Personal Finance

DOGE actions may cause Social Security benefit ‘interruption’: ex-agency head

Published

1 month ago

March 1, 2025

Then Social Security Commissioner Martin O’Malley testifies before the Senate Committee on the Budget on Sept. 11, 2024.

Anna Rose Layden | Getty Images News | Getty Images

Social Security has never missed a benefit payment since the program first began sending individuals monthly benefits more than eight decades ago.

But the recent actions at the U.S. Social Security Administration by Elon Musk‘s so-called Department of Government Efficiency are putting monthly benefit checks for more than 72.5 million Americans at risk, former commissioner and former Maryland governor Martin O’Malley told CNBC.com.

“Ultimately, you’re going to see the system collapse and an interruption of benefits,” O’Malley said. “I believe you will see that within the next 30 to 90 days.”

Ahead of any interruption in benefits, “people should start saving now,” O’Malley said.

The Social Security Administration uses multiple systems and technologies that Elon Musk has criticized for leading to errors. As commissioner, O’Malley told Congress the agency needed more funding for IT modernization.

O’Malley said DOGE leaders are now making changes at the agency, and significant staff cuts have already led to system outages. Those intermittent IT outages may happen more frequently and for more extended periods of time until there is a “system collapse and an interruption of benefits,” he said.

Neither the Social Security Administration nor the White House responded to requests for comment by press time.

Social Security Administration leadership upheaval

The Department of Government Efficiency, also known as DOGE, is not a federal department. And Musk, whom President Donald Trump brought on board to implement DOGE, is not an elected official.

Since its establishment, DOGE has looked to slash spending at federal government agencies.

Top Social Security official exits after refusing DOGE access to sensitive data

The cuts have led to leadership upheaval, with the recent resignation of acting commissioner Michelle King following a reported disagreement over DOGE’s access to sensitive data. O’Malley resigned from the Social Security Administration in November to run for chairman of the Democratic National Committee, a race which he lost to Minnesota Democrat Ken Martin.

Trump has nominated Frank Bisignano, CEO of financial-technology company Fiserv, to serve as the new commissioner of the Social Security Administration. Bisignano has yet to sit for Senate confirmation hearings.

In the interim, Lee Dudek, who first joined the agency in 2009, has been appointed acting commissioner.

Earlier this month, Dudek posted on LinkedIn that he had been placed on administrative leave from the agency for helping DOGE representatives, The Wall Street Journal reported on Feb. 20.

“Our continuing priority is paying beneficiaries the right amount at the right time, and providing other critical services people rely on from us,” Dudek said in a Feb. 19 statement about his appointment.

Whose benefits may be most at risk

Yet experts say the benefits Americans rely on could be at risk based on the Trump administration’s overhaul of the agency.

“The American public needs to understand that one of their major social safety nets is in dire jeopardy,” said Jill Hornick, a union official at the American Federation of Government Employees Local 1395, which primarily represents Social Security offices in Illinois.

“It’ll take a while for the effects to be felt, but they’re coming,” Hornick said, predicting what will happen to Social Security is going to be “far worse” than the planned cuts to Medicaid.

For people who are already receiving Social Security benefits, most of that is automated and may not be affected, she said. However, processing new claims — whether it be for retirement or disability benefits — may take longer since those cannot be processed without Social Security employees, she said.

On Thursday, the Social Security Administration sent a notice to employees that gives them until March 14 to decide whether to take an early buyout. Unlike a previous January offer, this now includes service employees, and staffing reductions in that area may impact how quickly the agency processes benefit claims and provides other services, Hornick said.

For example, if a woman files for a survivor benefit after her husband passes away, she needs to provide a copy of her marriage license. A Social Security employee then needs to code the system to verify they have seen that document and the applicant is eligible for benefits, Hornick said.

“Not everybody can do things electronically,” particularly the older adults and disabled individuals who the Social Security Administration serves, said Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare.

