Personal Finance

Here’s the deflation breakdown for October 2024 — in one chart

Published

2 months ago

November 14, 2024

As inflation has throttled back from pandemic-era highs, consumers have seen prices decline outright for many household items.

This dynamic, known as deflation, generally doesn’t occur on a broad, sustained scale in the U.S. economy: With limited exceptions, businesses are generally loath to lower prices once they’ve increased, economists said.

But some pockets of the economy — largely, prices for physical goods from new cars to appliances, sporting goods, consumer electronics and certain apparel — have deflated over the past year, according to the consumer price index.

“We are seeing [deflation] to some extent,” said Stephen Brown, deputy chief North America economist at Capital Economics.

Largely, prices have pulled back as pandemic-era contortions in supply and demand dynamics unwind, economists said. The U.S. dollar has also been relatively strong against major global currencies, making it cheaper to import goods from overseas.

But supply chains have “normalized” and deflation has “moderated to a pretty significant degree” as a result, said Mark Zandi, chief economist at Moody’s.

Where there has been deflation

Prices for some categories — like furniture and bedding, men’s clothing, cosmetics and used cars and trucks — are down from October 2023, but they’ve rebounded somewhat in recent months, according to CPI data.

That said, used cars and trucks should see a resumption of deflation since “wholesale prices have fallen recently, and supply and demand continues to improve in the sector,” Bank of America economists wrote on Monday in a research note.

Energy prices and electronics

Gasoline prices are also “way down,” Zandi said.

They’ve declined more than 12% in the past year, according to CPI data. Drivers paid $3.05 a gallon, on average, at the pump as of Nov. 11, according to the U.S. Energy Information Administration.

Consumers “could get more relief there because global oil prices are soft,” Zandi said.

That softness may be in anticipation of President-elect Donald Trump’s proposed policies around China, said Zandi. Those may include tariffs of at least 60% on goods imported from China, a nation with a huge appetite for oil. If Trump’s policies were to negatively affect the Chinese economy, they’d also likely dampen China’s oil demand.

Annual inflation rate hit 2.6% in October, meeting expectations

Other energy commodities refined from oil have also seen huge price declines. Fuel oil prices, for example, are down over 20% in the past year, a trend that should contribute to lower prices elsewhere such as for airfare, economists said.

Food prices are also generally underpinned by their own unique supply-and-demand dynamics, economists said. Turkey, snacks and bacon are about 4% cheaper than they were a year ago, for example.

Lower energy prices can also take pressure off food prices, as it costs less to transport and distribute food to grocery store shelves.

Consumer electronics have also seen big price declines: Computers, video equipment and smartphones are respectively 5%, 10% and 9% cheaper than they were a year ago, according to CPI data.

But consumers might not experience those lower prices at the store: They may only exist on paper.

That’s due to how the Bureau of Labor Statistics measures inflation for certain consumer goods like electronics, economists said.

Technology continually improves, meaning consumers get more for their money. The BLS treats those quality improvements as a price decline, giving the illusion of falling prices on paper.

Personal Finance

There’s a big inherited IRA change in 2025. How to avoid a penalty

Published

17 minutes ago

January 22, 2025

Business Finance News

Greg Hinsdale | The Image Bank | Getty Images

Inheriting an individual retirement account is a windfall for many investors.

However, a lesser-known change for 2025 could trigger a costly surprise penalty, financial experts say.

Starting in 2025, certain heirs with inherited IRAs must take yearly required withdrawals while emptying accounts over 10 years, known as the “10-year rule.”

“The big change [for 2025] is the IRS is enforcing penalties for missed required distributions,” said certified financial planner Judson Meinhart, director of financial planning at Modera Wealth Management in Winston-Salem, North Carolina.

There’s a 25% penalty for missing a required minimum distribution, or RMD, from an inherited IRA. But it’s possible to reduce the fee if your RMD is “timely corrected” within two years, according to the IRS.

Here are the key things to know about the inherited IRA change.

Which heirs could face a penalty

Before the Secure Act of 2019, heirs could withdraw funds from inherited IRAs over their lifetime, which helped reduce yearly income taxes.

Since 2020, certain inherited accounts have been subject to the “10-year rule,” meaning heirs must deplete inherited IRAs by the 10th year after the original account owner’s death.

After years of waived penalties for missed RMDs from inherited IRAs, the IRS in July finalized guidance. Starting in 2025, certain beneficiaries must take yearly withdrawals during the 10-year window or they’ll face a penalty for missed RMDs.

The rule applies to heirs who are not a spouse, minor child, disabled, chronically ill or certain trusts — and the yearly withdrawals apply if the original IRA owner had reached their RMD age before death.

One group who could be impacted are adult children who inherited IRAs from their parents, according to CFP Edward Jastrem, chief planning officer at Heritage Financial Services in Westwood, Massachusetts.

