By Brian Bushman, Financial Advisor – Saxon Financial Services
The COVID-19 pandemic has affected everyone’s lives on a daily basis. As restrictions begin to ease, we can begin to consider the impact of the pandemic on the economy and our personal finances.
Will COVID-19 Take Us into a Recession?
As of the end of May, we are seeing the world economies begin to recover from the decimation that COVID-19 has caused. States are beginning to allow businesses to re-open and people to get out of quarantine. After the unemployment rate was near historical lows in 2019, unemployment has now skyrocketed to over 20%. The probability of being in a recession is very high.
Since March 23rd however, the stock markets have rebounded tremendously as the markets expect the economy to recover quickly as the country re-opens. Part, if not most of the market rebound has been due to the U.S. government stepping in and providing stimulus packages that have been aimed at helping individuals and small businesses stay afloat during these tough times. This shows the importance of not panicking in challenging times and staying invested for the long term, but also making portfolio adjustments as opportunities present themselves.
The CARES Act
With all of the chaos that has come with this pandemic, the U.S. government enacted The Coronavirus Aid, Relief, and Economic Security (CARES) Act. This was a $2 trillion aid package designed to provide financial aid to individuals and small businesses. While the primary benefit for most came in the form of a stimulus check, enhanced unemployment and/or a Paycheck Protection Program (PPP) loan, there are several other individual benefits as part of the package.
- Mortgage Forbearance
If approved by your lending institution, you can delay your federally backed mortgage payment for up to 180 days plus possibly an additional 180 day extension.
- Student Loans
Borrowers can request to delay their payments on federal student loans until September 30th.
- Required Minimum Distributions (RMD)
All RMDs for 2020 have been suspended. If you have already taken your RMD for 2020, you may have options for replacing the RMD.
- 401(k) Loans
The loan limits have been increased from $50,000 to $100,000.
- Access to Retirement funds
The bill waives the 10% early withdrawal penalty for distributions up to $100,000 for those negatively affected financially from the coronavirus, retroactive to January 1. Withdrawals are still taxed, but taxes are spread over three years, or the taxpayer has the three-year period to roll it back over. This also allows you the opportunity to rollover up to $100,000 from your company retirement plan into an IRA regardless of your age. This is a great opportunity to have more control over some of your retirement assets. Access to these funds is up to the discretion of your employer.
Cinfed’s financial planning partners, Saxon Financial, can help you determine what benefits of the CARES Act you may be eligible for, help you navigate the financial markets, and help you maximize your financial opportunities that you may not even be aware of. The last few months have hurt many people financially. Brian Bushman and Kevin Hagerty can help you get on the right track.
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Cambridge, Saxon and Cinfed Credit Union are not affiliated. Investments are not NCUA insured, not credit union guaranteed, and may lose value.