Economic commentator Kyla Scanlon is noticing a potentially worrying trend in the investing outlook among younger generations.

“It’s a bifurcated world,” she told CNBC’s “ETF Edge” this week. 

Scanlon, 26, who rose to prominence through her social media videos on the market and economy, explained why some members of Generation Z are aggressively saving for milestones like retirement, while others are taking a far more lax approach. 

“You do have these people who are maxing out their 401(k)s. They’re doing everything they can to plan for retirement,” she said. “But then you have the other side, which is an element to financial nihilism, where people don’t want to save for retirement. They don’t want to save money in general because they don’t believe the future is there.”

Scanlon is aiming to bridge Gen Z’s divided financial attitudes with her new book, “In This Economy? How Money and Markets Really Work.”

“Financial education is always going to be an uphill battle, just because money is such a personal subject. But it’s important that we give people the tools that they need to start somewhere,” she said.

She points to the housing market as a prime example of where young people are falling behind. Gen Zers represented just 3% of total home buyers in 2023, according to a recent report from the National Association of Realtors — a statistic Scanlon attributes to higher interest rates.

“The younger generation definitely wants [homeownership], because there’s a lot of financial benefit to having equity,” she said. “People are just trying to figure out how to do that financially right now, considering where mortgage rates are, considering where home prices have been. It’s difficult.”

Disclaimer

If you’re eager to boost your retirement savings, there’s good news for 2023: higher contribution limits for your 401(k) and individual retirement account.

In 2023, the deferral limit for employees was $22,500, up from $20,500, and catch-up deposits for savers 50 and older rose to $7,500, up from $6,500. These increases also apply to 403(b) plans, most 457 plans, and savings plans.

“This is a big change for a lot of people,” said certified financial planner Brandon Ober, founder of TrustTree Financial in Huntersville, North Carolina.

But without a reminder from your 401(k) plan advisor or provider, these increases “may go undetected,” he said.

Contribution limits have also increased for IRAs, allowing you to save up to $6,500 for 2023, up from $6,000 in 2022. While the compensation deposit remains at $1,000 for 2023, it will mark inflation starting in 2024.

Some of the biggest personal finance changes of 2023 are related to inflation, said Scott Bishop, CFP director and CEO of Wealth Solutions at Houston-based Avidian Wealth Solutions.

For example, in October the IRS announced “some relief” as the federal income tax brackets for 2023 rose, he said, which means you can earn more before you get to the next level.

Each bracket shows how much you’ll owe in federal income taxes for each portion of your “taxable income,” calculated by subtracting the largest standard or itemized deductions from your adjusted total income.

The standard deduction also increases in 2023, rising to $27,700 for married couples filing a joint application, up from $25,900 in 2022. Single applicants may claim $13,850 in 2023, a jump from $12,950.

If you plan to sell investments from a taxable portfolio in 2023, you’re less likely to foot a long-term capital gains tax bill, experts say.

Based on inflation, the IRS also raised income thresholds of 0%, 15% and 20% for the 2023 long-term capital gains categories, which apply to profitable assets owned for more than a year.

“It’s going to be very important,” Tommy Lucas, CFP and registered agent for Moisand Fitzgerald Tamayo in Orlando, Florida, told CNBC recently.

Lucas said that with higher standard deductions and income thresholds for long-term capital gains in 2023, it will likely fall into the 0% category.

For 2023, you may qualify for the 0% rate with taxable income of $44,625 or less for single applicants and $89,250 or less for married couples filing together.

Experts say the inflation adjustments for 2023 also mean more investors may qualify for Roth IRA contributions.

“We talk a lot about Roth conversions,” said Lawrence Pon, CFP and CPA at Pon & Associates in Redwood City, Calif., referring to the strategy of converting pre-tax IRA money into a Roth IRA for future tax-free growth.

But what about Ruth? [IRA] contributions? “

More Americans may be eligible in 2023 because the adjusted gross income range increases to between $138,000 and $153,000 for single applicants and $218,000 and $228,000 for married couples filing jointly.

While some investors may seek “complex” moves, such as so-called Roth back-end conversions, which move post-tax 401(k) contributions into a Roth IRA, Boone urges investors to double-check Roth IRA contribution eligibility first.

in December. On September 23, Congress passed a $1.7 trillion comprehensive benefits bill, including dozens of retirement provisions known as “Secure 2.0.”

One of the provisions for 2023 is the change in the required minimum distributions, or RMDs, that must be taken annually from certain retirement accounts.

Currently, RMDs begin when you turn 72, with a deadline of April 1 of the year following your first drawing, and on. 31 due dates for future years. However, Secure 2.0 changes the starting age to 73 in 2023 and age 75 in 2033.

“Those who already take RMDs won’t be affected, even if you’re 72 now,” said Nicholas Ponyo, a staffing expert with Retirement Wealth Advisers in Berwyn, Pennsylvania.

But he said the change could provide some “great planning opportunities” if you’re younger and don’t need RMDs, such as potential Roth conversions.

Older Americans may have a number of different goals with their retirement savings. But usually their main goal is the same: to make it last.

Unfortunately, many baby-boomers and members of later generations who don’t have access to a traditional pension can live off the money in their 401(k) accounts, according to a recent study from the Retirement Research Center at Boston College.

