Personal Finance

There’s risk Trump will axe funding

Published

1 month ago

November 20, 2024

Maskot | Digitalvision | Getty Images

Prospective car buyers considering an electric vehicle may need to act fast to get a Biden-era EV tax credit worth up to $7,500, due to the likelihood that President-elect Donald Trump and Republicans on Capitol Hill will axe those savings in tax negotiations next year, according to auto and legal experts.

“There’s no question there’s real risk in the EV credit going away” in 2025, said Jamie Wickett, a partner at law firm Hogan Lovells who specializes in federal tax policy, energy and the environment.

“If you’re a consumer in the market for an EV, I would without a doubt push that into 2024, if at all possible — whether an outright purchase or a lease — just to reduce the risk of the credit going away,” Wickett said.

More people are choosing to lease EVs to not take the residual value risk, says former Ford CEO

The Inflation Reduction Act offered federal EV tax breaks through 2032 for consumers who buy or lease new or used EVs, including all-electric and plug-in hybrid electric vehicles.

The credit is worth up to $7,500 for new cars and $4,000 for used ones.

The IRA, which President Joe Biden signed in 2022, also made it easier for consumers to access the savings by allowing dealers to pay the funds upfront at purchase instead of waiting until tax season.

Trump pledged to ‘cancel the electric vehicle mandate’

The Trump transition team reportedly aims to eliminate the EV credits to raise money for a broad package of tax cuts Republicans are expected to pursue next year.

Trump’s campaign agenda vowed to “cancel the electric vehicle mandate.”

Elon Musk, chief executive officer of Tesla and an influential Trump supporter, has also called for an end to the credits and said killing the subsidies would hurt the EV maker’s U.S. competitors.

Karoline Leavitt, a spokeswoman for the Trump-Vance transition, said the president-elect would follow through with his pledge.

“The American people re-elected President Trump by a resounding margin giving him a mandate to implement the promises he made on the campaign trail,” Leavitt said in an email. “He will deliver.”

President-elect Donald Trump and Elon Musk talk ring side during the UFC 309 event at Madison Square Garden on Nov. 16, 2024 in New York.

Chris Unger | Ufc | Getty Images

There’s considerable uncertainty over the contents of a future Republican tax package and the fate of the EV credit, experts said.

Extending a slew of expiring income tax cuts and fulfilling various Trump campaign promises like slashing taxes on tips, Social Security benefits and overtime pay, for example, could cost about $7.8 trillion over 10 years, the Tax Foundation estimates.

Repealing all the IRA’s green energy tax credits, including the EV credit, would offset that cost by about $921 billion, it said.

Waiting is ‘too big of a gamble’

Laura, a 44-year-old living in Charlotte, North Carolina, has been looking to buy a plug-in hybrid for several years due to their environmental benefits and cost savings on gasoline.

She was getting ready to buy one thanks to the $7,500 EV credit, which made the vehicles more affordable, she said.

Laura, who asked not to use her last name, is now rushing to buy a 2025 Chrysler Pacifica Hybrid by year’s end because the credit might go away. To wait and buy in 2025 is “too big of a gamble” given Trump’s antipathy toward the EV credit, she said.

Local car dealers have informed Laura that she qualifies for the full $7,500 credit, which carries some restrictions depending on car model and buyers’ income, for example.

There’s no question there’s real risk in the EV credit going away.

Jamie Wickett

partner at law firm Hogan Lovells

However, dealers in her area don’t have many vehicles available right now, she said — and have told her that’s because consumers are scrambling to buy EVs in case the tax break disappears.

Dealers are hopeful they’ll have more inventory in the coming weeks, she said.

Laura said she wouldn’t buy the car without the tax credit.

“If it’s not going to be in by the end of December 2024, then that changes everything [for me],” she said.

She fears Trump and Republicans on Capitol Hill might try to claw back the $7,500 tax credit retroactively, for any consumers who get an EV in 2025 or beyond.

