Personal Finance
Musk, Ramaswamy call remote work a ‘Covid-era privilege.’ Some economists disagree
From left, Elon Musk, House Speaker Mike Johnson and Vivek Ramaswamy arrive for a meeting on Capitol Hill on Dec. 5, 2024.
Al Drago/Bloomberg via Getty Images
When Elon Musk and Vivek Ramaswamy laid out their vision for slashing the size of the federal government, they touted plans to bring workers back to the office full-time.
Working from home was a “Covid-era privilege,” the duo, appointed by President-elect Donald Trump to lead a new Department of Government Efficiency, wrote in a Nov. 20 Wall Street Journal op-ed.
But labor economists don’t see the pandemic-era uptick in remote work as a passing fad.
Instead, they view it as an enduring feature of the U.S. job market.
“Working from home is here to stay,” said Nick Bloom, an economics professor at Stanford University who studies workplace management practices.
Amazon, Washington Post curtail remote work
To be sure, many big name employers have curtailed remote work.
In September, Amazon CEO Andy Jassy announced a full-time in-office policy for corporate staffers starting in 2025, for example. The Washington Post recently announced a similar policy. UPS, Boeing and JPMorgan Chase have called some employees back to the office five days a week.
Others have cut the number of remote workdays as part of a “hybrid” arrangement, where employees split time in and out of office. Disney, for example, required four days a week of in-office work starting in 2023.
However, data shows remote work hasn’t fizzled out.
More than 60% of paid, full workdays were done out of the office at the peak in early 2020 — up from less than 10% before the pandemic, according to WFH Research, a project run jointly by researchers from MIT, Stanford, the University of Chicago and Instituto Tecnológico Autónomo de México.
That share has since fallen by more than half. However, it has remained flat at between 25% and 30% for two years, according to WFH Research data as of December.
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“Levels of working from home have been totally stable since January 2023,” Bloom said.
About 8% of job listings on Indeed advertised remote or hybrid work in November, down from a high of 10% in February 2022 but well above the 3% share in 2019.
“Remote work isn’t going away, but it is likely past its peak,” said Allison Shrivastava, an economist at Indeed.
Remote work is ‘hugely profitable’ for companies
Remote work — primarily hybrid work — has staying power because it’s “hugely profitable” for companies, Bloom said.
For one, workers’ productivity doesn’t seem to increase if they come to the office more than three days a week, said Bloom, citing research he co-authored that was published in the journal Nature in June.
But workers value the ability to work from home. Additional days mandated in the office increase employee turnover, which is “hugely costly” to firms, Bloom said.
Leaving workers’ output unchanged and reducing attrition therefore boosts profits, he said. A typical large company with tens of thousands of employees can increase profits by tens of millions of dollars a year by reducing turnover costs, he said.
A ‘covert’ way to lay off workers?
Musk and Ramaswamy aim to require federal employees to come back to the office full-time precisely because they expect the policy would increase attrition.
“Requiring federal employees to come to the office five days a week would result in a wave of voluntary terminations that we welcome,” they wrote in the November op-ed.
Remote work isn’t going away, but it is likely past its peak.
Allison Shrivastava
economist at Indeed
Companies may also be using return-to-office mandates as a “covert strategy for headcount reduction,” according to a recent ZipRecruiter employer survey.
Some organizations cite cultural and productivity concerns as the primary reasons for such a policy, but it seems that’s “rooted more in perception than data,” ZipRecruiter said.
Some officials have pushed back on such notions, however.
Jassy, Amazon’s CEO, denied the five-day in-office policy amounted to a “backdoor layoff,” he said in a meeting, according to notes obtained by CNBC. The decision “is very much about our culture and strengthening our culture,” he said.
Djelics | E+ | Getty Images
Retirees can expect to see some big changes in 2025 when it comes to their Social Security and Medicare benefits.
President Joe Biden is expected to sign a bill that will increase Social Security benefits for certain pensioners. Additionally, the annual Social Security cost-of-living adjustment goes into effect for all beneficiaries.
And Medicare enrollees who are worried about health-care costs now have a $2,000 annual out-of-pocket Part D prescription drug cap aimed at helping to reduce those financial pressures.
