NerdWallet's Smart Money Podcast - Are We in a Recession? What the Data Says—and How to Protect Your Finances

Episode Date: May 8, 2025

Learn what a shrinking GDP means for you. Plus: how to handle your HSA if your employer stops contributing. Is the U.S. in a recession? How do you roll over an HSA when your employer stops contributing? Hosts Sean Pyles and Elizabeth Ayoola discuss the current state of the economy and how to manage your Health Savings Account (HSA) to help you protect your finances. Joined by NerdWallet news writer Anna Helhoski and economist Elizabeth Renter, they begin with a discussion of economic indicators, offering insights into why the GDP shrank in Q1, how tariffs and inflation are affecting consumer behavior, and what signs might point to a looming recession. Then, NerdWallet health insurance expert Kate Ashford joins Sean and Elizabeth to discuss HSA rollovers. They discuss when it makes sense to move your HSA to a new provider, the tax implications of selling HSA investments, and how to avoid penalties during a rollover. Whether you’re consolidating accounts or reevaluating where to keep your medical savings, this segment breaks down your options and highlights key deadlines and common pitfalls to watch out for. Learn more about how (and why) to invest with your HSA: https://www.nerdwallet.com/article/investing/how-to-invest-hsa  In their conversation, the Nerds discuss: recession 2025, are we in a recession, GDP contraction, health savings account rollover, HSA rollover rules, economic indicators 2025, consumer sentiment index, inflation 2025, core PCE inflation, high deductible health plan, HSA transfer process, in-kind HSA transfer, trustee-to-trustee HSA rollover, capital gains taxes HSA, how to avoid HSA penalties, HSA 60 day rule, HSA rollover timeline, federal tariffs and economy, HSA investment options, HSA fees comparison, emergency fund strategy, when to move an HSA, economic impact of tariffs, HSA cash vs investment transfer, consumer confidence 2025, saving during economic uncertainty, signs of recession, HSA matching contributions ended, managing money in downturn, and investing HSA funds. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Say you get into a car accident, get pretty banged up, and are left with some steep hospital bills. How are you paying for them? Well, I'm hoping my insurance covers most of it since I give them my hard-earned money every month. But whatever is left, I'm paying for it with my emergency savings, investment accounts, and a hope and a prayer. Well, this episode, we're going deep into a unique kind of account that can help you

cover medical costs and how to fund it. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Elizabeth Ayola. This episode, we answer a listener's questions about how to manage their health savings account. But first, our weekly Money News Roundup, where we break down the latest in the world of finance to help you be smarter with your money.

Today we're digging into what's going on with the economy at large right now. The latest GDP numbers are showing that the economy actually shrunk in the first quarter of 2025. And we've been hearing from listeners with questions about whether we're on the cusp of a recession or if we're already in one. Our news colleague, Anna Helhasky, is here with more details. Hey, Anna.

Hey, Sean. Hey, Elizabeth. There is a lot of uncertainty when it comes to how the economy is actually doing. There's data, including recent stats on growth, unemployment, and inflation. And then there's how people feel about the economy and how it's affecting their actions. Since the state of economy is looking a little blurry right now, I've asked Nürburgring's resident economist, Elizabeth Renter, to help create a clearer picture.

Elizabeth, welcome back to Smart Money. Hey, thanks for having me, Anna. I'm hoping you can first talk a little about why there's some uncertainty about how the economy is doing at this particular moment. I am referring mainly to the lag in data. What is it and how does it shape economists' perception? Most economic data is released on at least a one-month lag.

So last week, for instance, we learned about April's unemployment rate and the size of the labor force that month. But we also learned about hiring and layoffs in March and economic production, or the GDP, for the entire first quarter. So when we talk about the health of the overall economy, it's a matter of making sense of all of these different snapshots of various parts of the economy at various times. But then you're also putting them together with what we know about how the economy has behaved in history and the impact of things that Are happening right now so things that we don't even have data for yet or in some cases Historic precedents like the current tariffs so it can make for a very complex recipe All right

