Now that you’ve cleaned out the linen closets and finished that other thing, you’ve got all the time in the world. If there’s one thing the pandem-ia has changed in our world, perspective matters! There are many things in our lives that we now have the opportunity to look at differently. It’s time you looked a little deeper into some of those “other” areas of your finances.
The following is an excerpt from Brian Bunn (brianbbunncpa.com), one of our Financial Professional friends. If you’ve got an interest in your future, this is awesome information:
The recent quarantine has given us an opportunity to reflect on many things. Now that we have had our fill of binge-watching, baking, and yard work, we find ourselves contemplating the way forward in a new world. In those new found quiet moments, there is a great opportunity to re-evaluate your financial life.
The events of the past six months have proven the importance of a solid financial plan. In February 2020, the stock market was hitting record highs and unemployment was at record lows. One month later, the country plunged into recession as the stock market dropped about 30% and unemployment reached levels not seen since the Great Depression. For those of you that maintained cash reserves, minimized your debt, and managed your investments with a prudent asset allocation, Congratulations. Your discipline is paying dividends with peace of mind. For those of you that were not so well-positioned before the downturn, for whatever reason, now is a great time to refocus and get back on track. I firmly believe the saying: “The best time to plant a tree is twenty years ago. The second best time is today”. Those who have followed a disciplined financial plan built for all phases of the economic cycle will have the best chance of weathering what will most likely be a long recovery period. While everyone benefits from a bull market, downturns reward disciplined savers.
For the prepared and unprepared alike, the government and related agencies have taken actions to ease financial burdens brought on by the pandemic-induced recession. Some of these programs are extended automatically with no requirement on your part. Others require individuals or businesses to apply for or otherwise request the assistance. Following is an overview of some opportunities available and other ideas to explore. This list is by no means comprehensive, so I would encourage you to have a conversation with your trusted financial advisor to determine the specific programs and strategies available to you. If you don’t have one, then this is a great opportunity to start that relationship.
Review your investment portfolio
Did it perform as expected through the market swings? Did you even have any expectations? Did you have a conversation with your adviser? While, the market has recovered to roughly December 2019 levels. That is, in my opinion, a false sense of security. It is incongruous to have bull market valuations amidst Great Depression unemployment and spiking bankruptcy filings. I can’t stress enough how important it is to have an asset allocation that supports your risk tolerance, goals, and time horizons.
Economic Impact Payments
These are the stimulus checks that went to taxpayers who filed a tax return in 2018 or 2019. Many payments have already been made; however payments are still in process. Don’t worry if you think you are due, but haven’t received a payment yet. Payments are still being distributed, some via debit card through the mail.
Student Loan Forbearance
Federal student loan payments will automatically stop March 13, 2020 – September 30, 2020. If your household needs cash flow relief, you’ve got it. As an added bonus, interest during the forbearance period is set to 0%. Also, employers can now make payments up to $5,250 towards employees’ student loans – deductible to the business and tax-free to the employee.
Mortgage Forbearance
If you have trouble making mortgage payments, there are options created by the CARES Act. You can find more information at consumerfinance.gov.
Mortgage Refinancing
Rates are at historical lows. Refinance your mortgage to lower monthly payments and increase your household cash flow.
Explore Roth Conversions
If your income will be significantly lower this year, it might be a good time to convert tax-deferred savings from a traditional or rollover IRA to a Roth IRA.
Skip your RMD
Required Minimum Distributions have been waived for 2020. If you took a distribution after Feb. 1, 2020, you may be able to put it back.
Charitable Contributions
The limit on Charitable Contributions increased for 2020 to 100% of Adjusted Gross Income. If you are able to donate to a qualified Charity, you can offset virtually all of your taxable income.
Emergency Sources of Cash
If you find yourself strapped for cash, carefully evaluate your options and their tax consequences before taking home equity loans or withdrawals from Retirement Accounts. For example, the interest on a home equity loan won’t be deductible. You can withdraw up to $100,000 from retirement accounts without penalty (tax-deferred income will be subject to income tax). However, increasing your taxable income may affect eligibility for other benefits. The tax can be refunded if you return the distribution.
Streamlined Tax Resolution
The IRS itself is under-resourced and struggling to implement programs for all the new stimulus laws. If you have an outstanding issue, talk to an experienced tax resolution professional. Word on the street is that they are motivated to clear cases.
Retirement Contributions
Deadlines for certain retirement contributions were also extended to the July 15 deadline when tax filings, income tax payments, and estimated tax payments are due.
EIDL, PPP, COVID Leave, etc.
There are several relief programs, loans, and grants available to businesses, especially small businesses. The parameters of the programs have undergone several changes so talk to your financial professionals and make sure you stay current with the constantly changing requirements.
If you haven’t caught my point yet, let me hit it one last time: talk to a professional, not just someone who sells financial products, but someone who is a fiduciary and versed in comprehensive financial planning. If you don’t have that type of relationship or you aren’t satisfied with your current arrangement, I would be happy to meet with you. With all the anxiety in today’s world, you need someone in your corner. There are many things we can’t control, but we can prepare.
Feel free to contact Brian directly about this great info – we’re confident that he’ll take great care of you!
