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ETF Strategist

Exchange-traded funds had $7.2 trillion of U.S. investor assets through September.
Investors, in aggregate, have been putting more money into ETFs each year than in mutual funds.
ETF market share relative to mutual funds has grown to 30%, up from 13%, in the last decade.
Taxes and low costs are big drivers of this trend, experts said.

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ETF demand outstrips mutual funds

At a high level, ETFs are investment funds that generally hold a basket of many securities such as stocks and bonds, similar to mutual funds.

Unlike mutual funds, however, ETFs are traded on a stock exchange. Like stocks, they can be traded through the day and their share price rises and falls during that time. Mutual fund trades, by contrast, are executed once a day and all investors get the same price.
Investors pulled more than $900 billion from mutual funds in 2022 and funneled about $600 billion into ETFs, according to Morningstar. That net difference in dollar flows — about $1.5 trillion — was the largest on record.

“It was a huge, huge dispersion,” said Bryan Armour, director of passive strategies research for North America at Morningstar.
The last time mutual fund flows eclipsed those of ETFs was in 2013, he said.
“Overall, the trend has been toward ETFs and away from mutual funds,” Armour said.
ETFs’ growth has been global, too: Total assets outside the U.S. market were $2.7 trillion at the end of 2022, up fivefold in a decade, according to Morningstar data. Total global ETF assets may exceed $20 trillion by 2026, according to PwC.

Asset managers have tried to capitalize on this demand by debuting more funds. There were 419 U.S. ETF fund inceptions in 2022, versus 197 mutual funds, Morningstar found.
“We really started to see in the past 10 years an acceleration of both the demand of ETFs, and more recently with the supply of ETFs,” Rosenbluth said.
That said, ETFs have a ways to go before their total assets overtake those of mutual funds. Mutual funds hold about $17 trillion, for a roughly 70% market share versus ETFs, according to Morningstar. Mutual funds are also relatively entrenched in 401(k) plans for the time being, a large pot of aggregate U.S. savings, experts said.

3 big reasons ETFs have gotten popular

There are three big reasons investors, in aggregate, have preferred ETFs over mutual funds, experts said.
For one, ETFs are generally more tax-efficient, experts said.
When asset managers buy and sell securities within mutual funds, those trades may trigger capital gains taxes for fund investors. (This is largely the case for “actively” managed mutual funds. More on that later.)
Due to ETFs’ structure, U.S. investors largely escape those taxes, experts said.
“It’s such a huge advantage for ETFs,” Armour said. “It gives investors control of when they take capital gains and when they don’t.”

Those tax benefits are important for investors in taxable accounts, but less so for those who invest in tax-advantaged retirement accounts.
ETFs also tend to have lower costs relative to mutual funds — an attractive feature as investors have generally become more price-conscious, Armour said.
The average asset-weighted annual fee for mutual funds and ETFs was 0.37% in 2022, less than half the cost 20 years earlier, according to Morningstar data. Asset-weighted fees take investor behavior into account, therefore showing that investors have been seeking out less expensive funds.
ETFs don’t carry distribution fees, such as 12b-1 fees, that tend to come with certain mutual funds. However, investors may pay commissions to buy and sell ETFs, eroding the fee differential.
A recent University of Iowa study found that the average annual cost of “passive” mutual funds is 0.45% of investor assets, more than double the 0.21% average for ETFs.

A passive, or index, mutual fund or ETF differs from an actively managed one. The former tracks a market index, such as the S&P 500 stock index, rather than engaging in active stock or bond picking to try to beat the market. Active management generally costs more as a result of that securities picking.
The third big reason investors have leaned toward ETFs is somewhat of a “misnomer,” Armour said.
Many investors think that ETFs are synonymous with passive investing. There are passive mutual funds, too — but investors may not know that. As passive investing has gotten more popular, ETFs have profited from that common misconception.
“People conflate ETFs with passive investing all the time,” Armour said. More

While shopping for new homes is already competitive, prospective buyers should consider an additional factor when weighing the pros and cons of a given property: homeowners associations.
HOAs can carry monthly fees as high as $1,000, the American National Bank of Texas found.
As these associations become more common, prospective buyers should vet them before signing the deed.

