This past week, during one of our TV watching marathons, my youngest son and I happened upon “The Wizard of Oz”.
When Glenda the Good Witch began her famous mantra to Dorothy of, “There’s no place like home. There’s no place like home”, I couldn’t help but think of the irony in hearing this famous one-liner right now.
After all, for now, home is the ONLY place for most of us. I don’t know about you, but my home is less than idyllic at this point. I think I need to channel my inner Glenda.
Home is usually the place where we feel most safe and at ease, yet the
fact that we are forced to stay home because of COVID19 instead creates a
dichotomy of sorts, where our being at home is the result of a
precarious situation reaped with uncertainties and anxiety.
What can we do during these times to help us feel less anxious and more
“at home”? We’ve all heard the cliché “control the controllable”. What
is controllable, or even worth controlling, will be different for
everyone, but there are always some things that are within our control.
We can let go of the rest, remembering to not beat ourselves up for
whatever we miss. Whatever it is that will offer stability, a sense of
normalcy or bring joy is what we focus on.
These have been some of my controllables:
out my closet. It helped declutter my mind and I had total control of
every decision I made to keep or donate. Hey, control is control.
to binge watch only happy, funny or heartwarming things. I don’t need
the added angst I get when I watch shows like Bluebloods. This, I can
my alarm for the same time every day. Granted, some mornings I hit
snooze more than others, but the attempt, and the control as to when I
start my day, is there.
You may be thinking, “what does this have to do with my finances”?
Nothing. Absolutely nothing. Well, almost nothing.
I’ve already addressed market volatility and the stimulus bill in
previous newsletters. I wanted this newsletter to acknowledge that right
now, while we are in the thick of this, it’s not only about money and
finances. And even in the “good times”, money issues are never black and
white. There is most always an emotional component to money decisions.
We make the best decisions by addressing the human side of things first.
I’ll end with a known fact about the human race.
We are a resilient and adaptable species. We are
problem-solvers. There are already countless ways we have adapted as
individuals, families and as a nation to a situation that 6 weeks ago we
would have thought impossible to deal with. We will get through this
and things will return to normal, because even a new normal eventually
becomes normal over time.
Like a good thriller movie (or perhaps
more accurately, a horror film), the suspense is over and Congress has
passed the stimulus bill that was then signed by President Trump late
Friday afternoon. It is officially called the CARES Act (free package of
TP for anyone who can guess what the “C” stands for).
But who really CARES what it is called? We care what it will do.
Let me see if I can help sort this out a bit.
This bill is over 800 pages long and includes many provisions for both
individuals and small businesses. I am going to focus today on the ones
that affect us most as individual taxpayers.
$1,200 for individuals; $2,400 for married couples
Additional $500 per child UNDER age 17
is phased out based on your Adjusted Gross Income (AGI) in either 2018
or 2019, whichever tax return is the most current the IRS has on file.
Phaseouts begin at AGI’s above:
$150,000 for Married Filing Joint
$112,500 for Head of Household
$75,000 for Single
A confusing part of this stimulus check is that although they will be determining the amount we get based off of 2018/2019 AGI, it is actually a 2020 rebate.
For those that may be phased out either partially or in full based on
their prior AGI but are now suffering hardship in 2020, you may still
get a rebate if your 2020 AGI falls into or below the phase out ranges.
You just won’t be getting it now when you need it most.
State unemployment benefits are $600/week more than “regular” unemployment
This additional bonus payment runs for up to 4 months
Overall benefits are extended by an additional 13 weeks
Federal Government will pay to cover the one week “waiting period”
Pandemic Unemployment assistance for those not eligible for unemployment
Contractors, self-employed, gig workers
FEDERAL Student Loan Relief:
Payments and interest are deferred until September 30, 2020
While not required to make payments, voluntary payments are allowed.
Proactively contact your loan provider to pause payments, it will not happen automatically.
No Required Minimum Distributions (RMD’s) for 2020
This includes IRA’s and employer plans
Applies to Inherited IRA’s as well
If subject to the 5-year rule, 2020 is ignored
Distributions from Retirement Accounts: aka “Coronavirus Related Distributions”
10% Early Withdrawal Penalty is waived
Not subject to mandatory withholding of taxes (usually 20%; this applies to employer plans)
Up to $100,000 combined from IRA’s or employer plans
Withdrawn in 2020
WITHDRAWALS ARE TAXABLE INCOME,
but eligible to be “rolled back in” to the account over 3 years. If
this is done, an amended return can be filed to claim a refund for any
taxes paid on the withdrawal.
If you do not roll it back in, the income and resulting tax can be spread out over 2020, 2021 and 2022.
Assuming your 2020 income has be greatly affected and you would be
taking this distribution due to a Coronavirus hardship, it may make more
sense for you to include all of this income on your 2020 return. Your
CPA will be able to give you guidance on this. Your advisor will give
you guidance on whether it is good option for you given your overall
These are just some of the major highlights affecting a vast majority of US citizens.
If you are unsure whether you will qualify for a stimulus check or what the amount will be if you do, shoot me an email at firstname.lastname@example.org and I will run through the numbers with you.
All we can do at this point is keep hanging on, be patient with our
families and strangers, control what we can control and let go of the
With three teenage boys trapped at home, a clean kitchen is NOT something I can control right now and I’m really trying to LET IT GO! What are YOU letting go?
A fun meme was going around on Facebook last weekend that said:
“Just a Warning, this week is starting by changing the clocks, has a full moon and ends with Friday the 13th. Good Luck People.
P.S. Don’t forget to wash your hands”.
As it turns out, that warning did not do the week justice as far as the stock market and our investment portfolios are concerned.
It happened whiplash fast. A week where the biggest warning for the coronavirus was to wash your hands and stay home if you feel sick ended with many of us feeling quite sick, but not because we had the virus.
This past week ended a record breaking 11 year bull run as the major market indices officially entered bear territory, defined as falling 20% or more below their all-time highs.
Because in this life none of us can predict the future, we rely on what we know and have learned from the past. But there is always that underlying itch that says, “but is this time different”? In talking with my friend and colleague Michelle this past week, also a financial advisor (a phenomenal one I will add), she remarked, “‘this time’ is always different, but also not different”. Meaning, it’s a new catalyst that pushed our markets into bear territory this week, but not different because we’ve been here before, and each time, the market eventually recovers and investors continue to make money in their portfolios.
So, following this crazy week, I thought I would share with you a compelling video by Loring Ward that depicts the value of $1 invested in the Total US Stock Market in 1927 and if left untouched, the value that single dollar would be today.
It gives a great perspective on the long term effects of “bad news” and “bear markets” on the overall stock market.
It covers over 90 years in about 3 minutes, so stick with it to the end for an inspiring quote from legendary investor Warren Buffet.
This clip will eventually be updated to reflect this past week and whatever the weeks and months ahead will bring, but I remain confident that history will again repeat.
None of this is to say it’s easy to watch our portfolios take a hit. It’s a punch in the gut and it takes resilience to stay the course. But when we ride the wave, history shows us that staying in the market is the best place to be for the long game.