College Costs for 2024-2025 March Higher
Every year, the College Board releases new college cost data and trends in its annual report. The figures published are average costs for public in-state, public out-of-state, and private colleges based on a survey of approximately 4,000 colleges across the country.
Over the past 20 years, average costs for tuition, fees, housing, and food has increased 32% at public colleges and 27% at private colleges over and above increases in the Consumer Price Index, straining the budgets of many families and leading to widespread student debt.
Here are cost highlights for the 2024–2025 year. (“Total cost of attendance” includes direct billed costs for tuition, fees, housing, and food, plus indirect costs for books, transportation, and personal expenses.)
Public four-year: in-state
- Tuition and fees increased 2.7% to $11,610
- Housing and food increased 4.2% to $13,310
- Total cost of attendance: $29,910
Public four-year: out-of-state
- Tuition and fees increased 3.2% to $30,780
- Housing and food increased 4.2% to $13,310 (same as in-state)
- Total cost of attendance: $49,080
Private four-year
- Tuition and fees increased 3.9% to $43,350
- Housing and food increased 4.1% to $15,250
- Total cost of attendance: $62,990
Sticker price vs. net price
The College Board’s cost figures are based on published college sticker prices. But many families don’t pay the full sticker price. A net price calculator, available on every college website, can help families see what they might pay beyond a college’s sticker price. It can be a very useful tool for students who are currently researching and/or applying to colleges.
A net price calculator provides an estimate of how much grant aid a student might be eligible for at a particular college based on the student’s financial information and academic record, giving families an estimate of what their out-of-pocket cost — or net price — will be. The results aren’t a guarantee of grant aid, but they are meant to give as accurate a picture as possible.
Federal student loans: interest rates and legal challenges to SAVE Plan
To finance college, many families take out student loans to supplement their savings and income. Federal student loan interest rates for the 2024–2025 school year are the highest they’ve been in years: 6.53% for undergraduate Direct Loans (up from 5.50% the previous year), 8.08% for graduate Direct Loans (up from 7.05%), and 9.08% for graduate and parent Direct PLUS Loans (up from 8.05%).
Regarding loan repayment, federal student loan repayment resumed in October 2023 for millions of borrowers after almost three-and-a-half years of payment pauses due to the pandemic. Around the same time, the Department of Education launched a generous new income-driven repayment plan called Saving on a Valuable Education, or SAVE. The SAVE Plan included multiple new benefits for borrowers, including monthly payments capped at 5% of discretionary income for undergraduate loans and at 10% of discretionary income for graduate loans.
After the SAVE Plan was launched, it faced multiple legal challenges. In June 2024, two separate federal courts in Kansas and Missouri temporarily blocked key parts of SAVE. In response, the Department of Education placed all borrowers enrolled in SAVE into administrative forbearance, which meant borrowers weren’t required to make any payments and interest didn’t accrue. Then in August 2024, the U.S. Court of Appeals for the 8th Circuit blocked SAVE in its entirety, saying the injunction would remain in place pending further order of the court or the U.S. Supreme Court. The result is that borrowers enrolled in SAVE will continue to be in limbo while the legal process plays out.
FAFSA delayed until December, again
Typically, the FAFSA (Free Application for Federal Student Aid) opens on October 1 for the upcoming school year. However, for the second year in a row, the FAFSA has been delayed. The 2025–2026 FAFSA will open in December 2024.
Last year, the Department of Education launched a new, shorter FAFSA that contained several changes, including:
- A new Student Aid Index (SAI) that replaces the Expected Family Contribution (EFC) terminology
- No reduced parent contribution for parents with multiple children in college at the same time
- No requirement to report cash support and other money paid on a student’s behalf on the FAFSA, for example a monetary gift from a relative or a distribution from a grandparent-owned 529 plan
A reminder that the 2025–2026 FAFSA will rely on income information from your 2023 federal tax return (sometimes referred to as the “prior-prior year” or the “base year”). However, the FAFSA will use asset information as of the date you submit the form.
Sources: College Board, Trends in College Pricing and Student Aid 2024; U.S. Department of Education, 2024
Zombie Debt: Is It Coming for You?
Zombie debt is old and often expired debt that could be revived after being purchased by a collection agency for pennies on the dollar — or less. These “debt scavengers” have plenty of incentive to cast a wide net and take aggressive steps to collect even a small portion of the original debt.
If you are contacted by a debt collector, it could be for a debt you already repaid or don’t owe. For debts written off by creditors long ago, some records might be lost or unreliable. If you don’t remember crossing paths with the creditor, it’s possible that the debt in question belongs to someone else with a similar name or is the result of identity theft.