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Homebuyers are dealing with record-high costs this year amid interest rate hikes and shrinking supply.
While shopping for homes is increasingly competitive, prospective buyers should consider an additional factor when weighing the pros and cons of a given property: the homeowners association, or HOA.

Homeowners associations are run by community residents elected to be members of the board of directors, which govern the neighborhood by a set of rules and regulations. Homeowners pay the HOA fees to have common areas such as parks, roads and community pools maintained and repaired.
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Mandatory membership in an HOA can cost homeowners a pretty penny, with dues as high as $1,000 a month, according to the American National Bank of Texas.
If the board is running low on money or didn’t budget right, all they have to do is charge a special assessment, said Raelene Schifano, founder of the organization HOA Fightclub.
“Unless the association members have 51% of the majority voting power, they can’t outvote a budget,” she added. “I’ve seen budgets go from $300 a month to $800 a month.”

As 84% of newly built single-family homes sold in 2022 belonged to HOAs, per the U.S. Census Bureau, it will be important for prospective buyers to vet these organizations ideally before signing the deed.

What kind of home are you considering?

Different types of homes can be affiliated with an HOA, from single-family homes to co-operatives.
Single-family homes are separate units where residents own both the plot of land and the house on it, said Clare Trapasso, executive news editor at Realtor.com. They have their own entrances and access to the street and don’t share utilities or other systems with other homes. 
Townhomes and rowhomes are somewhat similar; however, they do share walls with units next to them, although they are separated by a ground-to-roof wall, added Trapasso.

Meanwhile, condominiums, often called condos, and co-operatives, or co-ops, are units in a shared building where residences jointly own the common space, but their ownership structure is different. 
In a condo, residents own their individual units but jointly own the land and the common areas with other residents. Condos are run with a board of people on the homeowners association making decisions for the community, said Jaime Moore, a premier agent for Redfin.
In a co-op, residents own shares of a company that owns the building and will have a board made up of each member of each unit creating a community where all parties have a say, he added.
“Co-ops are popular in places like New York and Boston, but condos are generally more common throughout the rest of the country,” said Trapasso.

Why HOAs are becoming so common

A high percentage of new homes built nationwide today are part of developments managed by an HOA due to the financial benefit for local governments, according to Thomas M. Skiba, CEO of the Community Associations Institute, a membership organization of homeowner and condominium associations.
“They don’t have to plow the street anymore [or] do all that maintenance and they still collect the full property tax value,” Skiba added, referring to local authorities.
Homebuyers who want to avoid the additional costs associated with HOAs can search older homes on the outskirts of developments, said Redfin agent Moore. If you’re left with no other choice than to buy within an HOA-affiliated area, here are a few ways you can evaluate the organization.

How to vet an HOA

While real estate agents are not required nationwide to disclose to buyers if a property is tethered to an HOA, homebuyers can take initiative themselves and review the organization.
Some states such as Nevada do require sellers to provide potential buyers a disclosure of all things that relate to the homeowners association, including their financial status and meeting minutes, said Redfin’s Moore. However, brush up with local and state laws to be aware of what your rights are as a homebuyer and potential homeowner.  

These vetting tips may not apply to co-ops, and you may not have the time to completely investigate a given HOA.
Here is a checklist from experts:

