Connect with us

Personal Finance

How Musk’s access to Treasury system may impact Social Security

Published

on

The US Capitol building in Washington, DC, on November 24, 2024. 

Daniel Slim | Afp | Getty Images

News that Department of Government Efficiency led by Elon Musk now has access to a government payment system that is responsible for $6 trillion in annual federal payments — including Social Security and Medicare benefits — has prompted criticism from Democratic lawmakers and advocates.

Yet in a new letter to Congress, the Treasury Department said the new development has not caused those benefit payments to be “delayed or re-routed.”

Last week, it was reported Treasury Secretary Scott Bessent granted access to the federal payment system to DOGE, an office within the President’s executive office. DOGE has been tasked with finding ways to reduce federal spending and increase government efficiency.

Democratic lawmakers and advocacy organizations have raised their concerns about what that could mean for the continuity of federal payments and access to Americans’ confidential information.

“Millions of Americans rely on these systems for Social Security checks, Medicare benefits, federal salaries, grants and tax refunds,” Sen. Elizabeth Warren, D-Mass, posted on X on Monday, calling the move “extraordinarily dangerous.”

Elon Musk gets keys to the Treasury: DOGE team granted access to payments system

Social Security beneficiaries “have every reason to be alarmed,” according to a statement from the National Committee to Preserve Social Security and Medicare.

“It all depends on what they [at DOGE] think is efficient and what isn’t efficient,” said Dan Adcock, director of government relations and policy at the National Committee.

“These programs are the lifelines of millions of people and seniors with disabilities throughout the country,” he said.

Under Musk, the government may have the ability to stop Social Security Disability Insurance payments, as well as other benefits such as Medicaid or Meals on Wheels, according to the National Committee.

Payments on federal contracts and foreign aid may also be affected, according to Lindsay Owens, executive director at Groundwork Collaborative.

The idea that a private citizen — unelected and unconfirmed by the Senate — was in possession of the Treasury payment system and had access to Americans’ personal financial and identifying information is “a five-alarm fire for us,” Owens said.

However, a White House official, who spoke on background, said many of the perceptions of what the change could mean are unfounded.

“All DOGE is looking to do is restructure the payment system to reflect the President’s goals and his mission, especially regarding the executive orders,” the White House Official said.

“Any payments going for Social Security, Medicare, Medicaid, those are not at odds with the president’s executive order,” the official said. “Any assertion otherwise is just a lie.”

Moreover, any access to personal financial information will be limited to government employees who have proper security clearance to do so, the official said.

In a Tuesday letter to members of Congress, a Treasury Department official said the current review of the Fiscal Service that operates federal government payment systems “has not caused payments for obligations such as Social Security and Medicare to be delayed or re-routed.”

Further, Treasury staff members working with Treasury employee Tom Krause “will have read-only access to the coded data of the Fiscal Service’s payment systems in order to continue this operational efficiency assessment,” the official wrote. Krause, CEO of Cloud Software Group, had been working with DOGE and has been hired by the Treasury Department.

Federal worker ‘buyout’ may impact Social Security

The Trump administration has offered federal employees buyouts, whereby they may resign and get paid through September. Federal workers have until Feb. 6 to accept the resignation offers.

While reports suggest at least 20,000 federal employees have taken buyouts, that number isn’t current, according to a U.S. Office of Personnel Management spokesperson.

“The number of deferred resignations is rapidly growing, and we’re expecting the largest spike to come 24-48 hours before the deadline,” the Office of Personnel Management spokesperson said via email.

The policy may negatively impact the Social Security Administration, which already faces 25-year staffing lows, a group of Democratic senators said last week in a letter to the Office of Personnel Management.

“Trump’s buyout offer would have devastating consequences for the tens of millions of Americans who rely on Social Security,” Sen. Kirsten Gillibrand, D-New York, said in a statement.

More from Personal Finance:
How tariffs may impact U.S. consumers
The Fed holds rates steady. What that means for you
IRS announces the start of the 2025 tax season

The Social Security Administration has “historically struggled to provide essential services in a timely manner,” the Senators wrote in their letter. In 2024, the Social Security’s average phone wait time for service was 45 minutes. In 2023, the average wait time for determinations for disability benefits was 230 days.

All federal agencies have funding through a continuing resolution through March 14. After that, it’s up to Congress, according to Adcock.

The Social Security Administration has said it will take time to implement a new law, the Social Security Fairness Act, that will provide more than 3 million Americans who also receive public pensions with increased monthly benefit checks, as well as lump sum back payments.

“Though SSA is helping some affected beneficiaries now, under SSA’s current budget, SSA expects that it could take more than one year to adjust benefits and pay all retroactive benefits,” the agency states on its website.