One example is a recent wave of zombie second mortgages threatening families with the loss of their homes. After the 2008 housing crash, many homeowners had their mortgages modified and presumed (or were told) that their second loans were forgiven. Now that home prices have risen around the nation, more investors who bought defaulted second mortgages are moving to collect those debts, even if it means foreclosing on the homes.1
Unfortunately, this is just one of the ways that zombie debt could come back to haunt you, and depending on the circumstances, you may or may not be responsible for paying it back.
More types of zombie debt
Time-barred debt. You may be contacted about a debt that is beyond the statute of limitations — the length of time during which you can legally be sued by a creditor or debt collector over an unpaid debt. These limits differ based on the type of debt and can vary widely by state, though they generally range from three to 10 years. When a debt is “time-barred,” a debt collector may still try to convince you to repay it voluntarily.
Discharged debt. This refers to debt that has been legitimately wiped out through a bankruptcy case.
Settled debt. A lower payoff on non-secured debt (such as medical or credit-card debt) might have been negotiated with the creditor in exchange for forgiveness of the remaining balance.
Beware of scare tactics
Debt collectors are not allowed to use abusive language, constant harassment, or deception to intimidate you into repaying a debt that is beyond the statute of limitations or is not actually yours — but it’s been known to happen. They might threaten to sue, even if it’s illegal to do so, then offer to leave you alone if you make a partial payment.
Don’t get tricked. In some states, making one small payment on an expired debt can reset the statute of limitations and bring it back to life. The collector could then legally pursue the entire amount. Repaying part of a debt that was never yours could be interpreted as admitting it does belong to you.
Tips for fighting off debt scavengers
How should you respond if you are contacted about a zombie debt? Don’t panic, and don’t immediately make a payment or provide any personal information. On the other hand, it might not be wise to assume it’s a scam and ignore calls or letters from a collection agency.
Start by asking for a debt validation letter, which should include information about the original creditor, the amount of the debt, and when it was incurred. Don’t say anything to a debt collector until you have a chance to research the details, verify the debt is really yours, and determine whether it falls within the statute of limitations.
If you confirm that the debt is a mistake, has already been paid, or is expired, send a letter disputing the debt within 30 days (and keep a copy for your records). If it shows up as delinquency on your credit report, you can also file a dispute with the credit agency. You are entitled to a free copy of your credit report weekly from each of the three nationwide credit agencies: Experian, TransUnion, and Equifax. Visit www.annualcreditreport.com for more information.
Sometimes a zombie debt results from a long-forgotten charge and/or a bill left behind unknowingly when moving from one place to another. If you discover that you do owe the debt and have the money, resolving the unpaid account could help protect your credit. If you can’t pay the entire amount right away, you may be able to negotiate a payment agreement.
Receiving a collection notice for a home mortgage could be a more serious and costly threat. If you are contacted by an unfamiliar lender demanding money for a second mortgage, check the title report for any encumbrances or liens attached to your property. If you find one, consider consulting an attorney to help negotiate with the lienholder or challenge the debt in court, depending on your personal situation.
1) NPR.com, May 18, 2024
Medicare Open Enrollment Kicks Off
Medicare’s Open Enrollment period began on October 15 and runs through December 7. If you are covered by Medicare, it’s time to compare your current coverage with other available options. Medicare plans can change every year, and you may want to switch to a health or prescription drug plan that better suits your needs or your budget.
During this period, you can:
- Switch from Original Medicare to a Medicare Advantage Plan, and vice versa
- Change from one Medicare Advantage Plan to a different Medicare Advantage Plan
- Change from a Medicare Advantage Plan that offers prescription drug coverage to a Medicare Advantage Plan that doesn’t offer prescription drug coverage, and vice versa
- Join a Medicare Part D drug plan, switch from one Part D plan to another, or drop your Part D coverage
Any changes made during Open Enrollment are effective as of January 1, 2025.
Original Medicare (Part A) hospital insurance and (Part B) medical insurance) is administered directly by the federal government and includes standardized premiums, deductibles, copays, and coinsurance costs.
A Medicare Advantage (Part C) Plan is an alternative to Original Medicare. Medicare Advantage Plans cover all Original Medicare services and often include prescription drug coverage and extra benefits. They are offered by private companies approved by Medicare. Premiums, deductibles, copays, and coinsurance costs vary by plan.
Medicare (Part D) drug plans, like Medicare Advantage Plans, are offered by private companies and help cover prescription drug costs.