So we've had a few pieces of data trickle out in the last few weeks if you put them together What story are they telling? Well the economy holding up, but consumers and businesses are being cautious. So a quick rundown is that the unemployment rate is at a moderate level, wages are growing in a sustainable way, and prices aren't increasing dramatically. However, hiring continues to slow, and we know people are trying to get ahead

of the impact of tariffs. Over the past few months, for example, imports surged and so did vehicle sales. So we're beginning to see in the hard data, but also in sentiment data or consumer surveys, that people are preparing for potentially tougher economic times in the form of higher prices, for instance. I want to talk more about economic growth. Now, about a month ago, we started to hear murmurings that GDP for the first quarter could be negative. Can you talk a little bit about how GDP has behaved over the last few years and what last

week's data means for the economy? So GDP is the standard way that we measure economic production or growth. It's a formula that tries to capture most everything that an economy produces. So when the change in real GDP is positive, the economy is said to be growing or expanding. And when it's negative, we call that a contraction. Generally, the long-term average of real GDP is about 3%. So in 2024, for instance, it was around 2.5%. And in the whole of 2023, it was 3.2%. so there's some bouncing around that average. However, this last week, we learned that real GDP for the first quarter was negative 0.3%, which is just slightly negative, but it does indicate a contraction.

And at first blush, this could be alarming, but a look at what goes into the calculation provides some clarity. So the primary cause of this negative number is the effect of a rush to import goods ahead of tariffs. Household and government spending, business investments and exports, all of those are added together in GDP, but imports aren't produced here, so they aren't counted in the same way. If enough goods are imported, but not counted as inventory on store shelves or consumed

in the same time period, it can result in a negative number and that's likely what happened with the first quarter number. So while the GDP reflected a contraction, it wasn't really a broad-based decline in economic activity, rather the big effect of this one big number. Now are we continuing to see softening in employment? Is the labor market cooling? Is it normalizing? What's happening there? Well, coming into this year, I think it's safe to say the labor market was really coming into balance, if not fully balanced or normalized. And this is relative to where it was a few

years ago. Back then, workers really had the upper hand as labor demand or employers seeking workers, outpaced supply or workers themselves. And while this was really great for workers, it helped drive high inflation. So the Fed raising rates, among other things, has helped bring that labor supply and demand into better balance. You know, that feels less great to workers, but it's far more sustainable. Right now, I think the labor market is at a potential precipice, though.

So normalization has looked like lower hiring rates, fewer job openings, and slightly higher but still okay unemployment rate. Unfortunately, the current pressures on the economy and the labor force could tip these things from where they are now, which is stable, into a trouble zone. So I think the labor market is healthy, but there are increasing risks to that health. We got fresh inflation data last week, and the core PCE increased by 2.3% in the past 12 months. Now, for those who don't know, core PCE is a measure of prices for goods and services minus volatile food and energy.

And it's the Federal Reserve's preferred indicator of inflation. Elizabeth, is inflation still coming down compared to previous months, or are we in sticky territory? Well, yes, inflation continues to slow as of March, which was the latest data we received. Then headline inflation or overall inflation was 2.3%, which is down from 2.7% in February and down from over 7% in 2022 before the Fed began raising interest rates. And I want to reiterate that this percentage we use to discuss the PCE index is a measure of price growth.

So when we say it's decreasing, it means that prices are growing more slowly, not that price levels are coming down. But overall inflation is at a much better place now than it was a few years ago. And it's really within spitting distance of the Fed's 2% target. The big question now is whether it will hit that target, and I think not.

Going back to what we were discussing earlier, this data is on a lag. So the 2.3% is the March growth rate, and the biggest tariff announcements were saved for April. So if prices were increased in anticipation of tariffs or as the initial tariffs started to take place, we're likely to begin seeing that when we get April data, followed by months of potential increases as various tariffs take effect. If in fact they do. Let's shift over to consumer sentiment.

Now that's a measure of how people feel about the economy or the vibes. We've seen some seriously low figures in the past couple of readings. Last week, the Conference Board released its Consumer Confidence Indexes, and its Expectations Index fell to the lowest level in nearly 14 years. That index measures consumers' short-term outlook for income, business, and labor market conditions. Whenever the Expectations Index falls below a threshold of 80, it signals a recession may be ahead. The index for the past three months have been well below 80.

