking the most recent batch of filings more seriously,” Armour said. “I’m more optimistic about a bitcoin ETF than ever before.”
    Some crypto investors expect a bitcoin rally upon approval, but it’s also possible the price will dip as investors sell to collect profits, Armour said.

    Still an ‘extremely volatile’ asset

    While SEC approval of a spot bitcoin ETF may make the asset class more accessible to the masses, experts urge investors to consider their risk tolerance and goals before piling in.
    “I think it depends on the investor,” said certified financial planner Ben Smith, founder of Cove Financial Planning in Milwaukee. If you’re a more aggressive investor with an appetite for higher risk, a spot bitcoin ETF could fit into a diversified portfolio, he said.

    Still, experts often suggest limiting cryptocurrency exposure, such as 1% to 5% of your allocation, to minimize downside exposure. “It still remains an extremely volatile and speculative asset,” Armour added.
    Some 72% of financial advisors said they would be more likely to invest in crypto if spot ETFs were approved in the U.S., according to a 2022 Nasdaq survey of 500 advisors. 
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    It’s open enrollment season for health coverage. If you’re self-employed, you can’t afford to ignore it

    Year-end Planning

    The stakes are high during open enrollment for Americans who are freelancers, consultants, independent contractors and other self-employed individuals.
    If you need to buy individual or family health insurance coverage, the next few weeks could be your only chance for 2024.
    Most states set a deadline of Dec. 15 for coverage that begins Jan. 1, so don’t delay when it comes to signing up for benefits.

    Getty Images

    Open enrollment season can be a time of trepidation for the self-employed. 
    The stakes are especially high because if you need to buy individual or family coverage, the next few weeks could be your only chance for 2024, barring certain exceptions such as moving to a different state, getting married, divorced or having a child. 

    “For most people, the nationwide open enrollment period for individual and family coverage is your best shot to review your options and enroll in a new plan,” explained Anthony Lopez, vice president of individual and family and small business plans at eHealth, a private online marketplace for health insurance, in an email.

    More from Year-End Planning

    Here’s a look at more coverage on what to do finance-wise as the end of the year approaches:

    Picking health insurance on your own — without the help of a human resources department — can be daunting. Instead of throwing up your hands in frustration, here are answers to questions self-employed individuals often have about open enrollment.
    Healthcare.gov and other options for information
    Freelancers, consultants, independent contractors and other self-employed individuals can visit www.healthcare.gov to research and enroll in flexible, high-quality health coverage, either through the federal government or their state, depending on where they live. You can also choose to work directly with an insurance agent or with a private online marketplace to help you wade through options. To be considered self-employed, you can’t have anyone working for you. If you have even one employee, you may be able to use the SHOP Marketplace for small businesses. 
    The deadlines you need to stay on top of
    Most states set a deadline of Dec. 15 for coverage that begins Jan. 1, so don’t delay when it comes to signing up for benefits, said Alexa Irish, co-chief executive of Catch, which helps self-employed individuals choose health-care plans. Also, remember to pay your first month’s premium before your health care is supposed to start or you’ll be out of luck as well. “If you miss those deadlines, there’s no wiggle room,” said Laura Speyer, co-CEO of Catch.
    If you are already enrolled in a marketplace plan
    Those who were already enrolled in a plan last year can make changes by Dec. 15 for coverage that begins Jan. 1. Doing nothing will mean they are automatically reenrolled in last year’s marketplace plan. 

    Qualifying for tax credits and other savings
    Many people assume they won’t be entitled to savings, but they should still investigate their options, Irish said. Indeed, 91% of total marketplace enrollees received an advance premium tax credit in February 2023, which lowers their monthly health insurance payment, according to data from the Centers for Medicare & Medicaid Services, a federal agency within the U.S. Department of Health and Human Services.
    Credits and other eligible savings are available based on an applicant’s income and household size and can be estimated even before they officially apply. It’s advisable to check for savings possibilities every year, Irish said.
    What to consider in making coverage decisions
    The thought process will be similar to what you went through when picking health insurance offered by an employer. Whether you are signing up for the first time — or deciding whether to renew your existing plan or choose a different one — you’ll want to consider factors such as who in the family needs the coverage and for what purposes, and how different plans compare in terms of coverage options and cost. This analysis needs to take into account copays, prescription drugs you take or may start to take, whether the plan covers your doctors, and out-of-pocket maximums. 