Key changes for 2025
- Medicare Part D: As of January 1, all Medicare Part D plans will include an annual $2,000 cap on out-of-pocket on costs for prescription drugs covered by the plan. No copayment or coinsurance costs for Part D drugs will apply for the rest of the year. In addition, enrollees can opt in to a Medicare Prescription Payment Plan to pay their out-of-pocket prescription drug costs monthly rather than all at once at the pharmacy.
- Medicare Advantage: During the summer, Medicare Advantage Plans will send out a mid-year statement to enrollees that shows supplemental benefits available but unused and remind enrollees how to take advantage of them.
- Original Medicare: Starting in July, more caregivers of people with dementia who are not residing in a nursing home and are covered by Original Medicare may have access to a model program called Guiding an Improved Dementia Experience (GUIDE). This program, which initially rolled out in July 2024, provides a 24/7 support line, care coordination, referrals to community-based social services, caregiver training, and respite services. Although this program will be expanded in 2025, it won’t be available in all communities. Visit the CMS Innovation website at cms.gov to find out if a program is available in your area.
Compare your options
Start by reviewing any materials your plan has sent you. Look at the coverage offered, the costs, and the network of providers, which may be different than last year. Maybe your health has changed, or you anticipate needing medical care or new or pricier prescription drugs.
If your current plan doesn’t meet your healthcare needs or fit your budget, you can make changes. If you’re satisfied with what you currently have, you don’t have to do anything — your current coverage will continue.
If you’re interested in a Medicare Advantage Plan or a Medicare Part D drug plan, you can use the Medicare Plan Finder on medicare.gov to see which plans are available in your area and check their overall quality rating. For personalized information, you can log in or create an account to compare your plan to others and see prescription drug costs.
Get help
Determining what coverage you have now and comparing it to other Medicare plans can be confusing and complicated, but help is available. Call 1-800-MEDICARE or visit the Medicare website to use the Plan Finder and other tools that can make comparing plans easier. You can also call your State Health Insurance Assistance Program (SHIP) for free, personalized counseling. Visit shiphelp.org to find the phone number and website address for your state.
Can You Access Your Retirement Plan Money After a Disaster?
If you have been affected by Hurricane Helene, Hurricane Milton, or another recent federally declared major disaster, you may be relieved to hear that over the past few years, it has become easier to access your work-based retirement plan and IRA money. Following is a summary of the rules for qualified disaster recovery distributions and disaster-related plan loans. For more information, please contact your retirement plan or IRA Administrator.
Penalty-free distributions
Since 2019, many work-based plan participants affected by disasters have had the option to take a hardship withdrawal from their plan accounts to help recover from qualified losses. Generally, hardship withdrawals are subject to a 10% early-distribution penalty for those younger than 59½, as well as ordinary income taxes.
In 2022, the SECURE 2.0 Act ushered in a new provision allowing retirement savers to take qualified disaster recovery distributions of up to $22,000 in total, penalty-free, from their retirement accounts. Plans include (but are not limited to) 401(k) plans, 403(b) plans, 457(b) plans, and — unlike hardship withdrawals — IRAs.
The distribution must be requested within 180 days of the disaster or declaration, whichever is later. Although ordinary income taxes still apply to qualified disaster recovery distributions, account holders may spread the income, and therefore the tax obligation, over three years.1
Moreover, account holders have the option of repaying the amount distributed, in whole or in part, to any eligible retirement plan within three years, thereby avoiding or reducing the tax hit.2 (Note that if a work-sponsored plan does not accept rollovers, it is not required to accept repayments.)
An individual is qualified for a disaster recovery distribution if their primary residence is in the disaster area and the individual has suffered a disaster-related economic loss. Examples of economic loss include:
- Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, or wind
- Loss related to displacement from the individual’s home
- Loss of livelihood due to temporary or permanent layoff
This is not a comprehensive list; other losses may also qualify.
Although work-based plans are not required to offer qualified disaster recovery distributions, an individual may treat a distribution as such on his or her tax returns. Qualified disaster recovery distributions are reported on Form 8915-F.
Plan loans
Rather than taking a distribution and having to report it as taxable income, work-based plan participants (but not IRA account owners) may also be able to borrow from their plan accounts.
Typically, plan loans are limited to (1) the greater of 50% of the participant’s vested account balance or $10,000, or (2) $50,000, whichever is less. In addition, loans generally need to be repaid within five years. However, with respect to a qualified disaster, employers may raise the loan limit to as much as the full amount of the participant’s balance or $100,000, whichever is less (minus the amount of any outstanding loans). Employers may also extend the period for any outstanding loan payments due in the 180 days following a disaster for up to one year; the overall repayment period will adjust accordingly.
