COVID 19 financial relief

Navigating a Pandemic

What COVID-19 means for your financial health and how you can keep your finances afloat.

Be patient. Be strategic. Be safe.

Use this opportunity.

The current global pandemic likely has you feeling wary of your finances. Things will be unpredictable for longer than we’d like, but eventually, the virus’ spread will slow, businesses will reopen, markets will recover, and life will get back to “normal.”

Until then, we want to make sure you’re informed. We’ve put together a summary of current financial opportunities as well as a COVID-19 financial relief fact sheet to capitalize on.

0% Interest rates

In mid-march, the Federal Reserve and the Bank of Canada slashed their interest rates to help support economic recovery from a global pandemic.

What does this mean?

Interest rates from credit cards, loans, and savings accounts will drop. 

Mortgage rates go down. If you currently have a long-term, fixed-rate mortgage, with an interest rate above 5%, it could make sense to refinance.

The risk of 0% interest rates for those saving for retirement is a decline in dividends, yield, and interest.

The economic bill recovery

The CARES Act includes stimulus payments to individuals, expanded unemployment coverage, student loan changes, different retirement account rules and more.

*Each person’s situation is different. We recommend consulting a CPA/qualified tax professional and your financial advisor to advise on your personal situation.

Here’s how it breaks down:

Borrow up to 100k from your IRA and repay it any time within 3 years with no federal income tax consequences.

Most adults will receive $1,200 in their accounts by April 17th. For every qualifying child (age 16 or under), the payment will be an additional $500. Here are specifics based on income.

Unemployment benefit amounts will be calculated based on previous income, using a formula from the Disaster Unemployment Assistance program. Self-employed workers will also be eligible. The bill provides all eligible workers with an additional 13 weeks. The extra $600 payment will last for up to 4 months, covering weeks of unemployment ending July 31.

The federal government has waived two months of student loan payments and interest for many federal student loan borrowers. Until Sept. 30, there will be automatic payment suspensions for any student loan held by the federal government.

For the calendar year 2020, no one will have to take a required minimum distribution from any individual retirement accounts or workplace retirement savings plans, like a 401(k). That way, you aren’t forced to sell investments that may have fallen in value, which would lock in losses.

You can still borrow from your 401(k) or other workplace retirement plan, and you can take out twice the usual amount. For 180 days after the bill passes, with certification that you’ve been affected by the pandemic, you’ll be able to take out a loan of up to $100,000. Usually you can’t take out more than half your balance, but that rule is suspended. If you already have a loan and were supposed to finish repaying it before Dec. 31, you get an extra year. While loans are available, we don’t recommend using this option unless absolutely necessary.

    • The bill makes a new deduction available — and not just for 2020 — for up to $300 in annual charitable contributions. It’s available only to people who don’t itemize their deductions, and you calculate this new one by subtracting the amount you give from your gross income.
    • As part of the bill, donors can deduct 100 percent of their gift against their 2020 adjusted gross income. If you have $1 million of income, you can give $1 million to a public charity and deduct the full amount in 2020.

WORTHWHILE TAX OPPORTUNITIES

IRA to a Roth IRA

You may want to consider converting your traditional IRA to a Roth IRA to take advantage of the lower prices resulting in a lower tax burden available through this technique. 

Selling non-qualified funds now also generates a tax loss that may be used to offset any taxable gains through the end of the year.

* If you are interested in processing a Roth Conversion, please consult with your financial advisor and tax professional to see if it fits your specific tax situation.

INVESTMENT STRATEGIES

Buying or selling positions

Sometimes, what was the worst performer becomes the best. This could be the last great opportunity for someone who is retiring in 5-10 years to create true wealth by investing at these levels.

Investors should consider their long-term goals and use this time to round out their portfolios by either buying or selling positions that complement each other, such as by rebalancing their portfolio of bonds and equities to maintain appropriate diversification levels

Double check your plan

In times of economic turmoil, it’s important to look over your financial strategy to determine if you’re on the right path.

  • Check in on your health care plans and think about your options in retirement through Medicare. 
  • Review estate plans and the advantage of trusts, TOD accounts, Medical Directives, etc.
  • Review your risk tolerance and financial goals to re-affirm that your long-term plan matches your portfolio composition. Accepting short-term volatility is often preferred to making panic driven changes with long-term consequences. 
  • Take advantage of this opportunity to either add to your accounts and holdings if appropriate, or keep more cash available to meet your current financial needs.

What are advisors doing?

Portfolio
Rebalancing

Your financial advisors are checking portfolios, holdings, and returns to see if someone is under-weight in equities compared to their appropriate model in order to rebalance the portfolio and take advantage of these lower equity prices.

Over-Weighting
Contributions

For people contributing to 401k plans, IRAs, and investment accounts, we’re recommending they review with an advisor to see if they may benefit from over-weighting or increasing to 100% their future contributions to the stock market to take advantage of depressed prices. As the market recovers, the strategy rebalances the portfolio to take advantage of higher prices in a recovering market. Anyone who can comfortably reduce or postpone withdrawals should consider investing the funds they do not need for spending.

Maximizing
Benefits

We are encouraging people to maximize their benefits, like Social Security, to provide more long-term protection and longevity during uncertain times. Anyone approaching retirement or age 65 should begin looking at how to best pair Social Security and Medicare benefits.

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Take Advantage of Current Opportunities

Looking for more COVID-19 resources?

We’re dedicated to helping you achieve your financial goals, no matter the economic situation.

COVID-19 CHECKLIST

Download our COVID-19 Financial Relief Checklist for helpful tips on navigating your finances during the pandemic.