The economy survived the government shutdown but all is not well
Tag: Labor/Personnel Issues
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Small businesses are paying 100%+ of profits to Uncle Sam after tax-law change
Small businesses in sectors like software and manufacturing are panicking over the expiration of a critical tax deduction that they say could lead to mass layoffs and business closures, unless Congress acts quickly to amend the law.
“This is a life-and-death scenario for small software companies,” Michelle Hansen, co-founder of the geocoding company Geocodio, told MarketWatch.
The tax change that Hansen and other software executives are taking issue with was signed into law by President Trump in 2017, as part of a larger tax overhaul that slashed the top corporate tax rate from 35% to 21%.
But in order to satisfy Senate budget rules and pass the law with only Republican votes, the bill could not increase the budget deficit over a 10-year window.
So lawmakers included a provision that, beginning in 2022, drastically reduced how much research-and-development spending a business could deduct from their annual revenue to determine taxable income.
The change penalizes certain industries like software and information technology — where engineer salaries are often classified as R&D expenses — as well as manufacturing and pharmaceuticals
IHE.IntervalZero CEO Jeff Hibbard, whose Massachusetts-based company designs and sells software for installation on precision machines like semiconductor manufacturers, told MarketWatch that he has had to tap into company savings for the past several years in order to avoid laying off engineers.
He said that his firm brings in about $9 million in revenue annually with expenses of $8 million — but 60% of those expenses come in the form of engineer salaries, which can only be deducted from taxable income over a five-year period because the IRS treats it as R&D.
He said that after taxes consumed all his profits in 2022, he had to pay an additional $800,000 to Uncle Sam, and an additional $600,000 for the 2023 tax year.
“We’ve had to do a hiring freeze and postpone projects” in a cutthroat industry where technology progresses rapidly, Hibbard said. “We’ve been in existence for 15 years. For the first 14, we always hired additional people. Now we have a hiring and salary freeze.”
The House of Representatives voted last week 357-70 to restore full expensing for R&D as part of a $79 billion tax package that boosted the child tax credit and extended other business tax breaks.
The bill now heads to the Senate, which already has its hands full debating immigration and national-security issues, and analysts say election-year politics could thwart its passage in 2024.
Henrietta Treyz, director of economic-policy research at Veda Partners, gave just a 10% chance of the bill passing the Senate in a recent note to clients.
“This year’s effort to pass a tax package has been more robust than the effort we saw in 2022 and 2023,” she wrote. Treyz added, however, that “the competing need to pass border reform and Ukraine/Israel aid, and general dysfunction in Washington keep us pessimistic that we’ll see a bipartisan economic-stimulus package come out of Congress this year.”
On top of Republicans not wanting to give President Joe Biden a victory that would provide tax relief for businesses and families, Senate Republicans could decide to drag their feet on the bill in the hope that they’ll retake the chamber next year and can play a bigger role in the process, according to Owen Tedford, policy analyst at Beacon Policy Advisors.
“The critical member to watch is Senator Mike Crapo [of Idaho], the top Republican on the Senate Finance Committee,” Tedford wrote. “Crapo has not outright opposed the bill but has raised policy concerns and has expressed a desire to have a chance to amend it.”
Political considerations may be dictating the bill’s fate in Washington — but some business owners fear they don’t have the wherewithal to wait until next year for the problem to be fixed.
Benjamin Bengfort, co-founder and CEO of Iowa-based software firm Rotational Labs, told MarketWatch that he had to lay off workers last year after his 2022 tax bill rose by 438%.
He noted that even demand for his products has taken a hit because of the change in the law, because his services can count as an R&D expense for his customers, too.
“So it is [between] a rock and a hard place for us, no matter how you look at it,” Bengfort said. “This is an existential threat for software engineering companies.”
Andrew Keshner contributed.
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Trump says Powell is being ‘political’ with interest rates
Former President Donald Trump on Friday criticized Federal Reserve Chair Jerome Powell and said he’s playing politics with interest-rate policy.
“It looks to me like he’s trying to lower interest rates for the sake of maybe getting people elected,” Trump said, in an interview on the Fox Business Network.
“I think he’s political,” added Trump, the likely 2024 Republican nominee for president.
Asked if he would reappoint Powell to a third four-year term, Trump replied “no.”
Trump said he has a couple of choices in mind to replace Powell, but wouldn’t say who.
Trump said he thinks lowering interest rates would lead to massive inflation. The conflict in the Middle East is likely to lead to “big inflation” from a spike in oil prices, he added.
“Trump said he thinks lowering interest rates would lead to massive inflation. The conflict in the Middle East is likely to lead to “big inflation” from a spike in oil prices, he added.”
Powell “is not going to be able to do anything,” Trump said.
On Wednesday, Powell said he wasn’t giving a potential third term any thought. Powell’s current term expires in early 2026.
Speculation on a third term “is not something I’m focused on,” Powell said.
“We’re focused on doing our jobs. This year is going to be a highly consequential year for the Fed and monetary policy. We’re, all of us, very buckled down, focused on doing our jobs,” Powell said.
Analysts say that the Fed will be criticized by both parties in the election year.
On Sunday, Powell will appear on the CBS News program “60 Minutes” and will likely face more questions about the election.