The irony is their “complete disdain for the tax credit” is what prompted her to try to get an EV more rapidly, she said.

Take advantage of a ‘known entity’

“I would encourage consumers to take advantage of the tax credit while it’s a known entity,” said Ingrid Malmgren, senior policy director at Plug In America, a group that advocates for the transition to EVs.

Most consumers have opted to get the credit as a discount at the point of sale, according to the U.S. Treasury Department. The car dealer essentially issues an advance tax credit to consumers, and the Treasury then refunds that advance payment.

Consumers who sign a lease agreement by year’s end would be able to lock in their savings contractually over a multiyear lease term, even though the term would overlap with Trump’s presidency, Malmgren said.

But look over the agreement terms. One caveat might be if a dealer were to write a clause into the lease contract stipulating that if the tax credit were denied then the consumer’s monthly lease payments would increase, Wickett said.

He expects Republicans to pass a tax package by the end of 2025. In the most likely scenario, such a law would probably phase out the federal EV credit in 2026 or 2027, instead of turning off the spigot retroactively for all 2025 purchases, Wickett said.

“No one knows for sure,” he said. “But I think it’s fairly clear the Republicans are going to find a way to pass a major tax bill.”

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Personal Finance

Here are steps you can take to avoid overspending next holiday season

Published

13 hours ago

December 31, 2024

Business Finance News

Ezra Bailey | Stone | Getty Images

Opening presents during the holidays is of course a lot of fun. But for many, opening those credit card statements will be just the opposite.

Months before the holidays hit, consumers were already bracing for the anticipated costs.

More than half of 2024 holiday shoppers, or 55%, felt stress at the costs associated with the season, according to a survey conducted online in September by The Harris Poll on behalf of NerdWallet.

Still, 32% of consumers thought it was important to purchase holiday gifts and experiences to show their love for family and friends, despite the expenses, the survey found.

“The holidays are hyped 24/7 for weeks before the actual days,” said Carrie Rattle, a financial therapist in New York. “This builds a level of almost manic euphoria and gives us permission to ignore a spending plan, achieve instant gratification and worry about the aftershocks later.”

Those aftershocks are likely being felt right around now.

To that point, 10% of holiday shoppers this year were considering tapping their emergency savings for gifts, according to NerdWallet. Meanwhile, 9% said they’d prioritize their gift purchases over debt payments or other bills. (Some 2,000 adults ages 18 and older were polled.)

To avoid overspending during the holidays, people need to plan ahead and create a spending budget, experts say. There are steps you can take now to avoid a repeat next year.

Plan ahead and ‘bookend your shopping time’

It’s best to start thinking about big purchases, such as for the holidays, “when you are calm and rational,” Rattle said. That will likely be far in advance of when those events take place.

“Before the tide of emotional shopping overtakes you, know what you want to spend,” Rattle said.

This way, you can also take your time deciding what gifts you want to get people and to research the costs.

It can be a good idea to save throughout the year for the holidays, said Kristen Euretig, a certified financial planner and founder of Brooklyn Plans.

“You can simply set aside a monthly amount to a dedicated savings account and reserve it for holiday expenses,” Euretig said.

Starting early will also allow you to take advantage of different sales that pop up throughout the year, Euretig added.

Rattle recommends people make a list of the gifts they want to buy far in advance, and then space out their purchases to avoid breaking your budget.

“Buy once a week,” she said. “Bookend your shopping time by having an obligation before shopping, and right after your targeted completion time.”

“When you control your purchasing time you also control browsing,” Rattle added.

You can also be on the lookout for which of the gifts you bought people were actually put to use, she said.

“Reflecting on this helps you realistically separate what is truly valued by the receiver,” Rattle added.

Don’t miss these insights from CNBC PRO

Personal Finance

5 advisors offer important tips for managing your money in 2025

Published

15 hours ago

December 31, 2024

Business Finance News

Personal finances are top of mind for many households as they get set to ring in the new year.

