Personal Finance
As ETF assets top $10 trillion for first time, here are trends to watch
Pedestrians walk in front of the New York Stock Exchange, decorated with a giant U.S. flag, in New York City, Nov. 6, 2024.
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Assets in U.S. exchange-traded funds in November topped $10 trillion for the first time, according to the latest data from Cerulli Associates.
ETFs — funds that invest in stocks, bonds or other assets and trade on national stock exchanges — reached $156 billion in flows for November, surpassing previous monthly flow records.
The activity is “on par with elevated activity typically seen toward the end of the year,” Cerulli reported.
Research from Morningstar pointed to a “Trump bump” that helped U.S. funds — including both ETFs and mutual funds — take in $115 billion in November, the highest total since April 2021.
As 2024 comes to a close, these are a few of the ETF trends that dominated the year, based on the latest data.
S&P 500 among 2024 fund winners
Year to date, the S&P 500 index is up almost 24%, as of Monday.
The S&P 500 rally, buoyed by the Magnificent Seven stocks — Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Meta Platforms and Tesla — helped account for about half of the index’s gains for the year, according to data and analytics company VettaFi.
Four of the top 10 ETFs for 2024 by flows track the S&P 500 index, according to Cerulli.
The Vanguard 500 Index Fund ranks No. 1 for 2024 year-to-date inflows, according to Cerulli, followed by iShares Core S&P 500 ETF, iShares Bitcoin Trust, Invesco QQQ Trust, Vanguard Total Stock Market Index Fund, iShares Core US Aggregate Bond ETF, SPDR Portfolio S&P 500 ETF, Vanguard Total Bond Market Index Fund, Invesco S&P 500 Equal Weight ETF and Vanguard Growth Index Fund.
Malcolm Ethridge, a certified financial planner and founder and managing partner at Capital Area Planning Group, said he often uses S&P 500 ETFs in client portfolios because they allow for access to company names that would be in any large-cap growth strategy for significantly reduced costs.
While an actively managed fund may charge 50 or 75 basis points, a passive S&P 500 ETF may only charge 10 basis points, he said.
The S&P 500 index, which has had a record run, may be poised to continue to do well as the index rebalances to reflect current market leaders.
“I think this is a case where SPY [SPDR S&P 500 ETF Trust] probably outperforms the majority of fund managers in 2025,” Ethridge said.
Alternative ETFs see record growth
Meanwhile, alternative ETFs in November crossed $400 billion in net assets for the first time, according to Cerulli.
Moreover, the year-over-year asset growth rate for alternative ETFs — at 93% — was highest among all asset classes.
Most of the total alternative ETF market share — 80%, or around $325 billion — comprises digital assets, trading-leveraged equity and derivative income ETFs, according to Cerulli.
Financial advisors reported having just a 3.6% allocation to alternatives in 2024, though that is expected to increase, according to Cerulli. Within existing alternatives allocations, 14.4% is done through the use of ETFs, the firm found.
Crypto ETFs are ‘here to stay’
In January, bitcoin ETFs began trading on U.S. exchanges.
Now, spot bitcoin ETFs hold more digital currency than bitcoin founder Satoshi Nakamoto, VettaFi noted. Despite a “more lackluster” rollout for spot ethereum ETFs this year, crypto ETFs are “here to stay,” according to VettaFi.
The top five new ETFs by assets in 2024 are all bitcoin ETFs, according to Cerulli, based on data through November.
They include iShares Bitcoin Trust ETF at No. 1, followed by Fidelity Wise Origin Bitcoin ETF, ARK 21 Shares Bitcoin ETF, Bitwise Bitcoin ETF, and Grayscale Bitcoin Mini Trust ETF.
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Retirees can expect to see some big changes in 2025 when it comes to their Social Security and Medicare benefits.
President Joe Biden is expected to sign a bill that will increase Social Security benefits for certain pensioners. Additionally, the annual Social Security cost-of-living adjustment goes into effect for all beneficiaries.
And Medicare enrollees who are worried about health-care costs now have a $2,000 annual out-of-pocket Part D prescription drug cap aimed at helping to reduce those financial pressures.
Here are some important changes to note for the coming year.
