Connect with us

Personal Finance

How retirees can protect portfolios during a stock market downturn

Published

on

Johner Images | Johner Images Royalty-free | Getty Images

Protect from ‘sequence of returns risk’

Stock market dips can be most harmful to portfolios during the first five years of retirement, which is the “danger zone,” according to Arnott.

If you withdraw money when asset values have fallen, there are fewer funds available to capture growth when the market rebounds, she said. 

The phenomenon of poorly timed withdrawals paired with stock market losses is known as “sequence of returns risk,” and it could boost your chances of outliving retirement savings, Arnott said. 

Negative returns cause more damage to portfolios early in retirement than later, according to a 2024 report from Fidelity Investments.

However, if you don’t tap your nest egg when the market is down, “you’re clearly going to change the dynamics, and you have a better chance of recovering,” said David Peterson, head of advanced wealth solutions at Fidelity.

The ‘cash bucket’ can shield your portfolio 

CFOs uncertain on growth, generally 'pessimistic' on state of economy

“If you’re always spending from a cash bucket, then you don’t have to worry as much about making withdrawals when the market is down,” Arnott said.

The second bucket, which covers the next five years of spending, could be in short- to intermediate-term bonds or bond funds, and income distributions can replenish spending from the cash bucket, she said.   

After that, you’re investing long-term in the third bucket, focused on growth with primarily stock allocations, depending on risk tolerance and goals.  

Continue Reading

Personal Finance

How to save on summer travel in 2025

Published

on

Klaus Vedfelt | Digitalvision | Getty Images

Earlier this spring, consumers were feeling good about their summer vacation prospects. More people were planning to take a trip compared to last year, and summer travel budgets were up, too, according to a new report from Deloitte.

But just a few weeks later — after President Donald Trump announced widescale tariffs and the stock market dropped precipitously, bubbling up recession fears — some would-be vacationers abruptly scaled back their spending plans, a second round of the survey found.

About 53% of respondents plan to take leisure vacations this summer, up from 48% in 2024, according to a new report by Deloitte. 

We still see a strong summer travel season, but perhaps with a more frugal approach.

Kate Ferrara

the transportation, hospitality and services sector leader at Deloitte

The report is based on two surveys: one was conducted between March 26 and April 1, 2025, and another between April 7 and April 9. The first survey reached 1,794 travelers and 2,132 non-travelers while the second reached 1,064 travelers and 880 non-travelers.

Initially, Deloitte found, the average summer travel budget was set to grow 21% year over year, to $4,967. In the second round of the survey, travelers expected to spend just 13% more than last year, or about $4,606.

When looking at budgets for their longest trip of the season, respondents initially planned to spend an average $3,987, 13% more than 2024. That anticipated budget declined to $3,471 in the second poll, an increase of less than 1% from a year ago. 

More from Personal Finance:
Trade tensions drive consumers to cut back
Student loan borrowers brace for wage garnishment
House Republican tax bill favors the rich — how much they stand to gain, and why

Deloitte conducted a second poll because the firm noticed “softness” in consumer spending across other areas of their research, said Kate Ferrara, the transportation, hospitality and services sector leader at Deloitte.

“We still see a strong summer travel season, but perhaps with a more frugal approach,” said Ferrara.

Travel costs are down

Broadly, travel costs have declined, which may help travelers looking to stretch their budget. Hotel room rates are down 2.4% from a year ago, according to a recent report by NerdWallet. Rental car costs are also down 2.1% in that same timeframe, while airfares are down 7.9%.

Round-trip domestic airfare for this summer is averaging $265 per ticket, according to the 2025 summer outlook by Hopper, a travel site. That’s down 3% from $274 in 2024 and down 8% since 2019, the lowest level in three years.

Travel costs for international travel are generally down, said Hayley Berg, the lead economist at Hopper. The average round-trip airfare between the U.S. and Europe, the most popular international destination, costs $850 per ticket this summer, down 8% from 2024, Hopper found.

