401(k) Withdrawals, Mixed Inflation News, $37 T Debt, Charitable Giving Changes, Vegas Travel, Social Security Gains, Student Loans, Kodak, Tariff Impact on Producers & Resilient Spending

Unfortunately, more Americans are using their 401(k)’s for financial emergencies

I’m sure some will disagree with me based on the headlines arguing they were so happy that they had their 401(k) to tap for whatever their financial emergency was. In my opinion, people are thinking short term and not thinking about the long-term crisis when they retire in 20 or 30 years and then might be living at the poverty level because their 401(k) was not large enough to generate a decent income and social security was far less than they thought. I also want people to understand based on how fast medical technology is moving, in 20 to 30 years you may be spending more time in retirement than the 20 years or so that you were thinking.

The numbers are frightening when I look at them and I have wished many times that the 401(k) would eliminate the ability to access funds before retirement like the old pension plans from companies. According to Vanguard, 2024 saw a record of 4.8% of workers that took a hardship distribution for a financial emergency. This was more than double the 2% level in 2019. Even more frightening was nearly 33% of people decided to take and cash in their 401(k) when they changed jobs in spite of the fact of paying taxes and penalties as opposed to rolling that retirement over to an IRA rollover or their new 401K plan. Congress in their infinite wisdom has made it easier to qualify for withdrawals from 401(k)’s for emergencies.

I believe the Congress that set up the 401K in 1978 under The Revenue Act of 1978 did not envision the raiding of 401(k)’s for emergencies. I’m pretty confident in 1978 Congress felt this would be a great retirement plan for all Americans, not an emergency fund of to pay off debt. I highly recommend before people take any money out of the 401(k), they talk to a real financial professional to understand the taxes and penalties they are paying. It’s not just the taxes and penalties, and one should also figure out the future value of what that account could have grown to and how that withdrawal could devastate their retirement!

Inflation report shows some positives and some negatives

The July Consumer Price Index, also known as CPI, showed an annual increase of 2.7%, which was in line with June’s reading and below the expectation of 2.8%. The headline number was helped by energy, which showed an annual decline of 1.6%, largely thanks to a decline of 9.5% for gasoline. Energy services on the other hand were not as favorable considering an increase of 5.5% for electricity and 13.8% for utility (piped) gas service. I do wonder if the power demand for these large data centers is starting to put a strain on the grid and I worry this could become even more problematic. As for core CPI, which excludes food and energy, it was up 3.1% from a year ago and was slightly above the forecast of 3%. This was a slight increase from the 2.9% level in June and the highest annual increase since February.

Surprisingly, shelter continues to be a large reason for the elevated inflation rate as it was still up 3.7% compared to last year. In terms of tariffs showing up in the report, it still appeared to be subdued. Furniture was up 7.6% compared to last year, but other areas that I would anticipate seeing pressure like apparel and new vehicles saw little change. New vehicle prices were up just 0.4% compared to last year and apparel prices were actually lower by 0.2%. I did see an economist point out the fact that core goods inflation on an annual basis registered the largest growth in over two years, but at 1.2% I wouldn’t say that is putting strain on the economy. These tariffs will likely put continued pressure on inflation, but if other areas like shelter continue to see less inflation that could counteract that pressure and keep overall inflation in a manageable situation. Based on the slowing labor market and these manageable levels of inflation I do believe the Fed should cut in September. 

What does the national debt surpassing $37 trillion mean for you?

 On Tuesday, August 12th, the United States national debt passed $37 trillion for the first time ever. The debt is growing at about $6 billion per day, but that appears to be better than last year. In July 2024, the national debt passed $35 trillion and then in November 2024 it surpassed $36 trillion. Looking for some positives here, it did take nine months for the debt to grow another $1 trillion to the $37 trillion mark. At the end of the second quarter, debt to GDP stood at 119.4%, which is manageable but should not go much higher. Hopefully we can have a slowdown in debt expansion or maybe even a reversal and still have the GDP increase. The reason having a high national debt is a negative is it takes investment out of the private sector to fund our national debt, which can slow down the growth in our economy.