What's worrying consumers right now? Consumer sentiment data, like the index you just mentioned, can serve as leading indicators for the direction of the actual economy. In other words, how people feel can signal both things they're experiencing that haven't yet made it into the hard data, but also how they might be changing their behaviors, which will ultimately impact the hard data too. So sentiment data from several sources, including the Conference Board and the University of Michigan, has been declining, and it's likely a solid warning sign to pay attention to. We do our own sentiment research at NerdWallet, working closely with the Harris Poll. That's a partnership we've

had for over a decade now. And recently, we found 87% of Americans say they're planning to change their financial strategy over the next 12 months in response to tariffs. So when these strategies involve changes to spending, investing, and saving. It can have dramatic impacts on the economy overall. As you mentioned, the big economic news story over the last three months has been President Trump's tariffs and the trade war that's increasingly heating up. But are we seeing the effects of those tariffs showing up in the data yet? Definitely yes, in the soft data, which is what we often call sentiment data, as I was just discussing.

But we're seeing it in the hard data too, in what we often call sentiment data, as I was just discussing. But we're seeing it in the hard data too, in imports and purchases ahead of tariffs. This is just the tip of the iceberg though. We'll first see things that people are doing in anticipation of the potential economic change, then we'll see reactions to the actual economic change. In the case of tariffs, this is higher prices and constrained supply chains. Further, we'll continue to see reverberating effects of this in the labor market as businesses deal with higher costs and lower consumer demand, and potentially even further downstream in things like debt levels and delinquencies.

I'm going to open the hood up here a bit on how we do things at NerdWallet. Now, I've been keeping an eye on search traffic, as in how many people are typing the same search into Google. And it looks like there's a real uptick in people asking, are we in a recession? So are we or are we headed for one? Well, I can say pretty confidently that we are not in a recession right now. You know, something to keep in mind with all of the recession talk that is bound to increase in volume is that the official dating or declaration of a recession comes from the National Bureau of Economic Research. And generally, they announce an official recession after it's already begun, and sometimes not until it's over. So this space between where a recession begins and when it's officially called is when you

look to the experts for their educated opinion on whether we'll look back at the current moment as Being in a recession and with all of the data and information I have available to me today I would say no, we are not in a recession and I am not alone in that statement But for many of the reasons we've discussed today There is a definite risk of one on the horizon and that risk increases the longer this trade war continues All right, Elizabeth Is there anything specific that you're keeping an eye on in the coming months? Anything you're watching that others might be overlooking?

Well, I really wish I had more eyes for all of the things I'm trying to keep an eye on. But really, I think we've discussed many of the primary indicators that I watch on a regular basis to get a read on the overall health of the economy. One thing that we haven't touched on that I keep my eye on is consumer debt. And this is less of a predictive recession indicator and more of a way to look at how a recession might impact households. So we know debt levels are higher now than they were just a few years ago, and higher debt obligations mean less wiggle room in the budget to absorb financial and economic stressors. So that's concerning to think about in the budget to absorb financial and economic stressors.

So that's concerning to think about in the context of a potential recession. And when you begin to see higher rates of debt delinquencies, you know households are really struggling. One of my many concerns right now is that should we find ourselves in a situation where a growing number of households are in financial dire straits, are there resources to help them? And with federal grants being cut for community services, like food pantries, for instance, I'm not sure the answer is yes.

And finally, any advice for people on how to navigate all the uncertainty right now? It might sound a little bit cliche, but people should really focus on what's within their control, namely their saving and their spending. I think most of us, myself included, have varying levels of anxiety about the future of the economy and our place within it, but there's really only so much we as individuals can do in this moment. So the primary thing I would recommend is to revisit your emergency fund.

And I know that's something you guys talk about a lot on the podcast, but having easily accessible emergency savings can be useful whether you have an unexpected expense like a medical bill or something as serious as a job loss. Ideally, you have several months of living expenses saved up, but this can be a tall order, especially if you're starting with nothing. So don't be afraid to start small. Focusing on this safeguard doesn't only result in real insulation from financial shocks, but it can provide a sense of control in this time when everything feels a little chaotic. Thank you for your help, as always, Elizabeth.