Some pensioners could get benefit increase
The Senate passed a bill in the final legislative days of 2024 to boost Social Security payments for millions of people who receive pensions from work in federal, state and local government, or in public service jobs such as teachers, firefighters and police officers. The House had passed the bill in November.
Now, Biden is expected to sign the bill into law in the coming days.
The Social Security Fairness Act eliminates two provisions that reduce Social Security benefits for certain individuals who also have pension income from public work where Social Security payroll taxes were not paid.
That includes the Windfall Elimination Provision, or WEP, which reduces Social Security benefits for individuals who also receive pension or disability benefits from employers who did not withhold Social Security taxes.
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It also includes the Government Pension Offset, or GPO, which reduces Social Security benefits for spouses, widows and widowers who receive their own government pensions.
Together, the rules affect around 2.5 million beneficiaries, according to the Congressional Research Service. Once enacted, the law may provide higher benefit payments to those individuals.
Notably, it may provide retroactive payments of those benefit increases for the months after December 2023.
The legislation marks the biggest change to Social Security since certain couples claiming strategies were phased out in 2016, said Martha Shedden, president of the National Association of Registered Social Security Analysts.
“We’re sort of in limbo as to how that process will proceed, when people will see that increase and how the retroactive [benefits] will be applied,” Shedden said.
All Social Security beneficiaries to get 2.5% COLA
In 2025, all beneficiaries will see a 2.5% increase to their Social Security benefit checks, thanks to an annual cost-of-living adjustment.
Of note, the 2024 increase was 3.2%. This year’s COLA is the lowest increase beneficiaries have seen since a 1.3% increase in 2021, reflecting a decrease in the pace of inflation.
The change will be effective with January checks for more than 72.5 million Americans, including Supplemental Security Income beneficiaries.
The average worker retirement benefit will be $1,976 per month, up from $1,927 in 2024, according to the Social Security Administration.
Monthly Medicare Part B premiums go up
Monthly Medicare Part B premiums — which are often deducted directly from Social Security checks — may affect just how much of a bump beneficiaries see in their 2025 benefit payments.
Medicare Part B covers physician, outpatient hospital and certain home health services, as well as durable medical equipment.
In 2025, the standard monthly Part B premium will be $185 per month — a $10.30 increase from $174.70 in 2024.
Part B deductibles will also rise, to $257, in 2025 — a $17 increase from the $240 annual deductible for 2024.
Medicare Part B premiums are based on a beneficiary’s modified adjusted gross income, or MAGI, from their tax returns from two years prior. In 2025, beneficiaries who had less than or equal to $106,000 in MAGI in 2023 will pay the standard monthly Part B premium, as will married couples with less than or equal to $212,000.
Beneficiaries with higher incomes will be subject to income-related adjustment amounts, or IRMAA, that increase their monthly premium payments.
Medicare $2,000 prescription drug cap goes into effect
Annual out-of-pocket Medicare Part D drug costs will now be capped at $2,000, as changes enacted with the Inflation Reduction Act go into effect.
Beneficiaries with Medicare Part D drug plans that have a deductible will pay out-of-pocket costs until that threshold is met. In 2025, the highest deductible for those plans is $590.
Once beneficiaries pay their full deductible, they will owe 25% of the cost of coinsurance until their out-of-pocket spending on both generic and brand-name drugs reaches $2,000. After that, those beneficiaries will have what’s known as catastrophic coverage, which means they won’t be on the hook to pay out-of-pocket Part D costs for the rest of 2025.
However, beneficiaries will also have the option to pay out-of-pocket costs monthly over the course of the year, instead of all at once.
Notably, insulin costs have also been capped at $35 per month, both under Medicare Part D covered treatments and Medicare Part B covered insulin used with pumps.
Social Security trust fund depletion dates get closer
In 2024, the Social Security trustees projected the trust fund the program relies on to help pay retirement benefits may be depleted in 2033. At that time, just 79% of those benefits may be payable, unless Congress acts sooner.
Social Security’s combined trust funds — used to pay both retirement and disability benefits — are projected to run out in 2035.
Now that the calendar has turned to a new year, those depletion dates are closer.