A large national debt can also cause interest rates to increase as the need for more debt often means offering higher interest rates to attract buyers. It is also important to know that even when the Federal Reserve cuts interest rates, that generally has a larger impact on the short end of the curve, which includes instruments like treasury bills. Your long-term debt, such as 5–10-year notes are not controlled by what the Federal Reserve does and instead is based on supply and demand. It would not be a wise move for the government to only issue short-term debt for a lower rate because if rates were to increase in the future for whatever reason, that could cause our national debt to grow out of control and potentially cause a financial collapse.

Also, keep in mind that generally mortgage rates align with the rates for longer term debt and now with some car loans being six or seven years, the interest rates for those loans will probably not drop because they are now longer-term loans not the old 3-to-4-year loans they used to be. We are not in trouble yet, but we are getting close to the edge and we need to grow the economy and still reduce the national debt so our country can continue to prosper and grow.

Financial Planning: Changes Coming to Charitable Giving

The One Big Beautiful Bill Act, signed on July 4, 2025, delivers some new changes coming to how charitable giving may be deducted. For the first time since the pandemic-era CARES Act, those who claim the standard deduction will be able to deduct cash donations up to $1,000 for single filers and $2,000 for joint filers. This will act as an above-the-line deduction in addition to the standard deduction. For itemizers, however, the law imposes a new 0.5% of AGI floor, meaning only contributions above that threshold will count toward deductions, potentially reducing benefits for those making smaller annual gifts. For example, a tax filer with an AGI of $200,000 receives no tax benefit on the first $1,000 (.5%) of donations. Also, itemizers are not able to take advantage of the $1,000 to $2,000 above-the-line charitable deduction that standard deduction filers can. In addition, high earners who are in the 37% tax bracket will only receive a 35% deduction on charitable donations. All of these changes go into effect in 2026, so those claiming the standard deduction may want to wait until then while itemizers and high earners may want to make donations before the end of the year.

Pack your bags, it’s a good time to visit Las Vegas

2025 has not been a good year for Las Vegas in regards to revenue and visitors. Through May 2025, visits to Las Vegas were down 6 1/2% compared with the first five months of 2024. Occupancy in the hotels was down nearly 15% in June when compared to June 2024 and the revenue per available hotel room was down 19% in 2025. Since the pandemic in 2020 when revenue fell 55% and only 19 million people went to Las Vegas, the city has seen growth each and every year through 2024. In 2021 visitors came on strong increasing 69% to just over 32 million visitors and last year 42 million people went to Las Vegas, which was close to the same numbers they experienced in 2019.

Part of the reason for the decline is Las Vegas has continued to be blind to consumers spending and are still charging higher prices for everything from rooms to meals and expecting higher tips as well. We are now more than halfway through 2025 and I think the consumer is in the driver seat to ask for and receive good discounts for rooms, meals, and entertainment. If you don’t get what you want at one casino/hotel contact another one or two and don’t be shy about telling them that you’re comparison-shopping because they want your business. Have fun, but be sure to budget your spending at the gaming tables and slot machines. 

It looks like customer service at the Social Security office is improving

After Senator Elizabeth Warren came out and blasted the Social Security Administration, Frank Bisignano, who is the commissioner of the Social Security Administration, released some interesting facts about their improvement. He said now 40% of field office visits are scheduled in advance compared with 18 months ago when no field office visits were scheduled in advance. What was even more impressive was in July 2025 the time to answer a phone call was 7.6 minutes, compared to the same time last year when people were on hold for 27.6 minutes before their call was answered. This also allowed the administration to answer 33% more calls.

To help with fraud detection and improve their service, the administration has also installed artificial intelligence programs to try and catch fraudulent players. For years customer service has been non-existent at the Social Security Administration and while they still have a long way to go, I believe it appears there has been some improvement and hopefully we’ll see even more improvement as time progresses. Do you or do you know someone who has talked to the Social Security Administration recently? Did they have a good or a bad experience?