Employers are not required to offer plan loans or modify plan provisions due to a disaster.
For more information on qualified disaster recovery distributions and disaster loans, please speak with your IRA or retirement plan administrator, and consider seeking the guidance of a qualified tax professional.
For more information about disaster assistance available from the IRS, please visit www.irs.gov/newsroom/tax-relief-in-disaster-situations.
For information specific to Hurricanes Helene and Milton, please visit www.usa.gov/disasters-and-emergencies.
For general information about disaster financial assistance available from the federal government, please visit www.usa.gov/disaster-financial-help.
1) Alternatively, an individual may elect to report the entire distribution in the year it is made.
2) Taxpayers may file an amended tax return for taxes previously paid on the distribution(s).
Here are some things to consider as you weigh potential tax moves between now and the end of the year.
1. Defer income to next year
Consider opportunities to defer income to 2025, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable you to postpone payment of tax on the income until next year.
2. Accelerate deductions
You might also look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as qualifying interest, state taxes, and medical expenses before the end of the year (instead of paying them in early 2025) could be effective on your 2024 return.
3. Make deductible charitable contributions
If you itemize deductions on your federal income tax return, you can generally deduct charitable contributions, but the deduction is limited to 50% (currently increased to 60% for cash contributions to public charities), 30%, or 20% of your adjusted gross income (AGI), depending on the type of property you give and the type of organization to which you contribute. (Excess amounts can be carried over for up to five years.)
4. Bump up withholding to cover a tax shortfall
If it looks as though you will owe federal income tax for the year, consider increasing your withholding on Form W-4 for the remainder of the year to cover the shortfall. Time may be limited for employees to request a Form W-4 change and for their employers to implement it in time for 2024. The biggest advantage in doing so is that withholding is considered as having been paid evenly throughout the year instead of when the dollars are taken from your paycheck. This strategy can be used to make up for low or missing quarterly estimated tax payments.
5. Save more for retirement
Deductible contributions to a traditional IRA and pretax contributions to an employer-sponsored retirement plan such as a 401(k) can reduce your 2024 taxable income. If you haven’t already contributed up to the maximum amount allowed, consider doing so. For 2024, you can contribute up to $23,000 to a 401(k) plan ($30,500 if you’re age 50 or older) and up to $7,000 to traditional and Roth IRAs combined ($8,000 if you’re age 50 or older).* The window to make 2024 contributions to an employer plan generally closes at the end of the year, while you have until April 15, 2025, to make 2024 IRA contributions.
*Roth contributions are not deductible, but Roth qualified distributions are not taxable.
6. Take required minimum distributions
If you are age 73 or older, you generally must take required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans (special rules may apply if you’re still working and participating in your employer’s retirement plan). You must make the withdrawals by the date required — the end of the year for most individuals. The penalty for failing to do so is substantial: 25% of any amount that you failed to distribute as required (10% if corrected in a timely manner).
7. Weigh year-end investment moves
You shouldn’t let tax considerations drive your investment decisions. However, it’s worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all those gains by selling losing positions. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.
- Qualified Charitable contributions
A qualified charitable distribution (QCD) is a tax-free transfer from an IRA directly to a qualified charity. You must be at least 70.5 years old. Distributions from SEP or SIMPLE IRA do not qualify. The maximum that qualifies in 2024 is $105,000. An acknowledgement for the QCD must be received from the charity.
The Fed Finally Cut Interest Rates. What Could It Mean for Your Finances?
On September 18, 2024, the Federal Reserve’s Federal Open Market Committee (FOMC) lowered the benchmark federal funds rate one-half percentage point to a range of 4.75% to 5.0%. It was the first rate cut since the Fed raised the funds rate aggressively from March 2022 to July 2023 to help control inflation.1
The long-awaited policy shift suggests that a soft landing — the rare feat of bringing down inflation without causing a recession — is in sight. It also marks a critical juncture for the economy, with significant implications for consumers, businesses, and investors.
Why now?
The Federal Reserve operates under a dual mandate to foster maximum employment and stable prices for the benefit of the American public. For a couple of years rising prices have been considered the more serious threat, but the inflation rate has moved much closer to the Fed’s 2.0% target.
