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    Money in College Savings Accounts Can Now Go Toward Retirement

    But there are caveats to moving the money into Roth I.R.A.s, and the government still has to issue guidelines about the option.Starting this year, some of the money in 529 college savings accounts can be used for retirement if it’s not needed for education.New rules under the federal law known as Secure 2.0 allow up to $35,000 in a 529 account to be rolled over to a Roth individual retirement account for the beneficiary of the 529 account if certain conditions are met.State-sponsored 529 accounts, named for a section of the tax code, are used to pay for education expenses — mainly college costs. Money deposited in the accounts grows tax free and can be withdrawn tax free to pay for eligible expenses like tuition, housing, food and books.The new Roth option is aimed at parents who may be reluctant to save in a 529 because they worry about having to pay income taxes and a penalty if for some reason the funds aren’t needed for college and they want to withdraw the money.“It is parents’ No. 1 objection to opening a 529,” said Vivian Tsai, chair emeritus of the College Savings Foundation, a group that includes big financial firms that run the state college savings programs. “The barrier is really psychological.” (Ms. Tsai is also senior director and head of relationship management for the education savings unit at TIAA, a large investment firm that manages 529 plans in seven states.)Many families struggle to save for college, and accumulating “too much” money is usually not a problem. “The vast majority of account holders do not save enough,” Ms. Tsai said.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    January Was Awesome for Stock Pickers, but Can They Keep It Going?

    Most active fund managers beat the market at the start of the year. But history suggests that they’re not likely to keep doing so for long.Over the last 20 years, stock pickers have had a dismal record. Most haven’t come close to beating the overall stock market.But occasionally, there are exceptions. In some periods, stock pickers rule, and the start of this year was one of those times.In fact, it was the best January for actively managed stock mutual funds since Bank of America began compiling data in 1991. It wasn’t just that they turned in handsome returns for investors. The entire stock market did that. The S&P 500 and other stock indexes set records during the month.It was that active stock funds did even better, though not by much, beating various market indexes by less than a percentage point, on average. Still, it was the best single month for these funds — in which managers buy and sell individual stocks whenever they choose to do so — since 2007. That happened to be the best calendar year for stock pickers in decades.There’s no way of knowing how long this streak of outperformance will go on, or why, exactly, it has existed in the first place. But it’s quite possible that it will continue for the balance of the year, and that buying the average actively managed fund will look like a brilliant move. Index funds that mirror the entire market could well lag behind.That said, I think the active fund managers are unlikely to prevail over the long run. The reason is that history shows it’s just too hard to beat the market.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    IBM Reopens Its Frozen Pension Plan, Saving the Company Millions

    The company has stopped making contributions to 401(k) accounts, and instead giving workers cash credits in a new version of its old pension plan.Traditional pension plans haven’t come back. But the news from IBM might lead you to think so.Last month, IBM thawed out a defined benefit pension plan that it had froze more than 15 years ago. The company has also stopped making contributions into employee 401(k) accounts.These moves are startling, because, on the surface, at least, IBM seems to be reversing a decades-long trend of corporations moving away from traditional pension plans. With the old plans, companies promised to pay employees retirement income that rewarded them for long years of service. But these plans were expensive, and IBM and hundreds of other firms instead began to emphasize 401(k)s that moved the primary responsibility for saving and investing to workers. IBM’s new approach is significant because the company has been a leader in employee benefit policymaking. What it is doing now is no simple return to the classic cradle-to-grave benefits system. In fact, IBM’s new pension plan isn’t nearly as generous to long-tenured employees compared with its predecessor.The move has real advantages for some people who work at IBM, particularly those who put little or no money of their own into 401(k)s and who stay at the company for a relatively short while.Crucially, IBM’s maneuver is likely to be wonderful for its shareholders. The company is saving hundreds of millions of dollars a year by stopping contributions to employee 401(k) accounts. And it doesn’t need to put any money into the pension plan this year — and, probably, for the next few years — because it has plenty of money already in it. On a purely financial standpoint, IBM is improving its cash flow and bottom line.For a small but important subset of companies — those with fully funded, closed or frozen pension plans — IBM’s move could be a harbinger of things to come, pension consultants say. IBM is using a surplus in its pension fund to simultaneously change its employee benefits package and help the company’s finances.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Employers Can Now Enroll Workers in Some Emergency Savings Accounts