Earlier this week, top Democrats on the Senate Banking Committee urged the Fed to cut rates quickly, saying they were too high and hurting the housing market.
“Keeping interest rates high will be detrimental to American workers and their families and do little to bring down prices or promote moderate economic growth,” said Sen. Sherrod Brown, a Democrat from Ohio, and the chairman of the Banking Committee, in a letter to Powell prior to Wednesday’s Fed meeting.
At the meeting on Wednesday, the Fed kept its benchmark interest rate unchanged in a range of 5.25%-5.5%.
Asked about the letter from the Democrats on Wednesday, Powell said Congress has given the Fed the job of stable prices. High inflation hurts people at the lower end of the income spectrum, he added.
“It’s what society has asked us to do is to get inflation down. The tools we use to do it are interest rates,” he said.
The Fed has penciled in three rate cuts for 2024. Powell said that a cut at the Fed’s next meeting in March was unlikely. He said the Fed wants to see more good inflation reports so it can have greater confidence that inflation is coming down to the 2% target.
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Macy’s to lay off 13% of corporate staff, close five stores
Department-store chain Macy’s Inc. plans to cut 2,350 jobs and close five stores, the Wall Street Journal reported on Thursday, as the company tries to curb expenses and meet the demands of what it said was “an everchanging consumer and marketplace.”
The cuts, which amount to around 13% of Macy’s
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corporate staff and 3.5% of its staff overall, are part of an effort to shed costs, eliminate management layers and redirect spending toward improving customers’ shopping experience, the Journal said. The dismissals will begin on Jan. 26, according to a memo sent to employees cited by the publication.“As we prepare to deploy a new strategy to meet the needs of an everchanging consumer and marketplace, we made the difficult decision to reduce our workforce by 3.5% to become a more streamlined company,” a Macy’s spokesperson said in a statement to MarketWatch.
The spokesperson said that the store closures were part of an effort to “reposition our store portfolio and evaluate the right mix of on- and off-mall locations,” adding that the five stores would close this year.
Shares of Macy’s were up 0.2% after hours on Thursday, after gaining 0.4% in the day’s trading.
The Journal reported that Macy’s plans to develop a more automated supply chain and would outsource some jobs. Citing a person familiar with the matter, the publication said the company would be “investing in areas that impact consumers, such as adding more visual-display managers to enhance the look of stores and upgrading digital functions to make online shopping more seamless.”
The job cuts were announced as the landscape for retailers remains uneven, as higher prices for groceries and other basics have hindered what inflation-hit shoppers can spend elsewhere.
“Despite our strong and tangible progress over the last few years, we remain under pressure,” according to the Macy’s memo cited by the Journal said.
The moves come as Macy’s President Tony Spring prepares to succeed the outgoing Jeff Gennette as the company’s chief executive next month. Macy’s is also facing a nearly $6 billion takeover bid by an investor group that’s looking to take the retailer private.
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Even Cloudflare's CEO says that viral firing video is 'painful' — here's what went wrong
A tech employee’s recording of the meeting firing her from a sales role at Cloudflare
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has spurred criticism of the company — and a broader conversation about the right way to let employees go.Viewers have called the roughly 10-minute TikTok video, which went viral this week, “sad” and a “disaster.” Even Cloudflare CEO Matthew Prince responded on X (formerly Twitter) that it was “painful for me to watch.”
In the video captioned, “POV: You’re about to get laid off,” former Cloudflare account executive Brittany Pietsch logs into a virtual meeting with an HR representative and a director at the company, both of whom she says she’s never met before. In a caption, Pietsch writes that she assumed they were meeting to let her go, because she had heard from coworkers who had been axed already.
In the video, the company reps say that Pietsch hadn’t met performance expectations, and that Cloudflare had decided to “part ways” with her. Pietsch’s response is what has pushed this clip to be shared all over social-media newsfeeds: She asks for an explanation for why she, specifically, is being let go by the company, particularly because she’s a new employee who hasn’t heard any negative feedback. She also asks why her manager isn’t a part of this termination meeting.
“Every single one-on-one [meeting] I’ve had with my manager, every conversation I’ve had with him — he’s been giving me nothing but ‘I am doing a great job,’” she says during the meeting. “I’m just definitely very confused and would love an explanation that makes sense.”
The director, who can’t be seen in the video, says he “won’t be able to go into specifics” on Pietsch’s performance.
In a statement to MarketWatch, a Cloudflare spokesperson clarified that the company did not conduct layoffs, and is not engaged in a reduction of force. “When we do make the decision to part ways with an employee, we base the decision on a review of an employee’s ability to meet measurable performance targets,” the Cloudflare statement said. “We regularly review team members’ performance and let go of those who aren’t right for our team. There is nothing unique about that review process or the number of people we let go after performance review this quarter.”
Pietsch did not immediately respond to a request for comment.
Company CEO Prince added on X, formerly known as Twitter, that the company fired 40 salespeople out of 1,500 in its go-to-market division. “That’s a normal quarter,” he wrote in his post. “When we’re doing performance management right, we can often tell within 3 months or less of a sales hire, even during the holidays, whether they’re going to be successful or not.”
But he also added: “We try to fire perfectly. In this case, clearly we were far from perfect. The video is painful for me to watch. Managers should always be involved. HR should be involved, but it shouldn’t be outsourced to them … We don’t always get it right.”