Economists have compared decline speeds between those with traditional pensions and those with only 401(k) savings accounts. Although most research on how long retiree money lasts is based on the former, the majority of people now fall into the latter.

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“What most people have had the opportunity to notice are people with traditional pensions,” said Gal Wechstein, chief economic researcher at the Center for Retirement Research at Boston College, noting that 401(k) workplace retirement plans are becoming more widespread. in the eighties.

Those analyzes based on retirees with pensions found that they often did not spend their savings at all. In fact, many have seen their nest eggs continue to grow after they stop working.

“This optimistic notion from the past may give a false sense of security,” Whitstein said.

Access to traditional pensions has been scarce decades now. Workers have increasingly been mandated to save for their later years themselves in investment accounts, of which the poster child is a 401(k) plan offered through employers.

The researchers found that these plans wind up much faster than expected.

One example in the analysis looked at families entering retirement with $200,000 in savings. By age 70, retirees with a 401(k) plan but no pension were $28,000 less than retirees with a pension, according to their analysis — a difference equal to one-eighth of that starting balance. At age 75, 401(k) savers had $86,000 less than those with a retirement pension.

“People spend a big share of what they have when they have a 401(k),” Whitstein said.

A rapid withdrawal of savings into 401(k) accounts means that many dependent retirees may be at risk of fully depleting their money by age 85, although about half will survive after that time, the study said.

Wettstein said that although they will still receive their monthly Social Security checks, “this is not usually a sufficient substitute for their career-wide earnings.”

Wettstein said that because of the relatively new nature of 401(k) plans, more remains to be learned about why retirees are spending on accounts so quickly.

However, some reasons can be assumed. Those with a traditional pension, which guarantees a fixed payment each month until death, are likely to need to reduce their savings because of this reliable income. Perhaps they were able to keep their savings for inheritance purposes or in case of unexpected costs later in life.

On the other hand, many retirees who do not have a pension depend on their nest egg to cover a significant portion of their monthly expenses. Without a pension, people are also responsible for making sure they save enough to get them done through their post-working years, a task that requires decades of adequate earnings and discipline.

Additionally, the challenge with 401(k) savings plans is that they charge retirees a fee for figuring out how much to withdraw each month. It can be difficult to get into this account properly, and although those with big savings aim to live off their financial earnings, the market is unpredictable and has periods – like now – where it takes more than it gives.

“One of the advantages of the pension system was that it reassured you of how much you could spend, practically, because it would never run out, and from an advice perspective as well, because it says, ‘Here, you can spend that much, because next month, you’re going to get the same amount again. “A 401(k) does not give you that.”

Wettstein emphasized that it’s still too early to get a complete picture of how well 401(k) accounts keep people in retirement.

“But we did it as a first look at whether we should be concerned,” he said. “And our conclusion is, yes, we should.”

This article was written with support from the Journalism Fellowship of the American Aging Association, the Journalists’ Network for Generations and the Silver Century Foundation..

The ongoing Russo-Ukrainian war has worsened the financial outlook of Americans, prompting a desire to save more and put off investing, according to a survey by MassMutual. But financial experts say staying away from the vagaries of the stock market could be a mistake.

The report found that two-thirds of Americans are concerned that the conflict will hurt their wallets, with nearly half keen to save more money and 42% delaying investments.

“For a year that began with such hope and optimism, many are deeply concerned about the US economy,” said Amanda Wallace, head of insurance operations at MassMutual, noting the stress on day-to-day expenses and financial insecurity.

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It has been a volatile period for the stock market as investors respond to news of war, rising interest rates, and spiraling inflation, among other headlines.

Investment hesitation is common, especially after a “liquidity event,” such as the sale of a company, according to certified financial planner Dennis Morton, founder and director of Morton Brown Family Wealth in Allentown, Pennsylvania. Sometimes the language is ‘I’ll wait for things to calm down’.

But, he said, pausing investments during market turmoil can be costly, because relying on liquidity can mean skipping opportunities to “pitch money” at low prices, often missing the opportunity for recovery.

In fact, higher yields may come on the heels of some of the biggest declines, research by Bank of America shows.

Since 1930, the 10 best performing S&P 500 Index each decade has generated a total return of 28%. However, the company found that continuing to invest resulted in a return of 17,715%.

These results are consistent with JP Morgan’s research, which shows how the best days of the market often track the worst days, and there is a chance of a cost failure to keep investing.

“When we make a financial plan, we are assuming a certain rate of return over a certain period of time,” Morton said. “And missing a few days, weeks, or months can change that rate of return and really jeopardize the plan.”

Oftentimes, a long-term perspective may help reduce anxiety or the desire to panic sell during stock market volatility, experts say.

“Whether the markets are going up or down, my investment advice remains consistent,” said Jim Shagawat, a CFP advisor and partner at AdvicePeriod in Paramus, New Jersey. “Investing for retirement means a long-term strategy regardless of current market conditions.”

Even with strong financial knowledge or skill, he said, it can be alarming to see a significant decline in the portfolio. But it’s important to avoid emotional investment decisions.

“Let’s find it [asset] A customization you can stick with,” explaining the importance of knowing your risk tolerance and designing a portfolio to match.