    But many companies are spurning the “clunky” legal requirements for accounts linked to retirement plans. Instead, some have stand-alone rainy day offerings.Starting this year, a federal law allows employers to enroll workers in emergency savings accounts that are linked to their retirement accounts. But some companies, put off by the law’s complex rules, have begun offering rainy day benefits outside workplace retirement plans.“I do think there is tremendous interest in emergency savings programs,” said Matt Bahl, vice president and head of workplace financial health at the Financial Health Network, a nonprofit that promotes financial well-being. “Having access to liquid cash can greatly reduce levels of financial stress.”The Employee Benefit Research Institute, a nonprofit, found that about three-fourths of large employers (those with 500 or more workers) offered or planned to offer hardship or emergency assistance programs to workers last year. Of those, about a third said they offered an emergency savings account feature and another third planned to do so in the next year or two.But while the law, known as Secure 2.0, has helped draw attention to the need for rainy day savings, its rules for setting up emergency accounts within retirement plans are “clunky,” Mr. Bahl said. For instance, only workers making under a certain income limit ($155,000 for 2024) may participate, and their emergency savings are limited to $2,500, though employers can set lower ceilings. And though employers can help with contributions, they must deposit any match into the worker’s retirement account — not the emergency savings account.While employers may eventually choose to offer such “sidecar” savings accounts, stand-alone emergency savings programs are already available from financial technology start-ups and established retirement plan administrators. With emergency savings offerings, “it’s really important to be broadly available and simple to use,” said Emily Kolle, a vice president who oversees the emergency savings offering from Fidelity Investments, one of the largest retirement plan administrators.Emergency savings — a cash cushion available in the event of a job loss or surprise expenses like car repairs or medical bills — are a concern for many Americans. In a recent survey by the financial site Bankrate, about a third said they would have to borrow to cover a $1,000 unexpected expense. And almost a quarter of consumers have no savings set aside for emergencies, according to the Consumer Financial Protection Bureau.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    F.T.C. Warns Dozens of Funeral Homes to Provide Accurate Costs to Callers

    The agency said an “undercover phone sweep” of more than 250 homes found that 38 failed to provide prices or supplied inconsistent prices in separate calls.The Federal Trade Commission said its first “undercover phone sweep” of funeral homes across the country had found that dozens didn’t accurately disclose costs for services to callers.Of the more than 250 funeral businesses F.T.C. employees called, 38 either didn’t answer questions about prices or supplied inconsistent prices for identical services, the commission said. Many homes, it said, provided “materially different” prices for the same services during two separate phone calls.Another home promised to send an itemized price list, the agency said, but instead sent a list of package prices, which don’t meet disclosure requirements.The 39 funeral homes received warning letters in January that they had failed to comply with a law known as the Funeral Rule. The F.T.C. enforces the rule, which outlines protections for consumers shopping for funeral services.“It’s very important that consumers are able to comparison shop,” said Melissa Dickey, an F.T.C. lawyer and a co-coordinator of the Funeral Rule. “Not everyone can go in person to pick up a price list.”Of the funeral home that sent a list of package options, Ms. Dickey said: “You don’t have to buy a package.” The funeral home must let you buy only the services you want.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    More Tenants Can Now Add Rent Payments to Their Credit Score