Absolutely. Thanks for having me back. And thank you, Anna. Sure thing. Up next, we answer a listener's question about managing their health savings account. But before we get into that, a reminder, listener, to send us your money questions. Do you want to know the smartest way to budget for your summer vacation? Or are you in the market for a new credit card but aren't sure how to find one that's best for you? Leave us a voicemail or text us on the Nerd Hotline at 901-730-6373.

That's 901-730-NERD. Or email us at podcast at nerdwallet.com. Now let's get to this episode's money question. That's coming up in a moment. Stay with us. We are back and answering your money questions to help you make smarter financial decisions. This episode's question comes from Vicki, who left us a voicemail.

Here it is. Hi Sean, my name is Vicki, who left us a voicemail. Here it is. Hi, Sean, my name is Vicki. I have an HSA from my employer. They were giving a 3% contribution to match. I matched, and they recently stopped their contribution. So I am moving it over to Fidelity from the insurance company that holds the HSA. And I have to sell the stock at Health Equity, make it all cash before

they will move it to Fidelity. And Fidelity told me that it could take up to four weeks. I thought that I had 30 days to contribute that money back into a retirement account before I started to be penalized for selling it. If you could help me with anything on that, I would love it. I love your program.

Thank you so much for all of the information. Have a great day. Bye. To help us answer this listener's money question we have Kate Ashford, NerdWallet's Medicare and Health Insurance Authority. Welcome to Smart Money, Kate. Always happy to be here, Elizabeth. First of all, can you explain what a health savings account is for listeners who don't know much about it? I will say that I love HSAs for their triple tax benefit.

Absolutely. A health savings account in HSAs for their triple tax benefit. Absolutely. A health savings account in HSA is a savings account that lets you put money away pre-tax for medical expenses. To save to an HSA, you have to have a high deductible health plan, so this isn't available to everyone. But for people with access, HSAs are super useful, because as you mentioned, they have three tax advantages. You make your contributions pre-tax.

If you invest the money, any growth is potentially tax free. And as long as you're using that money for qualified medical expenses, the distributions you take are tax free. So it's a really good deal. And it rolls over year to year. So you don't have to use the money in the year that you save it.

I have an HSA and I'm effectively using it like a retirement account for medical expenses. That's how I'm planning to use it long term. I try not to use it day to day if I can avoid it. Well, Vicki said that their employer stopped their matching contributions to their HSA. So they're moving over from the insurance company holding the HSA account to Fidelity. Sounds like Vicki wants to do an HSA rollover. Can you explain when that might be a good ideaicki wants to do an HSA rollover. Can you explain when that might be a good idea or necessary to do?

Sure. The nice thing about an HSA is that even when you leave your job, you take your HSA with you. So it can be a good idea to move your HSA money if you're changing jobs, either because you're consolidating it with your HSA or your new position, or you're rolling it into an account with lower fees. Consolidating with another HSA makes it easier to keep track of your balance and it can help minimize fees since you're only being charged for one HSA, not two accounts which might each have their own administrative charges. And since HSAs usually require that you have a certain balance in order to invest the money, combining two HSAs can make it easier to reach that balance. And you may just want to roll over to a company

that has better investment options. So those are all options for you. And can you talk us through how the rollover process works? What are the options there? So you're basically just moving funds from one HSA to another, presumably with another HSA provider. And there are three ways that this can happen.

There is a trustee to trustee transfer, which is when your current HSA provider and there are three ways that this can happen. There is a trustee to trustee transfer which is when your current HSA provider transfers the money to your new HSA provider. There's a basic account rollover where your current HSA provider sends you the check and then you deposit that money into a new account. And then there is an in-kind transfer which works like the company to company transfer except everything can be moved over in its And then there is an in-kind transfer, which works like the company-to-company transfer, except everything can be moved over in its current form. So cash is sent as cash, and investments are transferred as investments. Vicki mentioned selling stock before doing the rollover.

