Five Reasons the Pandemic May Be a Good Thing for Your Retirement

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Finding the Silver Lining of COVID-19

There is no disputing that the COVID-19 pandemic has been a tragic event for millions. Illness, death, job loss, fear, and a world essentially shut down for weeks on end has wreaked havoc – and it isn’t over just yet. Truly, the negative impacts of this global health crisis cannot be overstated.

And yet, as is often the case in times of turmoil, there is a silver lining if we look closely. Below we’ll examine five ways that COVID-19 may positively impact your retirement.

1.     We’ve been forced out of our routines.

Routines can be positive, certainly. More often than not, though, they become less routine and more “rut.” We begin living life on autopilot, which can rob us of opportunities, experiences, and fresh perspectives, but we stay in the rut because it feels safe and certain. If there is anything that can be unequivocally said about this pandemic, it is that it has dragged each and every one of us out of our usual ruts. Though it has created much uncertainty, it has also caused us to think about many aspects of our lives in new ways – and this can be a good thing if we remember to look for the opportunities that may present themselves.

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The CARES Act Has Changed 2020 RMD Rules

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When President Trump signed the Coronavirus Aid, Relief and Economic Security (CARES) Act on March 27, he enacted the largest aid package in American history.[i] One important impact is that Required Minimum Distributions (RMDs) for 2020 are, in essence, suspended. In this way, the federal government chose to sacrifice short-term tax revenue in order to provide immediate financial relief to retirees.

This change bears discussion, however, as there are many questions about what the CARES Act means for those who have already taken their 2020 RMDs, as well as any impact on taxes and inherited accounts.

Let’s begin with a review of the basic tenets of the RMD portion of this new law.

Understanding the CARES Act

This relief package allows defined contribution plans, including 401(k)s, 403(b)s, 457(b)s and IRAs to suspend 2020 RMD requirements. Now, RMD rates were already a bit lower since 2020 is the first year, per the SECURE Act[ii], in which the age change from 70.5 to 72 began, but skipping RMDs in 2020 altogether is a meaningful change. With so many Americans facing financial struggles due to the COVID-19 pandemic, the flexibility to opt-out of distribution means that retirement portfolios have more time to recover from the current market volatility.

[i] https://www.forbes.com/sites/jackbrewster/2020/03/27/trump-signs-2-trillion-stimulus-bill-into-law-largest-aid-package-in-us-history/#77d59e864ea5

[ii] https://www.fidelity.com/learning-center/personal-finance/retirement/understanding-the-secure-act-and-retirement

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Financial Literacy Month, Coronavirus and Financial Resilience

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Beginning 16 years ago, April was declared Financial Literacy Month as part of a strategy to enhance and increase nationwide financial literacy. It was implemented with the hope that it would lead to increased government advocacy of financial literacy programs, as well as spark more interest in programming already offered through schools, non-profit organizations, and businesses.

The creation of a month-long focus on financial literacy was a pointed acknowledgment of its importance in helping Americans gain necessary financial knowledge – knowledge that proves integral during a time of crisis like we are facing now with the COVID-19 (coronavirus) pandemic.

Though prevention is always preferable over a cure, it’s never too late to learn more and change your financial behaviors. Doing so can help you become more resilient in the face of financial adversity during times of personal or worldwide crisis. So, here are three ways you can personally celebrate Financial Literacy Month this year:

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Scams Abound Amid Pandemic Panic

Sadly, as is the case in any crisis, there are those among us who are looking to capitalize on cruelty and take advantage of heightened vulnerabilities. Hackers are trying to lure victims to click on COVID-19 related hyperlinks that contain malicious software and other computer viruses. In some cases, these scams look like official messages from the government and they send people to fake websites where their sensitive information can be stolen.

The following guidelines can help you protect yourself from these digital scams and stay clear of suspicious links you may come across in your internet travels.

How to Spot a Phishing Email

Phishing is a practice in which scammers send emails that appear to be from legitimate organizations. In the case of COVID-19, they may promise to share important information about the coronavirus or how to keep your family safe. In short, they prey on a public fearful of a dangerous virus.

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CARES Act Signed into Law –Brings Relief to Millions of Americans

On March 27 the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to address the unprecedented public health and economic crisis related to COVID-19.

This $2 trillion bill is meant to impact both individuals and businesses and contains significant tax-savings measures. It could affect prior tax years while also creating immediate cash-flow.

Impact on Individuals

Stimulus Checks

Perhaps the most impactful provision for American citizens is the CARES Act’s promise of cash payments of up to $1,200 per single individual and $2,400 for a married couple. Parents will also receive an additional $500 per qualifying child. Payments are phased-out for individuals with incomes greater than $75,000 and for married couples filing jointly with income greater than $150,000.

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Tax News: IRS Announces Extended Deadline for 2019 Tax Returns

Americans Can Defer for 90 Days

As we continue to face uncertain times, the IRS has made a welcome announcement.

Treasury Secretary Steven Mnuchin has announced that the IRS has decided to extend the filing and payment deadline for 2019 tax returns, allowing taxpayers to defer until July 15. Mnuchin indicated this move will put $300 billion into the economy during a time of great economic concern over the consequences of the COVID-19 pandemic.

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How to Remain Hopeful and Keep Perspective During the Covid-19 Outbreak

We are facing something we have never faced before in our lifetimes. That is a fact and, in time, when the news of the pandemic spreading and the recommendations on social distancing getting broader by the day, it can be hard to feel certain or safe about anything.

Although Peak Financial clients have benefitted tremendously from the risk and volatility reduction strategies used to manage their assets, it is still very troubling to watch the unprecedented market decline and hard to tune out the constant media noise regarding losses. But most importantly, we need to maintain our health and the health and safety of our family, friends, and neighbors. Covid-19 which emerged late in 2019 in China has spread rapidly worldwide since then and is a global pandemic. The measures taken by leaders around the globe have for the most part been strong, leaving most children without a classroom to go to, parents working from home or without a job altogether, and investors uncertainty causing panic about what is to come.

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Coronavirus: What the Viral Epidemic Means for Investors

Volatile Markets and the Ongoing Spread of the Virus are Causing Economic Uncertainty

Last week saw the worst week on Wall Street since 2008, as the Dow fell into correction likely due to the outbreak and spread of COVID-19, commonly called novel coronavirus. A market correction is a nerve-wracking event for investors, but the current uneasiness in the markets is no cause for panic.

Market Impact

While the spread of COVID-19 is atypical, market correction is not. In fact, it’s an entirely normal process, and not altogether unexpected after experiencing the longest-running bull market on record. There have been 22 market corrections since 1974, and they are aptly named because the market usually “corrects” itself and returns prices to their longer-term trends. While the coronavirus is likely to cause economic impact into at least the second quarter of 2020, historically, Wall Street’s reaction to these types of epidemics has been short-lived, including in the recent past.

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Investment advisory services are offered through Fiduciary Solutions, LLC, a California Registered Investment Advisor. Insurance products and services are offered through PFFG Insurance Agency LLC, a licensed insurance agency (CA Insurance License #0N14013). Peak Financial Freedom Group LLC is a financial planning and umbrella marketing organization, which enables the provision of multiple financial services under one brand. Peak Financial Freedom Group LLC, PFFG Insurance Agency LLC, and Fiduciary Solutions LLC are affiliated entities with common ownership and control. Jim Files is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1620449) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0F06511). Dan Ahmad is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1491561) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0732913).

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