Continue Reading

Personal Finance

Trump administration loses appeal of DOGE Social Security restraining order

Published

on

A person holds a sign during a protest against cuts made by U.S. President Donald Trump’s administration to the Social Security Administration, in White Plains, New York, U.S., March 22, 2025. 

Nathan Layne | Reuters

The Trump administration’s appeal of a temporary restraining order blocking the so-called Department of Government Efficiency from accessing sensitive personal Social Security Administration data has been dismissed.

The U.S. Court of Appeals for the 4th Circuit on Tuesday dismissed the government’s appeal for lack of jurisdiction. The case will proceed in the district court. A motion for a preliminary injunction will be filed later this week, according to national legal organization Democracy Forward.

The temporary restraining order was issued on March 20 by federal Judge Ellen Lipton Hollander and blocks DOGE and related agents and employees from accessing agency systems that contain personally identifiable information.

More from Personal Finance:
Judge slams Social Security chief for agency shutdown ‘threats’
Social Security changes may impact service, benefit payments
Trump pick to lead Social Security faces questions on DOGE

That includes information such as Social Security numbers, medical provider information and treatment records, employer and employee payment records, employee earnings, addresses, bank records, and tax information.

DOGE team members were also ordered to delete all nonanonymized personally identifiable information in their possession.

The plaintiffs include unions and retiree advocacy groups, namely the American Federation of State, County and Municipal Employees, the Alliance for Retired Americans and the American Federation of Teachers. 

“We are pleased the 4th Circuit agreed to let this important case continue in district court,” Richard Fiesta, executive director of the Alliance for Retired Americans, said in a written statement. “Every American retiree must be able to trust that the Social Security Administration will protect their most sensitive and personal data from unwarranted disclosure.”

The Trump administration’s appeal ignored standard legal procedure, according to Democracy Forward. The administration’s efforts to halt the enforcement of the temporary restraining order have also been denied.

“The president will continue to seek all legal remedies available to ensure the will of the American people is executed,” Liz Huston, a White House spokesperson, said via email.

Fiserv CEO on the nomination to Social Security Commisioner role

The Social Security Administration did not respond to a request from CNBC for comment.

Immediately after the March 20 temporary restraining order was put in place, Social Security Administration Acting Commissioner Lee Dudek said in press interviews that he may have to shut down the agency since it “applies to almost all SSA employees.”

Dudek was admonished by Hollander, who called that assertion “inaccurate” and said the court order “expressly applies only to SSA employees working on the DOGE agenda.”

Dudek then said that the “clarifying guidance” issued by the court meant he would not shut down the agency. “SSA employees and their work will continue under the [temporary restraining order],” Dudek said in a March 21 statement.

Don’t miss these insights from CNBC PRO

Continue Reading

Personal Finance

Most credit card users carry debt, pay over 20% interest: Fed report

Published

on

Julpo | E+ | Getty Images

Many Americans are paying a hefty price for their credit card debt.

As a primary source of unsecured borrowing, 60% of credit cardholders carry debt from month to month, according to a new report by the Federal Reserve Bank of New York.

At the same time, credit card interest rates are “very high,” averaging 23% annually in 2023, the New York Fed found, also making credit cards one of the most expensive ways to borrow money.

“With the vast majority of the American public using credit cards for their purchases, the interest rate that is attached to these products is significant,” said Erica Sandberg, consumer finance expert at CardRates.com. “The more a debt costs, the more stress this puts on an already tight budget.”

More from Personal Finance:
How to spring-clean your finances
Americans are suffering from ‘sticker shock’ — how to adjust
1 in 5 Americans are ‘doom spending’ — how that can backfire

Most credit cards have a variable rate, which means there’s a direct connection to the Federal Reserve’s benchmark. And yet, credit card lenders set annual percentage rates well above the central bank’s key borrowing rate, currently targeted in a range between 4.25% to 4.5%, where it has been since December.

Following the Federal Reserve’s rate hike in 2022 and 2023, the average credit card rate rose from 16.34% to more than 20% today — a significant increase fueled by the Fed’s actions to combat inflation.

“Card issuers have determined what the market will bear and are comfortable within this range of interest rates,” said Matt Schulz, chief credit analyst at LendingTree.

APRs will come down as the central bank reduces rates, but they will still only ease off extremely high levels. With just a few potential quarter-point cuts on deck, APRs aren’t likely to fall much, according to Schulz.

Credit card debt?

Despite the steep cost, consumers often turn to credit cards, in part because they are more accessible than other types of loans, Schulz said. 

In fact, credit cards are the No. 1 source of unsecured borrowing and Americans’ credit card tab continues to creep higher. In the last year, credit card debt rose to a record $1.21 trillion.

Because credit card lending is unsecured, it is also banks’ riskiest type of lending.

“Lenders adjust interest rates for two primary reasons: cost and risk,” CardRates’ Sandberg said.