But the rules have become a “spiderweb mess of decision-making,” he said.

Avoid the ’10-year tax squeeze’

For 2025, there’s a enforced penalty for missed RMDs. But heirs also need to manage withdrawals to avoid the “10-year tax squeeze,” said Jastrem.

Over the past few years, some heirs have skipped yearly withdrawals from inherited IRAs, which could mean larger required withdrawals before the 10-year window closes, he said.

For example, boosting adjusted gross income can impact things like Medicare Part B and Part D premiums, eligibility for the premium tax credit for Marketplace health insurance and more.

Of course, timing inherited IRA withdrawals depends on your complete tax situation, including multi-year projections of your adjusted gross income, Meinhart said.

Personal Finance

‘Era of the billionaire.’ Here’s why wealth accumulation is accelerating

Published

2 hours ago

January 22, 2025

Business Finance News

President-elect Trump's cabinet to have more billionaires than any in history

The rich are getting richer.

The combined wealth of the world’s most wealthy rose to $15 trillion from $13 trillion in just 12 months, according to Oxfam’s latest annual inequality report — notching the second largest annual increase in billionaire wealth since the global charity began tracking this data.

Last year alone, roughly 204 new billionaires were minted, bringing the total number of billionaires to 2,769, up from 2,565 in 2023, the global charity found.

“Not only has the rate of billionaire wealth accumulation accelerated — by three times — but so too has their power,” Oxfam International’s Executive Director Amitabh Behar said in a statement Sunday.

“We’ve reached a new era now, we are in the era of the billionaire,” said Jenny Ricks, general secretary of the human rights group Fight Inequality Alliance. “The challenge now is turning this around and making this the era of the 99%.”

Despite the fact that America ranks first as the richest nation in the world in terms of gross domestic product, 36.8 million Americans live in poverty, accounting for 11.1% of the total population, according to the latest report from the U.S. Census Bureau.

“We need government serving people’s real needs and rights,” Ricks said, with increased funding for education and healthcare, among other social services.

‘Tax us, the super rich’

After Oxfam’s report was released, some of the world’s wealthiest people called on elected representatives of the world’s leading economies to introduce higher taxes on the very richest in society.

In an open letter to political leaders attending the annual World Economic Forum in Davos, Switzerland, more than 370 billionaires and millionaires said that they wanted to “tackle the corrosive impact of extreme wealth.”

To that end, “start with the simplest solution: tax us, the super rich,” the letter said.

36% of billionaire wealth is inherited

Oxfam found that 36% of billionaire wealth is now inherited. Much of that wealth will also get handed down. A separate report by UBS found that baby boomer billionaires’ heirs stand to inherit an estimated $6.3 trillion over the next 15 years.

“As the great wealth transition gains momentum … we expect the proportion of multigenerational billionaires to increase,” the report said.

According to Oxfam’s analysis, half of the world’s billionaires live in countries with no inheritance tax for direct descendants.

In the U.S., there is a federal estate tax up to 40%, depending on the amount of the estate over the current exclusion limit.

In 2025, the basic exclusion amount rose to $13.99 million per person, up from $13.61 million in 2024.

Meanwhile, President Donald Trump has vowed to fully extend the trillions in tax breaks he enacted via the Tax Cuts and Jobs Act in 2017, which also doubled the estate and gift tax exemption.

After 2025, the higher estate and gift tax exemption will sunset without action from Congress. If the provision expires, the exclusion will revert to 2017 levels, adjusted for inflation.

Some Democrats have pushed back on TCJA extensions, noting that they disproportionately benefit the wealthy, rather than middle-class families.

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Personal Finance

Here’s what you need to know about financial influencers

Published

4 hours ago

January 22, 2025

Business Finance News

Jaap Arriens | Nurphoto | Getty Images

TikTok’s fate is still uncertain.

While the Supreme Court last week upheld the law that effectively bans TikTok from the U.S., one of Trump’s first actions as president was an executive order to pause the ban for 75 days, starting Jan. 20.

The app’s future may shift how young adults learn about personal finance. Gen Zers, or those born between 1997 and 2012, often rely on TikTok’s financial community, or #FinTok, as a source of information about money.

A 2024 report by the CFA Institute found that the generation is more likely than older generations to engage with “finfluencer” — or financial influencer — content on TikTok, YouTube and Instagram, in part because they have less access to professional financial advisors and a preference for obtaining information online.

Americans last year turned to TikTok for financial advice on topics including budgeting (25%), investing (24%), credit cards and credit scores (33%), according to a recent report by Chime, a financial technology company.

The site polled 2,000 U.S. adults from November 1 to 16. It also analyzed user engagement patterns on TikTok compared with data from platforms like Google Trends and Exploding Topics, which track popularity and growth of trends over time.