    If you’re self-employed and aiming to grow your business in the coming year, possibly by hiring employees, it’s good to know you can enroll in a small business plan at any time of the year, Lopez said. “Small business group plans aren’t governed by the same open enrollment rules as individual and family plans. So, you can enroll in an individual plan today, then switch over to a group plan in mid-2024 if you add a couple employees and want to provide them with health benefits,” he said.
    How much health insurance costs the self-employed
    Cost will vary, depending on the plan you choose, who is covered and what subsidies you’re eligible for. But, as a general guide, the average total monthly premium before tax subsidies in February 2023 was $604.78. The average total premium per month paid by consumers after the tax subsidies was $123.69, according to the Centers for Medicare & Medicaid Services.
    Self-employed individuals may also be eligible for a cost-sharing reduction, a discount that lowers the amount paid for deductibles, copayments and coinsurance. You’ll find out what you qualify for when you fill out a marketplace application, but keep in mind, you need to enroll in a “Silver” plan, one of four categories of marketplace plans, to get the cost-sharing reduction. 
    Wading through policy options, working with an agent
    You don’t have to go through the process alone. There are assisters who are trained and certified by marketplaces to help you apply and enroll. If you want more specific help, you can also choose to work with an agent or broker who is trained and certified to sell marketplace health plans in the state they are licensed. Agents can advise you and give you more detailed information about the plans they sell, and since health insurance premiums are regulated by your state’s Department of Insurance, you don’t have to worry about paying more by working with an agent.

    A few things to note: Some agents may offer other plans that aren’t available on government exchanges, but that comply with government requirements. However, to take advantage of a premium tax credit and other savings, you must enroll for a plan through a state or federal marketplace, on your own or through an agent. 
    The risk and reward of high-deductible plans
    Marketplaces offer multiple plans to choose from and they will vary in terms of coverage and price. One option that’s becoming more popular, especially with young entrepreneurs, is called a high-deductible health insurance plan. This type of insurance plan comes with higher deductibles in exchange for lower premiums, which could be a good choice for people who are healthy and don’t visit the doctor much. Another benefit of a qualified high-deductible plan is the ability to contribute to a tax-advantaged savings vehicle known as a health savings account, or HSA. 
    When deciding whether to choose a high-deductible plan, individuals should take into account factors such as how often they visit the doctor, how much they can afford to pay out of pocket, whether their doctors are in network and what the out-of-pocket maximums are. It’s also important to know you have the means to cover a high-cost medical event, should the need arise. If a high-deductible plan makes sense for your circumstances, you can then consider an HSA.
    Lopez recommends people don’t delay when it comes to reviewing their coverage options, which may also include dental and vision insurance. “The last week or so of open enrollment can be a busy time for licensed agents too; if you want the best chance of talking to an agent to get your personal questions answered, don’t put it off.”
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    Exchange-traded funds are among the top 3 investment products that got more popular from 2020, survey finds

    ETF Strategist

    Exchange-traded funds came in third among the top 10 investment products that grew in popularity in U.S. households from 2020 to 2022, according to a new survey.
    Consumers are also more aware of what investment products they own compared with a decade ago.
    “It makes me excited that more households are able to even answer this question; that shows they’re way more engaged in their saving and investing,” said Laura Varas, founder and CEO of research firm Hearts & Wallets. 

    Getty Images

    Exchange-traded funds came in third among the top 10 investment products to grow in popularity with U.S. households from 2020 to 2022, according to a new survey.
    While individual stocks were the most commonly owned investment product, held by 43% of households in 2022, 18% of households invested in ETFs in the same year, up by 2 percentage points from 2020, research firm Hearts & Wallets found.

    Additionally, consumers are more aware of what investment products they own compared with a decade ago. To that point, of the 123 million households in the U.S. with assets of at least $100, 77% are aware of how their portfolios are allocated across product types, up from 55% in 2013, the survey found.
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    “It makes me excited that more households are able to even answer this question, that shows they’re way more engaged in their saving and investing,” said Laura Varas, founder and chief executive officer of Hearts and Wallets. 
    As households become more involved in their investing strategies, here are a few ways you can diversify your portfolio, increase your savings and reap tax benefits, according to experts.