    Policymakers view the reporting of an on-time pattern as a way to reduce disparities in homeownership.About a third of American households rent, yet in most cases their credit score doesn’t reflect their on-time payments.That’s beginning to change. Renters can increasingly choose to have their timely monthly payments reported to the credit bureaus, with the goal of improving their credit profile to qualify for loans.A bevy of third-party services now offer consumers the option of having their on-time rent payments reported to one or more credit bureaus. The bureaus — Equifax, Experian and TransUnion — can add rent payments to loan data to enhance the credit reports and credit scores that lenders use to evaluate potential borrowers.The services typically report only on-time payments, but consumer experts recommend checking the details first. The reporting of late payments, such as when tenants withhold rent to protest their living conditions, may be a drawback to enrolling, consumer experts say.Zillow, the real estate website, became the latest entrant in the rent-reporting market this month. Some options, like Zillow’s, are available to renters whose landlords or property managers use the company’s rental management system to process payments. Others, like the service offered by Self Financial, are available directly to renters.As it stands, few landlords routinely report rent payments to credit bureaus. Traditionally, only lenders have reported to the bureaus, and rent isn’t considered a loan. Fewer than 5 percent of the roughly 80 million adults who live in rental housing had rental data in their credit files, and it was mostly negative data from missed payments, according to the Urban Institute, a nonprofit research group focused on advancing upward mobility and equity. (Negative rent information can end up in credit files if a landlord reports delinquent accounts or sends them to a collection agency.)But in recent years, policymakers have been exploring whether consumers can benefit from having on-time rent payments included in credit scores, just as payments for mortgages, car loans and credit cards are. Reporting on-time rent payments is viewed as a way to reduce disparities in homeownership.Fannie Mae, the quasi-governmental home finance giant, began a pilot program in 2022 using three financial technology companies that report on-time payments from thousands of renters in multifamily buildings to the credit bureaus. Fannie Mae reported in November that its data “shows a trajectory toward better financial health for many renters.” Well over half the participants increased their credit scores. Those who already had a credit score, and saw an improvement, had an average increase of about 40 points. (Scores range from 300 to 850.) The pilot has been extended to the end of this year.TransUnion has been able to include rent payments in its credit reports since 2016 and has seen increasing interest from property managers, said Maitri Johnson, vice president of tenant and employment screening at the credit bureau. The company’s data show that rent reporting is particularly helpful to consumers who were “unscorable,” meaning they had no or little credit history, Ms. Johnson said.Ariel Nelson, a staff attorney with the National Consumer Law Center, said consumers should be cautious. Reporting on-time payments can make sense, she said, for people who are able to consistently pay on time and may be renting temporarily while saving to buy a home.But there can be risks, particularly for lower income tenants who may struggle to pay on time, she added. If a tenant opts into reporting and pays on time for several months but then hits a rough patch and falls behind, the late payment isn’t reported. But lenders might interpret the absence of rental information on the credit report for a month or two as a negative, Ms. Nelson said.(Fannie Mae said that separate from the pilot, lenders could use its automated underwriting system to supplement their credit evaluations of first-time home buyers by including rent data, and that missing rent payments weren’t counted against the borrower.)The general industry approach so far is to give renters a choice about whether to have their payments regularly reported, and to report only on-time payments.As the practice becomes more widespread, landlords could eventually require reporting of rent to credit bureaus, Ms. Johnson said. The requirement would probably be disclosed during the negotiation of the lease agreement.The reporting of negative information could affect tenants who might want to withhold rent as a way to force landlords to maintain or repair buildings, Ms. Nelson said. If landlords report the withheld payments, tenants may feel pressured to pay to avoid harming their credit. A recent news report suggested that has happened in New York City.Zillow’s service deems payments on time if they are received within 30 days of the due date, said Amy Wipfler, senior product manager for social impact at the company. Payments made after that aren’t reported. The new service is available to “tens of thousands” of renters, she said.Currently, Zillow’s service reports just to Experian. If a participant applies for a loan with a lender that uses one of the other credit bureaus, the positive rent payments won’t have an impact. Zillow aims to add the other credit bureaus, Ms. Wipfler said. (Other services, like Esusu and Self Financial, report to all three.)Here are some questions and answers about using rent payments to help credit scores:Are all credit scoring systems able to factor in rent payments?No. Only the latest, but not yet widespread, versions of credit scoring systems from FICO, the data analytics company, can incorporate rent data, said Ethan Dornhelm, the company’s vice president for scores and predictive analytics. The FICO 8 version, an older but widely used model, cannot factor in rents, he said. All versions of VantageScore, a scoring model owned by the major credit bureaus, are able to factor in rent payments, a spokeswoman, Sarah Cain, said in an email.Is there a charge for rent reporting services?That varies. Some services are free for both landlords and tenants, while others may charge one-time or monthly fees. (Some are free for new rental payments but charge for reporting prior rental history.) It may not be worthwhile for consumers who already have top-tier credit scores to have their rent reported, since they would probably see incremental benefits from an even higher score, Ms. Johnson at TransUnion said.What are other ways to build credit?Options for building credit if you have a scant credit file or marred credit include opening a “secured” credit card. You typically make a deposit and get a line of credit up to that amount, and your payment history is reported to the credit bureaus. Some community banks and credit unions offer “credit builder” loans. The money you borrow is held in a bank account while you make payments, which are reported to credit bureaus. Once you have paid the loan amount, you get access to the funds. More

