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Tag: Individual Retirement Accounts

  • As the S&P 500 enters bull market territory, here's what to consider before you invest

    As the S&P 500 enters bull market territory, here's what to consider before you invest

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    People walk through the Financial District by the New York Stock Exchange (NYSE) on the last day of trading for the year on December 29, 2023 in New York City.

    Spencer Platt | Getty Images

    The S&P 500 stock index climbed to a new all-time high on Monday.

    A bull market — by two definitions — is here. Last year, the S&P 500 rose more than 20% from its most recent low. As of Friday, it crossed another bull market threshold when it surpassed its previous high.

    For investors who want to get in on the action, the good news investing in a fund that tracks the S&P 500 index is an easily accessible strategy.

    But experts say it also deserves a word of caution: Past performance is not indicative of future returns. And while the S&P 500 was a clear winner in 2023 — finishing the year up 26% — it may not be the strategy that comes out ahead at the close of 2024.

    What is the S&P 500 index?

    How can you invest in the S&P 500?

    Today, investors may choose from mutual funds or exchange-traded funds that track the index. Among the biggest ETFs are: SPDR S&P 500 ETF TrustiShares Core S&P 500 ETF, and Vanguard S&P 500 ETF.

    Vanguard in 1975 created the first index mutual fund that tracked the S&P 500. Vanguard founder John Bogle was famously a proponent of investing in a broad index fund.

    “Simply buy a Standard & Poor’s 500 Index fund or a total stock market index fund,” Bogle wrote in his book, “The Little Book of Common Sense Investing.”

    “Then, once you have bought your stocks, get out of the casino — and stay out,” he wrote. “Just hold the market portfolio forever.”

    More from Personal Finance:
    Why egg prices are on the rise again
    A 12% retirement return assumption is ‘absolutely nuts’
    Here’s where prices fell in December 2023, in one chart

    For stock investors who want to keep their strategies simple, experts say the approach can work.

    “Among the better decisions people can make is starting with an index-based fund tracking the S&P 500 because it works,” Todd Rosenbluth, head of research at VettaFi, recently told CNBC.com.

    Over time, passive strategies have shown better returns than actively managed funds. Moreover, the cost of those funds is much lower compared to active strategies. Together, that combination is hard to beat.

    “I don’t think individual investors or money managers can generally outperform the S&P 500,” said Ted Jenkin, a certified financial planner and the CEO and founder of oXYGen Financial, a financial advisory and wealth management firm based in Atlanta. Jenkin is also a member of the CNBC FA Council.

    When does it pay to diversify?

    The greater a portfolio’s exposure to the S&P 500 index, the more the ups and downs of that index will affect its balance.

    That is why experts generally recommend a 60/40 split between stocks and bonds. That may be extended to 70/30 or even 80/20 if an investor’s time horizon allows for more risk.

    Moreover, exclusively investing in the S&P 500 on the stock side of a portfolio may be limiting if other areas of the market prove more successful in 2024.

    In 2023, the S&P 500 was up around 26% for the year, besting other strategies like a U.S. small cap index fund or an international stock index fund, noted Brian Spinelli, a certified financial planner and co-chief investment officer at Halbert Hargrove Global Advisors in Long Beach, California, which was No. 8 on CNBC’s FA 100 list in 2023.

    It may be tempting to throw out those other strategies and just go with the one that did really well last year, Spinelli noted.

    “But I wouldn’t go overboard,” Spinelli said. “You shouldn’t be 100% U.S. large cap and let it sit there and expect the same level of returns we’ve seen over the last five years.”

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  • Here’s how to use the new tax-bracket information for 2024 to lower your tax bill

    Here’s how to use the new tax-bracket information for 2024 to lower your tax bill

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    When it comes to managing your taxes, where you fall in one of the seven progressive tax brackets is the key to understanding how much you’re going to end up paying when you file your return.

    The Internal Revenue Service announced new inflation-adjusted brackets for 2024 on tax rates that go from 10% to 37%. The dollar amounts of income separating the bands run from as little as $11,600 to more than $365,000, for those filing single, with similar ratios for those married filing jointly. 

    You can pay no attention to this at all, and just let your tax preparer or software figure out the math for you. Or you can delve into the details and potentially reduce the amount you owe. 

    A progressive tax system means you don’t pay the top rate on your whole income. Instead, you pay the rates for each band in a row as you go up the income ladder. If your taxable income as a single filer is $11,600 in 2024, you’ll pay 10% on the entire amount. Anything above that, and you pay the 10% tax on that first chunk, and then add each additional band on top of it.

    Next year, for instance, if you have taxable income of more than $609,350, that puts you in the 37% bracket. You’ll pay $183,647.25 — the stacked combination of the 10%, 12%, 22%, 24%, 32% and 35% brackets — plus 37% of the excess over $609,350. 

    To figure out where you fall on the spectrum, you just need to estimate your 2024 taxable income or extrapolate from your previous tax returns. You can see the full tax-bracket charts here

    This may seem like just a curiosity for those with straightforward income, but you’ll need to pay close attention if you’re planning any atypical financial moves, such as a retirement, a conversion from a 401(k) to a Roth IRA or the sale of a business or significant piece of property. 

    “Everyone seems to care about tax brackets,” says Sri Reddy, the senior vice president of retirement and income solutions at Principal Financial Group. “But I wouldn’t tell you to worry about it. You should make as much money as you want, because you get to keep some portion of it. I’d just rather have you have an awareness of what it might mean to you.”

    Here’s where tax-bracket management matters most: 

    Retirement savings

    You can know your tax bracket now, but you don’t know what it will be in the future. Your retirement savings are stuck in the middle. 

    Should you pay tax on your retirement savings now and save in a Roth IRA or Roth 401(k), so the growth is tax-free after you’re 59½? Or should you save in tax-deferred accounts and pay tax down the road when you spend the money — or are forced to withdraw it yearly for required minimum distributions? And if you do this, at some point do you want to convert some of those funds to Roth, pay the tax and then let the funds grow tax-free into the future? 

    “If you’re in a high tax bracket now, doing a Roth contribution to your 401(k) makes no fiscal sense,” says Chris Chen, a Boston-based certified financial planner who runs Insight Financial Strategists

    Chen recently advised a couple in their 50s who wanted to shift all of their 401(k) contributions from tax-deferred accounts to Roth to save the hassle of converting the funds later. The challenge is they are currently in the 35% tax bracket, and must also pay Massachusetts’ 5% state income tax. They plan to retire early, at which point they’ll probably drop to the 12% bracket.

    “So putting money in Roth now does not make sense from a tax standpoint,” says Chen. “They got persuaded to continue putting money into a traditional 401(k), and they deferred the Roth idea to later.”