Ask for a copy of all HOA paperwork, such as covenants, bylaws, rules and regulations, which serve as the community’s constitution, said Schifano of HOA Fightclub. Also ask for meeting minutes to see what repairs have been done or discussed.
Inquire about monthly or annual fees, the HOA’s budget and the history of how assessments have gone up year to year, said Skiba.
Look into the community’s reserve funds, which ensures repair and renovation. Check if the community is putting enough money aside for big expenses or if they are properly funded. “No one likes surprises, and that is the kind of big financial surprise [that can] be really problematic for every homeowner,” said Skiba.
Search the HOA on the county website to see how many liens, judgments and foreclosures have been recorded within the community’s lifespan, said Schifano.
Look at the financials and see how much in attorney’s fees is disclosed. This signals whether they are having a lot of issues, said Schifano.
Check for permits with the county for reroofs, electrical and plumbing services for the community, she added.
Request to attend at least one board or annual meeting if possible. A meeting helps buyers understand who is controlling the finances and decisions of the community, said Schifano. The annual meeting includes other homeowners. As a litmus test of whether the board is doing a good job, note if residents seem to be happy, in a fight or complacent.

“The most important thing a buyer can do is to ask questions to their agent, the community association and neighbors,” said Skiba.Don’t miss these stories from CNBC PRO: More

Generation Z is taking a more relaxed approach to their long-term financial security, according to a recent study.
The so-called “soft saving” trend is about living in the moment, with less emphasis on retiring early — or none at all.
But when it comes to savings, young adults should not discount the power of compound interest.

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Soft saving gains steam in today’s economy

Only recently, there was tremendous buzz around FIRE, an acronym that stands for Financial Independence, Retire Early, a movement built on the idea that handling your money super efficiently can help you reach financial freedom.
But putting enough aside to get there has proved increasingly difficult.

“Younger adults feel discouraged,” said Ted Rossman, senior industry analyst at Bankrate.
Inflation’s recent run-up has made it harder for those just starting out. More than half, or 53%, of Gen Zers say a high cost of living is a barrier to their financial success, according to a separate survey from Bank of America.

Younger adults feel discouraged.

Ted Rossman
senior industry analyst at Bankrate

In addition to soaring food and housing costs, millennials and Gen Z face other financial challenges their parents did not as young adults. Not only are their wages lower than their parents’ earnings when they were in their 20s and 30s, but they are also carrying larger student loan balances.
Roughly three-quarters of Gen Z Americans said today’s economy makes them hesitant to set up long-term financial goals and two-thirds said they might never have enough money to retire anyway, according to Intuit.
Rather than cut expenses to boost savings, 73% of Gen Zers say they would rather have a better quality of life than extra money in the bank.
Gen Z workers are the biggest cohort of nonsavers, Bankrate also found. 

“As a wealth advisor, my radar goes up,” Kara Duckworth, managing director of client experience at Mercer Advisors, said of recent consultations with young clients.
Many would rather spend their money on an extended trip, she said, than pad a savings account.
But “first and foremost, do you have an emergency fund?” she asks such clients.
Most financial experts recommend having at least three to six months’ worth of expenses set aside. If that seems unrealistic, consider saving enough to cover an emergency car repair or dentist bill, Duckworth advised. “You need to have at least some amount of liquid assets.”

Don’t discount the power of compounding

Young adults also have the significant advantage of time when it comes to saving for long-term goals such as retirement.
“Every dollar you set aside in your 20s will compound over time,” Rossman said. The earlier you start, the more you will benefit from compound interest, whereby the money you earn gets reinvested and earns even more.
“Compound interest is the eighth wonder of the world,” Rossman added, referring to an earlier comment Einstein reportedly said.

Even if you don’t set aside much, put enough in your 401(k) to at least get the full employer match, Rossman also advised. Then, opt to auto escalate your contributions, which will steadily increase the amount you save each year. “That can grow tremendously over time.”
There are no magic bullets, added Matt Schulz, chief credit analyst at LendingTree, but there are a few financial habits that pay off. “Most things around saving aren’t super complicated but it doesn’t mean they’re easy to do,” he said.
“Just like having a healthy lifestyle, it’s just about doing the right things over and over again over time and having patience.”
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Year-end Planning

If you plan to have government health insurance coverage next year, you may be eligible for financial help.
These expert tips can help you sort through your options.