The Federal Reserve Bank of New York’s research shows that credit card charge-offs averaged 3.96% of total balances between 2010 and 2023. That compares to only 0.46% and 0.43% for business loans and residential mortgages, respectively.

As a result, roughly 53% of banks’ annual default losses were due to credit card lending, according to the NY Fed research.

“When you offer a product to everyone you are assuming an awful lot of risk,” Schulz said.

Further, “when times get tough they get tough for most everybody,” he added. “That makes it much more challenging for card issuers.”

The best way to pay off debt

The best move for those struggling to pay down revolving credit card debt is to consolidate with a 0% balance transfer card, experts suggest.

“There is enormous competition in the credit card market,” Sandberg said. Because lenders are constantly trying to capture new cardholders, those 0% balance transfer credit card offers are still widely available.

Cards offering 12, 15 or even 24 months with no interest on transferred balances “are basically the best tool in your toolbelt when it comes to knocking down credit card debt,” Schulz said. “Not accruing interest for two years on a balance is pretty hard to argue with.”

Subscribe to CNBC on YouTube.

Continue Reading

Personal Finance

The 60/40 portfolio may no longer represent ‘true diversification’: Fink

Published

on

Andrew Ross Sorkin speaks with BlackRock CEO Larry Fink during the New York Times DealBook Summit in the Appel Room at the Jazz at Lincoln Center in New York City on Nov. 30, 2022.

Michael M. Santiago | Getty Images

It may be time to rethink the traditional 60/40 investment portfolio, according to BlackRock CEO Larry Fink.

In a new letter to investors, Fink writes the traditional allocation comprised of 60% stocks and 40% bonds that dates back to the 1950s “may no longer fully represent true diversification.”

“The future standard portfolio may look more like 50/30/20 — stocks, bonds and private assets like real estate, infrastructure and private credit.” Fink writes.

Most professional investors love to talk their book, and Fink is no exception. BlackRock has pursued several recent acquisitions — Global Infrastructure Partners, Preqin and HPS Investment Partners — with the goal of helping to increase investors’ access to private markets.

More from Personal Finance:
Why uncertainty makes the stock market go haywire
Investors are ‘miles ahead’ if they avoid 3 things, CIO says
How investors can ready their portfolios for a recession

The effort to make it easier to incorporate both public and private investments in a portfolio is analogous to index versus active investments in 2009, Fink said.

Those investment strategies that were then considered separately can now be blended easily at a low cost.

Fink hopes the same will eventually be said for public and private markets.

Yet shopping for private investments now can feel “a bit like buying a house in an unfamiliar neighborhood before Zillow existed, where finding accurate prices was difficult or impossible,” Fink writes.

60/40 portfolio still a ‘great starting point’

After both stocks and bonds saw declines in 2022, some analysts declared the 60/40 portfolio strategy dead. In 2024, however, such a balanced portfolio would have provided a return of about 14%.

“If you want to keep things very simple, the 60/40 portfolio or a target date fund is a great starting point,” said Amy Arnott, portfolio strategist at Morningstar.

If you’re willing to add more complexity, you could consider smaller positions in other asset classes like commodities, private equity or private debt, she said.

However, a 20% allocation in private assets is on the aggressive side, Arnott said.

The total value of private assets globally is about $14.3 trillion, while the public markets are worth about $247 trillion, she said.

For investors who want to keep their asset allocations in line with the market value of various asset classes, that would imply a weighting of about 6% instead of 20%, Arnott said.

Yet a 50/30/20 portfolio is a lot closer to how institutional investors have been allocating their portfolios for years, said Michael Rosen, chief investment officer at Angeles Investments.

BlackRock CEO Larry Fink: Infrastructure will be the largest growing sector in private capital

The 60/40 portfolio, which Rosen previously said reached its “expiration date,” hasn’t been used by his firm’s endowment and foundation clients for decades.

There’s a key reason why. Institutional investors need to guarantee a specific return, also while paying for expenses and beating inflation, Rosen said.

While a 50/30/20 allocation may help deliver “truly outsized returns” to the mass retail market, there’s also a “lot of baggage” that comes with that strategy, Rosen said.

There’s a lack of liquidity, which means those holdings aren’t as easily converted to cash, Rosen said.

What’s more, there’s generally a lack of transparency and significantly higher fees, he said.

Prospective investors should be prepared to commit for 10 years to private investments, Arnott said.

And they also need to be aware that measurement issues with asset classes like private equity means past performance data may not be as reliable, she said.

For the average person, the most likely path toward tapping into private equity will be part of a 401(k) plan, Arnott said. So far, not a lot of companies have added private equity to their 401(k) offerings, but that could change, she said.

“We will probably see more plan sponsors adding private equity options to their lineups going forward,” Arnott said.

Don’t miss these insights from CNBC PRO

Continue Reading

Trending