    Roth conversions

    When you do come to the Roth conversion stage, you’ll need to look even closer at your tax bracket so that you can see how much income you can add without pushing into the next level. It’s a particularly steep increase from the 12% bracket to the 22% bracket, and then from the 24% bracket to the 32% bracket. 

    “You have to see at what point is it too painful to pay the tax,” says Ryan Losi, a CPA and executive vice president at PIASCIK, based in Glen Allen, Va. “We don’t want to go up to 32% or 35%, because that’s too big a payment.”

    For example, if your taxable income for 2024 is going to be $80,000 as a married couple, you’d be in the 12% bracket. If you plan to convert $20,000 from your 401(k) or IRA to Roth, that pushes you over the $94,300 limit, and $5,700 would be taxable at 22%, to the tune of $1,254. So perhaps you’d want to only convert $14,000 instead, and by controlling the size of the conversion, you can minimize your tax liability. 

    You can do some of this tax-bracket management on the income side as well, Reddy says. You can employ a bunching strategy, meaning you make all your stock sales that would cause capital gains in one year and avoid transactions the following year. Or you might be due a lump-sum payment for disability or severance or from an annuity, and you can spread it out instead. “This is where awareness is important,” says Reddy. 

    Charitable giving

    Bunching strategies also are helpful with charitable giving. Losi’s high-income clients are big users of donor-advised funds, which are charitable accounts that allow donors to take a deduction the year they deposit the funds and then distribute them later. “Clients will call and ask me, ‘What do I need to contribute this year to get me out of the 37% bracket?’” Losi says. 

    This works with the lower brackets, too, not just among the rich. If you’re in a high-tax state or paying a mortgage, it might benefit you to see where you are in your tax bracket. If you make a charitable donation of even a few hundred dollars, it could make sense for you to itemize instead of taking the standard deduction, and that extra amount could push you into a lower bracket. 

    Business owners and QBI

    Business owners and sole practitioners are the ones who pay the most attention to their tax brackets, Losi says, especially because of the qualified business income deduction that can reduce taxes on business income by up to 20%. The rules are complicated, and it takes a lot to manage not only where you fall in the brackets, but also the phase-outs for specific trades. 

    For these taxpayers, it may make sense to try to get paid less by clients in a certain calendar year, and pay themselves more. 

    “You can invoice, but tell clients to hold off on payment,” Losi says. “You can accelerate deductions. You can deduct 100% of capital spent for automobiles, desks, chairs — everything [a business] needs to run.”

    Losi also encourages business owners to pay themselves a healthy salary, which can reduce business income, and then set up solo qualified plans and cash-balance pension plans to put that money away pretax. “Heck yeah, cash-balance pension plans,” Losi says. “I’m the trustee of ours.”

    More on investment tax strategy:

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  • You can save up to $23,000 in your 401(k) next year, IRS says

    You can save up to $23,000 in your 401(k) next year, IRS says

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    Retirement savers can tuck away slightly more in 2024 than in 2023, but this year’s contribution increases are more modest than last year’s, according to new inflation-related adjustments released by the IRS.

    People who are building up their 401(k) accounts will be able to contribute a maximum of $23,000, a more than 2% increase from the $22,500 maximum for 2023.

    IRA contribution limits will climb to $7,000 for 2024, a 7.6% increase over the $6,500 limit in 2023.

    When the IRS announced its adjustments for 2023, 401(k) savers got a big increase of nearly 10% year over year, and the IRA contribution limit went up more than 8%.

    The 2024 adjustments reflect an economy where inflation rates, although cooling, are still warm.

    For 2024, the catch-up amount for workers 50 and older is holding at a maximum of $1,000 on IRA contributions and of $7,500 for people with 401(k)s and other defined-contribution plans, the IRS said.

    The IRS numbers set a limit on how much people can set aside each year in 401(k) accounts, but data suggest many people fall far short of those maximums.

    In 2022, people with retirement accounts through Vanguard had an average account balance of $112,572. The median account balance was $27,376, the wealth-management giant reported.

    The new retirement-account contribution limits are part of the tax code’s yearly changes to account for inflation.

    Taxpayers are still awaiting the IRS adjustments for tax brackets, standard-deduction amounts and other provisions for tax year 2024.

    The tax agency adjusted the ranges on income-tax brackets last year by 7%.

    Roth IRA rules and the Saver’s Credit

    The numbers on 401(K) and IRA contributions were just one part of the IRS announcement Wednesday.

    The tax agency also lifted the income thresholds for people making Roth IRA contributions. Roth IRAs are funded with after-tax dollars, so they aren’t taxed when account holders pull out the money.

    Read also: If saving $23,000 in your 401(k) next year isn’t enough, you can double that (or more) with the right strategy — and it’s legal

    But Roth IRA contributions hinge on household income. In 2024, individuals and people filing as head of household who make between $146,00 and $161,000 must limit their Roth IRA contributions. People with incomes above $161,000 won’t be able to contribute to a Roth IRA.

    That’s up from a 2023 phase-out range of $138,000 to $153,000.

    For married couples filing jointly, the phase-out range climbs to $230,000 – $240,000. That’s an increase from this year’s range of $218,000 to $228,000.

    Other retirement tax rules are also slated for 2024 updates.

    For example, there’s the “saver’s credit” which is designed to help low- and moderate-income households that are finding a way to put aside money for retirement. It pays up to $1,000 for individuals and up to $2,000 for married couples. The amount depends on income and contribution amounts.

    For 2024, married couples saving for retirement are eligible for the credit if their income stays under $76,500, up from $73,000. The income maximum is $38,250 for individuals, up from $36,500.

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  • These Teens Opened Roth IRAs Before They Could Even Vote

    These Teens Opened Roth IRAs Before They Could Even Vote

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    What to Read Next

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  • Roth vs. Traditional 401(k): Where to Put Your Money for Retirement?

    Roth vs. Traditional 401(k): Where to Put Your Money for Retirement?

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    Roth vs. Traditional 401(k): Where to Put Your Money for Retirement?

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  • How Wall Street’s REIT giants are reshaping U.S. real estate

    How Wall Street’s REIT giants are reshaping U.S. real estate

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    U.S real estate investment trusts today manage $4.5 trillion in real estate worldwide. Many groups on Wall Street offer these tax-friendly funds to retail investors. 

    KKR’s real estate business is one of the big players in the REIT game. The private equity firm manages multiple REIT funds. The KKR Real Estate Select Trust, which currently manages $1.5 billion in assets, paid a dividend of 5.4% to its investors in July 2023.

    But the benefits extend beyond returns.

    “When you look at the after tax equivalent of that yield, it is very compelling.” said Billy Butcher, CEO of KKR’s global real estate business. “The depreciation from our properties has covered 100% of the income generated by our properties, and there’s no tax on that dividend,” he said in an interview with CNBC.

    Larger funds sometimes contain a diversified pool of assets. Categories may include office, student housing, casino, timberlands, radio and cell towers, server farms, self-storage properties, billboards, and much more.