Here are some important changes to note for the coming year.
Some pensioners could get benefit increase
The Senate passed a bill in the final legislative days of 2024 to boost Social Security payments for millions of people who receive pensions from work in federal, state and local government, or in public service jobs such as teachers, firefighters and police officers. The House had passed the bill in November.
Now, Biden is expected to sign the bill into law in the coming days.
The Social Security Fairness Act eliminates two provisions that reduce Social Security benefits for certain individuals who also have pension income from public work where Social Security payroll taxes were not paid.
That includes the Windfall Elimination Provision, or WEP, which reduces Social Security benefits for individuals who also receive pension or disability benefits from employers who did not withhold Social Security taxes.
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It also includes the Government Pension Offset, or GPO, which reduces Social Security benefits for spouses, widows and widowers who receive their own government pensions.
Together, the rules affect around 2.5 million beneficiaries, according to the Congressional Research Service. Once enacted, the law may provide higher benefit payments to those individuals.
Notably, it may provide retroactive payments of those benefit increases for the months after December 2023.
The legislation marks the biggest change to Social Security since certain couples claiming strategies were phased out in 2016, said Martha Shedden, president of the National Association of Registered Social Security Analysts.
“We’re sort of in limbo as to how that process will proceed, when people will see that increase and how the retroactive [benefits] will be applied,” Shedden said.
All Social Security beneficiaries to get 2.5% COLA
In 2025, all beneficiaries will see a 2.5% increase to their Social Security benefit checks, thanks to an annual cost-of-living adjustment.
Of note, the 2024 increase was 3.2%. This year’s COLA is the lowest increase beneficiaries have seen since a 1.3% increase in 2021, reflecting a decrease in the pace of inflation.
The change will be effective with January checks for more than 72.5 million Americans, including Supplemental Security Income beneficiaries.
The average worker retirement benefit will be $1,976 per month, up from $1,927 in 2024, according to the Social Security Administration.
Monthly Medicare Part B premiums go up
Monthly Medicare Part B premiums — which are often deducted directly from Social Security checks — may affect just how much of a bump beneficiaries see in their 2025 benefit payments.
Medicare Part B covers physician, outpatient hospital and certain home health services, as well as durable medical equipment.
In 2025, the standard monthly Part B premium will be $185 per month — a $10.30 increase from $174.70 in 2024.
Part B deductibles will also rise, to $257, in 2025 — a $17 increase from the $240 annual deductible for 2024.
Medicare Part B premiums are based on a beneficiary’s modified adjusted gross income, or MAGI, from their tax returns from two years prior. In 2025, beneficiaries who had less than or equal to $106,000 in MAGI in 2023 will pay the standard monthly Part B premium, as will married couples with less than or equal to $212,000.
Beneficiaries with higher incomes will be subject to income-related adjustment amounts, or IRMAA, that increase their monthly premium payments.
Medicare $2,000 prescription drug cap goes into effect
Annual out-of-pocket Medicare Part D drug costs will now be capped at $2,000, as changes enacted with the Inflation Reduction Act go into effect.
Beneficiaries with Medicare Part D drug plans that have a deductible will pay out-of-pocket costs until that threshold is met. In 2025, the highest deductible for those plans is $590.
Once beneficiaries pay their full deductible, they will owe 25% of the cost of coinsurance until their out-of-pocket spending on both generic and brand-name drugs reaches $2,000. After that, those beneficiaries will have what’s known as catastrophic coverage, which means they won’t be on the hook to pay out-of-pocket Part D costs for the rest of 2025.
However, beneficiaries will also have the option to pay out-of-pocket costs monthly over the course of the year, instead of all at once.
Notably, insulin costs have also been capped at $35 per month, both under Medicare Part D covered treatments and Medicare Part B covered insulin used with pumps.
Social Security trust fund depletion dates get closer
In 2024, the Social Security trustees projected the trust fund the program relies on to help pay retirement benefits may be depleted in 2033. At that time, just 79% of those benefits may be payable, unless Congress acts sooner.
Social Security’s combined trust funds — used to pay both retirement and disability benefits — are projected to run out in 2035.
Now that the calendar has turned to a new year, those depletion dates are closer.