Frontier CEO on travel demand: The consumer is coming back with a vengeance

In spite of slightly lower prices for travel, people are generally spending more due to inflation, and might have less leftover money to spend on non-essential items like travel, said Deloitte’s Ferrara.

‘The root of all of our hacks’

Of those who reduced their summer travel budgets, 34% of respondents plan to cut back on their in-destination spending activity, such as food or paid guided excursions, Deloitte found. About 30% plan to stay with family and friends instead of paying for lodging, and 21% chose to drive instead of flying to their destination.

You can also save money this summer if you can be flexible with things like when you take the time off, your destination, what you do while you’re there and your mode of transportation, experts say.

“The root of all of our hacks for saving this summer is flexibility,” said Berg.

Airfare tends to spike or be higher during federal holiday weekends like the Fourth of July and Labor Day, Hopper found. This year, prices on these weekends will be about 34% higher compared to other weekends.

Instead of flying in the middle of the summer, consider delaying trips toward the end of the season, in late August or even early September, Berg said. Both price and travel demand will typically drop off by then as the new school year starts and employees go back to regular work schedules, she said.

What’s more, flying in the middle of the week can help save as much as 20% on airfare, per the site’s report.

Traveling on a Tuesday or Wednesday can also help vacationers save about $67 on a round trip domestic flight this summer, Hopper found. That flexibility can help travelers save over $100 on international trips to Europe or Asia. 

Continue Reading

Personal Finance

Denmark raises retirement age to 70; U.S. might follow

Published

on

Aleksandarnakic | E+ | Getty Images

Denmark has moved to increase its retirement age to 70 — making it the highest retirement age in Europe.

Yet it may be difficult for the U.S. to follow its lead.

The new change in Denmark will apply to public pension retirements starting in 2040. Since 2006, the country has been adjusting its retirement age to reflect changes in life expectancy.

The U.S. does not technically have an official retirement age. At age 65, individuals become eligible for Medicare coverage. At age 66 to 67, depending on date of birth, an individual becomes eligible for full Social Security benefits based on their earnings record.

More from Personal Finance:
House Republican tax bill favors the rich
Some lawmakers want to defer capital gains taxes for mutual funds
What the House GOP budget bill means for your money

However, those individuals who wait until age 70 to claim Social Security retirement benefits stand to get the biggest payout — an increase of 8% for each year beyond full retirement age. (The full retirement age is when beneficiaries are eligible for 100% of the benefits they’ve earned based on their work records.)

Yet few people wait until age 70 to claim benefits. While more than 90% of individuals would benefit from delaying Social Security until that age, only about 10% actually do, according to a 2023 paper from the National Bureau of Economic Research.

While age 70 is not the official U.S. retirement age, it is the threshold based on economists’ definition — the age at which you can’t accrue any more benefits, according to Teresa Ghilarducci, a labor economist and professor at The New School for Social Research.

“In the United States, it’s been 70 for decades, and we had the highest retirement age than any other country for years,” Ghilarducci said.

Retirement age in the U.S. up for debate

Yet there are efforts to officially bump up the U.S. retirement age higher.

In 1983, Congress passed legislation to gradually raise the full retirement age for Social Security from 65 to 67. That change is still getting phased in today, with people born in 1960 and later subject to the higher 67 retirement age.

In December, an amendment to raise the full retirement age to 70 was introduced by Sen. Rand Paul, R-Ky., during last-minute efforts to advance legislation that increased Social Security benefits for certain public pensioners.

Economist discusses the 'risky' French election issue of increasing the retirement age

The bill, the Social Security Fairness Act, was voted into law. However, the proposal to raise the retirement age was struck down.

Paul called for raising the retirement age by three months per year until it reached age 70, to reflect current life expectancies. The change would have created nearly $400 billion in savings for the program, while the Social Security Fairness Act added $200 billion in costs to the program over 10 years.

