March 18, 2025

IN THIS ISSUE: Fed update, changing jobs, and an investing myth

GOOD START

These 20 cost-cutting tricks could help you hold on to more money for saving and investing.

Federal reserve symbol beside money and arrows pointing down and up.

THE HEADLINES

Fed says … ?

What’s happening: The Federal Reserve meets on March 18 and 19, and there’s plenty to discuss when determining whether to raise interest rates, hold them steady, or cut them.

Here’s why: There’s a lot going on. Last week, February’s Consumer Price Index, which tracks the price of goods and services, showed that inflation ticked up less than expected at 2.8%.¹ The February jobs report showed the labor market is still growing but at a slower pace than expected. Recent government policy changes are also likely top of mind.

All of these clues about the economy’s health could influence the Fed’s decision. Generally speaking, the Fed aims to cut interest rates before the economy gets too cold or raise them if it gets too hot.

What it means for you: The Fed might go with Plan C and hold rates steady until we know more about where the economy is headed. That means it’s still possible to earn more interest on your savings than you could have a few years ago when interest rates were lower. You could potentially grow shorter-term savings with a CD or in a money market fund. Thinking about one or the other? Here’s how to decide between the two.

• • •

Tax trimmers

What’s happening: Many investors might not be taking steps to reduce taxes on their retirement savings, according to Fidelity’s State of Retirement Planning study.

Here’s why: 41% of survey respondents who aren’t doing anything to reduce taxes on retirement savings didn’t realize they should be—or they lack professional guidance to do it effectively.²

What it means for you: Investing for the future can be a win-win: You could potentially reduce your tax bill today and set yourself up for a comfortable retirement. Beyond contributing to workplace retirement plans, such as a 401(k) or 403(b), you may be able to reap tax benefits from investing in an individual retirement account (IRA) or health savings account (HSA). You might also consider converting traditional retirement accounts to a Roth. Check out these 8 ways to potentially reduce your taxable income.

• • •

A new high

What happened: Americans owed a record $1.21 trillion³ in credit card debt as of December 2024, according to the Federal Reserve Bank of New York. That’s about 7% higher than December 2023 (though the rate of growth is starting to slow). This breaks down to an average balance per consumer of $6,580, says a report from TransUnion, a credit reporting agency.⁴

Here’s why: Higher prices over the last few years have made it more difficult for some to cover expenses with monthly cash flow alone. Plus, credit card interest rates are in the 20% range, and debt compounds when people don’t pay off their balances in full each month.⁵

What it could mean for you: Debt can get in the way of your financial goals, including investing. These tips could help when deciding whether to pay off debt or invest. Want to cut your spending to divert more cash to your credit card bill? Find out whether a no-spend month could jumpstart your progress.

JOB CHANGE CONSIDERATIONS

STREET SMART

TIPS

Treasury Inflation-Protected Securities (aka TIPS) are government bonds with principal and interest payments that rise when inflation does. While the bond’s coupon is fixed, the principal is adjusted every 6 months based on the average rate of inflation, according to the Consumer Price Index, and could be attractive to investors who believe prices might climb quickly. These bonds are available in 5-year, 10-year, and 30-year maturities and can be more valuable than other bonds when overall prices are rising. Plus, TIPS carry little risk of default since they are backed by the US government.

However, in a taxable account, the inflation adjustment to the principal is federally taxable in the year it occurs, but an investor won’t have to pay it until the bond matures. (Earnings on TIPS and other Treasury securities are exempt from state and local taxes.) TIPS may lose value if inflation turns negative and we enter a period of deflation. They may also lose value if interest rates rise, particularly when inflation is low or falling. Here’s how to tell whether TIPS could be right for you.

HOW TO

Prepare for rockier markets

Consider these 3 components to help create a long-term financial plan.

Help protect yourself

Two people under an umbrella walking in the rain.

MONEY LIE DETECTOR

I need to check my investments every day.

False.

If you’re a long-term investor—think: you’re saving for retirement in a 401(k) or IRA or for another goal that’s years away—you don’t need to monitor stock prices (or your portfolio’s performance) every day. Actually, you probably shouldn’t.

Having a front-row seat to the market’s swings could stress you out and even cause you to make investment decisions you’ll regret. Some of the best investment returns have come during down markets, and trying to time when you buy and sell could mean you miss out on those top days.

When should long-term investors check in on their portfolios? Aim for at least annually and consider making changes if a particular investment isn’t meeting your expectations or if your ideal mix of investments becomes out of balance.

In the meantime, these 6 tips could come in handy during volatile markets.

NEXT STEPS TO CONSIDER

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1. “Consumer Price Index Summary February 2025,” Bureau of Labor Statistics, March 12, 2025.

2. “State of Retirement Planning study,” Fidelity Investments, March 11, 2025. About the 2025 State of Retirement Planning study: This study presents the findings of a national online survey, consisting of 2,001 adult financial decision-makers age 18 plus who own at least one investment account. The generations are defined as: Baby Boomers (ages 60–78), Gen X (ages 44–59), Millennials (ages 28–43) and Gen Z (ages 18–27). Interviewing was conducted December 10–17, 2024, by Big Village, which is not affiliated with Fidelity Investments. The results may not be representative of all adults meeting the same criteria as those surveyed.

3. Federal Reserve Bank of New York, “Household Debt Balances Continue Steady Increase; Delinquency Transition Rates Remain Elevated for Auto and Credit Cards,” February 13, 2025.

4. “Americans’ average credit card balance hits $6,580, but there are signs consumers are managing their debt relatively well,” CNBC, February 20, 2025.

Investing involves risk, including risk of loss.

Past performance is no guarantee of future results.

In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Any fixed income security sold or redeemed prior to maturity may be subject to loss. Increases in real interest rates can cause the price of inflation-protected debt securities to decrease. Interest payments on inflation-protected debt securities can be unpredictable. Interest income generated by Treasury bonds and certain securities issued by US territories, possessions, agencies, and instrumentalities is generally exempt from state income tax, but is generally subject to federal income and alternative minimum taxes and may be subject to state alternative minimum taxes.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially affect investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

The third parties mentioned herein and Fidelity Investments are independent entities and are not legally affiliated.

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