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IN THIS ISSUE: Social (in)Security, student loan changes, and summer investments |
THE HEADLINES
Bull riding
What’s happening: The stock market has been gaining momentum, and
Fidelity pros think it could continue.
Here’s why: Investors may be anticipating a further economic boost if the potential Iran deal and Strait of Hormuz reopening drive down oil prices, slow inflation, and make rate hikes less likely. The AI boom bringing big-name IPOs into the market could be reflecting investor enthusiasm too. Tremendous earnings growth has also lifted stocks so far this year, and Fidelity pros expect that may keep on going.
What it means for you: While it may take weeks if not months for traffic, and prices, to normalize if the Strait of Hormuz reopens, conflict-related volatility may be easing.
Still, investors may want to consider diversifying their portfolios to help protect against any future market upset. This might look like investing beyond the heavy-hitter
Magnificent 7
tech stocks in small cap stocks (smaller companies that currently have lower valuations than the big guys) or value stocks (stocks that may be underpriced—here’s
how to find them). Investors might also consider international stocks, which have been outpacing US stocks and generally have less exposure to technology companies, as well as other diversifiers like bonds.
While you’re at it, here are
5 big investment ideas Fidelity pros are watching for the rest of the year. |
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Change of plansWhat’s happening: If you have student loans, your payment plan could get switched up soon.
Here’s why: The US Department of Education is modifying some existing student loan repayment programs and phasing out others as part of the recent tax and spending act. They’re also introducing a new income-driven repayment plan, called the Repayment Assistance Plan (RAP).
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What it means for you: Borrowers currently on the SAVE payment plan will have 90 days after July 1 to select a new payment plan, including RAP
(find out if RAP may be right for you).
Borrowers on other income-based repayment plans being phased out will have until 2028 to select a new repayment plan. If you don’t choose a new plan, you’ll automatically be enrolled in the Standard Repayment Plan or the new Tiered Standard Plan, which spreads out your fixed payments over different terms based on your loan balance. This could result in a change of your current monthly payment. For now, it’s best to contact your student loan servicer to find out what payments are expected of you, if any.
Still owe a lot? Here’s how one person paid off $130,000 in student loan debt.
If your student loan payment takes a big chunk of each paycheck, try these 9 ways to save thousands in a year. |
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Disappearing actWhat happened: Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund, which funds retirees’ Social Security payments, could run out in late 2032, the latest annual report found.1 This is a quarter earlier than last year’s forecast. The Penn Wharton Budget Model projects retirement benefits running dry later, in February 2033.2
Here’s why: Several factors: people living longer and therefore collecting more benefits over time; falling fertility and immigration rates, meaning fewer workers contributing payroll taxes to the trust fund; and recent tax legislation lowering income taxes on Social Security benefits that go back to OASI.
What it means for you: Unless Congress acts to increase revenue through taxes or reduce benefits, say, by raising the full retirement age for high earners, beneficiaries will receive 78%3 of their scheduled benefits (about a $500 average monthly cut) starting in 2032.4 But in 29 states, reductions could be steeper, according to the nonpartisan Committee for a Responsible Federal Budget.5
So what can you do? Here are 4 steps you could take now if you’re concerned about cuts. Try to avoid these 10 retirement savings mistakes too. |
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INVESTMENTS YOU MAY WANT TO WATCH |
FEATURE
Find income nowRising inflation and surprisingly strong economic growth have made this kind of investment particularly appealing lately. |
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WORTH A TRY?
3 midyear tax moves to considerThese tips could help you save on taxes.
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Check W-4 withholdings: Did you recently add a dependent, buy a home, or pick up a side gig that could require extra withholding or estimated tax payments? Or did you owe a large sum or receive a very large refund in the recent tax season? If so, you might want to update your W-4. That helps make sure you’re not overpaying Uncle Sam—or underpaying and getting a big tax bill next spring. Adjusting your W-4 affects how much tax is withheld during the year, not your total tax liability, and may help you avoid underpayment penalties if withholding is insufficient. Ask your employer’s HR department how to resubmit.
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Consider increasing contributions: If there’s room in your budget, eligible pretax contributions to an employer retirement plan and deductible contributions to a traditional IRA or HSA may reduce your current federal taxable income, subject to contribution limits and eligibility rules. Roth contributions generally do not reduce current federal taxable income.
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Harvest losses: Consider selling investments that are below your purchase price to offset realized investment gains (as in, investments you sold for a profit and may be taxed on). This could help less of your money go to taxes and keep more invested and working for you. (Psst … Fidelity’s tax-loss harvesting tool
🔒 could help you pull this off.) Just watch out for the wash sale rule: buying the same or “substantially identical” investments within a 61-day window of selling.
Here are
3 extra tips that could help bring future tax savings. |
