In an effort to help curb the effects of COVID-19, the United States government has just passed one of the largest stimulus bills ever to protect workers, small businesses and the economy. The Federal Reserve has lowered the Federal Funds rate to near 0% and the markets and pandemic updates are changing daily and sometimes hourly. We are expecting to send you a Quarterly Economic Report in a few weeks that will discuss some key details of the economic climate and offer some possible ideas on how to strategically navigate a volatile and unpredictable equity market.
In the meantime, we are reviewing the very long stimulus bill that the Senate unanimously passed. While there are many provisions to be implemented and many of the details are vague, here are some key items for you to be aware of:
- The tax filing deadline was officially moved to July 15, 2020. The ability to contribute to a 2019 IRA has also been extended for an extra three months.
- Required Minimum Distributions for 2020 are suspended.
- Those who are financially struggling now have the option to take a larger loan against their workplace retirement plan. The bill will double the borrow-able amount to $100,000.
- If you are a single taxpayer who made less than $75,000, you will be eligible for a full payment of $1,200. Couples who filed jointly and made less than $150,000 will get $2,400. An individual who filed as "head of household" and earned $112,500 or less gets $1,200. This amount decreases by $5 for every $100 of income that exceeds the limits. For every child in the household, you will receive an additional $500.
- The 10% standard penalty for non-qualified early withdrawals by those under age 59 ½ has been waived for Coronavirus-related IRA distributions of up to $100,000 (these distributions will still be considered income and therefore subject to regular income tax. However, taxpayers will have three years to pay those taxes). This option is available for individuals who have either: been diagnosed with COVID-19 or have a spouse or dependent who was diagnosed; those whose financial situation has been affected due to quarantine, furloughs, layoffs or reduced working hours. Unless absolutely necessary, this should be a “last resort” option.
- Small businesses will be given the ability to apply for a forgivable loan if they are affected by COVID-19 (this is a very complicated section that experts are reviewing for applicability and usage). We will try to update you on this provision after we understand it better. It is more critical that we give you correct information than just information.
As with all proposals, especially ones this complicated, the details will take some time to fully understand. We will continue to keep you updated on items that are relevant to you.
We are now in new and uncharted waters that have an indefinite timeline. Our primary concern is the health and well-being of our clients and loved ones. Panic and bad decisions have caused more harm than market downturns. As financial professionals, we are a resource and not a daily news source. We are keeping a very watchful eye on the equity markets and economic conditions. Our goal is to look at today’s uncertain conditions and to offer long-term ideas and strategies that require patience and discipline.
Although during turbulent times it can be harder to stay focused, we are reminding you to have confidence in the plans we have developed with you. If anything in your personal situation has changed or if you just need to talk, we are always here for you
Thank you, as always, for the honor of working with you.