    Separately managed accounts grew the most

    Meanwhile separately managed accounts and high-yield savings accounts beat out ETFs for spots No. 1 and No. 2, respectively, in the Hearts & Wallets survey of investment products that grew the most from 2020 to 2022.

    SMAs, which are a portfolio of securities that a professional manages on your behalf, took the lead because “they solve three main problems for investors,” said Varas: They help investors diversify their portfolios in an “especially good way,” they can be tax-optimized and are under a professional’s oversight, whether that is a financial institution or a manager.
    “SMAs can be effective” for investors who don’t want to pick their own stock investments and still gain a broad exposure, said certified financial planner Douglas A. Boneparth, founder and president of Bone Fide Wealth in New York. 

    There’s almost any kind of ETF you could imagine.

    Douglas Boneparth
    president of Bone Fide Wealth

    While it will be important for investors to know how much they’re paying the professional manager and the costs of the underlying investments, “[I’m] not shocked to see that there’s an increase in allocation or demand for that,” added Boneparth.
    Meanwhile, high-yield savings accounts speak to the story around inflation and the Federal Reserve increasing rates, which “have been the main headline the last year or so,” he said.
    As this type of savings account benefits from high-rate conditions, investors can get more for their cash. These FDIC-insured accounts are also liquid, which can benefit investors who want to start an emergency fund.
    “If you’re not getting 5% [interest] on your savings, you’re leaving money on the table,” added Boneparth, a member of CNBC’s FA Council.

    Why ETFs are becoming ‘extremely popular’

    While ETFs do not benefit from high rates, “they are becoming extremely popular investments for investors,” said certified financial planner Blair duQuesnay, investment advisor at Ritholtz Wealth Management.
    They offer a level of diversification investors can’t get by owning individual stocks, like “being able to access the entire S&P500, every stock in it, for the price of one share of an ETF,” and they are more tax-efficient than mutual funds, said duQuesnay, also on the CNBC FA Council.
    ETFs also trade during market hours, as opposed to the end of the day like mutual funds do and can be held in brokerage platforms.
    “There’s almost any kind of ETF you could imagine,” said Boneparth.

    The original ETFs tracked major market indexes, but once the mechanism became popular, you can create an ETF with any investment thesis in mind, said duQuesnay.
    “The most recent phenomenon are what we call thematic [ETFs],” she said, “if these themes catch on in the news, that investors maybe are searching for that theme, and they find their way easily to an ETF, which can raise a lot of money.”

    Finding your best investment product fit

    Investors should weigh potential investment product picks depending on the problems they’re looking to solve, said Varas at Hearts & Wallets.
    High-yield savings accounts protect your principal with minimal risk. For the first time in a long time, cash is up for consideration in an investment portfolio as investors can earn 5% on cash savings, added duQuesnay.
    These are ideal if you want to benefit from high interest and are seeking liquidity, said Boneparth.
    If, on the other hand, you’re looking for a way to invest your money and not have to choose your investments, a separately managed account outsources that decision-making process to a manager based on whatever the objective is, he added.
    In the end, however, if investors want to take a relatively small amount of money and access a very large basket of securities in a very tax efficient way, ETFs would be good to consider, duQuesnay said.
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    How to prepare for the ‘survivor’s penalty’ before a spouse passes

    Your Money

    After a spouse dies, unmarried older women typically switch from married filing jointly to filing single on their federal taxes.
    With a smaller standard deduction and tax brackets, surviving spouses may face higher taxes.
    However, spouses may consider advance tax planning, such as weighing Roth individual retirement account conversions, account ownership and beneficiaries.

    Nosystem Images | E+ | Getty Images

    Many older women outlive their spouses and may not expect higher future taxes after suffering from the loss. But there are ways to prepare, according to financial experts. 
    American women have a significantly higher life expectancy than men, according to data from the Centers for Disease Control and Prevention. In 2021, life expectancy at birth was 73.5 years for males compared to 79.3 years for females. 