    “Back in the 1960s, there were three or four different types [of REITs], said Sher Hafeez, a managing director at Jones Lang LaSalle, a real estate services firm. “Now, I can count at least 20 different types.”

    Top performing REIT sub-sectors in recent years include data centers, self-storage properties, residential housing and tower REITs. Residential housing delivered a return of 16% from 2010 to 2020, according to a S&P Global Investments report.

    The investor-friendly tax rules can also increase the pace of large-scale development. 

    “Having REITs there as a potential exit helps the market, and helps the availability of financing,” said Michael Pestronk, CEO and co-founder of Post Brothers, a Philadelphia-based housing developer. 

    Some funds like Invitation Homes and American Homes 4 Rent were founded in the yearslong slowdown in U.S. home construction. At the time, REITs bought and managed commercial-scale properties, which could include products like master-planned communities or traditional apartment complexes.

    In recent years, publicly traded trusts have targeted single-family rental market, and today, these REITs have grown tremendously — enough to build new neighborhoods in their entirety. 

    Watch the video above to learn the fundamentals of real estate investment trusts.

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  • A Retirement Tax Break That Ends the Fear of Outliving Your 401(k)

    A Retirement Tax Break That Ends the Fear of Outliving Your 401(k)

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    A Retirement Tax Break That Ends the Fear of Outliving Your 401(k)

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  • Here’s why Wall Street has fallen out of love with Tesla — for now

    Here’s why Wall Street has fallen out of love with Tesla — for now

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    Late on Wednesday, Tesla Inc.
    TSLA,
    -1.10%

    reported that quarterly sales were up 47% from a year earlier. But the stock tumbled 10% on Thursday.

    Tesla’s shares are still up 113% this year. The company is among a group of 13 in the S&P 500 that stand out with high growth expectations for sales, earnings and free cash flow through 2025.

    But less than half of analysts polled by FactSet rate Tesla a buy. Emily Bary explains what they are worried about.

    Traders have placed large short bets against Tesla and two of its rival EV makers — Rivian Automotive Inc.
    RIVN,
    -2.09%

    and Nio Inc.
    NIO,
    +2.52%
    .
    Claudia Assis looks into how well those trades have been working out.

    Cody Willard explains why he remains confident that Tesla and Rivian will dominate the EV market over the long term.

    Related coverage:

    Here’s what may propel U.S. stocks for years.

    Chipotle Mexican Grill is among 14 stocks named by Michael Brush for consideration by investors looking to ride along with long-term improvement of U.S. labor productivity.


    AP

    The S&P 500
    SPX,
    +0.03%

    has returned 19% this year, following its 18% decline in 2022. On the same basis, with dividends reinvested, the benchmark index is still down 2% since the end of 2021.

    What is going on? Michael Brush believes that a high level of corporate investment in new technology and equipment is setting the stage for a long phase of earnings growth for U.S. companies. He shares four developments behind the coming productivity boom and 14 stocks expected to benefit from it.

    A signal for the stock-market’s health


    Getty Images

    The Dow Jones Industrial Average
    DJIA,
    +0.01%

    is up 6% this year. The venerable index has trailed the S&P 500, but its closing level of 35,255.18 on Thursday was only 4% shy of its record close a 36,799.65 on Jan. 4, 2022. Joseph Adinolfi explains Dow Theory, which according to technical analysts is sending a strong bullish signal for the stock market.

    Other opinions about market sentiment:

    Even if you have resisted the idea of a Roth IRA, you may soon be forced to have one

    This year if you are age 50 or older and are already maxing-out your contribution to a 401(K), 403(B) or other qualified employer-sponsored tax-deferred retirement plan at $22,500, you can make an additional “catch up” tax deductible contribution of $7,500 for a total of $30,000. But starting in 2024, the catch up contribution will no longer be tax deductible if you earn at least $145,000 a year. You can still make the contribution with after-tax money into a Roth 401(K) account that your plan administrator may already have set up for you.

    Alessandra Malito provides more details and news about employers’ efforts to delay the rule’s implementation.

    Beth Pinker writes the Fix My Portfolio column. This week she digs into Roth IRA conversions, through which you can simplify your taxes down the line.

    A hot vote in Spain

    The center of Madrid on July 15, 2023. A brutal heat wave could affect turnout for the country’s general election on July 23.


    Uncredited

    Barbara Kollmeyer reports from Spain about a highly contested election on Sunday, with controversy over the government’s policies during the pandemic, parties’ social policies and the possibility of a coalition government that might rattle financial markets.

    Meta vs. Alphabet

    Shares of Meta Platforms Inc. and Alphabet Inc. trade only slightly higher than the S&P 500 on a forward price-to-earnings bases, while Nvidia Corp., Microsoft Corp. and Apple Inc. trade much higher.


    FactSet

    Leslie Albrecht looks at Meta Platforms Inc.
    META,
    -2.73%
    ,
    which is Facebook’s holding company and has a hit on its hands with the new Threads social-media platform, and Google holding company Alphabet Inc.
    GOOGL,
    +0.69%
    ,
    to consider which stock is a better buy.

    Brett Arends: ‘I used to work at Nvidia. The stock I got is now half my portfolio. Should I sell?’

    The Ratings Game

    In The Ratings Game column, MarketWatch reporters track analysts’ thoughts about various stocks. Here’s a sampling of this week’s coverage:

    You don’t know every bad factor causing air travel to be nothing but harassment

    Getting there is half the fun.


    Getty Images

    The U.S. flying scene — from shortages of equipment and labor (and runways) to ill-staffed air-traffic control towers — is a well-known nightmare for U.S. travelers. But there is more to the story. Jeremy Binckes looks into other factors that may surprise you and cause great inconvenience this summer.

    The Federal Reserve is expected to raise interest rates again next week

    The Federal Open Market Committee will meet next Tuesday and Wednesday, to be immediately followed by a policy announcement. Economists expect the central to raise the federal-funds rate by another quarter point. The question is whether or not this will end the Fed’s inflation-fighting rate cycle.

    More coverage of the Fed:

    How much would you pay for 100% downside protection in the stock market?


    MarketWatch illustration/iStockphoto

    Over the past 30 years, the SPDR S&P 500 ETF Trust
    SPY,

    has returned 1,650%, for an average annual return of 10%, with dividends reinvested, according to FactSet. But it hasn’t been a smooth ride. The ETF, which tracks the benchmark S&P 500, fell 18% last year and 37% during 2008, for example. And there have been even larger declines if the analysis isn’t confined to calendar years.

    But can you ride through market declines? Many studies have shown that most investors who try to time the market sell after a decline has started and buy back in well after a recovery is under way, which means their long-term performance can suffer significantly.