Many viewers seem to agree, as the video has drawn close to 200,000 views on TikTok and millions of views on X, along with going viral on Reddit.
“Total disaster on both sides,” lawyer Eric Pacifici said.
“Totally unfair to her,” wrote Austen Allred, CEO of the online-coding bootcamp Bloom Institute of Technology. “Pretty sad across the board.”
On LinkedIn, Pietsch gave her own response to the social-media uproar. She said that her manager was unaware that she was being let go, and that she asked questions during the meeting not to try and save her job, but rather to get greater clarity on why she had been singled out for termination.
“I’ll never be able to wrap my mind around it,” she wrote in the post. “We as employees are expected to give 2 weeks notice and yet we don’t deserve even a sliver of respect when the roles are reversed?”
What’s the right way to fire an employee?
It’s never easy to part ways with an employee, according to Molly, a human-resources consultant who runs the TikTok account HR Molly, which has 80,000 followers. She asked only to be identified by her first name for privacy reasons.
But that being said, it’s very important to treat affected employees with respect. That can include sharing as much information as possible about why the decision is being made.
“I tell people that even if you catch someone stealing, even that termination meeting should have a level of decency,” she said. “It seems like there’s a significant consensus that the meeting [in the viral video] lacked some dignity.”
It’s also important to understand these kinds of conversations will be difficult for an employee no matter what, Molly added.
“We know this impacts people and we know this is emotional and that it’s harmful. How can we do it in a way that creates the least amount of additional harm?” she said, noting that she picked up the concept from fellow TikTok creator and diversity consultant Ciarra Jones. “Companies need to prioritize the well-being of the employee that’s impacted.”
As for recording your layoff or firing meeting — that can be risky, Molly said, and downright illegal in states that require you to receive consent before doing so.
But companies and HR professionals would be wise to remind themselves that, in this day and age, it can happen, she said. And if a camera or tape recorder would change the way you handle an interaction, it’s a good sign to reevaluate.
According to its company website, Cloudflare has dozens of job postings for open positions across the company, including sales roles.
In her LinkedIn post, Pietsch said that she’s not very concerned about any backlash over the video that might impede her chances of getting another job.
“Any company that wouldn’t want to hire me because I shared a video of how a company fired me or because I asked questions as to why I was being let go is not a company I would ever want to work for anyway,” she wrote.
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Hasbro to lay off more workers amid toy sales slump
Hasbro Inc. is cutting about 900 jobs as the company is facing a slump in toy and game sales after a boom during the pandemic.
The cost-saving plan will result in “the reallocation of people and resources,” including early retirement for some employees and layoffs over the next two years, Hasbro
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said in a filing late Monday.The Wall Street Journal reported the layoff plans earlier Monday, citing a memo it had viewed.
The maker of My Little Pony and Monopoly launched the plan in January, and at the time announced the layoffs of about 15% of its workforce.
It has booked about $94 million in expenses related to severance, stock compensation and employee benefits, and expects to book an additional $40 million, the company said in the filing Monday.
Hasbro in October missed third-quarter earnings expectations and slashed its full-year outlook, citing a “softer toy outlook.”
Shares of Hasbro and rival Mattel Inc.
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fell about 4% and 3%, respectively, in the extended session Monday, as the Wall Street Journal report also cited “early data points to another weak year” for the toy industry following the a boom during the pandemic.Mattel in October reported a better-than-expected third quarter, thanks in part to its wildly successful Barbie movie.
Shares of Mattel have gained 6% this year, which contrasts with a 20% drop for Hasbro stock. Both stocks, however, have underperformed in relation to the S&P 500 index
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which is up about 20% in 2023.In a February filing, Hasbro said it had about 6,500 employees worldwide as of the end of 2022.
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S&P 500 ends at 2023 high, books longest weekly win streak in 4 years
U.S. stocks closed higher on Friday, shaking off earlier weakness after a strong monthly jobs report, to clinch a sixth straight week in a row of gains. The Dow Jones Industrial Average
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advanced about 130 points, or 0.4%, to end near 36,247, according to preliminary FactSet data. The S&P 500 index gained 0.4% Friday and the Nasdaq Composite finished 0.5% higher. A string of weekly gains propelled the S&P 500 index
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to a fresh 2023 closing high and left the Dow about 1.4% away from its record close set nearly two years ago, according to Dow Jones Market Data. Equities have benefitted from a risk-on tone going into year end, which has been driven by falling 10-year Treasury yields
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and optimism around the Federal Reserve potentially cutting interest rates in the year ahead. That hinges on if inflation continues to ease. November’s robust jobs report served as a reminder Friday of the tough path of the “last mile” in getting inflation down to the Fed’s 2% annual target. As part of this, the 10-year Treasury yield jumped about 11.5 basis points Friday to 4.244%, but still was about 74 basis points lower than its October high. For the week, the Dow was only fractionally higher, the S&P 500 gained 0.2% and the Nasdaq climbed 0.7%. -
It’s Giving Tuesday: Americans are spending hard this holiday shopping season. Nonprofits are ‘cautiously optimistic.’
After Black Friday’s record-breaker for online sales, there’s hope that the holiday haul for nonprofits will also be generous on Giving Tuesday, and throughout the year-end charitable giving season.