    As a result, many married women eventually face a “survivor’s penalty,” resulting in higher future taxes, according to certified financial planner Edward Jastrem, chief planning officer at Heritage Financial Services in Westwood, Massachusetts.

    More from Women and Wealth:

    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.

    Taxes can be ‘the biggest shock’ for widows

    The year a spouse dies, the survivor can file taxes jointly with their deceased spouse, known as “married filing jointly,” unless they remarry before the end of the tax year.
    After that, many older survivors file taxes alone with the “single” filing status, which may include higher marginal tax rates, due to a smaller standard deduction and tax brackets, depending on their situation.

    For 2023, the standard deduction for married couples is $27,700, whereas single filers can only claim $13,850. (Rates use “taxable income,” which is calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income.)
    Higher taxes can be “the biggest shock” for widows — and it may be even worse once individual tax provisions sunset from former president Donald Trump’s signature legislation, explained George Gagliardi, a CFP and founder of Coromandel Wealth Management in Lexington, Massachusetts.

    Before 2018, the individual brackets were 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. But through 2025, five of these brackets are lower, at 10%, 12%, 22%, 24%, 32%, 35% and 37%.

    Typically, the surviving spouse inherits the deceased spouse’s individual retirement accounts and so-called required minimum distributions are about the same. But the surviving spouse now faces higher tax brackets, Gagliardi explained.
    “The larger the IRAs, the bigger the tax problem,” he said.

    Consider partial Roth conversions

    Some surviving spouses may face higher future taxes, but it’s important to run tax projections before making changes to the financial plan, experts say.
    Spouses may consider partial Roth IRA conversions, which transfers part of pretax or non-deductible IRA funds to a Roth IRA for future tax-free growth, Jastrem explained.

    This is often best done over a number of years to minimize the overall taxes paid for the Roth conversions.

    George Gagliardi
    Founder of Coromandel Wealth Management

    The couple will owe upfront taxes on the converted amount but may save money with more favorable tax rates. “This is often best done over a number of years to minimize the overall taxes paid for the Roth conversions,” Gagliardi said.

    Review investment accounts

    It’s always important to keep account ownership and beneficiaries updated, and failing to plan could be costly for the surviving spouse, Jastrem said.
    Typically, investors incur capital gains based on the difference between an asset’s sales price and “basis” or original cost. But when a spouse inherits assets, they receive what’s known as a “step-up in basis,” meaning the asset’s value on the date of death becomes the new basis.

    A missed step-up opportunity could mean higher capital gains taxes for the survivor.

    Edward Jastrem
    Chief planning officer at Heritage Financial Services

    That’s why it’s important to know which spouse owns each asset, especially investments that may be “highly appreciated,” Jastrem said. “A missed step-up opportunity could mean higher capital gains taxes for the survivor.”

    Weigh non-spouse beneficiaries for IRAs

    If the surviving spouse expects to have enough savings and income for the remainder of their life, the couple may also consider non-spouse beneficiaries, such as children or grandchildren, for tax-deferred IRAs, Gagliardi said.
    “If planned correctly, it can reduce the overall taxes paid on the IRA distributions,” he said. But non-spouse beneficiaries need to know the withdrawal rules for inherited IRAs.
    Before the Secure Act of 2019, heirs could “stretch” IRA withdrawals over their lifetime, which reduced year-to-year tax liability. But certain heirs now have a shortened timeline due to changed required minimum distribution rules. More

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    Health savings accounts, with a triple tax advantage, are ‘perfect,’ advisor says — but only if used the right way

    Health savings accounts offer a three-pronged tax benefit: tax-free contributions, investment growth and withdrawals.
    Consumers should ideally invest their HSA funds, like they would a 401(k) account, for example, to allow the money to grow for future medical costs.
    Most people don’t do that; they save in cash.

    Delmaine Donson | E+ | Getty Images

    Health savings accounts offer perhaps the best tax perks relative to other investment accounts.
    But most account holders use them in a way that dilutes their benefits, data shows.

    Just 19% of HSA participants invest their account assets, according to a new survey by the Plan Sponsor Council of America, a group that represents employers. Those investments might be a stock mutual fund, for example.
    The rest park their money in cash, treating their HSA like a bank account.