    In this week’s ETF Wrap column (and emailed newsletter), Isabel Wang describes a new buffered fund that can give you 100% downside protection over a two-year period, in return for a cap on your potential gains in the stock market. Here’s the price you would pay for the protection.

    The World Cup games have started

    Hannah Wilkinson scored the home team’s first goal against Norway during the first World Cup game in Auckland, New Zealand, on July 20.


    Getty Images

    The Women’s World Cup began Thursday with an upset victory by New Zealand over Norway.

    James Rogers reports on what is expected to be a much easier environment for FIFA and corporate sponsors than that of last year’s Men’s World Cup in Qatar.

    U.S. Soccer Federation President Cindy Parlow Cone participated in MarketWatch’s Best New Ideas in Money podcast and spoke about the long-term effort to achieve equal treatment for women soccer players.

    More coverage of the World Cup:

    Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing.

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  • High-Earning Retirement Savers Are Losing Some of Their 401(k) Tax Break

    High-Earning Retirement Savers Are Losing Some of Their 401(k) Tax Break

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    Millions of high-earning Americans are slated to lose a popular tax deduction starting next year. 

    Copyright ©2023 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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  • Why Charles Schwab became a financial ‘supermarket’

    Why Charles Schwab became a financial ‘supermarket’

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    Charles Schwab Corp. is the largest publicly traded brokerage business in the United States with $7.5 trillion of client assets, and is a leading service provider for financial advisors, among the top exchange-traded fund asset managers and one of the biggest banks.

    “It would be fair to characterize Charles Schwab as a financial services supermarket,” Michael Wong, director of North American equity research and financial services at Morningstar, told CNBC. “Anything that you want, you can find in Charles Schwab’s platform.”

    Over the decades, Charles Schwab helped usher in a low-cost investing revolution while surviving market crashes and fierce competition — even when the game was taken up a notch to zero-fee commissions in 2019. 

    “Inherently, this is a scale business. The larger you are, the more efficient you are from an expense perspective,” Alex Fitch, portfolio manager for the Oakmark Select Fund and the Oakmark Equity and Income Fund, which invests in Charles Schwab, told CNBC. “It enables you to cut prices.”

    Various facets of Charles Schwab’s business compete against many legacy full-service brokers and investment bankers, including Fidelity, Edward Jones, Interactive Brokers, Stifel, JPMorgan, Morgan Stanley and UBS. And, it has to battle in the financial tech market against companies like Robinhood, Ally Financial and SoFi. 

    The melee reached a turning point in 2019 when Charles Schwab announced it was slashing commissions for stock, ETF and options trades to zero, matching the fees offered by Robinhood when it entered the market in 2014.

    Quickly, other companies followed suit and cut fees, which damaged TD Ameritrade’s business enough that Charles Schwab ended up acquiring it in a $26 billion all-stock deal less two months later.

    Charles Schwab was among the firms that benefited from the growth of retail investing during the coronavirus pandemic, and it’s now facing the consequences of Federal Reserve’s aggressive interest rate hikes. 

    That’s because of Charles Schwab’s huge banking business that generates revenue from sweep accounts, which are when the firm uses money leftover in investors’ portfolios and reinvests it in securities, like government bonds, to help turn a profit. 

    Charles Schwab told CNBC it was unable to participate in this documentary.

    Watch the video above to learn more about how Charles Schwab battled the ever-evolving financial services market – from fees to fintech – and how the reward doesn’t come without the risk. 

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  • Brokerage firm lured politically right-leaning seniors into gold-coin scam, says U.S. regulator

    Brokerage firm lured politically right-leaning seniors into gold-coin scam, says U.S. regulator

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    A finance company boasting hundreds of apparently glowing online “customer reviews” and an A+ rating from the Better Business Bureau was this week civilly charged with cheating over 700 investors — many of them senior citizens — out of more than $30 million over 5 years.

    El Segundo, Calif.–based Red Rock Secured and its controlling chief executive, Sean Kelly, were accused by the Securities and Exchange Commission of playing on the retirement and tax fears of older investors to sell them gold and silver coins at vastly inflated prices to hold in self-directed IRAs.

    The markup on the coins “was almost always above 100 percent, and typically 120 percent or more,” the SEC said in its complaint.

    Between 2017 and last year, Red Rock pocketed more than $30 million of the $50 million investors paid for the coins, said the SEC, which also sued two former Red Rock executives. 

    Attorney Michael Schafler of the Los Angeles law firm Cohen Williams, representing both Red Rock and its CEO, said the company had “nothing to hide” and has been “completely cooperative” with the SEC investigation.

    “Red Rock has demonstrated that it is focused on compliance and providing clients with information necessary to make reasoned and informed decisions about purchasing precious metals,” he added. “Red Rock stands by that. It looks forward to the opportunity to defend itself against the government’s allegations in Court.”

    According to the SEC, Red Rock used an aggressive marketing campaign to target investors, especially those who were “conservative” or “right wing” politically and “over 59½ [years old].” 

    Sales personnel played on customers’ fears about government policy, inflation, the stock market and retirement to persuade investors to move IRA funds to Red Rock and invest in gold and silver bullion, according to the SEC. But then, using what the commission calls a “bait and switch,” they persuaded investors instead to buy niche “premium” gold coins with huge, but hidden, markups, which included an 8% sales commission.

    These so-called premium coins included an obscure silver Canadian coin for which Red Rock Secured controlled the entire market, allowing it to claim falsely that the “market value” of the coin was more than twice the value of its silver content, the SEC said.

    Red Rock Secured salespeople were told to pitch the idea of a “worry-free retirement” to potential clients, while warning them that in the stock market “you could wake up and half your retirement could be gone,” the SEC said.

    “The defendants used fear and lies to defraud investors out of millions of dollars from their hard-earned retirement savings,” said Antonia Apps, director of the SEC’s New York office.

    There was no hint of any of this in the company’s glowing online “customer reviews.” At Google, Red Rock had an average rating of 4.8 stars out of 5 from 136 self-described customers. At Trustpilot, it got an average rating of 4.8 stars out of 5 from 167 alleged customers. Trustpilot said the rating was “excellent.” At the Better Business Bureau, Red Rock got an average rating of 4.75 stars out of 5 across 96 reviews. At Consumer Affairs it got an average rating of 4.9 stars out of 5.

    The Better Business Bureau, contacted by MarketWatch, said it had added an alert to its site about the SEC probe into Red Rock. But, it added, “BBB ratings are not a guarantee of a business’s reliability or performance. BBB recommends that consumers consider a business’s BBB rating in addition to all other available information about the business.”

    The organization, which provides information about businesses through a rating system and handles consumer complaints, said its standard policy is to check that all reviews are from legitimate customers by contacting the company being reviewed. The BBB does not possess legal or policing powers. 

    Business-review platform Trustpilot also told MarketWatch it had added an alert to the Red Rock Secured review page.