About 38% of Americans ranked financial stability as their No. 1 focus area for 2025, according to a recent Allianz Life survey.

CNBC reached out to certified financial planners on its Financial Advisor Council to list their top resolutions for households as they look ahead to the coming year.

Here’s the financial advice they offered.

Kamila Elliott, Co-founder and CEO of Collective Wealth Partners

Kamila Elliott, CFP, is co-founder and CEO of Collective Wealth Partners in Atlanta.

Kamila Elliott

Create and stick to your budget! Max out on retirement contributions and create one personal financial goal such as paying off credit cards or investing an additional $100 a month in an investment account.

Barry Glassman, Founder and president of Glassman Wealth Services

It starts and ends with knowing where the money is going. I encourage people to track their spending for a period of time, maybe going back to three months’ worth of credit card and Apple Pay payments. It’s incredible what behaviors will change once people just know the truth.

Marguerita Cheng, CEO of Blue Ocean Global Wealth

Courtesy Marguerita Cheng

I’m going to say estate planning. It’s important for everyone to address — even for an 18-year-old heading off to college in Fall 2025. I had my daughter complete a health care and financial power of attorney before I sent her off to college.

If people feel overwhelmed with the estate planning process, I remind people that it’s a process. Start with a financial and health care power of attorney.

You can then focus on beneficiary designations. Next, a will and trust, if the trust is appropriate for your situation. This process also helps individuals track down retirement plans from former employers. Estate planning is a wonderful opportunity to revisit life insurance as well.

Lee Baker, founder, owner and president of Claris Financial Advisors

1. It’s not a popular subject but take the time review all your insurance coverages:

Auto and home in particular have jumped significantly for many people. Don’t forget about disability and life insurance. As long as you can get up and earn a living, you can replace your car or rebuild your home. What happens if you can’t generate an income?

Why so many young adults are still living with their parents

2. Spend some time reviewing your tax strategies and retirement planning:

Required minimum distributions: Do you ‘need’ them? Would making Qualified Charitable Distributions improve your overall picture?
Tax loss harvesting: Here’s an opportunity to improve your overall portfolio performance.
Employee benefits: Are you fully taking advantage of a health savings account (if available) and retirement plan contributions?

3. Review your cash flow:

If you spent more than you should have over the holidays, now is a good time to make a plan to get rid of that financial hangover as well as making a plan to avoid it next year. Take a look at your personal interest rate environment. We have gotten a few rate cuts from the Federal Reserve so far. There may be more but either way take stock of your situation.

Cathy Curtis, founder and CEO of Curtis Financial Planning

1. Automate savings:

One of the best features of company retirement plans such as 401(k) plans and 403(b) plans is that the contribution amounts are automatically taken out of a person’s paycheck each month, and then the funds are automatically invested in a pre-selected selection of funds.

Since it’s important to save outside of retirement as well for other goals, setting up an automatic withdrawal from a checking account to a savings or investment account is a smart move. First step is to determine how much to save each money based on cash flow and then set up a monthly or quarterly transfer. Once it is set up, it is out of sight and out of mind and the savings will grow.

It starts and ends with knowing where the money is going … It’s incredible what behaviors will change once people just know the truth.

Barry Glassman

Founder and president of Glassman Wealth Services

2. Manage overspending:

In order to get a handle on overspending, the first step is to identify the spending weaknesses. It could be household furnishings, electronic equipment, clothing, travel, or jewelry, etc. Then, write down how much was spent in the problem category. A good way to find the numbers is to look at the year-end credit card statements. Then, write down a number that is 20-30% below the amount spent in 2024 and make that a new budget and target for 2025. Track spending each month on a spreadsheet or app to keep the spending goal top of mind.

3. Stay invested no matter the headline news:

If the end of 2024 is any indication, 2025 is likely to be a turbulent year in the stock market. With a new presidential administration coming in, global wars, inflation and uncertainty around the projection of interest rates, that is much to worry about. But decades of history show us that the market will go up over longer periods and the smartest move a long-term investor can make is to keep investing and stay invested.