Officials now see these two risks as “roughly in balance.” In his post-meeting press conference, Fed Chair Jerome Powell said, “The labor market has cooled from its formerly overheated state, inflation has eased substantially from a peak of 7% to an estimated 2.2%, as of August.”2
In recent months, job gains have slowed considerably, and unemployment climbed from 3.8% in March to 4.2% in August. Powell maintained that employment data remains at solid levels, but recent changes suggest the downside risks have increased.3–4
Relief for borrowers
Lowering the federal funds rate helps to reduce borrowing costs across the board, creating breathing room in the budgets of many households and businesses.
The prime rate, which commercial banks charge their best customers, typically moves with the federal funds rate. Though actual rates can vary widely, small-business loans, adjustable-rate mortgages, home equity lines of credit, auto loans, credit cards, and other forms of consumer credit are often linked to the prime rate, so the rates on these types of loans should adjust lower relatively soon after a Fed rate cut.
Borrowers with home equity lines of credit, adjustable-rate mortgages, credit card balances, or other outstanding loans with variable interest rates should see their monthly payments fall as well, in many cases within a couple of billing cycles.
Mortgage rates are influenced by a mix of complex factors that includes Fed policies, longer-term inflation expectations, and government bond market dynamics. The rates for 30-year fixed mortgages, which tend to track the yield on the 10-year Treasury note, fell steeply in August after government reports confirmed that inflation and the job market were cooling.5
The average rate on a 30-year fixed-rate mortgage was 6.09% on September 19, the lowest in 19 months. This is down from a recent peak of 7.22% in early May. Aspiring home buyers have gained significant purchasing power since last spring and mortgage rates may continue to fall gradually, but it’s also possible that much of the anticipated decline in interest rates has already been priced in.6
Too much cash on hand?
Savers have enjoyed being rewarded for holding cash in high-yield savings accounts and short-term certificates of deposits (CDs). Although it may not happen overnight, they should be prepared for the yields on these accounts to follow the Fed funds rate downward. Some bank CDs had a feature allowing the bank to “call” them before they mature.
Investors who have more cash savings than they expect to need in the next couple of years might consider locking into today’s relatively high yields by shifting money into CDs or bonds with fixed interest rates, without a call feature, and longer terms. For example, someone could purchase bonds that mature when the money is likely to be needed for retirement expenses or to pay for a child’s college education.
Moving more money into stocks, which have historically generated higher average returns over time, is a riskier option that may be appropriate for investors who intend to hang on to them for the long haul, but only if they can endure frequent price swings.
Rate cuts in a strong economy
Past rate-cutting cycles have aimed to boost growth when the economy was in trouble, which doesn’t appear to be the case this time around. Powell stated clearly, “The U.S. economy is in a good place. And our decision today is designed to keep it there.”7
In the second quarter of 2024, U.S. gross domestic product (GDP) expanded at a healthy 3.0% annual rate, and recent forecasts based on the Atlanta Fed’s GDPNow model indicate that the economy grew at a similar pace in the third quarter.8–9
The September rate cut — which officials hope will keep job market conditions from worsening — is presumably a starting point. The Fed plans to keep cutting interest rates until they reach a neutral stance that should no longer impact the economy for better or worse. According to current FOMC projections, the fed funds rate could drop an additional 0.50% by the end of 2024, and another 1.0% over 2025.10
It can take time for borrowing rates to respond to changes in the fed funds rate and noticeably impact the decisions of consumers and businesses. This “lag” in the effects of monetary policy is one reason that some people fear the economy is not out of the woods.
Whatever happens next, the Committee intends to make policy decisions “meeting by meeting based on the incoming data, the evolving outlook, and balance of risks.”11
The FDIC insures CDs and bank savings accounts, which generally provide a fixed rate of return, up to $250,000 per depositor, per insured institution. The return and principal value of an investment in bonds or stocks fluctuate with changes in market conditions and, when sold, these securities may be worth more or less than their original cost. Investments seeking to achieve higher yields also involve a higher degree of risk. Forecasts are based on current conditions, subject to change, and may not come to pass.
1, 9–10) The Federal Reserve, 2024
2, 4, 7, 11) The Wall Street Journal, September 18, 2024
3) U.S. Bureau of Labor Statistics, 2024
5) The New York Times, August 8, 2024
6) Freddie Mac, 2024
8) U.S. Bureau of Economic Analysis, 2024
After a Massive Breach, Is Your Data in Danger?
National Public Data, a consumer data broker, confirmed last week that a hacker had targeted the company in December 2023, “with potential leaks of certain data in April 2024 and summer 2024.”1) Other reports indicate that this leaked data had been found on the dark web and could include the names, addresses, phone numbers, and Social Security numbers of millions of Americans. 2) A data breach of this magnitude is especially worrisome, and is the latest in a string of major data breaches this year. 3) Following are some steps to help protect yourself against the growing threat of identity theft.