    “Trustpilot is an open, independent review platform, meaning anyone who has had an experience with a business can leave a review — whether positive or negative — on the business’s Trustpilot profile page,” the company said in a statement “We are currently investigating Red Rock Secured to ensure that they are using our platform in line with our business guidelines, and should we find any evidence they are not, we will take the necessary steps to prevent it.”

    Alphabet unit
    GOOG,
    +1.28%

    GOOGL,
    +1.27%

    Google and Consumer Affairs could not be reached for comment.

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  • I’m a single dad maxing out my retirement accounts and earning $100,000 – how do I make the most of my retirement dollars?

    I’m a single dad maxing out my retirement accounts and earning $100,000 – how do I make the most of my retirement dollars?

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    Dear MarketWatch, 

    I make over $100,000 a year, and expect to for the foreseeable future. As of now, I am contributing 8% of my income to my 403(b) with a 3% 401(a) match; all Roth. It would be more, but I am maxing out a Roth IRA and an HSA as well each year. I am a single father with a 9-year-old daughter, and do not have plans to marry, so I’m planning everything as single. I expect house to be paid off when I (plan to anyway) retire at age 65. I plan to collect Social Security at 67.

    My question is, should I move my 403(b) & 401(a) income to pretax dollars, since I expect to be in a lower tax bracket echelon once I retire? Or leave it at Roth. I’m hoping for some advice on what would generally be the most prudent option to maximize retirement dollars. 

    See: I’m a 39-year-old single dad with $600,000 saved – I want to retire at 50 but don’t know how. What should I do?

    Dear reader, 

    First, congratulations on maxing out your Roth IRA and HSA and contributing to your other retirement accounts — managing that while being a single dad and paying off a home is no simple task. 

    You’ve asked the age-old retirement planning question: should I be investing in a traditional account, or a Roth? For readers unaware, traditional accounts are invested with pretax dollars, and the money is taxed at withdrawal in retirement. Roth accounts are invested with after-tax dollars upon deposit, and then withdrawn tax-free (if investors follow the rules as far as how and when to take the money, such as after the account has been opened for five years and the investor is 59 ½ years old or older).

    As you know, the rule of thumb for choosing between a Roth and a traditional account comes down to taxes. If you’re in a lower tax bracket, advisers will typically suggest opting for a Roth as you’ll be paying taxes at a lower rate now versus a potentially higher one later. For a traditional, you may be better off if you’re in your peak earning years and expect to drop a tax bracket or more at the time of withdrawal. 

    One of the greatest challenges, however, is knowing future tax brackets. You may think you’ll be in a lower one now, but you can’t be sure. We also don’t know what tax rates might even look like when you get to retirement. The current tax rates are expected to increase in 2026, when the brackets from the Tax Cuts and Jobs Act are set to expire. Congress may do something before that, or after of course.

    Check out MarketWatch’s column ‘Retirement Hacks’ for actionable advice for your own retirement savings journey 

    That being said, if you believe you’ll be in a lower tax bracket in retirement, it doesn’t hurt to have some of your money go in a traditional account. Having tax diversification can really work in your favor, too. It allows you more control and freedom when retirement does come, as you’ll be able to choose which accounts you withdraw from and how to save the most on taxes. The more options, the better. 

    You should do your best to crunch the numbers now, and then make a plan to do it every year or so until you get to retirement. Here’s one calculator that can help

    Make estimates where you have to, and factor in inflation — I’m sure we’ve all seen how inflation can impact personal finances in the last year alone. There are a few other things you can do to make these calculations. For example, get a sense of what your Social Security income may be by creating an account with the Social Security Administration, which will show you what you could expect to receive in benefits at various claiming ages. Also add in any other income you may get, like a pension.

    After you calculate what you expect to spend in retirement, you can figure out what your withdrawal needs will be — and how that will impact your taxable income depending on if the money comes from a traditional or Roth account. Remember: Withdrawals from Roths do not increase your taxable income, whereas traditional account investments do when taken out.  

    Keep in mind, Roth IRAs have one really great advantage over traditional accounts — they are not subject to required minimum distributions, which is when investors must withdraw money from the account if they haven’t yet done so by the mandatory age. Traditional employer-sponsored plans, like 401(k) and 403(b) plans, are subjected to an RMD. Roth employer-sponsored plans have also had an RMD, though the Secure Act 2.0, which Congress passed at the end of 2022, eliminates the RMD for Roth workplace plans beginning in 2024. (The Secure Act 2.0 also pushed the age up for RMDs to 73 this year, and age 75 in 2033.) 

    Also see: We want to retire in a few years, and have about $1 million saved. Should I move my money to a Roth, and pay off my $200,000 mortgage while I’m at it?

    Traditional versus Roth accounts are just one piece of the puzzle in retirement planning, though. There are many other questions you need to ask yourself, and a financial planner if you’re interested and able to work with one. For example, what rates of return are you anticipating on your investments, and how are your investments allocated? What state do you live in now and will that change in retirement (that will affect your taxes). Are you concerned about leaving behind an inheritance, and have you considered life insurance? And even before you get to retirement, as a single dad, do you have a will, healthcare proxy and disability insurance in the event something unfortunate happens? 

    I know this may feel overwhelming, especially when you’re taking into account calculations and estimates for years and years from now, but it will all be worth it. Consider working with a qualified financial planner, or talking to someone at the firm that houses your investments, and don’t feel obligated to stick with whatever you choose until you retire. As with many things in life, retirement plans tend to change and adapt as you do. 

    Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

    Readers: Do you have suggestions for this reader? Add them in the comments below.

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  • I ruined my family’s finances by withdrawing from my 401(k) to buy a house – I regret it

    I ruined my family’s finances by withdrawing from my 401(k) to buy a house – I regret it

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    I recently made a panic decision to withdraw all my money from one retirement account and I am now closing on a house in February (about $200,000). I am 36 years old, married and have a 1-year-old. Half of me is regretting it, and I’m worried about next year’s taxes due to the withdrawal and the 10% penalty I paid.

    I have been saving up money with my family in order to buy our first home. Recently, however, interest rates have risen, making me worry that this window to get an affordable house was closing. In a fit of panic, I withdrew all of our $26,000 saved money from my 401(k), putting it in a high-yield savings account (3.75%). We have now chosen a home and will be using around $18,000 of this money for the down payment. 

    I am now worried that I might have to pay income taxes and a penalty for the withdrawal itself. I am extremely anxious over this situation as I feel I have destroyed our family’s financial future and that we cannot afford to pay taxes on the money I withdrew. 

    My main concern or question is, is there a way to tell the IRS that this money is being used toward a house? Retroactively? 

    See: I’m a single dad maxing out my retirement accounts and earning $100,000 – how do I make the most of my retirement dollars?

    Dear reader, 

    The first thing you need to do: Take a breath. Most decisions should not be made in a panic, especially when involving money. 