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For millions of people, it’s time to compare benefits and prices and pick health coverage on the Affordable Care Act health insurance marketplaces.
Open enrollment on those plans started on Nov. 1 and typically lasts through Jan. 15, though that will be extended to Jan. 16 in 2024 due to a federal holiday.

Enrollment has set records in each of the past four years due in part to increased premium tax credits that have been extended through 2025, according to the Center on Budget and Policy Priorities (CBPP).
As of February, 15.6 million people had enrolled in an ACA marketplace plan for 2023 and paid the first month’s premium, according to the nonpartisan research and policy institute.

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The enrollment will likely stay high this year, according to Jennifer Sullivan, director of health coverage access at the CBPP.
“People can continue to get really robust help with the cost of premiums,” Sullivan said.
Moreover, with some people set to lose Medicaid or Children’s Health Insurance Program coverage, they may need to move to marketplace coverage.

People who lost coverage via those plans who are moving to the Affordable Care Act health insurance marketplace will have a special enrollment period until the end of next July, Sullivan noted.
Importantly, that special enrollment period also allows them to enroll and start coverage sooner than January.

However, for everyone looking to enroll in a marketplace health plan for next year, it’s best to try to do it sooner rather than later.
In states that use the marketplace, you will need to enroll by Dec. 15 to make sure you’re covered on Jan. 1, according to Louise Norris, health policy analyst at Healthinsurance.org which provides consumers with educational resources on health insurance.
If instead you wait until January to enroll, your coverage won’t take effect until Feb. 1, she noted.
“Tell yourself the deadline is Dec. 15,” Norris said, “and try to get it done by then just so that you have the full year of coverage.”

How to research your options

The Affordable Care Act marketplace is available in 32 states. The 18 other states and Washington, D.C., use their own marketplaces and are free to set their own deadlines, Norris said.
For example, Idaho has an early open enrollment period that started Oct. 15 and ends on Dec. 15. Other states may extend their open enrollment through the end of January.
Regardless of where you live, you may use the “find local help” tool on Healthcare.gov. Once you enter in your ZIP code, you will see which plans are covered in your area.
Additionally, the Get Covered Connector provides navigators and other assistance by ZIP code, and appointments can be set up directly in the tool, Sullivan said.

It’s important for people to know they can get free help understanding their options.

Jennifer Sullivan
director of health coverage access at the Center on Budget and Policy Priorities

The search may also help you find a list of brokers, navigators and enrollment counselors who are both licensed by the state and certified by the exchange.
Navigators are often best for complicated households, such as those where some family members are eligible for Medicaid while others are eligible for the marketplace, according to Sullivan.
“It’s important for people to know they can get free help understanding their options,” Sullivan said.
That free help may include assistance in filling out applications and understanding the questions asked from professionals who are not affiliated with insurance companies, she noted.

Your coverage choices may change

While it may be tempting to automatically renew your current exchange plan, which in most circumstances is possible, there are reasons to revisit your coverage, Norris said.
“You’re still better off picking your own plan,” she said.
Around 13 states will have new carriers entering the marketplace for 2024, she said. Meanwhile, Virginia will debut a new exchange next year.

“One of those new plans might be a good option for you,” Norris said. “And you won’t know, if you just let your plan renew and don’t go in there and actively look.”
If your health circumstances have changed, particularly if you want access to certain doctors or prescription medications, it’s also wise to research your options. Also be sure to pay attention to the size of the deductibles you will need to pay, she said.

You may be eligible for savings

Nine out of 10 people enrolled in marketplace plans around the country will get premium subsidies next year, according to Norris.
Also, nearly half of enrollees will get cost-sharing reductions that may reduce their deductibles or out-of-pocket costs, she said.
A subsidy calculator on Healthinsurance.org may help you check your eligibility.
Further, some states offer their own subsidies that may help lower costs. More

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In recent quarters, we have witnessed a dramatic shift higher in interest rates, a move that investors should not fear but embrace. Bonds are now all the rage.
The current real yield on a 10-year Treasury is approaching 2.5%, a level that should excite bond investors.
Return expectations are the highest in years and, although markets could remain volatile, now is the appropriate time to reassess your portfolio and consider an increase in your fixed-income allocation.