That would be a welcome development for charities that have been burned by inflation and experienced an overall drop in donations last year, experts say.
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No, Jeff Bezos hasn’t been unloading Amazon stock
A number of Amazon.com Inc. executives have disclosed sales of some of their Amazon stock holdings in recent weeks, but Jeff Bezos, the company’s executive chair and a mega-shareholder, was not among them.
Despite some reports to the contrary, Bezos hasn’t disclosed any sales of Amazon shares AMZN for two years, but he has given some shares away to nonprofit organizations.
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Remote workers are flexing their muscle, and the best-run companies won’t fight them
When COVID-19 struck, companies had little choice but to adapt swiftly. Office spaces were replaced by living rooms and in-person meetings transitioned to virtual calls — a temporary solution, or so it was thought.
But months have turned into years, and now it’s clear this is not just a fleeting phase but a profound transformation in work dynamics.
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Don’t ruin Thanksgiving by making these rookie mistakes
A friend calls this day “Thanksscrapping.” He may have a point.
My favorite Thanksgiving story happened at a dinner on Park Avenue about 20 years ago when a lady with a large bouffant and a genial manner — let’s call her Mrs. Anders — raised a glass. Knowing I grew up in Dublin in a Catholic family, she said: “…and I’d like to raise a glass to Fair Eire and hope that the six counties of Northern Ireland are one day free from the British!” She did not realize that the host’s in-laws were Ulster Protestants. They were not amused.
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The price tag for happiness? Millennials say it’s $525,000.
Some people think money can buy happiness.
Millennials say they need a $525,000 salary to achieve financial happiness, the highest among all generations, according to an Empower survey conducted by the Harris Poll.
Here are the yearly salaries Americans of different generations say they need to feel happy, according to the poll:
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Virgin Galactic to cut staff to focus on lower-cost Delta spacecraft
Commercial space-flight operator Virgin Galactic Holdings Inc. on Tuesday said it would cut staff in an effort to focus on developing its new class of Delta spacecraft that are expected to cost less and bring more profit.
Management, in an email to employees, did not offer specific figures on the cuts, while citing a shaky investing environment as part of the reason for them. The message said the company would offer more details during its third-quarter earnings call on Wednesday.
Virgin Galactic
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when reached on Tuesday, declined to offer additional information. Executives over the summer said they expected commercial service for Delta ships to begin in 2026, after testing in 2025.Shares were little changed after hours on Tuesday. The stock has fallen 50.4% so far this year.
The cuts follow a handful of space flights this year from Virgin Galactic, which was founded by billionaire Richard Branson. But Chief Executive Michael Colglazier, in the email, said that following successes from the spaceship Unity and its carrier mothership, Eve, the company needed to “reduce our reliance on unpredictable capital markets.”
“To profitably scale our business, we must first invest upfront capital to create a fleet of ships based on a standardized production model — the Delta Class ships,” Colglazier said in the email.
He added that “uncertainty has grown in the capital markets,” with higher interest rates pressuring borrowing and “geopolitical unrest” making for a more cautious environment. He said the Delta spacecraft played a key role in expanding flight service and profitability, and that it was crucial to focus on bringing them into service.
“Interest rates remain high, which adds pressure to companies who are investing today for profits that will come in the future,” he said. “Geopolitical unrest continues to expand, and the combination of these factors makes near-term access to capital much less favorable.”
“The Delta ships are powerful economic engines,” he continued. “To bring them into service, we need to extend our strong financial position and reduce our reliance on unpredictable capital markets. We will accomplish this, but it requires us to redirect our resources toward the Delta ships while streamlining and reducing our work outside of the Delta program.”
He said employees would be notified of their job status between Tuesday and Thursday. Employees will be working from home for the rest of the week, Colglazier said, adding that on-site work locations would be unavailable through that time.
“Delta ships have been designed to have a relatively low unit-production cost and have a material improvement flight cadence relative to our initial ship, VSS Unity,” Colglazier said on Virgin Galactic’s earnings call in August.
“The Delta development process has yielded some excellent enhancements to the ship’s architecture, particularly with regard to manufacturability and maintainability,” he said. “And we are tracking well against our primary ship-performance criteria.”
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GM’s stock bounces of more than 3-year low after report of tentative deal reached with UAW to end strike
Shares of General Motors Co.
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bounced 1.2% off a 3 1/2-year low in morning trading Monday, after CNBC reported that the automaker reached an tentative deal with the United Auto Workers that would end the six-week long labor strike. The report comes a day after the UAW widened its strike against GM, as the Associated Press reported, hours after a tentative deal was reached with fellow Big 3 automaker Stellantis N.V.
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and about a week after Ford Motor Co.
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also reached a deal. CNBC reported that the UAW’s 4 1/2-year agreement with GM includes a 25% wage increase, including a 68% increase in starting hourly wages to $28 an hour. and UAW didn’t immediately respond to a request for comment. The stock, which closed Friday at the lowest price since Aug. 7,. 2020, has tumbled 28.1% over the past three months while the S&P 500
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Inside Kanye West’s troubled Adidas partnership: Tears. Rage. Thrown shoes. Even a scrawled swastika.
