Personal Finance
What RFK, Jr.’s financial disclosures may teach us about managing debt
Robert F. Kennedy Jr., U.S. President Trump’s nominee to be secretary of Health and Human Services, testifies before a Senate Finance Committee confirmation hearing on Capitol Hill in Washington, U.S., Jan. 29, 2025.
Evelyn Hockstein | Reuters
Credit cards have become a ‘de facto emergency fund’
Yet in recent years, as prices have climbed, carrying credit card debt has been difficult for some borrowers to avoid.
“With inflation being so powerful and so stubborn, it’s just shrunken a lot of people’s financial wiggle room down to zero,” said Matt Schulz, chief credit analyst at LendingTree. “Americans look at credit cards as kind of a de facto emergency fund.”
Those balances can be costly.
Because the disclosures are essentially snapshots, it’s not clear if he pays off his balances in full each month, experts say.
If Kennedy pays $50,000 per month toward the lower estimated $610,000 credit card balance, it will take him an estimated 15 months to pay off the debts. Notably, that will cost him approximately $93,000 in interest, according to a Federal Reserve Bank of Dallas calculator.
If instead he pays the same $50,000 per month on a $1.2 million balance, it will take 33 months to pay off, and cost roughly $434,000 in interest.
To reduce those costs, experts say it would be wise for Kennedy to accelerate the paydown of those balances.
“He has a lot of income, so I don’t even know why you’d have all that debt if you have that much income,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners, who reviewed Kennedy’s filing.
That same advice may apply to the average household, for whom credit card debt can also be costly.
The average debt per credit card borrower was $6,380 as of the third quarter of 2024, according to TransUnion. Currently, the average credit card interest rate is 20.13%, according to Bankrate.
Those borrowers may also be paying for other debts. Average unsecured debt — excluding balances tied to real property like cars or homes — climbed 8% to $29,364 in 2024, according to Money Management International.
Paying off debts provides ‘guaranteed risk-free’ return
With interest rates that high, it usually makes the most sense to prioritize debt paydown over other priorities like investing or saving, according to experts.
“If you’re paying down credit card debt at 20%, that’s a guaranteed risk-free, tax-free return,” Rossman said. “You’re unlikely to get that much from your investments.”
Bankrate’s research has found higher-income individuals are more likely to carry long-term credit card debt, with 59% of borrowers who earn $100,000 or more having been in debt for at least a year. That includes 24% who have been in credit card debt for at least five years, Rossman said.
“Higher-income people often get higher credit limits, and sometimes that gets people into trouble,” Rossman said.
While wealthy borrowers may face substantial interest charges, they may be tempted to use credit cards for certain perks. For example, the American Express Centurion Card, also known as the Black Card, comes with a $10,000 one-time fee, as well as an annual $5,000 fee. In return, borrowers, get access to airport lounges, elite status at hotels and help finding tables at restaurants, among other rewards.
Nevertheless, credit cards usually are not the most effective way for the wealthy to borrow money, according to Charlie Douglas, a certified financial planner who works with ultra-high net worth families.
For wealthy investors to avoid having to sell investments and incur capital gains taxes when they want to make a big purchase like real estate, it makes sense to have a line of credit already established, Douglas said. Importantly, that comes with no costs on an ongoing basis.
It may also make sense to have up to one years’ worth of expenses in cash as a buffer, he said.
Martin Barraud | Ojo Images | Getty Images
As U.S. home equity climbs, owners are more likely to face capital gains taxes from selling property. But a lesser-known tax strategy could help shrink your bill, experts say.
When selling your main home, there’s a special tax break that shields up to $250,000 of profits for single filers and $500,000 for married couples filing jointly. However, you need to meet certain rules.
An increasing number of home sellers are exceeding those thresholds, according to a 2024 report from real estate data firm CoreLogic. Nearly 8% of U.S. homes sold in 2023 exceeded the capital gains tax limit of $500,000 for married couples, up from about 3% in 2019, the report found.