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

    This behavior runs counter to the advice of financial experts: to invest and grow HSA assets as a type of retirement account, like a 401(k) plan, to cover future health costs.
    “There’s a fair amount of health care you can expect to pay for in retirement, and this is simply a more efficient way to pay for it,” said Lee Baker, a certified financial planner based in Atlanta and member of CNBC’s Advisor Council.

    Why HSAs are ‘perfect’

    HSAs are tax-advantaged accounts for health expenses and are only available to consumers enrolled in a high-deductible health plan.

    They have a three-pronged tax benefit: Account contributions are tax-free, and investment growth and withdrawals are also tax-free if used for eligible medical costs.

    “An HSA is a perfect investment vehicle, if we dare say there is such an animal,” said Baker, founder and president of Apex Financial Services. “You can’t beat it under current tax law.”
    There’s a long list of health costs that qualify for HSA use. Even if used for a non-qualified expense, the account’s tax benefit is still like that of a traditional 401(k) or individual retirement account: a withdrawal would be taxed as income.
    HSAs don’t carry requirements to “use or lose” the money each year, unlike many healthcare flexible spending accounts.

    The best way to use an HSA

    The optimal way to use an HSA is by holding cash in the account equal to one’s annual insurance deductible and investing the remainder, Baker said.
    Consumers would pay for current health costs out of pocket, if possible, allowing HSA money to grow for the future. In the event consumers have a big health bill, they can use the HSA cash to cover the annual deductible, if unable to pay for it out of pocket, Baker said.
    Of course, “that’s just not the reality for everybody,” said Hattie Greenan, PSCA’s research director.

    There’s a fair amount of health care you can expect to pay for in retirement, and this is simply a more efficient way to pay for it.

    founder of Apex Financial Services

    Most people likely can’t afford to pay out of pocket for current medical bills, so continually draw from their HSAs instead of investing the assets, Greenan said.
    “If they need to tap it to pay current health expenses, they’re not using it as an investment vehicle,” she said.
    Additionally, about 40% of employers don’t even offer HSA investment options to their workers, according to the PSCA survey. They only offer cash options.
    However, there’s a workaround: Unlike with 401(k) accounts at work, employees aren’t beholden to the HSA options offered by their employers; they can open an HSA account elsewhere with a different provider to access investments. More

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    ‘Maid’ author Stephanie Land’s new book tells the story of how this homeless single mom clawed her way out of poverty

    Your Money

    While Stephanie Land’s first memoir, “Maid,” which became a best seller and then a popular Netflix series, chronicled her work cleaning houses for $9 an hour, her new book, “Class: A Memoir of Motherhood, Hunger, and Higher Education,” tells the story of how she clawed her way out of poverty and became a writer.
    A new report by the U.S. Department of Agriculture found that, like Land, more than 33% of single mothers reported food insecurity in 2022.

    Stephanie Land
    Source: Simon and Schuster

    Stephanie Land’s daughter, Emilia, was 7 months old when Land was forced to leave her volatile partner. What came next for the single mother was homelessness and food insecurity — but somehow, at the same time, Land also worked to finish her college degree and pursue a writing career.
    Her memoir, “Maid” became a best seller in 2019 and then, two years later, a popular Netflix series, chronicled Land’s work cleaning houses for $9 an hour. Her new book, “Class: A Memoir of Motherhood, Hunger, and Higher Education,” published on Nov. 7, tells the story of how she clawed her way out of poverty and became a writer — taking out nearly $50,000 in student debt to do so.

    Like Land, more than 33% of single mothers reported food insecurity in 2022, a recent report by the U.S. Department of Agriculture found.
    “The fight to make rent, eat and find child care was constant,” Land writes. “I never got a break from it.”
    More from Personal Finance:Social Security cost-of-living adjustment will be 3.2% in 2024Lawmakers take aim at credit card debt, interest rates, feesMedicare open enrollment may help cut health-care costs
    CNBC interviewed Land last month. The conversation has been edited and condensed for clarity.
    Annie Nova: I notice that whenever you’ve been faced with a big setback or problem, you don’t really have time to feel much about it. You write that immediately you have to figure out what to do.