The ending of the partnership between the artist Kanye West, who now goes by Ye, in October 2022 appeared to come after weeks of his comments about Jewish people and Black Lives Matter, but the New York Times is reporting that the relationship was troubled from the very start.
At a meeting on the collaborative creation of the very first shoe in 2013, Adidas
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designers were stunned when West rejected all of the ideas that were presented using fabric swatches on a table and a mood board, the seven-month investigation found. Instead, West, the Times reports, grabbed a sketch and drew a swastika in marker.The move shocked the Germans in the room. Germany has a strict ban on displaying the symbol of the Nazi era apart from for artistic purposes. Adding to the sense of horror, the company’s founder — Adolf, or “Adi,” Dassler, who died in 1978 — was a Nazi Party member, and the meeting took place close to Nuremberg, where leaders of the Third Reich were famously tried for crimes against humanity.
“A year ago this week, Adidas threw in the towel.”
West’s fixation on the Nazi era continued, the Times reports, when he later told a Jewish manager at Adidas to kiss a portrait of Adolf Hitler every day. He also told Adidas workers that he admired Hitler’s use and command of propaganda.
West also brought porn to the workplace and made crude, sexual comments at meetings, according to the Times report. Before the swastika episode, West, according to the Times, had made Adidas executives watch porn at a meeting in his Manhattan apartment.
In 2022 he reportedly ambushed executives with a porn film. Other workers complained to top managers that he had made angry sexual comments to them.
The artist, said to have been diagnosed with bipolar disorder, also frequently cried or became angry during meetings, according to the Times investigation. In one instance in 2019, he reportedly moved the operation designing his shoes to Cody, Wyo., and ordered the Adidas team to relocate. In a meeting to discuss his demands with executives, he threw shoes around the room, the Times reports.
Adidas sought to adapt to this behavior, given how valuable the West-established Yeezy brand was to the company, locked in a perennial battle for both revenue and buzz with its U.S.-based rival Nike Inc.
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Yeezy sales would rapidly surpass $1 billion a year and help Adidas resonate with young American customers.Ratings Game (July 2020): Gap hopes it can burnish its image with a new Kanye West clothing line, repeating the rapper’s brand success with Adidas
Managers launched a group text chain they called the “Yzy hotline” to discuss his behavior. To reduce stress on individuals, the company is said to have rotated managers in and out of dealing directly with West.
Over time, meanwhile, Adidas sweetened the terms of West’s deal. Under a 2016 contract, he was entitled to a 15% royalty on sales with a $15 million upfront payment as well as millions of dollars in Adidas stock. In 2019, a further $100 million a year was earmarked for marketing, but, in reality, West could spend those funds at will.
A year ago this week, though, as public awareness of West’s problematic attitudes are remarks spiked, Adidas threw in the towel, and as sales of Yeezy shoes fell away, it warned it would record its first annual loss in decades. As West’s net worth plummeted, the company wrestled with the decision of how to dispense with its final $1.3 billion in Yeezy products, mulling options including disassembly and repurposing, donation to charity, and outright disposal.
When a decision was reached to sell the product — in release batches — with some of the proceeds directed to charity and most of the rest flowing to Adidas, West, even then, was entitled to royalties.
From the archives (October 2022): Kanye West is no longer a billionaire after Adidas shelves Yeezy partnership
Also see (November 2022): Nike parts ways with Kyrie Irving as controversy swirls over Brooklyn Nets star’s apparent endorsement of antisemitic film
After bottoming in October 2022, Adidas shares have mounted a 67% comeback, with relief over the company’s not having had to book a damaging loss on the Yeezy line one factor in the restoration of investor confidence.
Adidas is quoted as having told the Times that it “has no tolerance for hate speech and offensive behavior, which is why the company terminated the Adidas Yeezy partnership,” while West reportedly declined requests for interviews and comment.
The Times investigation is said to have been based on access to hundreds of previously undisclosed internal records.
Read on: Michael Jordan is now worth $3 billion. Here’s what billionaire athletes have in common.
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Can the average American family be called millionaires? Yes, but …
It seems hard to believe, and it’s one of those cases where definitions mean everything, but the average family in America has achieved millionaire status.
That’s according to the Federal Reserve’s latest authoritative survey of consumer finances, and it comes with lots of asterisks attached.
But first, the data: The mean net worth of the average American household, even adjusting for inflation, was $1.06 million last year. Compared with 2019, that figure was up 23%, boosted by rising house prices and a surging stock market
SPX.OK, here comes the but: The median, as opposed to the mean, net worth of the typical American household is just $192,900. That figure still represents an impressive after-inflation gain of 37% over those three years, but it’s more in line with what everyday experience suggests.
The median household refers to the grouping smack in the middle of rankings. The average, or mean, gets boosted by the likes of billionaires Elon Musk and Jeff Bezos. American households by income in the top 10% have a net worth, on average, of $6.63 million, according to the Fed.
Showing the massive importance of home ownership to amassing wealth, those who own their residence have an average net worth of $1.53 million, compared with just $155,000 for renters.
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‘For religious reasons, I cannot invest to earn interest’: I’m 53 and expect to earn $90,000 a year. Is it too late to start investing?