“If you don’t have people to run an agency that requires hands-on customer service, then of course there’s a risk that you could end up with benefits being either denied or interrupted,” Freese said.

Office closures may reduce access to services

The DOGE savings web page has a list of about 45 Social Security locations where leases will be terminated, according to Rich Couture, spokesperson for AFGE SSA General Committee, a union that represents 42,000 Social Security employees nationally.

The list provides little information on the uses for the locations that are being closed. Based on the square footage listed, they may be sites used to conduct in-person hearings for disability benefits, Couture said. In one case, the location seems to be a busy New York state field office that provides general services, he said.

“If they’re going to close these offices that are busy in highly populated areas, it would suggest to me that there’s no office in this country that would be safe from having a lease terminated, especially in rural areas,” Couture said.

Fiserv CEO on the nomination to Social Security Commisioner role

In a recent statement, Rep. John Larson, D-Conn., said the moves are a “backdoor benefit cut.”

“Let me be clear — laying off half of the workforce at the Social Security Administration and shuttering field offices will mean the delay, disruption and denial of benefits,” Larson said.

In a statement to CNBC.com earlier this week, the Social Security Administration said it has not set any reduction targets, in response to reports it plans to cut 50% of its employees.

As a union, AFGE has been issuing bargaining demands in response to the agency’s recent decisions and plans to enforce employee rights through other methods as necessary, spokesperson Couture said.

While many lawsuits have been filed, it will take time to work through them, especially as the courts are now being flooded with cases tied to the Trump administration’s actions, said Nancy Altman, president of advocacy organization Social Security Works.

The biggest results may come from the pressure American voters could put on elected officials, former SSA commissioner O’Malley said.

“I think many people throughout the country are going to start bringing a lot of heat to members of Congress who have been facilitating, supporting, aiding and abetting the breaking of their Social Security and the interruption of benefits that they work their whole lives to earn,” he said. “These are earned benefits.”

Personal Finance

Student loan repayment tips amid challenging times for borrowers

Published

17 hours ago

April 6, 2025

Business Finance News

Sdi Productions | E+ | Getty Images

It’s a challenging time for many federal student loan borrowers just trying to find ways to pay off their debt.

Millions of borrowers who enrolled in the Biden administration-era Saving on a Valuable Education plan are now in limbo after the program was blocked by Republican-led legal challenges.

Meanwhile, the Trump administration has changed the terms on several other repayment plans.

To successfully keep up with your student loan payments and eventually emerge debt-free, borrowers should explore their options and understand the terms of their repayment plan. Here’s what you need to know amid major challenges to the lending system.

How the SAVE plan got blocked

A U.S. appeals court in February blocked the Biden administration’s student loan relief plan known as SAVE.

The 8th U.S. Circuit Court of Appeals sided with the seven Republican-led states that filed a lawsuit against the U.S. Department of Education’s plan. The states had argued that former President Joe Biden, with SAVE, was essentially trying to find a roundabout way to forgive student debt after the Supreme Court struck down his sweeping debt cancellation plan in June 2023.

SAVE came with two key provisions that the lawsuits targeted: It had lower monthly payments than any other federal student loan repayment plan, and it led to quicker debt erasure for those with small balances.

Forbearance has no clear end date

When its SAVE plan got tied up in legal challenges, the Biden administration put millions of borrowers who’d enrolled in the plan in an interest-free forbearance. Borrowers, if they wish, can still remain in that payment pause.

There’s no specific end date to that forbearance as of now, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

But unlike the Covid-era pause on student loan bills, this forbearance does not give borrowers credit toward debt forgiveness under an income-driven repayment plan or Public Service Loan Forgiveness.

Historically, at least, IDR plans limit borrowers’ monthly payments to a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years. PSLF, which President George W. Bush signed into law in 2007, allows certain not-for-profit and government employees to have their federal student loans wiped away after 10 years of payments.