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    In Race to Replace George Santos, Financial Questions Re-emerge

    Mazi Pilip, the Republican candidate running in New York’s Third District, drew scrutiny after her initial financial disclosure was missing required information.The Republican nominee in a special House election to replace George Santos in New York provided a hazy glimpse into her personal finances this week, submitting a sworn financial statement to Congress that prompted questions and led her to amend the filing.The little-known candidate, Mazi Pilip, reported between $1 million and $5.2 million in assets, largely comprising her husband’s medical practice and Bitcoin investments. In an unusual disclosure, she said the couple owed and later repaid as much as $250,000 to the I.R.S. last year.But the initial financial report Ms. Pilip filed with the House Ethics Committee on Wednesday appeared to be missing other important required information, including whether the assets were owned solely by herself or her husband, Dr. Adalbert Pilip, or whether they were owned jointly.And despite making past statements that she stopped working there in 2021 when she ran for the Nassau County Legislature, Ms. Pilip reported receiving a $50,000 salary from the family medical practice in 2022 and 2023.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    The Stock and Bond Markets Are Getting Ahead of the Fed.

    Stock and bond markets have been rallying in anticipation of Federal Reserve rate cuts. But don’t get swept away just yet, our columnist says.It’s too early to start celebrating. That’s the Federal Reserve’s sober message — though given half a chance, the markets won’t heed it.In a news conference on Wednesday, and in written statements after its latest policymaking meeting, the Fed did what it could to restrain Wall Street’s enthusiasm.“It’s far too early to declare victory and there are certainly risks” still facing the economy, Jerome H. Powell, the Fed chair, said. But stocks shot higher anyway, with the S&P 500 on the verge of a record.The Fed indicated that it was too early to count on a “soft landing” for the economy — a reduction in inflation without a recession — though that is increasingly the Wall Street consensus. An early decline in the federal funds rate, the benchmark short-term rate that the Fed controls directly, isn’t a sure thing, either, though Mr. Powell said the Fed has begun discussing rate cuts, and the markets are, increasingly, counting on them.The markets have been climbing since July — and have been positively buoyant since late October — on the assumption that truly good times are in the offing. That may turn out to be a correct assumption — one that could be helpful to President Biden and the rest of the Democratic Party in the 2024 elections.But if you were looking for certainty about a joyful 2024, the Fed didn’t provide it in this week’s meeting. Instead, it went out of its way to say that it is positioning itself for maximum flexibility. Prudent investors may want to do the same.Reasons for OptimismOn Wednesday, the Fed said it would leave the federal funds rate where it stands now, at about 5.3 percent. That’s roughly 5 full percentage points higher than it was in early in 2022. Inflation, the glaring economic problem at the start of the year, has dropped sharply thanks, in part, to those steep interest rate increases. The Consumer Price Index rose 3.1 percent in the year through November. That was still substantially above the Fed’s target of 2 percent, but way below the inflation peak of 9.1 percent in June 2022. And because inflation has been dropping, a virtuous cycle has developed, from the Fed’s standpoint. With the federal funds rate substantially above the inflation rate, the real interest rate has been rising since July, without the Fed needing to take direct action.But Mr. Powell says rates need to be “sufficiently restrictive” to ensure that inflation doesn’t surge again. And, he cautioned, “We will need to see further evidence to have confidence that inflation is moving toward our goal.”The wonderful thing about the Fed’s interest rate tightening so far is that it has not set off a sharp increase in unemployment. The latest figures show the unemployment rate was a mere 3.7 percent in November. On a historical basis, that’s an extraordinarily low rate, and one that