I recently graduated with my master’s degree and am seeking full-time employment at age 53. I want to know what is the best way to invest some of my earnings when I begin receiving a paycheck. I expect to have an annual salary of between $80,000 and $90,000.
For religious reasons, I cannot invest to earn interest, but business-related ventures such as stocks are acceptable. I am planning to set aside up to $1,000 per month for investment purposes, so that I can build some retirement funds. What are my options?
First-Time Investor
“You have already made the best investment you can make — one in yourself, your education and your future.”
MarketWatch illustration
Dear First-Time,
Congratulations on your master’s degree. You have already made the best investment you can make — one in yourself, your education and your future. It takes patience, guts and stamina to go back to college in your 50s, and you should be very proud. You were one of about 505,000 students in college ages 50 and over, representing less than 4% of the student population.
Given your faith, CDs and high-yield savings accounts are ruled out. A letter writer recently asked me where he should start looking to invest his $50,000 life savings, and I pointed him in the “make interest off your cash” direction, particularly given the recent rise in interest rates. That won’t work for you, but the good news is that you do have many options.
There are investment vehicles for you. In fact, the Accounting and Auditing Organization for Islamic Financial Institutions sets guidelines for investing in accordance with the Sharia religious code, including rules around companies that derive a percentage of their profits from tobacco and alcohol products. And, yes, it also regards interest as unjust and exploitative.
Saturna Capital has mutual funds that follow Islamic principles. The Amana Income Fund AMANX, which focuses on current income and the preservation of capital, has had an average annual five-year return of 8.8% for investor shares, slightly lower than the 9.9% average return for the S&P 500
SPX
over the same period with dividends reinvested. I suggest this as a guidepost rather than a recommendation.Similarly, the Knights of Columbus assets are managed by Knights of Columbus Asset Advisors in accordance with Catholic moral principles, which are distilled to six main tenets: “protecting human life, promoting human dignity, reducing arms production, pursuing economic justice, protecting the environment [and] encouraging corporate responsibility.”
Related: How do I know if my ESG investments are doing any good?
Of course, investing along religious principles — similar to ESG investment, which takes environmental, social, and corporate-governance factors into account when deciding what to do with your money — is fraught with complications, contradictions and problems with transparency. Regulators are cracking down on vehicles that “greenwash” their ESG credentials.
A major report by the Organization for Economic Cooperation and Development, an intergovernmental organization with 38 member nations, found that ESG ratings vary strongly depending on the provider, as they commonly use different measures, indicators, metrics, data and qualitative judgments to make decisions about funds and companies.
“Moreover, returns have shown mixed results over the past decade, raising questions as to the true extent to which ESG drives performance,” the OECD said. “This lack of comparability of ESG metrics, ratings, and investing approaches makes it difficult for investors to draw the line between managing material ESG risks within their investment mandates.”
You have many funds to choose from. If you’re Catholic, you could look into the Global X S&P 500 Catholic Values ETF
CATH
; the LKCM Aquinas Catholic Equity Fund AQEIX; or Ave Maria, which offers mutual funds for growth AVEGX, value AVEMX and bonds AVEFX AVEFX. You can read more here. Investing based on religious, moral or ethical principles doesn’t guarantee a satisfactory return.It’s not too late to start investing at 53. With the advice of a financial adviser, your risk profile may need regular adjusting, based on your age and tolerance. But you may work into your 70s and may live into your 80s or 90s, and you will want to find myriad ways to build your wealth throughout your retirement. Cash-hoarding typically gets outdone by inflation.
You may find a job with a 401(k) and an employer match, meaning your employer will contribute an additional sum toward your retirement based on the amount you are contributing every month. You may also consider an IRA. Both account types have “catch-up” contributions for people who are over 50. Annual IRA contribution limits for 2023 are $6,500 for people under 50, but $7,500 for those 50 and older.
You can also use pretax dollars for health savings accounts, which are used to offset the burden of high-deductible healthcare plans. With the latter, you pay a lower premium, but you will be saddled with higher out-of-pocket expenses for medical services should you require them. You can contribute up to $4,150 to an HSA for 2024, up from $3,850 this year.
As for right now? Pay off your credit cards. Don’t let high-interest debt trap you. Warren Buffett said one of the best investments he ever made was buying his Omaha, Neb., home for $31,500 in 1958. It’s worth $1.4 million today. He has said he may have put that money to better use if he had rented instead, but owning your own home will solidify your financial position in retirement.
Investing $1,000 a month may be ambitious. But thinking in the medium to long term — and knowing this is a marathon rather than a sprint, even at 53 — is half the battle. With compounding, or making money off your principal and the increase in value of your initial investment, you could have more than $120,000 in 10 years, and over $600,000 in 30 years.
Bravo on this new chapter. Take it one day, one week and one month at a time, and enjoy your life.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
‘I’m tired of feeling like I am in hell’: My boss tears into me almost daily. He says I’m worthless. What can I do?
I earn $210,000 and I’m 59. My wife and I want to move to Hawaii. Is it too late to get a mortgage?
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These are the biggest money mistakes we make in our 20s, 30s and 40s
Financial literacy peaks at age 54, according to a 2022 study. That’s around the time you’ve gained enough knowledge and experience to make sound money decisions — and before your cognitive ability might start to ebb.