Borrowers have other options

Some borrowers who are in the SAVE program’s forbearance might want to sit tight, said higher education expert Mark Kantrowitz. Not having to make payments might be a relief to those who are experiencing any financial struggles.

Another benefit of remaining in the payment pause is that interest isn’t accumulating on your debt, like it would under other IDR plans, Buchanan explained.

“But months in SAVE forbearance do not count toward loan forgiveness, so both those considerations need to be weighed when thinking about switching plans,” Buchanan said.

If you do decide to switch out of the now-blocked SAVE plan, the Trump administration says that the other IDR plans now open are: Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment.

The Education Department recently reopened those IDR plan applications, following a period during which the plans were unavailable. (The Trump administration said it was updating the plans’ applications to make them comply with the recent court order over SAVE.)

Borrowers should know that the automatic loan forgiveness after 20 or 25 years is not available at the moment under ICR or PAYE “since the courts have questioned that permissibility under statute,” Buchanan said.

Still, if a borrower enrolled in ICR or PAYE, then switches to IBR, their previous payments made under the other plans will count toward loan forgiveness under IBR, as long as they meet the plan’s other requirements, Buchanan said.

Meanwhile, borrowers in any of the three IDR plans can get credit toward PSLF.

If you’re on strong financial footing and not seeking loan forgiveness, the Standard Repayment Plan is a smart option for borrowers, experts say. Under that plan, the payments will usually be larger than on an IDR plan, but they’re fixed and borrowers are typically debt-free after just a decade.

Personal Finance

Here’s why ‘dead’ investors outperform the living

Published

2 days ago

April 5, 2025

Business Finance News

Andrew Fox | The Image Bank | Getty Images

“Dead” investors often beat the living — at least, when it comes to investment returns.

A “dead” investor refers to an inactive trader who adopts a “buy and hold” investment strategy. This often leads to better returns than active trading, which generally incurs higher costs and taxes and stems from impulsive, emotional decision-making, experts said.

Doing nothing, it turns out, generally yields better results for the average investor than taking a more active role in one’s portfolio, according to investment experts.

The “biggest threat” to investor returns is human behavior, not government policy or company actions, said Brad Klontz, a certified financial planner and financial psychologist.

“It’s them selling [investments] when they’re in a panic state, and conversely, buying when they’re all excited,” said Klontz, the managing principal of YMW Advisors in Boulder, Colorado, and a member of CNBC’s Advisor Council.

“We are our own worst enemy, and it’s why dead investors outperform the living,” he said.

Why returns fall short

Dead investors continue to “own” their stocks through ups and downs.

Historically, stocks have always recovered after a downturn — and have gone on to reach new heights every single time, Klontz said.

Data shows how detrimental bad habits can be relative to the buy-and-hold investor.

The average stock investor’s return lagged the S&P 500 stock index by 5.5 percentage points in 2023, according to DALBAR, which conducts an annual investor behavior study. (The average investor earned about 21% while the S&P 500 returned 26%, DALBAR said.)

The theme plays out over longer time horizons, too.

The average U.S. mutual fund and exchange-traded fund investor earned 6.3% per year during the decade from 2014 to 2023, according to Morningstar. However, the average fund had a 7.3% total return over that period, it found.

That gap is “significant,” wrote Jeffrey Ptak, managing director for Morningstar Research Services.

It means investors lost out on about 15% of the returns their funds generated over 10 years, he wrote. That gap is consistent with returns from earlier periods, he said.

“If you buy high and sell low, your return will lag the buy-and-hold return,” Ptak wrote. “That’s why your return fell short.”

Wired to run with the herd

Emotional impulses to sell during downturns or buy into certain categories when they’re peaking (think meme stocks, crypto or gold) make sense when considering human evolution, experts said.

“We’re wired to actually run with the herd,” Klontz said. “Our approach to investing is actually psychologically the absolute wrong way to invest, but we’re wired to do it that way.”