Other Republican proposals have likewise called for raising the retirement age.

The Social Security Administration faces looming depletion dates for the trust funds it relies on to help pay benefits. To help resolve that issue, lawmakers may consider raising taxes, cutting benefits or a combination of both. Raising the retirement age is effectively a benefit cut.

Like the changes enacted in 1983, raising the retirement age could be on the menu.

Denmark’s move ‘sends a signal’ to work longer

Urbazon | E+ | Getty Images

Denmark’s move to raise the retirement age to 70 is not a surprise, experts say.

In 2023, research published by the Danish Center for Social Science Research found increasing good health and educational resources for 60- to 70-year-olds, along with higher demand for older workers, could point to retirement age increases in the future.

In 2025, Denmark residents can retire with public pensions when they are 67. That will gradually increase to age 70 as of 2040.

“That means simply that younger people today will have to work longer before they can go on retirement,” said Jesper Rangvid, professor of finance at the Copenhagen Business School and co-director of its Pension Research Centre.

That retirement age affects everybody entitled to basic public pension income, according to Rangvid. However, those with private pension savings may retire earlier.

“There’s nothing that prevents you from retiring earlier if you have the funds and the means to do so,” Rangvid said.

Denmark does offer options for early retirement, including an early pension. However, raising the retirement age conveys a message, Rangvid said.

“It sends a signal that this is what the positions would like, that you should work longer,” Rangvid said.

Retirement age increases in U.S. may be problematic

Anchiy | Istock | Getty Images

Retirement experts say raising the U.S. retirement age may not present the same solution for the population that it does in Denmark.

Denmark has a much more “equal society” when it comes to income, wealth, education and life expectancy compared to the United States, said Alicia Munnell, senior advisor at the Center for Retirement Research at Boston College.

In the U.S., government data shows a stark difference between the life expectancy for those at the bottom and top income quartiles, Munnell said.

“When you have such a big, big difference, any across-the-board increase in the retirement age would be foolish,” Munnell said. “It’d be immensely harmful to those at the bottom who already receive benefits for a shorter period of time.”

A policy to raise the retirement age may also be problematic for another reason — it would take time to phase the change in, according to Andrew Biggs, senior fellow at the American Enterprise Institute.

For example, Congress may enact a higher retirement age that starts to go into effect in 10 years, and then it would take 30 years for people with the higher retirement age to go through the system.

While moving the age from say 67 to 69 would produce savings for the program in the long run, “they’re going to need the money right now,” Biggs said.

Retirement age and the economy

The welfare reform that began in Denmark in 2006 — whereby the retirement age increased with life expectancy — has been “extremely important” for the country’s economy, according to Rangvid.

“We have basically no public debt at all,” Rangvid said.

In contrast, the U.S. faces high national debt that requires the country to spend more on interest payments than on the military.

Budget legislation that is currently under consideration in Congress could add an estimated $3.3 trillion to the debt including interest, according to the Committee for a Responsible Federal Budget.

That package would not touch Social Security or its retirement age. However, other proposals have suggested that change, a benefit cut that would be a “pretty powerful lever” toward helping to resolve the program’s funding issues, according to Munnell.

One proposal scored by the Social Security Administration’s actuaries found raising the full retirement age to 70 would eliminate 26% of the program’s 75-year shortfall.

Continue Reading

Personal Finance

3 smart money moves to make

Published

on

Fed: Committee well-positioned to wait for more clarity on inflation and economic outlooks

In minutes released this week from the Federal Reserve May meeting, central bank policymakers indicated that an interest rate cut isn’t coming anytime soon.

Largely because of mixed economic signals and the United States’ changing tariff agenda, officials noted that they will wait until there’s more clarity about fiscal and trade policy before they will consider lowering rates again.

In prepared remarks earlier this month, Fed Chair Jerome Powell also said that the federal funds rate is likely to stay higher as the economy changes and policy is in flux. 