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Fixed-income investing is entering an exciting new era, and investors should take notice. Decades of low interest rates, engineered by global central banks, have suppressed the bond market’s ability to generate attractive and reliable returns.
But in recent quarters, we have witnessed a dramatic shift higher in interest rates, a move that investors should not fear but embrace. Bonds are now all the rage in investing circles and, although not as trendy as Taylor Swift, their popularity has certainly risen in recent months alongside interest rates.

Interest rates have increased dramatically since the beginning of 2022. As an example, the yield-to-maturity on the benchmark U.S. 10-year Treasury is now nearing 5%, up over 3.30%.

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The yield on the 10-year and other Treasury bonds is now the highest since the onset of the Great Financial Crisis in 2007. In addition to the rise in nominal interest rates, we have also experienced a similar increase in real interest rates (rates adjusted for inflation).
If we use market-derived, forward-looking expectations of inflation to adjust nominal yields, the current real yield on a 10-year Treasury is approaching 2.5%, a level that should excite bond investors.

Granted, the journey to higher yields has been painful to bond investors. In 2022, the total return of the Bloomberg Aggregate Bond Index, a broad universe of U.S. taxable bonds, posted a return of -13.01% (according to Bloomberg as of Dec. 31, 2022), the worst calendar year performance for this index since its inception in 1976.
Other bond market sectors experienced similar distress, but with the pain comes the gain. Higher rates can now provide more total return and more stability in returns going forward.

When calculating fixed-income returns for most bonds, there are two components: price return and income return.

At the start of 2022, there was little income being generated from high-quality bonds. The negative total returns for the year were driven by large price declines with a small positive contribution from income.
As an example, the Bloomberg Aggregate Bond Index posted a price return of -15.3% and an income return of +2.3%. However, the yield-to-maturity on the Bloomberg Aggregate Index is now 5.64% (according to Bloomberg as of Oct. 17, 2023), over 3.5% higher than the beginning of 2022.
As a result, we would expect a much larger positive contribution to future returns from income and a less negative contribution from price return.

How can an investor take advantage of the higher-yield environment?

We would suggest that investors reassess their current bond allocation and marginally increase their exposure in a manner consistent with their portfolio’s current position, investment objectives and risk tolerance.
While we are not calling the top in near-term rate movements, we do believe we are entering more of a range-bound yield market for longer maturity bonds. This is consistent with our expectations of no additional rate hikes from the Federal Reserve this cycle and a continued decline in near-term inflation.
To efficiently capture the higher yields, we would advise a modest increase in longer-dated maturity bonds as well as an allocation to shorter maturity bonds in a barbell approach, while avoiding intermediate maturity where possible.
Given the inverted shape of the yield curve, a barbell approach can help maximize the overall yield of the portfolio and provide additional return should long-end rates move lower.

For non-taxable or investors that are not tax-sensitive, we would prefer the use of higher-quality corporate bonds, as we believe the market has not appropriately priced the risk of a potential recession in lower-quality bonds.
Additionally, the agency mortgage-backed securities market is a high-quality sector for investors to consider. Year to date, this sector has underperformed other investment grade sectors and now offers an attractive risk-return profile.
For those investors in high-income tax brackets, municipal bonds are attractive. Similar to our view on taxable bonds, we would recommend a bias toward higher-quality bonds as a potential recession could negatively impact lower-rated municipalities.
While we currently favor municipal bonds for those high-tax investors, we would not eliminate corporate bonds or other taxable securities from consideration. Certain market conditions can favor taxable bonds on an after-tax, risk-adjusted basis.
It’s important that investors select a manager who can take advantage of those opportunities when they arise to create a tax-efficient portfolio.