Place fraud alerts and credit freezes
One way to reduce your risk after a data breach is to place a fraud alert or a credit freeze on your credit report. Both are free tools that can help you prevent fraud, but they work somewhat differently.
A fraud alert is a notice placed on your credit report that warns potential creditors that your identity has been compromised. It allows them to check your credit but requires them to take extra steps to verify your identity before issuing new credit in your name. You can place a fraud alert by contacting one of the three major credit bureaus (Equifax, Experian, and TransUnion), and that agency will notify the others. An initial alert will last for one year, but can be extended to seven years if you have become an actual, rather than potential, victim of fraud.
A credit freeze (sometimes called a security freeze) may also help protect you if you suspect your personal information was stolen, but it’s more stringent. Once you have a credit freeze in place, potential creditors won’t be able to access your credit report or credit score (there are some exemptions). This helps prevent identity thieves from opening fraudulent accounts in your name. To request a credit freeze, you will need to contact each of the three major credit reporting agencies. The credit freeze will stay in place until you decide to lift it, which you will need to do at least temporarily, before applying for credit.
A fraud alert or credit freeze can be set up online, by phone, or by mail, following each credit bureau’s instructions. This may also be a good time to request a free credit report so that you can check recent credit activity. Here are the website addresses and phone numbers for each of the three major credit bureaus.
- Equifax, at Equifax.com 888-298-0045
- Experian at Experian.com 888-397-3742
- TransUnion at Transunion.com 800-916-8800
Continue to monitor your personal and financial information
- Consider subscribing to a credit monitoring service if you need extended support. These services come at a cost, but may bundle together credit report monitoring, credit report locks, scans of the dark web, help with recovering from identity theft, and identity theft insurance.
- Periodically review your credit reports to spot suspicious activity. You can receive free weekly online reports from all three credit bureaus at the official site annualcreditreport,com.
- Sign up for alerts for your bank, financial, and credit card accounts that will notify you when a transaction has occurred, or someone has signed into your account. Check your accounts frequently and review your statements.
- Pick strong passwords that are different for each account, and change them periodically. For an extra layer of protection, use a password manager that generates strong, unique passwords that you control through a single master password.
- Enable multifactor authentication when offered. For example, in addition to providing a password, you may be required to enter a code sent to your phone or email, answer a security question, use a physical security key, or sign in using a facial or fingerprint scan.
- Keep your device and security software up to date. Operating system and software updates may include security fixes. An easy way to do this is to turn on automatic updates.
- Watch out for phishing attempts from scammers looking to obtain passwords or financial information. Be cautious if you receive a link or attachment in your email or via social media. Don’t click on it until you can verify that it’s legitimate. Let unsolicited phone calls go to voicemail, and double-check phone numbers, even if they appear familiar or seem to come from a company that you normally do business with.
1) National Public Data, August, 2024
2) KrebsonSecurity.com, August 15, 2024
3) Identity Theft Resource Center, 2024
Required Distributions: Changes You Need to Know
The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) changed the rules for taking distributions from retirement accounts inherited after 2019. The so-called 10-year rule generally requires inherited accounts to be emptied within 10 years of the original owner’s death, with some exceptions. Where an exception applies, the entire account must generally be emptied within 10 years of the beneficiary’s death or within 10 years after a minor child beneficiary reaches age 21. This reduces the ability of most beneficiaries to spread out, or “stretch,” distributions from an inherited defined contribution plan or an IRA.
In 2022, the IRS issued proposed regulations that interpreted the revised required minimum distribution (RMD) rules. Final regulations have now been issued and are generally applicable starting in 2025. They basically adopt the proposed regulations, while reflecting some changes made by the SECURE 2.0 Act of 2022 and including certain changes in response to comments received on the proposed regulations. Under these regulations, some beneficiaries could be subject to annual required distributions as well as a full distribution at the end of a 10-year period. Account owners and their beneficiaries may want to familiarize themselves with these changes and how they might be affected by them.
RMD basics
If you own an individual retirement account (IRA) or participate in a retirement plan like a 401(k), you generally must start taking RMDs for the year you reach your RMD age. RMD age is 70½ (if born before July 1, 1949), 72 (if born July 1, 1949, through 1950), 73 (if born in 1951 to 1959), or 75 (if born in 1960 or later). If you are still working for the employer that maintains the retirement plan, you may be able to wait until the year you retire to start RMDs from that account. Failing to take an RMD can be costly: a 25% penalty tax (50% prior to 2023) generally applies to the extent an RMD is not made.