    Because you withdrew from your 401(k), yes, you will have to pay taxes and a penalty. Had it been a loan, you’d have to pay interest on what you borrowed, but it would be to your own account. Keep in mind however that loans from your employer-based retirement plans are also risky – if you were to separate from your job, for whatever reason, you’d be responsible to pay it back or it would be treated as a distribution.

    I understand your sense of urgency in wanting to buy a home during a more favorable market, but your time now should be spent on getting yourself financially situated and saving for the future. 

    “I wouldn’t advise this or done it this way, but he’s not stuck and it’s not detrimental – it’s just a tough lesson to learn,” said Jordan Benold, a certified financial planner at Benold Financial Planning.  

    Get very serious about your current finances and find a way to earmark a portion of your income to savings if at all possible. There are a few things you should be doing. 

    First, assess how much you will be paying in taxes and penalties. I’m not sure what your tax bracket is, but did this distribution push you into a higher tax bracket? You can use a calculator or talk to an accountant to see what that withdrawal will incur in taxes – then make sure you can pay it, or talk to the Internal Revenue Service about an extension. There are penalties for failing to file your taxes or pay them, and you don’t want to add that on top of your stress. 

    Also see: We have 25 years until retirement and are saving 25% of our income – are we doing it right? And are we saving too much?

    The IRS may not be able to do anything for you in terms of waiving those penalties – though it doesn’t hurt to ask, even if you have to wait on the phone for a while to talk to someone – but communication and attention to detail are key when it comes to your taxes. Getting an IRS agent on the phone and talking through your situation won’t be time wasted. There are so many rules, and an agent can help make sense of your options.

    Read: The days of IRS forgiveness for RMD mistakes may soon be over

    Once you get that sorted, look extremely carefully at whatever money you have coming in and what’s going out. You’re about to close on a home, and that costs money – not just the home itself, but all of the extras associated with closing. You may also need money for insurance, furniture, any repairs and so on if you haven’t factored that in yet, so fit that into your budget for when you sign the papers. Beyond that, list every expense you expect to have for the next 12 months – home insurance and taxes, a mortgage or utilities, groceries, medicine, any other nonnegotiable costs and add it all up. Don’t forget anything – ask your partner if there’s anything you may have forgotten. 

    Then compare it to your income. Are you under? Are you over? What changes can you make without totally draining your happiness? I always advocate for a balance…yes, in some cases you have to omit a few expenses for the time being when building up an emergency savings account or paying down debt, but don’t completely rob yourself of joy or all of your hard work may backfire. If you really need to buckle down, make a separate list of activities and entertainment you can get for free (or as close to free as possible)—walks in the park or on the beach with your partner and child, museums on free days, pot lucks and at-home movie nights with family and friends and so on. 

    Want more actionable tips for your retirement savings journey? Read MarketWatch’s “Retirement Hacks” column

    Earmark a portion of your income to replenish your retirement savings before you try saving for any other goals. (This is separate from an emergency savings account, however – you should have one of those.) You may do that with payroll deductions in your 401(k), or also by allocating some of your savings to an IRA outside of the 401(k). 

    Take some time to learn the rules of your retirement plans. For example, an IRA allows an investor to take $10,000 out of the account penalty-free if it’s for a first-time home purchase (whereas a 401(k) does not have that exception). It may be too late for that, but there are other perks with various retirement accounts. 

    The 401(k) has a higher contribution limit and also comes with the possibility of employer matches (if your company offers it), whereas an IRA allows for penalty-free withdrawals for college. With a traditional IRA, you’d have to pay taxes on the withdrawal, whereas with a Roth IRA you’ve already paid the taxes and won’t have to pay any more for withdrawing from your contributions (you may have to pay taxes on the earnings portion, so follow distribution rules closely).

    Remember – you don’t want to make distributions from your retirement savings for just anything. You can borrow money for a home or college, but you can’t borrow money for retirement, so it’s important to protect those accounts. Familiarize yourself with the pros and cons of all accounts so that you can maximize your savings and diversify your withdrawal options when you finally get to retirement. 

    So just buckle down, get yourself in order and think of the future. “He’s got plenty of time – 30 to 40 years to work,” Benold said. “This might be a distant memory that he hopes he can forget.” 

    Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

    Readers: Do you have suggestions for this reader? Add them in the comments below.

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  • How Congress may make it easier to set money aside for emergency expenses

    How Congress may make it easier to set money aside for emergency expenses

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    Thomas Barwick | Digitalvision | Getty Images

    Many families struggle to come up with the cash when faced with an unexpected $400 expense.

    That lack of emergency savings may force them to borrow money at high interest rates to pay for the surprise expense, putting their financial security at risk.

    Now Congress has a window to address that issue by paving the way for new emergency savings plans in the lame duck session.

    Three emergency savings proposals may be included in a legislative package known as Secure 2.0, which is set to amplify changes to the retirement system brought by the Secure Act in 2019.

    “We’re on the cusp of a significant shift in how people save for emergencies in this country, thanks to public policy and private sector innovation,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center, during a recent web panel hosted by the Washington, D.C., think tank.

    More from Personal Finance:
    Reasons to say ‘no’ to a store credit card this holiday shopping season
    How to score a charitable tax break on Giving Tuesday
    Inflation boosts U.S. household spending by $433 a month

    The panel discussion coincided with an open letter from the Bipartisan Policy Center Action with 40 organizations to Senate Majority Leader Chuck Schumer, D-N.Y., and Minority Leader Mitch McConnell, R-Ky., as well as House Speaker Nancy Pelosi, D-Calif., and Minority Leader Kevin McCarthy, R-Calif.

    The letter called for the inclusion of three bills that would amplify emergency savings in the pending retirement package.

    “We firmly believe emergency savings policy aligns with the goals of the U.S. retirement system and will help boost financial resiliency for American households,” they wrote.

    Why emergency savings falls short

    Anti-eviction banners are displayed on a rent-controlled building in Washington, D.C., on Aug. 9, 2020.

    Eric Baradat | AFP | Getty Images

    The Covid-19 pandemic was a stress test for many Americans’ finances.

    As many parts of the economy shut down, many individuals and families found their incomes were reduced or eliminated altogether.

    The federal government stepped in and sent unprecedented amounts of aid through three rounds of stimulus checks, enhanced federal unemployment benefits, direct monthly child tax credit payments to parents and other policies.

    Yet the pandemic still led some workers to withdraw funds from their 401(k) or other retirement savings accounts, putting their long-term financial futures at risk.

    Those that had at least $1,000 in emergency savings at the height of the pandemic were half as likely to withdraw from their retirement savings accounts, according to the Aspen Institute.

    “As people face that crisis, you need that liquid savings to protect your long-term investments and make sure you have a secure retirement and build wealth,” Tim Shaw, associate director of policy at the Aspen Financial Security Program, said during the Bipartisan Policy Center panel.

