It’s a challenge adjusting to this temporary reality. Most are heeding instructions to slow the spread of the CoVID-19 virus: social distancing for two weeks, now for another month, and possibly longer. We encourage parents, relatives, friends, children, and co-workers to take precautions. Precious lives have been lost, the broad economy and personal jobs are affected and at this point most of us know someone or know someone who knows someone affected by the CoVID-19 virus. Our emotional health is strained. Thank goodness for facetime, zoom and other apps that bring loved ones nearer.
Although Alpers Financial Planning is deemed “essential” our office is practicing social distancing. One employee is in the office at a time and the others work from home. We have offered virtual meetings for years and can remote in to continue to serve clients.
Medical professionals are “all hands-on deck.” My niece was pulled from her regular nursing position to the front lines. Nursing students were assigned early to medical facilities. Some residents are sewing masks. Entertainment shows featuring MDs and Nurses donated masks and gowns from costume departments. Many churches accept food and cash donations for those in need. Counselors are available to listen, pray and comfort. Some homeowner associations including my own have opportunities for neighbors to help and seek help, or just to communicate, creating avenues of virtual contact. My sister in law is teaching her kindergarten class online. My daughter became an overnight homeschooler. Our financial planning support organization (ACP) offers a daily virtual meeting to share anything on our hearts as we serve our clients and work through tax season.
Comparing to another historic time when our country banded together: During World War II civilians collected rubber (tires) for the military. Women’s fashion statement included nylons, and they went without for needed parachute material. Diets were restricted for military rations. Civilians sewed uniforms, packed rations and cared for children and their home. They took jobs in factories replacing men. My maternal grandmother became a Red Cross nurse. My paternal grandmother worked in Iceland as a riveter.
Both then and now people wonder(ed) how long this would last and how soon will/would we recover. Constant media coverage heightens emotions and can move us to make emotionally weighted financial decisions. That is where we come in. We are here to discuss any concerns about your financial situation. Fortunately, our clients understand why and how they are invested. For retired or nearly retired clients US Treasury Bonds, Cd’s and highly rated bond funds are comforting, and you understand that the stock portion of your portfolio is for long term growth. Equities (stocks) protect against inflation and create long term wealth. Younger clients have time for recovery while continuing to add to savings. Investors have opportunities for wisely managed growth. We recommend maintaining a comfortable level of cash to offset sudden unemployment or unexpected expenses and avoiding credit card and any other unnecessary debt. This is financial wisdom.
Wise tax planning protects net worth. Clients who attended our appreciation dinner last fall heard more about the value of time, savings, wise investment allocations, and that tax planning enhances overall life planning for each individual or couple.
But it’s been difficult to watch the market’s wild ride. So if you (as our client) were to ask me if you should sell everything now, I would recommend “no” at this time, because we set your target allocation and would instead recommend focusing on tactics such as strategic rebalancing, tax loss harvesting, strategies for IRAs, ROTH conversions, and maintaining a healthy cash balance.
From the March 27, 2020 Cares Act: The tax filing season has been extended to July 15th, delaying taxes owed and the first quarter 2020 estimated payments. July 15th is also the deadline for IRA and ROTH contributions for tax year 2019. Ironically, the second quarter estimates are still due June 15th. This will likely change, so stay tuned.
IRA and Beneficiary IRA Required Minimum Distributions (RMDs) normally taken in 2020 are now suspended. If you took the distribution within the past 60 days, you could deposit the funds back into your IRA provided there were no other indirect rollovers in the past 12 months. If you take your distribution in monthly withdrawals, you can stop those for the balance of the year plus a 60-day lookback. Beneficiary IRA Minimum Required Distributions are also suspended if not already taken for 2020. The last time any Required Distributions were suspended was in 2009 after the 2008 financial crisis.
Suspending these taxable withdrawals and using after tax assets for cash flow allows RMDs calculated based on a higher 12/31/19 balance to remain in the account another year, and this results in less taxable income in 2020. We are discussing this with clients. (UPDATE as of 4/3: The IRS is being pressured to reconsider the 60 days limit and allow any Required Distributions taken in 2020 to be returned to the accounts. So… again stay tuned.
If you are concerned about your cash level or equity balance, please call us to discuss. This is particularly important if you have an unanticipated a life change or are concerned about job security or your health. I don’t have answers as to how long this will last or how quickly the market will recover but I can provide the historical chart below. For the 26 market corrections since World War II it shows the overall average market decline was 13.7% (the max being over 20%). We have topped 23% so far. The average recovery cycle was 4 months down then 4 months up.
For small businesses: As of 4/3 the IRS is on its 4th draft of the PPP (Paycheck Protection Program) application that allows small businesses a 100% forgivable loan up to $10,000 to cover payroll costs to avoid laying employees off. If you apply for this, read the fine print carefully. There are 3 other types of loans for small businesses to sustain them through this period.
Above all, stay healthy, rested, hydrated and while practicing social distancing, communicate with those in your life. Find someone to talk with when this temporary reality starts wearing on you. Last week I called a friend because on a personal note, my father was at “end of life” in a local nursing home and I was allowed in to say “goodbyes.” We’ve been unable to see him for weeks for the residents’ and staff protection. It was surreal to have my temperature taken, complete a health form, don a mask and receive orders of where I could go. I left I worried I might not be allowed back in, and he would pass away without family near him. My father peacefully passed away two days later, and they allowed me to be by his side. They were sensitive and gracious and it meant a lot.
While this is our temporary reality, it affects real life in ways we might not imagine. I’m optimistic things will get better and I’m grateful for the kindness I see in others.
Alpers Financial Planning is available to discuss your concerns because you chose to work with a firm that is interested in more about you than the singular topic of investment rate of return. We are interested in helping you live life to your fullest with solid financial guidance, comprehensive advice and a long-term outlook. Stay Safe.