has been associated with a robust economy, not a weak one. Economic growth accelerated in the three months through September (the third quarter), with gross domestic product climbing at a 4.9 percent annual rate. That doesn’t look at all like the recession that had been widely anticipated a year ago.To the contrary, with indicators of robust economic growth like these, it’s no wonder that longer-term interest rates in the bond market have been dropping in anticipation of Fed rate cuts. The federal funds futures market on Wednesday forecast federal funds cuts beginning in March. By the end of 2024, the futures market expected the federal funds rate to fall to below 4 percent.But on Wednesday, the Fed forecast a slower and more modest decline, bringing the rate to about 4.6 percent.Too Soon to RelaxSeveral other indicators are less positive than the markets have been. The pattern of Treasury rates known as the yield curve has been predicting a recession since Nov. 8, 2022. Short-term rates — specifically, for three-month Treasuries — are higher than those of longer duration — particularly, for 10-year Treasuries. In financial jargon, this is an “inverted yield curve,” and it often forecasts a recession.Another well-tested economic indicator has been flashing recession warnings, too. The Leading Economic Indicators, an index formulated by the Conference Board, an independent business think tank, is “signaling recession in the near term,” Justyna Zabinska-La Monica, a senior manager at the Conference Board, said in a statement.The consensus of economists measured in independent surveys by Bloomberg and Blue Chip Economic Indicators no longer forecasts a recession in the next 12 months — reversing the view that prevailed earlier this year. But more than 30 percent of economists in the Bloomberg survey and fully 47 percent of those in the Blue Chip Economic Indicators disagree, and take the view that a recession in the next year will, in fact, happen.While economic growth, as measured by gross domestic product, has been surging, early data show that it is slowing markedly, as the bite of high interest rates gradually does its damage to consumers, small businesses, the housing market and more.Over the last two years, fiscal stimulus from residual pandemic aid and from deficit spending has countered the restrictive efforts of monetary policy. Consumers have been spending resolutely at stores and restaurants, helping to stave off an economic slowdown.Even so, a parallel measurement of economic growth — gross domestic income — has been running at a much lower rate than G.D.P. over the last year. Gross domestic income has sometimes been more reliable over the short term in measuring slowdowns. Ultimately, the two measures will be reconciled, but in which direction won’t be known for months.The MarketsThe stock and bond markets are more than eager for an end to monetary belt-tightening.Already, the U.S. stock market has fought its way upward this year and is nearly back to its peak of January 2022. And after the worst year in modern times for bonds in 2022, market returns for the year are now positive for the investment-grade bond funds — tracking the benchmark Bloomberg U.S. Aggregate Bond Index — that are part of core investment portfolios.But based on corporate profits and revenues, prices are stretched for U.S. stocks, and bond market yields reflect a consensus view that a soft landing for the economy is a near-certain thing.Those market movements may be fully justified. But they imply a near-perfect, Goldilocks economy: Inflation will keep declining, enabling the Fed to cut interest rates early enough to prevent an economic calamity.But excessive market exuberance itself could upend this outcome. Mr. Powell has spoken frequently of the tightening and loosening of financial conditions in the economy, which are partly determined by the level and direction of the stock and bond markets. Too big a rally, taking place too early, could induce the Fed to delay rate cuts.All of this will have a bearing on the elections of 2024. Prosperity tends to favor incumbents. Recessions tend to favor challengers. It’s too early to make a sure bet.Without certain knowledge, the best most investors can do is to be positioned for all eventualities. That means staying diversified, with broad holdings of stocks and bonds. Hang in, and hope for the best. More