The required beginning date (RBD) for the first year you are required to take a lifetime distribution is no later than April 1 of next year. After your first distribution, annual distributions must be taken by the end of each year. (Note that if you wait until April 1 to take your first-year distribution, you will have to take two distributions for that year: one by April 1 and the other by December 31.)
Lifetime distributions are not required from Roth accounts and, as a result, Roth account owners are always treated as dying before their RBD. Prior to 2024, these two special rules for Roth accounts applied to Roth IRAs, but not to Roth employer retirement plans.
When you die, the RMD rules also govern how quickly your retirement plan or IRA will need to be distributed to your beneficiaries. The rules are largely based on two factors: (1) the individuals you select as beneficiaries of your retirement plan, and (2) whether you pass away before or on or after your RBD.
Who is subject to the 10-year rule?
The SECURE Act still allows certain beneficiaries to “stretch” distributions, at least to some extent. These eligible designated beneficiaries (EDBs) include your surviving spouse, your minor children, any individual not more than 10 years younger than you, and certain disabled or chronically ill individuals. Generally, EDBs can take annual required distributions based on remaining life expectancy. However, once an EDB dies, or once a minor child EDB reaches age 21, any remaining funds must be distributed within 10 years.
Significantly, though, the SECURE Act requires that if your designated beneficiary is not an EDB, the entire account must be fully distributed within 10 years after your death.
What if your designated beneficiary is not an EDB?
If you die before your RBD, no distributions are required during the first nine years after your death, but the entire account must be distributed in the 10th year.
If you die on or after your RBD, annual distributions based on remaining life expectancy are required in the first nine years after the year of your death, then the remainder of the account must be distributed in the 10th year. Annual distributions after your death will be based on the greater of (a) what would have been your remaining life expectancy or (b) the beneficiary’s remaining life expectancy.
What if your beneficiary is a nonspouse EDB?
After your death, annual distributions will be required based on remaining life expectancy. If you die before your RBD, required annual distributions will be based on the EDB’s remaining life expectancy. If you die on or after your RBD, annual distributions after your death will be based on the greater of (a) what would have been your remaining life expectancy or (b) the beneficiary’s remaining life expectancy.
After your beneficiary dies or your beneficiary who is your minor child turns age 21, annual distributions based on remaining life expectancy must continue during the first nine years after the year of such an event. The entire account must be fully distributed in the 10th year.
What if your designated beneficiary is your spouse?
There are many special rules if your spouse is your designated beneficiary. The 10-year rule generally has no effect until after the death of your spouse, or possibly until after the death of your spouse’s designated beneficiary.
What life expectancy is used to determine RMDs after you die?
Annual required distributions based on life expectancy are generally calculated each year by dividing the account balance as of December 31 of the previous year by the applicable denominator for the current year (but the RMD will never exceed the entire account balance on the date of the distribution).
When your life expectancy is used, the applicable denominator is your life expectancy in the calendar year of your death, reduced by one for each subsequent year. When the nonspouse beneficiary’s life expectancy is used, the applicable denominator is that beneficiary’s life expectancy in the year following the calendar year of your death, reduced by one for each subsequent year. (Note that if the applicable denominator is reduced to zero in any year using this “subtract one” method, the entire account would need to be distributed.) And at the end of the appropriate 10-year period, any remaining balance must be distributed.
Relief for certain RMDs from inherited retirement accounts for 2024
The IRS has announced that it will not assert the penalty tax in certain circumstances where individuals affected by the RMD changes failed to take annual distributions in 2024 during one of the 10-year periods. (Similar relief was previously provided for 2021, 2022, and 2023.) For example, relief may be available if the IRA owner or employee died in 2020, 2021, 2022, or 2023 and on or after their RBD and the designated beneficiary who is not an EDB did not take annual distributions for 2021, 2022, 2023, or 2024 as required (during the 10-year period following the IRA owner’s or employee’s death). Relief might also be available if an EDB died in 2020, 2021, 2022, or 2023 and annual distributions were not taken in 2021, 2022, 2023, or 2024 as required (during the 10-year period following the EDB’s death).
The rules relating to required minimum distributions are complicated, and the consequences of making a mistake can be severe. Talk to a tax professional to understand how the rules, and the new regulations, apply to your individual situation.