    Stephanie Land: Yeah. There’s a line in the book that says, ‘I didn’t have the privilege to feel.’ And that extended to my daughter, too. There was just no time. I’ve had the same therapist now for five or six years, and it’s mind blowing how lacking in that kind of care I was. Just acknowledging that an experience was really hard, and taking the time to try and process it, we never had time for that. It was always, ‘Okay, we got to go.’ And I think there were many layers to it: I couldn’t get angry at the lack of government assistance programs because, you know, an angry person is often not treated very well. They’re often given fewer resources.

    Arrows pointing outwards

    Simon and Schuster

    AN: The child support you received from your daughter’s father never seemed to be enough. What problems do you have with the child support system in the U.S.?
    SL: I really struggled with the fact that they kept imputing my income at full time, but I didn’t have enough childcare to work full time. I got $40 a week, or something like that. So, it didn’t really feel helpful.
    AN: What is it like to have to be in court demanding money from someone you’ve dated?
    SL: It’s hell. There’s really no gentle way of putting it. Especially as a domestic violence survivor. When I first went to court after he kicked us out and punched out the window, the judge said in open court, ‘The question we’re presented with is if a reasonable person would feel threatened.’ And he said, ‘No.’ And so I was shown to be unreasonable. I also think I was looked down upon because I was homeless. And I had left a home that, you know, to everybody else, seemed stable. He had a full-time job, and I wasn’t working. And so I was the ‘bad parent.’ Because he hadn’t been charged with abuse or because it wasn’t visible, it was like it never happened.
    AN: For how long were you and your daughter homeless?
    SL: The first time, it was for almost six months. We moved in with my dad for a little while. That didn’t work out. And then, we got the little cabin in the homeless shelter system. We really didn’t have that much stuff. All of our main stuff that we used could fit in my car.

    You can’t really move out of homelessness if you don’t have money to pay rent.

    Stephanie Land

    And so, it was just kind of like, ‘Oh, well, we’re sleeping here now.’ I don’t think my daughter was really affected by it all that much because she was so little. My main concern was just finding a job. You can’t really move out of homelessness if you don’t have money to pay rent. But that was impossible because I didn’t have childcare.
    AN: Your daughter was so young when there wasn’t enough to eat. How did that affect her?
    SL: It was hard. It took several years for her to not be scared of new food, because as much as I tried not to be stressed about what she ate or what she didn’t eat, there was kind of this fear in her of, ‘What if I don’t like it?’ Because we couldn’t waste food. And it’s not like I had yelled or anything. But it was frustrating when your kid won’t eat, and you don’t have money to buy something else. I couldn’t make another dinner.
    AN: You wrote about getting this desire to flee, like your mother did to Europe. What do you think that fantasy was about?
    SL: I needed a break that was longer than a couple of minutes in the bathroom. As a poor woman, and a single mom, the stress we have of not being able to feed and house ourselves, they’ve documented how much of a toll that takes on your body. Cognitively, it lowers your IQ. And it’s pretty recognizable, the amount of stress you are under. It’s constant, and you can’t get away from it. And there were times that I just really wanted to get away from it.

    AN: While you were struggling to work and raising your daughter, you were also studying literature. How did you focus on topics like Shakespeare while facing eviction?
    SL: I just had to get it done. It was homework. And when I started working as a freelancer, it was the exact same situation. I think one of the most valuable things college taught me was how to write a paper even when my life is in chaos.
    AN: You’ve published books and own a house now. What is it like to be more stable?
    SL: I still worry about everything. A weird smell, or a weird noise, and I’m nervous that everything will just disappear. But that may live with me forever. More

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    Here’s why it ‘doesn’t make financial sense’ for Americans living abroad to give up their U.S. citizenship, one expert says

    Year-end Planning

    Americans who move abroad still have a responsibility to file their taxes with the IRS.
    While giving up American citizenship to avoid paying U.S. taxes may sound like a tempting idea, experts advise against it.
    “It typically doesn’t make financial sense, and there’s a few reasons why,” said Italy-based Alex Ingrim, a financial advisor for Chase Buchanan Wealth Management.

