I hope things are well and you are staying healthy. If you have any questions on the information below, please reach out to mus.
On Friday March 27th, President Trump signed the CARES Act into law. This enormous stimulus bill will provide financial assistance for most Americans. I have spent the weekend reading up on this and believe it will provide relief, as well as planning opportunities, for many of you. Highlights include:
Direct payments - Tax payers may be eligible for one time pay of $1200 (individual) and $2400 (married filing jointly) with an additional $500 for children under the age of 17. Benefits phase out at income levels $150k (joint), $75k (individual) and $112,500 (head of household). Your benefit would be phased out by $50 for every $1k your AGI (adjusted gross income) is over the limit. My understanding is that the calculation will be based on your AGI from your 2019 tax return or 2018 if you have not filed your 2019 return. This may be reason to delay or accelerate completing your tax return depending on which year your income would be lower.
RMDs are suspended for 2020 - If you have already taken an RMD you can pay it back. Many retirees will be able to take advantage of being able to live off non-retirement accounts and convert portions of their IRAs to Roth IRAs, and also capture lower tax rates.
401k loans (if your plan permits) - loan minimums increase from 50% of vested balance up to $50k to 100% of vested balance up to $100k. Paying back loan can be delayed up to 1 year.
Up to $100k can be withdrawn from IRAs without penalty. These withdrawals are still taxable but can be spread out over 3 years. Alternatively, you can pay back within 3 years to avoid any penalty. I generally would try to avoid this option as you would be selling in a down market and could potentially miss a substantial upswing.
Expanded unemployment benefits - One week wait period is waived. Up to $600 additional benefit per week for the first 4 months. Overall benefit period will be increased by 13 weeks. Self-employed and contract workers are eligible.
Student Loan Relief - No payments required until 9/30/20. No interest will accrue, and time will still count towards any loan forgiveness program. Please note that you must proactively request that payments be delayed.
Small business loans - Potential loans for business with 500 employees or less. Loans can be taken up to the lesser of $10 million or 2.5 times average monthly payroll for the previous year (excluding those that made over $100k). Part or all of these loans may be forgiven if certain criteria are met. This will be enormously impactful for those of you that are business owners, and I will reach out to each of you individually to discuss.
Please let us know if you have any questions or would like to discuss any of these bullet points further.
Thanks and be well,
John Steiger AIF®, CFP®