New Consumer Protections for Weary Airline Passengers
Banks, hospitals, retailers, and airlines are still dealing with the fallout from the massive CrowdStrike IT outage in July. The tech meltdown impacted businesses across the globe, and airlines were hit particularly hard. This was not good news for the airline industry, which just last year had the highest number of flight delays ever recorded.1
The U.S. Department of Transportation determined that the delays and cancellations resulting from the CrowdStrike outage were “controllable,” or caused by the airline. As a result, most airlines were obligated to provide some sort of compensation and assistance to stranded travelers.2
Fortunately, there could be much-needed relief for airline passengers on the horizon, thanks to a new federal law and rules issued by the U.S. Department of Transportation.
Hassle-free refunds
In the past, airline passengers were forced to figure out how to obtain a refund by researching an airline’s website or waiting for hours on the phone with an airline’s customer service department. Airline passengers will be entitled to an automatic refund for:
- Cancelled or significantly delayed flights (e.g., departure or arrival times delayed by three hours or more for domestic flights and by six hours or more for international flights), regardless of the reason
- Significantly delayed baggage return
- Extra services (e.g., Wi-Fi, seat selection, or inflight entertainment) that were paid for but not provided
Airlines must issue refunds of the full amount of the ticket purchased within seven business days of refunds becoming due for credit card purchases and 20 days for other payment methods. Passengers who accept a ticket for a significantly delayed flight or are rebooked on a different flight to their destination will not receive refunds. The refunds must be in the form of cash or whatever original payment method was used to make the purchase (e.g., credit card or airline miles). Finally, airlines are not allowed to substitute for other forms of compensation (e.g., vouchers or travel credits) unless a passenger affirmatively chooses to accept an alternate form of compensation.
Protection against surprise fees
Many airlines advertise cheap “teaser” fares that don’t take into account additional fees — all of which can significantly increase the cost of a ticket. Airlines will be required to disclose various ancillary fees up front, such as charges for checked bags, carry-on bags, and changing or cancelling a reservation. They must also provide a detailed explanation of each fee before a ticket can be purchased. In addition, under a proposed rule airlines will be prohibited from charging families an extra fee to guarantee a child will sit next to a parent or adult travel companion.
When are these protections scheduled to take effect?
These consumer protections are scheduled to have different implementation periods over the next year. In addition, the rule on surprise fee disclosures was temporarily blocked by a U.S. Appeals Court last week. Visit the U.S. Department of Transportation’s website at transportation.gov/airconsumer for more information.
1-2) U.S. Department of Transportation, 2024
Tax Treatment of Work-Life Referral Services
The IRS has provided informal guidance on the federal income tax treatment to an employee of certain work-life referral services offered as an employee benefit.
What is a work-life referral program?
Employers often provide eligible employees with a work-life referral service as an employee benefit. Work-life referral services assist employees with identifying, contacting, and negotiating with life-management resources for solutions to a personal, work, or family challenge.
Work-life referral services might be offered in connection with, for example, the following:
- Identifying appropriate education, care, and medical service providers
- Choosing a child or dependent care program
- Navigating eligibility for government benefits, including Veterans Administration benefits
- Evaluating and using paid leave programs offered through an employer or a state or locality
- Locating home services professionals who specialize in adapting a home for a family member with special care needs
- Navigating the medical system, including private insurance and public programs, and utilizing available medical travel benefits
- Connecting the employee with local retirement and financial planning professionals
How are work-life referral services taxed?
A fringe benefit provided by an employer to an employee is presumed to be income to the employee unless specifically excluded from gross income under the Internal Revenue Code. One exception is for de minimis fringe benefits: a fringe benefit which, considering its value and the frequency with which it is provided, is so small that accounting for it would be unreasonable or administratively impracticable.
The IRS guidance notes that work-life referral programs may be available to a significant portion of an employer’s employees, but they are used infrequently by employees and only when an employee faces one of the challenges the programs are designed to address.
Accordingly, the IRS concluded that work-life referral services are excluded from gross income as a de minimis fringe benefit. Furthermore, these services are excluded from federal employment taxes, including FICA (Social Security and Medicare taxes), FUTA (federal unemployment tax), and federal income tax withholding.
Work-life referral services are often included in an employee assistance program (EAP) or otherwise bundled with other types of services offered by an employer. The IRS guidance provided here applies only to the work-life referral program itself; it does not address the tax treatment of direct or indirect payment for the life-management resources offered through an EAP or that may be bundled with a work-life referral program. Under the general rule, those other services would be presumed to be income to the employee unless specifically excluded from gross income under the Internal Revenue Code.
See FS-2024-13, April 2024
