The markets closed their worst first quarter in history last week, and we expect the volatility, or the ups and downs in the market, to continue for some time. What’s important to remember is that markets are forward looking, meaning stock prices reflect what is expected to come, not what currently is. The markets have already priced in the expectation of a recession. The key takeaway is that the market rebound will come before the economy rebounds. Stay the course, as scary as that seems right now.
There are also some important things for investors to know about the CARES Act, the third-round of stimulus. The law includes a tremendous amount of support for small businesses and I’d encourage you to visit the state and local government websites for links to these programs. If you’re an individual investor, here’s what you need to know:
- If you are single and had a 2019 adjusted gross income of less than $75,000, or $150,000 as a married couple, you’ll be receiving a stimulus check, plus more for each child. If you are fortunate enough to still have your paycheck coming in, some great things to do with the money are to pay down debt and build your cash reserves. Other options include buying low by investing it, or donating to one of the many local non-profits that are struggling right now.
- If you are taking Required Minimum Distributions, or RMD’s from an IRA, the CARES Act waives the RMD requirement for 2020. If you do not need the money, you can leave that distribution in the account.
- In addition to the filing and payment deadline for 2019 taxes being moved to July 15th, the IRA contribution deadline has also been moved. You have until July 15th to fund your IRA for 2019.
- While we generally only recommend tapping retirement funds as a last resort, we know that these are extraordinary times. If you do need to tap into your retirement accounts, the law waives the 10% penalty for up to $100,000 of withdrawals for affected individuals under 59 ½. It also allows you to spread the taxes due on the withdrawal over three years, and even repay the withdrawal over the three-year period.
- The limit for 401(k) loans has increased, from a maximum of 50% of your account balance, or $50,000, whichever is lower, to $100,000 or 100% of your account balance, whichever is lower. Repayment will not need to start until January 2021.
- There is also a provision for federal student loans, suspending payments and interest for six months, in the Act. Please visit myfedloan.org for more information about the impact on student loans.
We continue to provide new updates online, so visit us at www.covingtonalsina.com and our Facebook page, www.facebook.com/covingtonalsina. We’re sending out emails with research and investment commentary, and you can sign up on our Facebook page for those as well.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, consult with your attorney, accountant, and financial advisor or tax advisor prior to investing.
And if you don’t have a financial advisor, or you haven’t heard from yours, come talk to us. This is Ann Alsina with CovingtonAlsina.