Market moves can also trigger a fight-or-flight response, said Barry Ritholtz, the chairman and chief investment officer of Ritholtz Wealth Management.

“We evolved to survive and adapt on the savanna, and our intuition … wants us to make an immediate emotional response,” Ritholtz said. “That immediate response never has a good outcome in the financial markets.”

These behavioral mistakes can add up to major losses, experts say.

Consider a $10,000 investment in the S&P 500 from 2005 through 2024.

A buy-and-hold investor would have had almost $72,000 at the end of those 20 years, for a 10.4% average annual return, according to J.P. Morgan Asset Management. Meanwhile, missing the 10 best days in the market during that period would have more than halved the total, to $33,000, it found. So, by missing the best 20 days, an investor would have just $20,000.

Buy-and-hold doesn’t mean ‘do nothing’

Of course, investors shouldn’t actually do nothing.

Financial advisors often recommend basic steps like reviewing one’s asset allocation (ensuring it aligns with investment horizon and goals) and periodically rebalancing to maintain that mix of stocks and bonds.

There are funds that can automate these tasks for investors, like balanced funds and target-date funds.

These “all-in-one” funds are widely diversified and take care of “mundane” tasks like rebalancing, Ptak wrote. They require less transacting on investors’ part — and limiting transactions is a general key to success, he said.

“Less is more,” Ptak wrote.

(Experts do offer some caution: Be careful about holding such funds in non-retirement accounts for tax reasons.)

Routine also helps, according to Ptak. That means automating saving and investing to the extent possible, he wrote. Contributing to a 401(k) plan is a good example, he said, since workers make contributions each payroll period without thinking about it.

Personal Finance

As recession risk jumps, top financial pros share their best advice

Published

2 days ago

April 4, 2025

Business Finance News

Fg Trade | E+ | Getty Images

There is at least a 60% chance of recession if Trump's tariffs stick, says JPMorgan's David Kelly

Meanwhile, J.P. Morgan raised its odds for a U.S. and global recession to 60%, by year end, up from 40% previously.

“Disruptive U.S. policies has been recognized as the biggest risk to the global outlook all year,” J.P. Morgan strategists said in a research note on Thursday.

Allianz’s Chief Economic Advisor Mohamed El-Erian also warned on Friday that the risk of a U.S. recession “has become uncomfortably high.”

‘There is some nervous energy’

“There is some nervous energy there,” said certified financial planner Douglas Boneparth, president of Bone Fide Wealth in New York, of the conversations he is having with his clients.

Even though stocks took a beating on Friday, “we advise them to focus on fundamentals and what they can control, which means maintaining a strong cash reserve and discipline around cash flow so that they can stay in the market and feel confident about taking advantage of buying opportunities,” said Boneparth, a member of the CNBC Financial Advisor Council.

Recession or not, maintaining a consistent cash flow and investment strategy is key, other experts say.

“The best way to manage these moments is to maximize your current and future selves is to block out noise that doesn’t apply to your plan,” said CFP Preston Cherry, founder and president of Concurrent Financial Planning in Green Bay, Wisconsin.

Letting emotions get in the way is one of “the greatest threats to life and money plans,” said Cherry, who is also a member of the CNBC Advisor Council.

When it comes to volatility tolerance, sharp drops in the market are to be expected, the advisors say.

“The stock market is unpredictable, but historically, there’s a trend in how the market recovers,” Cherry said.

“In years with market corrections and pullbacks, these are the worst days, which are followed by the best days,” he added.

In fact, the 10 best trading days by percentage gain for the S&P 500 over the past three decades all occurred during recessions, often in close proximity to the worst days, according to a Wells Fargo analysis published last year.

“Being out of the market and missing the best days and cycles after recessions significantly hurt portfolios in the long run,” Cherry said.

Boneparth said his clients also “know volatility and uncertainty is part of the game and, most importantly, know not to sell into chaos.”

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