“As we get older, we seem to rely more on past experience, rules of thumb, and intuitive knowledge about which products and strategies are better,” said Rafal Chomik, an economist in Australia who led the study.
If people in their mid-50s tend to make smart financial moves, where does that leave younger generations?
Advisers often educate clients at different stages of life to avoid money mistakes. While those in their 50s usually demonstrate optimal prudence in navigating investments and savings, advisers keep busy helping others — from twentysomethings to mid-career professionals — avoid costly financial blunders:
Navigate your 20s
Perhaps the biggest blunder for young earners is spending too much and saving too little. They may also lack the long-term perspective that encourages long-range planning.
“The mistake is not establishing the saving habit early, and not appreciating the power of compounding” over time, said Mark Kravietz, a certified financial planner in Melville, N.Y.
Similarly, it’s common for young workers to delay enrolling in an employer-sponsored retirement plan. Not participating from the get-go comes with a steep long-term cost.
“ Better to prioritize debt with the highest interest rate, which can result in paying less interest over the long run. ”
People in their 20s process incoming information quickly. But their high level of fluid intelligence can work against them. Cursory research into a consumer trend or hot sector of the stock market can spur them to make rash investments. Such impulsive moves might backfire.
“It’s important to resist the hype,” Kravietz said. “Don’t chase fads or try to make fast money” by timing the market.
Many young adults with student debt juggle multiple loans. Eager to chip away at their debt, they fall into the trap of choosing the wrong loan to tackle first, says Megan Kowalski, an adviser in Boca Raton, Fla.
Rather than pay off the highest-interest rate loan first (so-called avalanche debt), they mistakenly focus on the smallest loan (a.k.a. snowball debt). It’s better to prioritize debt with the highest interest rate, which can result in paying less interest over the long run.
Navigate your 30s
“ Resist the temptation to lower your 401(k) contribution to boost your take-home pay. ”
By your 30s, insurance grows in importance. You want to protect what you have — now and in the future. But many people in this age group neglect their insurance needs. Or they misunderstand which coverages matter most.
“If you have a life partner and kids, get the proper life insurance while in your 30s,” Kravietz said.
It’s easy to get caught up in your career and assume you can put off life insurance. But even low odds of your untimely death doesn’t mean you can ignore the risk of leaving your loved ones without a cash cushion.
Another common blunder involves disability insurance. If your employer offers short-term disability insurance as an employee perk, you may think you’re all set.
However, the real risk is how you’d earn income if you suffer a serious and lasting illness or injury. Don’t confuse short-term disability insurance (which might cover you for as long as one year) with long-term disability coverage that pays benefits for many years.
Assuming you were wise enough to enroll in your employer-sponsored retirement plan from the outset, don’t slough off in your 30s. Resist the temptation to lower your 401(k) contribution to boost your take-home pay.
“You want to give till it hurts,” Kravietz said. “Keep putting money away” in your 401(k) or other tax-advantaged plan until you feel a sting. Weigh the minor pain you feel now against the major relief of having a much bigger nest egg decades from now.
Navigate your 40s
“ ‘The 40s are often the most expensive in anyone’s life. Life is getting more complicated.’”
For Kravietz, the 40s represent a decade of heavy spending pressures. Mid-career professionals face a mortgage and mounting tuition bills for their children.
“The 40s are often the most expensive in anyone’s life,” he said. “Life is getting more complicated.”
As a result, it’s easy to overlook seemingly minor financial matters like updating beneficiaries on your 401(k) plan or completing all the appropriate estate documents such as a will.
“People in their 40s sometimes fail to update beneficiaries,” Kravietz said. For example, a new marriage might mean changing the beneficiary from a prior partner or current parent to the new spouse.
It’s also easy to get complacent about your investments, especially if you’re the conservative type who favors a set-it-and-forget-it strategy. Instead, think in terms of tax optimization.
“In your 40s, you want to take advantage of what the government gives you,” Kravietz said. “If you have a lot of money in a bank money market account and you’re in a top tax bracket, shifting some of that money into municipal bonds can make sense” depending on your state of residence and other factors.
If you’re saving for a child’s college tuition using a 529 plan — and you have parents who also want to chip in — work together to strategize. Don’t make assumptions about how much (or how little) your parents might contribute to your kid’s education.
“Rather than assume you’ll have to pay a certain amount for educational expenses, coordinate between generations of parents and grandparents” on how much they intend to give, Kowalski said. “That way, you’re not duplicating efforts and you won’t put extra funds in a 529 plan.”
-
These are the biggest money mistakes we make in our 20s, 30s and 40s
Financial literacy peaks at age 54, according to a 2022 study. That’s around the time you’ve gained enough knowledge and experience to make sound money decisions — and before your cognitive ability might start to ebb.
“As we get older, we seem to rely more on past experience, rules of thumb, and intuitive knowledge about which products and strategies are better,” said Rafal Chomik, an economist in Australia who led the study.
If people in their mid-50s tend to make smart financial moves, where does that leave younger generations?
Advisers often educate clients at different stages of life to avoid money mistakes. While those in their 50s usually demonstrate optimal prudence in navigating investments and savings, advisers keep busy helping others — from twentysomethings to mid-career professionals — avoid costly financial blunders:
Navigate your 20s
Perhaps the biggest blunder for young earners is spending too much and saving too little. They may also lack the long-term perspective that encourages long-range planning.