The Fed’s benchmark sets what banks charge each other for overnight lending, but also has a domino effect on almost all of the borrowing and savings rates Americans see every day.  

When will interest rates go down again?

With a rate cut on the backburner for now, consumers struggling under the weight of high prices and high borrowing costs aren’t getting much relief, experts say. 

“You don’t have to wait for the Fed to ride to the rescue,” said Matt Schulz, chief credit analyst at LendingTree. “You can have a far, far greater impact on your interest rates than any Fed rate cut ever will, but only if you take action.”

Here are three ways to do just that:

1. Pay down credit card debt

With a rate cut likely postponed until September, the average credit card annual percentage rate is hovering just over 20%, according to Bankrate — not far from last year′s all-time high. In 2024, banks raised credit card interest rates to record levels, and some issuers said they’ll keep those higher rates in place.

“When interest rates are high, credit card debt becomes the most expensive mistake you can make,” said Howard Dvorkin, a certified public accountant and the chairman of Debt.com.

Rather than wait for a rate cut that may be months away, borrowers could switch now to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a lower-rate personal loan, said LendingTree’s Schulz.

“Lowering your interest rates with a 0% balance transfer credit card, a low-interest personal loan or even a call to your lender can be an absolute game-changer,” he said. “It can dramatically reduce the amount of interest you pay and the time it takes to pay off the loan.”

Start by targeting your highest-interest credit cards first, Dvorkin advised. That tactic can create an added boost, he said: “Even small extra payments can save you hundreds in interest over time.”

2. Lock in a high-yield savings rate

Rates on online savings accounts, money market accounts and certificates of deposit will all go down once the Fed eventually lowers rates. So experts say this is an opportunity to lock in better returns before the central bank trims its benchmark, particularly with a high-yield savings account.

“The best rates now are around 4.5% — while that’s down about a percentage point from last year, it’s still better than we’ve seen over most of the past 15 years,” said Ted Rossman, senior industry analyst at Bankrate.com. “It’s well above the rate of inflation and this is for your safe, sleep-at-night kind of money.”

More from FA Playbook:

Here’s a look at other stories impacting the financial advisor business.

A typical saver with about $10,000 in a checking or savings account could earn an additional $450 a year by moving that money into a high-yield account that earns an interest rate of 4.5% or more, according to Rossman.

Meanwhile, the savings account rates at some of the largest retail banks are currently 0.42%, on average.

“If you’re still using a traditional savings account from a giant megabank, you’re likely leaving money on the table, and that’s the last thing anyone needs today,” said Schulz.

3. Improve your credit score

Those with better credit could already qualify for a lower interest rate.

In general, the higher your credit score, the better off you are when it comes to access and rates for a loan. Alternatively, lower credit scores often lead to higher interest rates for new loans and overall lower credit access.

However, credit scores are trending down, recent reports show. The national average credit score dropped to 715 from 717 a year earlier, according to FICO, developer of one of the scores most widely used by lenders. FICO scores range between 300 and 850.

Amid high interest rates and rising debt loads, the share of consumers who fell behind on their payments jumped over the past year, FICO found. The resumption of federal student loan delinquency reporting on consumers’ credit was also a significant contributing factor, the report said.

VantageScore also reported a drop in average scores starting in February as early- and late-stage credit delinquencies rose sharply, driven by the resumption of student loan reporting.

Some of the best ways to improve your credit score come down to paying your bills on time every month and keeping your utilization rate — or the ratio of debt to total credit — below 30% to limit the effect that high balances can have, according to Tommy Lee, senior director of scores and predictive analytics at FICO.

In fact, increasing your credit score to very good (740 to 799) from fair (580 to 669) could save you more than $39,000 over the lifetime of your balances, a separate analysis by LendingTree found. The largest impact comes from lower mortgage costs, followed by preferred rates on credit cards, auto loans and personal loans.

Subscribe to CNBC on YouTube.

Continue Reading

Trending