Notably, the previously mentioned Social Security Fairness Act that will provide increased benefits to some pensioners may move the trust fund depletion date six months closer.
“That’s the major looming issue right now, is what can be done to shore up those trust funds,” Shedden said. “That’s going to require very comprehensive, bipartisan changes to multiple parts of the Social Security rules in the program.”
However, most financial advisors emphasize that shouldn’t affect personal claiming decisions.
For younger generations, there could be changes to future benefits, said George Gagliardi, a certified financial planner and founder of Coromandel Wealth Strategies in Lexington, Massachusetts.
“But for those already receiving or about to get Social Security checks, I don’t think that there is anything to worry about,” Gagliardi said.
Other important changes to note
- Maximum taxable earnings — the amount of wages subject to Social Security payroll taxes — will rise to $176,100 in 2025, up from $168,600 in 2024. Once workers hit that cap, they no longer pay into the program for the rest of the year.
- Social Security beneficiaries who claim benefits before their full retirement age and who continue to work face what is known as a retirement earnings test. The earnings exempt from the retirement earnings test is now $23,400 per year in 2025 for those under full retirement age, up from $22,320 per year in 2024. For every $2 in earnings above the limit, $1 in benefits is withheld. For the year an individual reaches retirement age, a higher threshold of $62,160 in earnings applies, up from $59,520 in 2024. For every $3 in earnings above the limit, $1 in benefits is withheld. Of note: this only applies to the months before a beneficiary turns full retirement age. Starting from their birthday month, the retirement earnings test no longer applies. Importantly, once a beneficiary reaches full retirement age, any previously withheld benefits are applied to monthly benefits.
- Do you want to talk to the Social Security Administration face to face? Starting Jan. 6, the agency is requiring appointments for local office services, such as obtaining Social Security cards. To improve efficiency, the agency is directing individuals who need help to first try its online or automated telephone services. However, people who are unable to schedule in-person appointments, particularly vulnerable individuals, may still come in and get in-person service.
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If you’re ready to focus on retirement in 2025, early January could be the perfect time to boost your 401(k) plan contributions, financial experts say.
More than half of American workers feel they are behind on retirement savings, according to a Bankrate survey that polled 2,445 U.S. adults in August.
But starting in 2025, your 401(k) plan has a higher contribution limit — and a special catch-up for older investors — which could help grow your nest egg.
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For 2025, you can defer $23,500 into your 401(k) plan, up from $23,000 in 2024. Investors aged 50 and older can make catch-up contributions of $7,500 on top of the $23,500 limit.
Typically, it takes a couple of paychecks for 401(k) deferral changes to go into effect, according to Boston-area certified financial planner Catherine Valega, founder of Green Bee Advisory.
Boosting your contribution to max out deferrals can be easier earlier in the year because the higher percentage is spread across more paychecks.
Be aggressive with your investments, especially if you have decades until retirement.
Catherine Valega
Founder of Green Bee Advisory
“Be aggressive with your investments, especially if you have decades until retirement,” said Valega, who urges clients to max out their 401(k) plans if possible.
Starting in 2025, there’s also a special catch-up limit for investors aged 60 to 63, thanks to a change enacted via Secure 2.0. Instead of $7,500, this group can save $11,250 for catch-up contributions, which brings their total deferral limit to $34,750 for 2025.
Invest ‘as much as you feel comfortable’
While many investors aim to max out 401(k) deferrals, it can be difficult with other short-term goals, like paying off debt or buying a home.
To that point, roughly 14% of employees maxed out 401(k) plans in 2023, according to a 2024 Vanguard report, based on data from 1,500 qualified plans and nearly five million participants.
Max contributors were typically older, with higher income and a longer tenure with their current employer, the report found.
Ultimately, you should defer “as much as you feel comfortable” not tapping until retirement, said CFP George Gagliardi, founder of Coromandel Wealth Strategies in Lexington, Massachusetts. Otherwise, you could owe a 10% penalty and taxes for early withdrawals, with some exceptions.
Plus, you need a “sufficient emergency fund” outside of your retirement savings, he said.
Typically, experts recommend a minimum of three to six months of expenses for an emergency fund, depending on your family’s circumstances.
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