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Practical financial advice during coronavirus.  

1) Mortgage and other debt refinancing 

  • Loan interest rates are low giving you the potential to pay off sooner, reduce payments, and reduce total interest paid.  Please contact us if you need a referral to a mortgage broker or student loan specialist. This can also help you with your savings and budgeting.
  • Refinance your mortgage
  • Refinance private student loans

2) Budgeting

  • Review your budget to make sure your spending and savings align with your goals and values. Are there monthly expenses you could cut?
  • There may not be “one big thing” you can cut to make a dramatic difference.  So, it will take lots of little cuts.  Do the thirty-day budget buster – every bill you receive in the next 30 days find a way to cut or eliminate. 
  • Consider what your income may look like during these tough times and adjust accordingly.

3) Emergency Savings

  • Make sure you have 3 months of living expenses in an emergency savings account.  If you do not have this it might make sense to pull some from investments to get this covered.
  • We recommend saving 10% of your income for this and other short-term goals.

4) Hardships withdrawals and loans from your retirement plan

  • The 10% early-distribution penalty tax that would normally apply to distributions made prior to age 59½ (unless an exception applies) is waived for retirement plan distributions of up to $100,000 relating to the coronavirus; special re-contribution rules and income inclusion rules for tax purposes apply as well.  Additionally you can spread the tax liability out over three years.
  • Limits on loans from employer-sponsored retirement plans are expanded, with repayment delays provided.
  • We advise only looking at these options as a last resort.

5) Retirement Savings – if you are working

  • If possible, increase your monthly contributions, so you are buying more at these relatively lower prices.
  • Try to cut other areas before reducing or stopping savings.  If you must reduce retirement savings don’t stop all together but at least drop to a minimum amount.
  • Remember you should be saving at least 10% of your income for your retirement if working.

6) Retirement Savings – if you are retired

  • Consider re-balancing your account to add to stocks (by selling bonds or cash) or if it’s within your risk tolerance increase your exposure to stocks.
  • Skip your Required minimum distributions (RMDs) and leave it invested to recover if you do not need the funds. RMDs will not apply for the 2020 calendar year; this includes any 2019 RMDs that would otherwise have to be taken in 2020.

7) Roth IRA conversions

  • If you have traditional IRAs or old 401ks review converting those to Roth IRAs now that the values have likely dropped (the taxes owed on conversion can also drop accordingly).

8) Tax Loss Harvesting

  • If you have non-retirement investments look at selling some investments to generate a tax loss, which would lower your taxes, and buy a similar investment.

9) Student Loan Payments

If you have Direct loans (not FFEL or Private) you get automatic payment suspension ($0 a month payment) and 0% interest until September 30, 2020.

  • This will happen automatically.
  • The best part is these $0 payments count towards the loan forgiveness programs.
  • Under already existing rules, up to $5,250 in payments made by an employer under an education assistance program could be excluded from an employee's taxable income; this exclusion is expanded to include eligible student loan repayments an employer makes on an employee's behalf before January 1, 2021

10) Small Business relief

  • An employee retention tax credit is now available to employers significantly impacted by the crisis and is applied to offset Social Security payroll taxes; the credit is equal to 50% of qualified wages up to a certain maximum
  • Employers may defer paying the employer portion of Social Security payroll taxes through the end of 2020 and may pay the deferred taxes over a two-year period of time; self-employed individuals are able to do the same
  • Deductibility of business interest expanded
  • Provisions relating to Small Business Administration (SBA) loans allow small businesses to borrow up to $10 million and defer payments for six months to one year; self-employed individuals, independent contractors, and sole proprietors may qualify for loans (Please note, as of 4/16/20 many of these programs are out of funding or not accepting new applications.  However it is possible they receive additional funding.  They are generally first come first serve).

None of the information in this document should be considered as tax advice.  You should consult your tax advisor for information concerning your individual situation.