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Those percentages were even higher in high-cost states like Colorado, Massachusetts, New Jersey, New York and and Washington, according to the CoreLogic report.
Exceeding the $250,000 and $500,000 exclusions is “becoming more common,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
Home sale profits above the $250,000 or $500,000 thresholds are subject to capital gains taxes of 0%, 15% or 20%, depending on your taxable income.
Increase your ‘basis’ to reduce profits
Many home sellers don’t realize they can reduce capital gains by increasing their “basis,” or the home’s original purchase price, according to Mark Baran, managing director at financial services firm CBIZ’s national tax office.
You can increase your basis by adding “capital improvements,” such as renovations, adding a new roof, exterior upgrades or replaced systems.
Your “adjusted basis” is generally the cost of buying your home plus any capital improvements made while you own the property.
“That adds up over time and can bring them fully within the [$250,000 or $500,000 capital gains] exclusion,” Baran said.
However, you cannot add home repairs and maintenance, such as fixing leaks, holes, cracks or replacing broken hardware, according to the IRS.
You also can reduce your home sale profit by adding fees and closing costs from the purchase and sale of the home, according to Lucas.
The IRS says some of these expenses could include:
- Title fees
- Charges for utility installation
- Legal and recording fees
- Surveys
- Transfer taxes
- Title insurance
- Balances owed by the seller
“Maybe that gets you an extra few thousand” to reduce the profit, Lucas added.
Traders on the floor of the New York Stock Exchange at the opening bell in New York City on Feb. 12, 2025.
Angela Weiss | Afp | Getty Images
Stock market investors enjoyed lofty annual returns over the past two years. However, 2025 may not offer a “three-peat,” investment analysts say.
The S&P 500 stock market index yielded a 23% return for investors in 2024 and 24% in 2023. (Those returns were 25% and 26%, respectively, with dividends.)
Three consecutive years of total returns of more than 20% for U.S. stocks is a historical rarity. It has only happened once — in the late 1990s — dating back to 1928, according to Scott Wren, senior global market strategist at the Wells Fargo Investment Institute.
“Do we expect an S&P 500 Index three-peat in 2025? In short, no,” Wren wrote in a market commentary Wednesday.
The U.S. stock market has delivered average annual returns of roughly 10% since 1926, according to Dimensional, an asset manager. After accounting for inflation, stocks have consistently returned an average 6.5% to 7% per year dating to about 1800, according to a McKinsey analysis.
“We have been spoiled as investors” the past two years, said Callie Cox, chief market strategist at Ritholtz Wealth Management.
“Twenty-percent gains haven’t been the norm,” Cox said. “Twenty percent gains are the exception.”
What might ruin the party?
While history “isn’t gospel,” there are reasons to think the stock market may not perform as well in 2025, Cox said.
For one, there are many uncertainties that could negatively impact the stock market, including tariffs and a potential rebound in inflation, Wren said. A surge in bond yields might also pose a headwind, Wren wrote in a market commentary. (Higher yields could dampen demand for U.S. stocks.)
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Additionally, technology companies have been a major driver of S&P 500 returns in recent years but may not be poised for the same outperformance this year, Cox said.
Tech stocks suffered a rout in late January, for example, amid fears of a Chinese artificial intelligence startup called DeepSeek undercutting major U.S. players. Those stocks have largely recovered since then, however.
In all, a rosy backdrop of solid economic growth and consumer spending, coupled with relatively low unemployment, may push the S&P 500 up by about 12% in 2025, Wren wrote. That would be slightly better than the long-term historical average, he said.
“So do not be disappointed,” Wren wrote. “We think investors should be optimistic.”
However, investors shouldn’t let high expectations cloud judgment about market risks, Cox said.
The current environment is one in which investors should “prioritize portfolio balance” and long-term investors should ensure their portfolio is in line with their targets, she said.
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