    Alexander Spatari | Moment | Getty Images

    Americans who move abroad still have a responsibility to file their taxes with the IRS, sometimes in addition to taxes paid in their place of residence. Unsurprisingly, the thought of renouncing their U.S. citizenship may have crossed their minds at least once.
    However, experts advise against the move.

    “It typically doesn’t make financial sense, and there’s a few reasons why,” said Italy-based Alex Ingrim, a financial advisor for Chase Buchanan Wealth Management.

    More from Year-End Planning

    Here’s a look at more coverage on what to do finance-wise as the end of the year approaches:

    While there may be some instances where “the pain of being American” arises in the tax liability, “you’re very rarely double-taxed” as an American, Ingrim said.
    Additionally, citizenship renunciation is not an easy process and can be difficult to backtrack on if you change your mind, said certified financial planner Jude Boudreaux, a partner and senior financial planner at The Planning Center in New Orleans.
    Therefore, taxpayers looking to move abroad in the coming year may need to plan ahead of time to figure out what their tax residency will look like.

    ‘The pain of being American’

    Before you move abroad, make sure what your income situation will be: whether you will be working or will depend on retirement savings.

    “The U.S. and the country [of residence] might have an income tax treaty, it might have an estate tax treaty [or] it might have a normalization agreement, which deals with retirement income like Social Security,” said Boudreaux, a CNBC FA Council member. “It all depends on the different rules.”
    To that point, some European countries, such as Portugal, tax retirees’ streams of income, so expats’ tax liability under the double taxation agreement is to the foreign country where they reside and not the U.S., Ingrim said.

    Under such an agreement, those filing U.S. tax returns can use the credit from what was paid in the other country to extinguish their tax liability back in the States, he added. For example, if Portugal has higher tax rates, it expunges your U.S. liability.
    Similarly, if you earn Portuguese income and pay Portuguese income taxes, you will get some credits on your U.S. filing for taxes paid overseas, according to Boudreaux.
    “The pain of being American comes when you go to file … and the fact that it costs more money to file your taxes in two different countries,” he said. 

    Why American expats renounce U.S. citizenship

    Americans who end up rescinding their U.S. citizenship might do so to explore different investment options or really low tax jurisdictions, Ingrim said.
    For example: An American moves to a place with little to no taxes, like Monaco or Dubai. However, they still have the U.S. tax liability.
    “For those people, it’s a pain, and [they] opt for giving up their citizenship to avoid paying taxes,” Ingrim said.
    Others may want to explore investment options, like European mutual funds, exchange-traded funds, savings products and wealth-structuring solutions.
    However, “if you buy a mutual fund, you may end up under a really kind of negative set of tax rules,” Boudreaux said.

    Jordi Mora Igual | Moment | Getty Images

    The IRS considers these products as passive foreign investment corporations, or PFIC, and the federal agency has rules around the types of structures American taxpayers can invest in, Ingrim said.
    “The reporting is extremely onerous and costs a lot of money,” he said. “For people that are just trying to build their savings, it can be really frustrating.”
    This may especially apply to Americans making money in euros who do not want to send money back to the U.S. and invest in dollars, or if they want to reap the tax benefits some European mutual funds may offer in certain jurisdictions.
    However, despite the hefty guardrails, American citizens still have access to the U.S. financial system, which is something to consider before giving up the passport.

    U.S. financial system is ‘huge benefit to have’

    The U.S. financial system is “really is a huge benefit to have, where you can invest, trade and hold your money for almost nothing,” Ingrim said.
    Most European banks typically charge high fees for the same services and are constantly trying to sell you new products.
    “The U.S. system is more evolved, and if Americans took that view when they live abroad … they’d be a little bit happier about being American,” he added.

    Altogether, renouncing your U.S. citizenship is a much bigger process than may be necessary, Boudreaux said.
    “It’s not necessarily easy, could be a little expensive and it’s one of those things it’s kind of hard to undo once you’ve done it,” he said.
    Additionally, you might owe exit taxes as an expatriate under the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008, Boudreaux added.
    “You can’t just expatriate and not pay taxes on things you owned in the U.S. and then went overseas,” he said, “There’s basically no way to get out of not paying U.S. taxes in one form or fashion.” More