To the extent that interest rates move significantly higher, counter to our expectations, we would view this as an opportunity for investors to lock in even higher yields for longer. Under such a scenario, we would not expect a repeat of 2022 bond market returns.
We estimate that interest rates would have to increase by 0.70% to 1.00% before forward-looking 12-month total returns would turn negative for the major bond indexes.
We have little doubt that the heightened level of market volatility will continue into 2024. Opportunities present themselves when market volatility increases.
To that end, we recommend an active approach to fixed-income management. Having the flexibility to successfully navigate and benefit during challenging markets allows for better returns.
It is a new dawn for bonds and fixed-income investors. Return expectations are the highest in years and, although markets could remain volatile, now is the appropriate time to reassess your portfolio and consider an increase in your fixed-income allocation.
— By Christopher Gunster, head of fixed income at Fidelis Capital More

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Series I bonds, an inflation-protected and nearly risk-free asset, will pay 5.27% through April 2024, the U.S. Department of the Treasury announced Tuesday.
Based on inflation data, it’s the fourth-highest rate since I bonds were introduced in 1998.
However, investors need to consider the downsides, along with their goals, before purchasing.

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The U.S. Department of the Treasury announced Series I bonds will pay 5.27% annual interest from Nov. 1 through April 2024, up from the 4.3% annual rate offered since May.
Tied to inflation, investors can claim 5.27% for six months — the fourth-highest I bond rate since 1998 — by purchasing any time from Nov. 1 through the end of April 2024. 

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How to calculate I bond rates

The Treasury adjusts I bond rates every May and November, and there are two parts to I bond yields: a variable and fixed portion.
The variable rate moves every six months based on inflation, and the Treasury can change the fixed rate every six months, but that doesn’t always happen.

The fixed portion of the I bond rate remains the same for investors after purchase. The variable rate resets every six months starting on the investor’s I bond purchase date, not when the Treasury announces new rates. You can find the rate by purchase date here.

Currently, the variable rate is 3.94% and the fixed rate is 1.30%, for a rounded combined yield of 5.27% on I bonds purchased between Nov. 1 and April 30.
“The new fixed rate makes it a very good deal” for long-term investors, said Ken Tumin, founder and editor of DepositAccounts.com, which tracks I bonds, among other assets.

How new rates affect older I bonds

If you already own I bonds, your rate change depends on the bonds’ issue date.For example, if you bought I bonds in September on any given year, your rates reset each year on March 1 and Sept. 1, according to the Treasury. 
However, the headline rate may be different than what you receive because the fixed rate stays the same for the life of your bond. 

What to know before buying I bonds

Before purchasing I bonds, it’s important to consider your goals, experts say.
One of the downsides of I bonds is you can’t access the money for at least one year and you’ll trigger a three-month interest penalty by tapping the funds within five years.
“I don’t consider I bonds as part of a long-term portfolio,” said certified financial planner Christopher Flis, founder of Resilient Asset Management in Memphis, Tennessee.
I bonds may make sense as a supplement to savings that you can access more quickly, such as money in a checking account, savings account or money market funds, he said.

Frequently asked questions about I bonds
1. What’s the interest rate from Nov. 1 to April 30, 2024? 5.27% annually.
2. How long will I receive 5.27%? Six months after purchase.
3. What’s the deadline to get 5.27% interest? Bonds must be issued by April 30, 2024. The purchase deadline may be earlier.
4. What are the purchase limits? $10,000 per person every calendar year, plus an extra $5,000 in paper I bonds via your federal tax refund.
5. Will I owe income taxes? You’ll have to pay federal income taxes on interest earned, but no state or local tax.

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Year-end Planning

Inheriting an individual retirement account comes with mandatory withdrawals, and the rules can be complicated, experts say.
The required minimum distribution rules hinge on when the original account owner died, whether they already started RMDs and the type of beneficiary.
However, the IRS has waived penalties for certain heirs for 2023 due to ongoing confusion.

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Inheriting an individual retirement account can be a welcome surprise. But the gift comes with mandatory withdrawals for heirs and following the rules can be difficult, experts say.
According to the Secure Act of 2019, certain heirs now have less time to deplete inherited accounts due to a change in so-called “required minimum distributions.” Before 2020, heirs were allowed to “stretch” withdrawals over their lifetime.