    Covid relief measures helped push the share of families who could cover an unexpected $400 expense with cash or an equivalent method to 68% in 2021, a 4-percentage point increase from 2020. It also marks the highest level since the Federal Reserve began the survey in 2013.

    Still, 1 in 3 households would need to borrow money to cover a $400 emergency, which is still “far too many,” Shaw noted.

    How 3 proposals may encourage savings

    Image Source | Getty Images

    Advocates are hoping three proposals that could help encourage emergency savings will be included in Secure 2.0.

    That includes two bills proposed by Sens. Cory Booker, D-N.J., and Todd Young, R-Ind., as well as a third created by Sens. James Lankford, R-Okla., and Michael Bennet, D-Colorado.

    One proposal from Booker and Young would enable employers to provide emergency savings accounts to workers in addition to their retirement savings accounts. Employees would be able to set aside up to $2,500 automatically that they could access at any time in case of an emergency.

    The second proposal from Booker and Young would allow for separate standalone plans outside of retirement accounts, which would be “really important” for employees who don’t currently have retirement plans through their employer, Akabas noted.

    A third, the Lankford-Bennet plan, would allow workers to take out up to $1,000 from their retirement accounts penalty-free in case of an emergency. Those withdrawals would only be allowed once per year; additional contributions would be required before making another withdrawal.

    Chantel Sheaks, executive director of retirement policy at the U.S. Chamber of Commerce, said she has “fingers crossed” that all three proposals will make it into Secure 2.0 and that the legislation will pass.

    From an employer’s viewpoint, we need choice,” Sheaks said.

    What may work for one employer may not work for another, she noted. The three proposals would allow for more options, including possibly encouraging employers who do not current have retirement plans to think about adopting them, Sheaks said.

    Moreover, because hardship withdrawals can reduce workers’ retirement security, these emergency savings options can help prevent those stumbling blocks to building wealth.

    “People have emergency needs today, and we can’t forget about those emergency needs,” Sheaks said. “We need to find a way to balance today’s needs with tomorrow’s needs.”

     

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  • IRS to Make Largest Increase Ever to 401(k) Contribution Limit

    IRS to Make Largest Increase Ever to 401(k) Contribution Limit

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    IRS to Make Largest Increase Ever to 401(k) Contribution Limit

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  • IRS sets new 401(k) limits — investors can save a lot more money in 2023

    IRS sets new 401(k) limits — investors can save a lot more money in 2023

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    People can contribute up to $22,500 in 401(k) accounts and $6,500 in IRAs in 2023, the IRS said Friday.

    For 401(k)s, that’s an almost 10% increase from 2022’s contribution limit of $20,500. For IRAs, it’s a more than 8% rise from 2022’s limit of $6,000.

    As added context, the inflation-indexed bumps tax year 2023 income tax brackets and the standard deduction worked to approximately 7%.

    When the IRS increased the 401(k) contribution limits last year, it came to a roughly 5% rise.

    “Given the inflation we have been experiencing recently, the early announcement of this increase is encouraging,” Rita Assaf, vice president of retirement products at Fidelity Investments, said after the IRS released the 2023 contribution limits.

    Seven in 10 people are “very concerned” how inflating costs will impact their readiness for retirement according to a Fidelity study, Assaf noted. “Every dollar counts, and this increase will provide Americans with the opportunity to set aside just a bit more to help fund their retirement objectives,” she said.

    Older workers can save even more

    The 2023 contribution limits that apply to 401(k)s — plus 403(b) plans, most 457 plans and the federal government’s Thrift Savings Plan — are even larger for workers age 50 and over.

    Catch-up contribution limits rise to $7,500 from $6,500, the IRS said. Combine the catch-up contributions with the regular contribution limits, and workers age 50 and over can sock away $30,000 for retirement in these accounts during 2023, the agency said.

    Income phase-outs increase when it comes to possible deductions, credits and contributions

    Tax rules can let people deduct contributions to traditional IRAs so long as they meet certain conditions, pegged to issues like coverage through a workplace retirement plan and yearly income. Above phase-out ranges, deductions don’t apply if a person or their spouse has a retirement plan through work, the IRS noted.

    For 2023, a single taxpayer covered by a workplace retirement plan has a phase-out range between $73,000 and $83,000. That’s up from a range between $68,000 and $78,000 during 2022.

    For a married couple filing jointly “if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $116,000 and $136,000,” the IRS said.

    If an IRA saver doesn’t have a workplace plan but their spouse is covered, “the phase-out range is increased to between $218,000 and $228,000,” the agency noted.

    There are also changes coming for the Roth IRA, which people fund with after-tax money and then can tap tax-free later.

    Read also: Here’s when you should choose a Roth IRA over a traditional account

    The Roth IRA contribution limits also climb to $6,500. Retirement savers putting money in their 401(k) can’t also put pre-tax money in a traditional IRA, but they can contribute to a Roth account.

    Still, the eligibility to contribute to Roth IRA accounts is pegged to income, subject to phase-out ranges.

    In 2023, the income phase-out range on Roth IRA contributions climbs to between $138,000 – $153,000 for individuals and people filing as head of household. (That’s up from a range between $129,000 and $144,000, the IRS noted.)

    With a married couple filing jointly, next year’s phase-out range goes to $218,00 – $228,000. That’s a step up from this year’s $204,000 – $214,000 range.

    The income limit surrounding the saver’s credit, which is geared toward low- and moderate-income households, is also getting a lift. The credit lets taxpayers claim 10%, 20% or one-half of contributions to eligible retirement plans, including a 401(k) or an IRA. The credit’s income limits are climbing, the IRS said.

    The 2023 income limit will be $73,000 for married couples filing jointly, $54,750 for heads of household and $36,500 for individuals and married individuals filing separately, according to the IRS.

    Don’t miss: Opinion: It’s harder for me to look at my 529 balance than my 401(k) because I have a high school junior. Here’s some advice for parents on a similar timeline.

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  • Manchin rails against Biden’s clean energy plans as he faces tough political headwinds in West Virginia | CNN Politics

    Manchin rails against Biden’s clean energy plans as he faces tough political headwinds in West Virginia | CNN Politics

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    CNN
     — 

    West Virginia political observers were not surprised when Sen. Joe Manchin appeared on Fox News on Monday to make a stunning threat: He could be persuaded to vote to repeal his own bill, the Inflation Reduction Act, if the Biden administration pushed him far enough.

    The conservative Democratic senator reiterated this to CNN, saying he would “look for every opportunity to repeal my own bill” if the administration continued to use the IRA to steer the US quickly towards the clean energy transition and away from fossil fuels.

    The IRA, passed and signed into law last year, was a sweeping $750 billion bill that lowered prescription drug costs, raised taxes on large corporations, and invested $370 billion into new tax credits for cleaner energy. Even though Manchin carved out space for fossil fuels, the bill represents by far the biggest climate investment in US history.