Leading up to the law’s initial Jan. 19 deadline for TikTok, finfluencers had been directing their followers to other platforms like Instagram and YouTube. Individuals also downloaded social media apps like RedNote as TikTok substitutes.

But whatever ends up happening with TikTok, finfluencers are here to stay. Here’s how to vet their advice.

The value of financial advice on TikTok

About 65% of respondents in Chime’s survey said they feel more financially secure since using TikTok. Another 68% say #FinTok has improved their financial situation at home.

“For 2025, TikTok users are gravitating toward digestible personal finance tips that incorporate budgeting apps, micro-investing and community-based saving challenges,” said certified financial planner Douglas Boneparth, president and founder of Bone Fide Wealth, a wealth management firm based in New York City that focuses on millennials, young professionals and entrepreneurs.

Some viral TikTok trends are worth applying to your finances in 2025, like “loud budgeting,” experts say. The trend encourages consumers to take control of their finances and be vocal about making money-conscious decisions rather than overspending.

Essentially, “loud budgeting is just financial boundaries,” financial therapist Lindsay Bryan-Podvin, author of “The Financial Anxiety Solution” and founder of Mind Money Balance.

A short-term, no-spend challenge can also be an opportunity to do a “gut check on where you’re spending and where you’re saving,” Bryan-Podvin said.

TikTok 'refugees' stream to Chinese app RedNote

“These trends are worth adopting if you verify the underlying strategies [… and] modify them to align with your personal financial goals and risk tolerance,” said Boneparth, who is a member of the CNBC Financial Advisor Council.

But a lot of incorrect or risky advice appears on social media, too. About 27% of social media users believed misleading financial advice or misinformation on social media, according to Edelman Financial Engines. About 42% of surveyed adults in their 30s have fallen prey to bad financial advice in social platforms, and 2 in 10 have been affected more than once, the report found.

Edelman polled 3,008 adults of ages 30 and up from June 12 to July 2024. The total sample included 1,500 respondents between ages 45 and 70 with household assets between $500 and $3 million.

Vet financial content and find other sources

It’s important for social media users to be cautious about the content that influencers share, experts say.

“There’s really no barrier to entry for [an] influencer to participate on a platform,” said CFP Brian Walsh, head of financial planning advice at SoFi, a personal finance and financial planning technology company.

While social media helps people easily access information and get unique insights, it can be concerning when it comes to information you’d apply to your personal finances, he said.

“There’s nothing stopping someone with a ton of followers from promoting something that’s completely wrong,” Walsh said.

Individuals who are affected by risky or incorrect advice they took from a social media creator can file a complaint with the Consumer Financial Protection Bureau, according to Amy Miller, an accredited financial counselor and manager of America Saves, a campaign managed by the Consumer Federation of America.

Otherwise, here are three key steps to consider:

1. Look for other sources of other information

In most instances, you might not find experienced financial advisors on TikTok like on other social platforms, according to Winnie Sun, co-founder and managing director of Irvine, California-based Sun Group Wealth Partners.

Much of it has to do with compliance rules. In order for financial planners to maintain their licensing, they must adhere to certain guidelines on what information they’re allowed to share. It’s easier to track and review content posted on some platforms — TikTok isn’t one of them.

“I’m not allowed to share information on TikTok,” said Sun, who is also a CNBC FA Council member.

You can typically find licensed financial professionals actively sharing content on platforms like LinkedIn, YouTube and X, she said.

It’s also “absolutely crucial” to develop a basic level of financial literacy before turning to social media for advice, said SoFi’s Walsh.

Look for online courses, join financial forums and subscribe to legitimate publications to gain financial literacy, experts say. Organizations like the Consumer Financial Protection Bureau also provide free educational resources.

2. Do a background check on the content creator

Search for designations and look up the creator’s background, Walsh said: “The CFP [certified financial planner designation] is really the baseline when it comes to financial planning.”

You can enter the content creator’s name on BrokerCheck to see if they have any credentials. If they are accredited, find out if they have any disclosures, a red flag which means they’ve gotten into trouble in the past.

3. Verify the advice

If the content creator is not actively in the financial industry or lacks accreditation altogether, be careful about what they say. Be cautious if they are promising quick results and if they speak in absolutes, SoFi’s Walsh said — it can take a long time to save for an emergency, pay off credit card debt or learn how to invest.

“So promising get rich quick or overnight sensations […] that’s a big red flag for me,” Walsh said.

Also be careful if a creator talks about how one product or solution can answer all of your problems, he explained.

Outside of the basics like spending less than you make and saving money, there are “very few absolutes,” Walsh said.

Cross-reference an influencer’s claims with sources like government regulators and content from reputable financial professionals and publications, Boneparth said. If you need personalized advice, consider reaching out to a certified financial planner, a tax professional or a licensed investment advisor, he said.