Now, Kate, why might they have to do that? Of the three ways that I just mentioned to rollover an HSA, the first two are cash only. So if you do a trustee to trustee transfer or the kind of transfer where your money gets sent to you and you deposit it, those have to happen in cash. So you would have to liquidate investments before transferring and so it sounds like that's what Vicki is doing here. There's a potential to do that third in-kind transfer where you can transfer investments directly but not all HSA companies offer this so it's not as common to do it that way. If you do have investments, you can ask your provider whether this is an option.

What are the tax implications of doing this? I know depending on where they live, they might owe state taxes on capital gains. You are correct. Selling investments can certainly have tax implications depending on where you live because some states tax your capital gains. So this applies if there's been any growth on any of the contributions to your account. Capital gains treatment is state specific, so Vicki will need to check on the laws in their state

to see how that would be handled. And to clarify, you're only going to owe capital gains taxes if you roll over your HSA. If you leave the account alone, those gains are tax free. What opportunities, if any, would Vicki have to reduce tax liabilities on this? Well, Sean, the good news is that HSA rollovers are tax-free unless you're dealing with capital gains taxes,

and that's going to depend on your state. So if you have investments and there's the option to do an in-kind transfer, that would be the best way to avoid taxes on the rollover. So the last part of Vicki's question relates to the time it will take to do a rollover and potential penalties if Vicki doesn't rollover the funds to a new provider fast enough. Can you talk us through the rules around HSA rollovers and the timelines involved? How long people have to deposit funds with a new provider?

Well, Vicki is right to be keeping an eye on the timing, but the timing is only a worry if they're managing a transfer themselves. So if the HSA company is sending them a check and they have to deposit it with a new provider, they've got 60 days to make that happen. But if the HSA company is just moving that money directly to the new HSA company, they don't have to worry about a deadline. And it is really important if Vicki is doing this rollover on their own to not miss that 60 day deadline, because that can leave them on the hook for expensive penalties.

Kate, can you give us a quick rundown of what Vicki might face if they do miss that deadline? If you are managing a transfer and you don't get the money deposited within 60 days, the IRS basically looks at that as you taking a taxable withdrawal. So you may owe income taxes, plus there will be a 20% penalty. So we do not recommend missing that deadline. What are some potholes that people can avoid

when doing an HSA rollover? What are some ways to minimize the potential of penalties? In general, if you can do a trustee-to-trustee transfer directly from one company to the other company, the risk of penalties is low because the money never comes to you, so you don't risk missing any deadlines. So if that's an option, it is your best and easiest choice. And I also want to note that if you decide to do this on your own, you decide to roll over your HSA by having the money sent to you and then depositing with a new HSA provider, you can only do that kind of transfer once every 12 months. Well Kate, is there anything else people need to know or the listeners should know that we haven't already covered? It's a little hard to tell from

the question, but it sounds as though the reader is rolling their HSA to another provider even though they're still employed with the same company. They've just stopped matching. So maybe they're not planning to contribute anything else to this HSA, in which case it wouldn't really matter, but it's worth noting that if your employer offers an HSA with your health plan, those contributions can be taken directly from your paycheck and you won't have to pay Social Security and Medicare taxes, which is not the case if you're saving to a non-employer HSA with adage tax money. So if they're going to continue making contributions, it may be better for them to keep their HSA where it is until they change jobs, even if

their company is no longer matching. And it might be a good idea to consult a tax professional on all of this. The other thing to just repeat for the general public is that you can only contribute to an HSA if you have a high deductible health plan. So if you change jobs and you get a different type of health insurance, you can still roll over your HSA money into an account with lower fees or different investment options, but you won't be able to keep making contributions to it. Well, Kate Ashford, thank you for coming on and answering our listeners question. Of course. Thank you so much for having me.

And if you're looking for more nerdy information about investing in an HSA, we'll link an article in the episode description that walks you through why and how you should invest in one of those accounts. And that's all we have for this episode. Remember, listener, that we are here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcastatnerdwallet.com. Or if you're listening on Spotify, you can leave us a comment with your question or even just your thoughts on the episode. Come back next week when we'll talk with a listener trying to manage the financial fallout of losing a job.

Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Hillary Georgie

and Anna Helhasky, Holly Carey helped with fact checking, Nick Charisame mixed our audio, and a big thank you to NerdWallet's editors for all their help. And with that said, until next time, turn to the nerds.