There’s been a big surge in delinquent student loan accounts

Recently, the Federal Reserve Bank of New York released data showing in the second quarter of 2025 10.2% of student loans were considered delinquent. Total student loan debt now stands at $1.64 trillion which was an increase of $7 billion from the first quarter of 2025 and I was surprised to learn who the worst offenders were. If I didn’t see the data myself, I would think the younger generation or those maybe between 18 to 29 years old would be more likely to be in a delinquent status vs the older generation or those who are over 50 years old. Looking at the numbers, starting with the worst generation those over 50 years old were 18% delinquent. It improved as the ages got younger with the 40- to 49-year-olds showing 14% of them delinquent and 30 to 39-year-olds were 11% delinquent.

As I said, the surprise was in the 18 to 29-year-olds where only 8% of those loans were delinquent. As I think about it, I believe part of the reason for this could be that those that are between 18 and their early 20’s is likely still accruing debt and aren’t in the repayment phase yet. I do believe this will improve going forward as I think some of the people that had student loans did not realize that it was now time to pay them back and if they didn’t, it would be reported to the credit agencies. It’ll be interesting to see where we stand in six months.

Eastman Kodak is still around?

This past Monday, Eastman Kodak announced a filing with the Securities Exchange Commission, also known as the SEC, that there is substantial doubt that the company will stay in business. Well, it was a surprise to me and maybe you as well that the company was still around. I thought for sure this company was gone years ago. Back roughly 30 to 40 years, Eastman Kodak, which was known simply as Kodak, held 80% of the US market for film development. They were actually the pioneer in developing the first digital camera in 1975, but they pulled back on that idea because they knew it would hurt their film development business. I guess they thought no one else would invent a digital camera.

However, as the years passed, companies like Canon, Sony and Nikon develop their own digital photography and the rest is history as they say. The company did file bankruptcy years ago and emerged from bankruptcy protection in 2013. Unfortunately, they have been unable to capture any type of real market share in any business as it tried to switch to commercial printing and technology. It even did some licensing deals with clothing stores Forever 21 and Urban Outfitters to sell their products. The stock trades under the symbol KODK and is around five dollars per share. I see no reason why to gamble on buying this stock and this post was mostly just about a walk down memory lane. 

Are producers eating the tariffs?

The Consumer Price Index didn’t seem to have much impact from tariffs, but the Producer Price Index, also known as PPI had a big headline miss as the monthly increase of 0.9% greatly exceeded the expectation of 0.2%. This was the largest monthly gain since June 2022. Core PPI, which excludes food and energy, also was problematic with a monthly increase of 0.9% vs the expectation of 0.3%. Even with the potentially concerning monthly increase, the annual gains of 3.3% for headline PPI and 2.8% for core PPI don’t look overly problematic. It does appear that producers are absorbing some the potential prices increases from tariffs as goods inflation for the month was 0.7%, but services really drove the monthly increase with a 1.1% gain.

One of the main areas that drove this was portfolio management fees as they surged 5.4% in the month. This was likely due to a rising stock market and definitely had nothing to do with tariffs. My standpoint at this time remains that tariffs still are not showing up to a major extent for the mass economy, it will be interesting to see if they do have a larger impact in the months ahead.  

The consumer is still spending!

Even with all the concerns around the economy, the consumer is apparently ignoring them and choosing to still spend money. July retail sales showed a nice gain of 3.9% compared to last year and they were even more impressive when excluding the decline of 2.9% at gasoline stations as growth was 4.5%. Outside of gas stations, only two other major categories saw declines with electronics & appliance stores falling 2.3% and building material & garden equipment & supplies dealers declining 2.6%.

Strength was broad based in the report, but areas that stood out included nonstore retailers as sales increased 8%, food services and drinking places advanced 5.6%, health & personal care stores were up 5.6%, and motor vehicle & parts dealers climbed 4.7%. With strength like this I can see why the Fed is in a pickle when it comes to lowering rates. If the economy is strong, why would they need to goose demand with a rate cut? On the other hand, you don’t want to be late to the party and start cutting after the slowdown takes place. It will be interesting to see what conversations Fed members have between now and September.