Personal Finance

As ETF assets top $10 trillion for first time, here are trends to watch

Published

1 day ago

December 30, 2024

Business Finance News

Pedestrians walk in front of the New York Stock Exchange, decorated with a giant U.S. flag, in New York City, Nov. 6, 2024.

China News Service | China News Service | Getty Images

Assets in U.S. exchange-traded funds in November topped $10 trillion for the first time, according to the latest data from Cerulli Associates.

ETFs — funds that invest in stocks, bonds or other assets and trade on national stock exchanges — reached $156 billion in flows for November, surpassing previous monthly flow records.

The activity is “on par with elevated activity typically seen toward the end of the year,” Cerulli reported.

Research from Morningstar pointed to a “Trump bump” that helped U.S. funds — including both ETFs and mutual funds — take in $115 billion in November, the highest total since April 2021.

As 2024 comes to a close, these are a few of the ETF trends that dominated the year, based on the latest data.

S&P 500 among 2024 fund winners

Year to date, the S&P 500 index is up almost 24%, as of Monday.

The S&P 500 rally, buoyed by the Magnificent Seven stocks — Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Meta Platforms and Tesla — helped account for about half of the index’s gains for the year, according to data and analytics company VettaFi.

Four of the top 10 ETFs for 2024 by flows track the S&P 500 index, according to Cerulli.

The Vanguard 500 Index Fund ranks No. 1 for 2024 year-to-date inflows, according to Cerulli, followed by iShares Core S&P 500 ETF, iShares Bitcoin Trust, Invesco QQQ Trust, Vanguard Total Stock Market Index Fund, iShares Core US Aggregate Bond ETF, SPDR Portfolio S&P 500 ETF, Vanguard Total Bond Market Index Fund, Invesco S&P 500 Equal Weight ETF and Vanguard Growth Index Fund.

Malcolm Ethridge, a certified financial planner and founder and managing partner at Capital Area Planning Group, said he often uses S&P 500 ETFs in client portfolios because they allow for access to company names that would be in any large-cap growth strategy for significantly reduced costs.

While an actively managed fund may charge 50 or 75 basis points, a passive S&P 500 ETF may only charge 10 basis points, he said.

The S&P 500 index, which has had a record run, may be poised to continue to do well as the index rebalances to reflect current market leaders.

“I think this is a case where SPY [SPDR S&P 500 ETF Trust] probably outperforms the majority of fund managers in 2025,” Ethridge said.

S&P 500 could get close to 7,000 in the first half of next year, says Fundstrat's Tom Lee

Alternative ETFs see record growth

Meanwhile, alternative ETFs in November crossed $400 billion in net assets for the first time, according to Cerulli.

Moreover, the year-over-year asset growth rate for alternative ETFs — at 93% — was highest among all asset classes.

Most of the total alternative ETF market share — 80%, or around $325 billion — comprises digital assets, trading-leveraged equity and derivative income ETFs, according to Cerulli.

Financial advisors reported having just a 3.6% allocation to alternatives in 2024, though that is expected to increase, according to Cerulli. Within existing alternatives allocations, 14.4% is done through the use of ETFs, the firm found.

Crypto ETFs are ‘here to stay’

In January, bitcoin ETFs began trading on U.S. exchanges.

Now, spot bitcoin ETFs hold more digital currency than bitcoin founder Satoshi Nakamoto, VettaFi noted. Despite a “more lackluster” rollout for spot ethereum ETFs this year, crypto ETFs are “here to stay,” according to VettaFi.

The top five new ETFs by assets in 2024 are all bitcoin ETFs, according to Cerulli, based on data through November.

They include iShares Bitcoin Trust ETF at No. 1, followed by Fidelity Wise Origin Bitcoin ETF, ARK 21 Shares Bitcoin ETF, Bitwise Bitcoin ETF, and Grayscale Bitcoin Mini Trust ETF.