    From the start, Manchin has insisted the IRA was an “energy security bill,” rather than a clean-energy bill. Still, experts said he must be sensitive to the idea that he ushered in what ended up being the nation’s largest climate law, given he represents West Virginia – a state where coal and natural gas reign supreme.

    Manchin’s repeal threat “was probably good politics,” West Virginia University political science professor Sam Workman told CNN. If he decides to seek reelection in 2024, the 75-year-old senator will face his toughest political fight yet, as popular West Virginia Republican Gov. Jim Justice jumped into the race this week.

    Justice’s bid for the seat “doesn’t change anything at all,” Manchin told CNN. But political experts from his home state see a man who is gearing up for a fight.

    Since delivering President Joe Biden one of his biggest legislative wins with the IRA last summer, Manchin has spent the last few months on a rampage against the administration, homing in on what he calls its “radical climate agenda.” Manchin has voted against Biden’s nominees for high-ranking administration positions, bashed new rules from the Environmental Protection Agency and Treasury Department and clashed with members of the president’s cabinet at Senate hearings.

    Manchin’s appearance on Fox to slam Biden and threaten to repeal the law he had an outsized role in writing “is a pretty good indicator to me that he’s running,” said John Kilwein, chair of West Virginia University’s political science department.

    Manchin has been silent on whether he’ll run for reelection, but as Justice announced his candidacy, Manchin expressed confidence. “Make no mistake, I will win any race I enter,” he said in a statement.

    The Democrat beat his Republican challenger by just three percentage points in 2018. And though Justice still must get through a primary against Republican Rep. Alex Mooney, the governor is already backed by Senate Republicans’ electoral arm and many in the state think he will present a serious challenge to Manchin.

    “Justice is a likable candidate – he takes that ‘aw shucks’ thing to the next level,” Kilwein said. “This is going to be [Manchin’s] toughest fight, but I think anyone who thinks this is going to be a piece of cake is wrong. I don’t think he’s going to be easy to beat.”

    Manchin is “in danger” politically, his Democratic colleague Sen. Richard Blumenthal of Connecticut told CNN.

    “Joe Manchin is the last remaining statewide elected Democrat [in West Virginia], and we want [him] back in the United States Senate,” Blumenthal said, adding Manchin was a “pillar of strength to Democrats in the last session.”

    Justice made little mention of Manchin during his official campaign launch but came out swinging against Biden and his agenda. On Friday, Justice told Fox News that Manchin “would be a formidable opponent” if he runs for reelection, but added that he’s “done some things that have really alienated an awful lot of West Virginians.”

    There is no denying that West Virginia is incredibly conservative; the state went nearly 40 percentage points for Trump in the 2020 election. But even with those fundamentals, political experts said Manchin has had tremendous staying power through retail politics and argue he can deliver for the state while standing up to Biden.

    “His whole appeal is a retail appeal; every blueberry festival, huckleberry festival, Joe Manchin’s there,” former West Virginia political science professor Patrick Hickey told CNN. “He’s a really smart and talented politician. He gets all the benefits that come from supporting (the IRA), but the next time he’s in West Virginia, he’ll be in a diner telling voters how terrible Biden is.”

    Behind the political rhetoric, the Inflation Reduction Act’s energy provisions could be a windfall for West Virginia, and Manchin is walking a tightrope in his messaging around the law.

    Despite blasting the Biden administration, Manchin has spent the past few months at home touting the benefits of the IRA and jobs it is already bringing to the state.

    Several major clean energy companies have invested hundreds of millions of dollars to build new manufacturing plants in the state: a battery factory, a new industrial facility totally powered by renewable energy, and a plant to make electric school buses.

    “The way Manchin talked about those, he’s crediting the IRA and saying, ‘see, these are the good things that have happened,’” said Angie Rosser, executive director of environmental group West Virginia Rivers. “Those are hundreds of jobs reaching into the thousands, which for our small state is a big, big deal.”

    The John E. Amos coal-fired power plant in Poca, West Virginia. Fossil fuel energy is still a mainstay in state.

    Rosser and others pointed out that Manchin designed the IRA specifically to deliver money to West Virginia, designing tax credits to incentivize more manufacturing in coal country and funding to help these communities during the transition to clean energy.

    Morgan King, a staff member of West Virginia Rivers, has been traveling across the state recently to talk to local officials about how they can apply for federal IRA funding. The response has been overwhelmingly positive, King told CNN.

    “We’ve spoken with people of all parties,” she said. “People don’t care [about] the politics of how this bill was created so long as this funding can make it into their communities. West Virginia is set to disproportionately benefit from this bill more than any other state.”

    Manchin has been at odds with the Biden administration on several fronts, but the administration’s climate policies and implementation of the Inflation Reduction Act seem to have struck a particular nerve – and Republicans have continued to heavily criticize the law.

    A political ad from Republican dark money group One Nation is already circulating in the state, claiming that the IRA would kill 100,000 jobs in West Virginia.

    “The notion that this is just a climate bill … it is damaging here in the state because we’re pretty far to the right on these issues, especially energy issues,” Workman said. “When you sell something as a climate bill, given the economic context here and our history, it’s somewhat harder for people to see indirect benefits like jobs.”

    Manchin recently voted alongside Republicans on Congressional Review Act bills to undo EPA emissions rules for heavy-duty trucks as well as a climate-focused Labor Department rule (Biden has already vetoed one and promised to veto the other). In March, Manchin tanked top Interior Department nominee Laura Daniel-Davis, claiming she wasn’t upholding a part of the IRA that mandates offshore oil drilling in certain federal waters.

    The dynamic has put Senate Democrats in a tough spot. Democrats have a slightly expanded Senate majority after the midterms, but the continued absence of California Sen. Dianne Feinstein, who has been away from Washington as she recovers from shingles, has made for nailbiter votes.

    “He’s one of the most independent US senators out there,” Democratic Sen. Brian Schatz of Hawaii told CNN. “When he is frustrated, he’s not going to be shy about it. And right now, he’s obviously extremely frustrated with the administration, and that has to get sorted.”

    Manchin has also spent the last few months lobbing a steady stream of blistering statements aimed at Biden’s agencies. When the Environmental Protection Agency proposed strong new vehicle emissions regulations intended to push the US auto market towards electric vehicles in the next decade, Manchin said the agency was “lying to Americans” and called the regulations “radical” and “dangerous.”

    And when the Treasury Department issued guidance on IRA’s new EV tax credits – which were written by Manchin – the senator called it “horrific” and said it “completely ignores the intent” of his law.

    Some of his Democratic colleagues have panned his comments about repealing the IRA.

    “Maybe he should run for president,” Democratic Sen. Martin Heinrich of New Mexico told CNN. “He’s got one job; the president’s got another. The IRA is working.”

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