“It is so complicated,” said IRA expert and certified public accountant Ed Slott. “It’s almost unfair that it’s so hard to get money out of an IRA by going through this quagmire of rules.”

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“Inherited accounts generally require beneficiaries to take a distribution by Dec. 31 of the year of the original owner’s death,” said certified financial planner Ashton Lawrence, director at Mariner Wealth Advisors in Greenville, South Carolina. 
But the rules for inherited accounts “can be complex,” he said, depending on when the original owner died, whether they started RMDs and the type of beneficiary. (There’s an IRS chart with the details here.)

What to know about the 10-year rule

The first question is when you inherited the IRA, because heirs who received the account before 2020 can still use the “stretch” rules to take lifetime withdrawals, according to Slott.
But there’s now a 10-year withdrawal rule for certain heirs, meaning everything must be withdrawn by the 10th year after the original account owner’s death. The rule applies to accounts inherited by so-called “non-eligible designated beneficiaries” on Jan. 1, 2020, or later.

The IRS said we won’t implement a penalty for [missed] RMDs, which in effect means you don’t have to take them.

IRA expert

Non-eligible designated beneficiaries are heirs who aren’t a spouse, minor child, disabled, chronically ill or certain trusts. 
But if you inherited an account in 2020 or later and the original owner already started RMDs, you must start withdrawals immediately, Slott said. “It’s sort of like a water faucet,” he said. “Once the faucet is open and RMDs start, it can’t be shut off.”

Some penalties waived for missed RMDs 

Like retirees, heirs generally face a penalty for missing an RMD or not withdrawing enough. The penalty is 25% of the amount that should have been withdrawn or 10% if the RMD is corrected within two years.
Amid confusion, the IRS waived the penalty in 2022 for missed RMDs for some inherited IRAs and then expanded the waiver to include 2023 this summer.
“The IRS said we won’t implement a penalty for [missed] RMDs, which in effect means you don’t have to take them,” Slott said. But heirs may want to start taking RMDs anyway to avoid a “giant RMD” in future years, he said. More

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The Biden administration has a plan to improve its oversight of higher education institutions.
“We are raising the bar for accountability and making sure that when students invest in higher education, they get a solid return on that investment and a greater shot at the American dream,” said U.S. Secretary of Education Miguel Cardona.

U.S. Secretary of Education Miguel Cardona speaks during the National Action Network’s National Convention in New York on April 12, 2023.
Jeenah Moon | Reuters

The Biden administration announced on Tuesday a finalized plan to improve its oversight of higher education institutions and to bolster consumer protections for student loan borrowers.
“We are raising the bar for accountability and making sure that when students invest in higher education, they get a solid return on that investment and a greater shot at the American dream,” said U.S. Secretary of Education Miguel Cardona.

Some of the new rules aim to protect borrowers whose schools abruptly close, while other policies will better inform students about their rights and reduce their chances of being unable to pay down their student debt when they leave school.
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Under the regulations, which will go into effect July 1, 2024, colleges that receive Title IV financial aid will be required to provide “adequate” financial aid counselling to students, including information on the cost of attendance and varying types of aid available. They’ll need to provide sufficient career services, too.
Families will also begin to see standardized financial aid award offers that should make clearer the expenses of colleges, as well as the differences between aid that does and doesn’t need to be repaid.
“It will reduce student loan debt by increasing awareness of true college costs,” said higher education expert Mark Kantrowitz.

Outstanding education debt in the U.S. exceeds $1.7 trillion, burdening Americans more than credit card or auto debt. The average loan balance at graduation has tripled since the ’90s, to $30,000 from $10,000.
The Biden administration also plans to stop colleges from withholding the transcripts of students who fall behind on their bills.
“Ending the ability of colleges to withhold academic transcripts will enable more students to transfer colleges and apply for jobs,” said Kantrowitz.
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