“The mistake is not establishing the saving habit early, and not appreciating the power of compounding” over time, said Mark Kravietz, a certified financial planner in Melville, N.Y.
Similarly, it’s common for young workers to delay enrolling in an employer-sponsored retirement plan. Not participating from the get-go comes with a steep long-term cost.
“ Better to prioritize debt with the highest interest rate, which can result in paying less interest over the long run. ”
People in their 20s process incoming information quickly. But their high level of fluid intelligence can work against them. Cursory research into a consumer trend or hot sector of the stock market can spur them to make rash investments. Such impulsive moves might backfire.
“It’s important to resist the hype,” Kravietz said. “Don’t chase fads or try to make fast money” by timing the market.
Many young adults with student debt juggle multiple loans. Eager to chip away at their debt, they fall into the trap of choosing the wrong loan to tackle first, says Megan Kowalski, an adviser in Boca Raton, Fla.
Rather than pay off the highest-interest rate loan first (so-called avalanche debt), they mistakenly focus on the smallest loan (a.k.a. snowball debt). It’s better to prioritize debt with the highest interest rate, which can result in paying less interest over the long run.
Navigate your 30s
“ Resist the temptation to lower your 401(k) contribution to boost your take-home pay. ”
By your 30s, insurance grows in importance. You want to protect what you have — now and in the future. But many people in this age group neglect their insurance needs. Or they misunderstand which coverages matter most.
“If you have a life partner and kids, get the proper life insurance while in your 30s,” Kravietz said.
It’s easy to get caught up in your career and assume you can put off life insurance. But even low odds of your untimely death doesn’t mean you can ignore the risk of leaving your loved ones without a cash cushion.
Another common blunder involves disability insurance. If your employer offers short-term disability insurance as an employee perk, you may think you’re all set.
However, the real risk is how you’d earn income if you suffer a serious and lasting illness or injury. Don’t confuse short-term disability insurance (which might cover you for as long as one year) with long-term disability coverage that pays benefits for many years.
Assuming you were wise enough to enroll in your employer-sponsored retirement plan from the outset, don’t slough off in your 30s. Resist the temptation to lower your 401(k) contribution to boost your take-home pay.
“You want to give till it hurts,” Kravietz said. “Keep putting money away” in your 401(k) or other tax-advantaged plan until you feel a sting. Weigh the minor pain you feel now against the major relief of having a much bigger nest egg decades from now.
Navigate your 40s
“ ‘The 40s are often the most expensive in anyone’s life. Life is getting more complicated.’”
For Kravietz, the 40s represent a decade of heavy spending pressures. Mid-career professionals face a mortgage and mounting tuition bills for their children.
“The 40s are often the most expensive in anyone’s life,” he said. “Life is getting more complicated.”
As a result, it’s easy to overlook seemingly minor financial matters like updating beneficiaries on your 401(k) plan or completing all the appropriate estate documents such as a will.
“People in their 40s sometimes fail to update beneficiaries,” Kravietz said. For example, a new marriage might mean changing the beneficiary from a prior partner or current parent to the new spouse.
It’s also easy to get complacent about your investments, especially if you’re the conservative type who favors a set-it-and-forget-it strategy. Instead, think in terms of tax optimization.
“In your 40s, you want to take advantage of what the government gives you,” Kravietz said. “If you have a lot of money in a bank money market account and you’re in a top tax bracket, shifting some of that money into municipal bonds can make sense” depending on your state of residence and other factors.
If you’re saving for a child’s college tuition using a 529 plan — and you have parents who also want to chip in — work together to strategize. Don’t make assumptions about how much (or how little) your parents might contribute to your kid’s education.
“Rather than assume you’ll have to pay a certain amount for educational expenses, coordinate between generations of parents and grandparents” on how much they intend to give, Kowalski said. “That way, you’re not duplicating efforts and you won’t put extra funds in a 529 plan.”
-
UAW says 8,700 Ford workers have walked off the job at Louisville truck plant
In what was described as an unannounced decision, the United Auto Workers union has called a strike at Ford Motor Co.’s
F,
+0.41%
large Kentucky Truck Plant in Louisville, the union said Wednesday.The union, in a statement, said that 8,700 union members had walked off the job at 6:30 p.m. Eastern at the plant, which Ford described as its biggest. The union said that the move marked a “new phase” in its ongoing strike, in which select workers have been called on at different times to walk out.
In a statement, UAW President Shawn Fain said Ford “has not gotten the message.”
“It’s time for a fair contract at Ford and the rest of the Big Three,” Fain said. “If they can’t understand that after four weeks, the 8,700 workers shutting down this extremely profitable plant will help them understand it.”
Ford, in a statement, called the decision “grossly irresponsible” and said it had made an “outstanding offer” in the negotiations, which involve the union and the Big Three auto makers.
Ford said the vehicles made at the factory — the F-Series Super Duty, the Ford Expedition and the Lincoln Navigator – bring in $25 billion a year in sales.
The automaker said the UAW’s decision “carries serious consequences for our workforce, suppliers, dealers and commercial customers.”
Fain will host an event on Facebook on Friday to give updates on bargaining. Shares of Ford fell nearly 2% after hours.