Notably, the previously mentioned Social Security Fairness Act that will provide increased benefits to some pensioners may move the trust fund depletion date six months closer.
“That’s the major looming issue right now, is what can be done to shore up those trust funds,” Shedden said. “That’s going to require very comprehensive, bipartisan changes to multiple parts of the Social Security rules in the program.”
However, most financial advisors emphasize that shouldn’t affect personal claiming decisions.
For younger generations, there could be changes to future benefits, said George Gagliardi, a certified financial planner and founder of Coromandel Wealth Strategies in Lexington, Massachusetts.
“But for those already receiving or about to get Social Security checks, I don’t think that there is anything to worry about,” Gagliardi said.
Other important changes to note
- Maximum taxable earnings — the amount of wages subject to Social Security payroll taxes — will rise to $176,100 in 2025, up from $168,600 in 2024. Once workers hit that cap, they no longer pay into the program for the rest of the year.
- Social Security beneficiaries who claim benefits before their full retirement age and who continue to work face what is known as a retirement earnings test. The earnings exempt from the retirement earnings test is now $23,400 per year in 2025 for those under full retirement age, up from $22,320 per year in 2024. For every $2 in earnings above the limit, $1 in benefits is withheld. For the year an individual reaches retirement age, a higher threshold of $62,160 in earnings applies, up from $59,520 in 2024. For every $3 in earnings above the limit, $1 in benefits is withheld. Of note: this only applies to the months before a beneficiary turns full retirement age. Starting from their birthday month, the retirement earnings test no longer applies. Importantly, once a beneficiary reaches full retirement age, any previously withheld benefits are applied to monthly benefits.
- Do you want to talk to the Social Security Administration face to face? Starting Jan. 6, the agency is requiring appointments for local office services, such as obtaining Social Security cards. To improve efficiency, the agency is directing individuals who need help to first try its online or automated telephone services. However, people who are unable to schedule in-person appointments, particularly vulnerable individuals, may still come in and get in-person service.
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If you’re ready to focus on retirement in 2025, early January could be the perfect time to boost your 401(k) plan contributions, financial experts say.
More than half of American workers feel they are behind on retirement savings, according to a Bankrate survey that polled 2,445 U.S. adults in August.
But starting in 2025, your 401(k) plan has a higher contribution limit — and a special catch-up for older investors — which could help grow your nest egg.
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For 2025, you can defer $23,500 into your 401(k) plan, up from $23,000 in 2024. Investors aged 50 and older can make catch-up contributions of $7,500 on top of the $23,500 limit.
Typically, it takes a couple of paychecks for 401(k) deferral changes to go into effect, according to Boston-area certified financial planner Catherine Valega, founder of Green Bee Advisory.
Boosting your contribution to max out deferrals can be easier earlier in the year because the higher percentage is spread across more paychecks.
Be aggressive with your investments, especially if you have decades until retirement.
Catherine Valega
Founder of Green Bee Advisory
“Be aggressive with your investments, especially if you have decades until retirement,” said Valega, who urges clients to max out their 401(k) plans if possible.
Starting in 2025, there’s also a special catch-up limit for investors aged 60 to 63, thanks to a change enacted via Secure 2.0. Instead of $7,500, this group can save $11,250 for catch-up contributions, which brings their total deferral limit to $34,750 for 2025.
Invest ‘as much as you feel comfortable’
While many investors aim to max out 401(k) deferrals, it can be difficult with other short-term goals, like paying off debt or buying a home.
To that point, roughly 14% of employees maxed out 401(k) plans in 2023, according to a 2024 Vanguard report, based on data from 1,500 qualified plans and nearly five million participants.
Max contributors were typically older, with higher income and a longer tenure with their current employer, the report found.
Ultimately, you should defer “as much as you feel comfortable” not tapping until retirement, said CFP George Gagliardi, founder of Coromandel Wealth Strategies in Lexington, Massachusetts. Otherwise, you could owe a 10% penalty and taxes for early withdrawals, with some exceptions.
Plus, you need a “sufficient emergency fund” outside of your retirement savings, he said.
Typically, experts recommend a minimum of three to six months of expenses for an emergency fund, depending on your family’s circumstances.
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