5 Financial Moves to Make Now During COVID-19

You do not need me to tell you these are crazy times!  They will be talking about 2020 for many years to come.  Although the last 6 COVID-19 pandemic-months have been long; in a way, blink your eyes and it is already the 4th quarter of 2020.

            What does this mean financially?  There are MAJOR OPPORTUNITIES AVAILABLE for ALL American’s to set up a better financial future NOW! Some of these opportunities need to be taken advantage of NOW, and over the next 60 days, since many laws and what I call “Covid-19 Special Rules” will be changing “sun-setting” on 12/31/2020. 

            These times are unique as we are in an historically low interest rate environment with low tax rates and a stock market near record highs!  In 2020, a married couple “filing jointly” can earn $325,000 (combined) and only be in the 24% tax bracket.  Our current level of spending is unsustainable, and most experts agree that taxes will be raised!

September 30th closed our “fiscal year,” and our federal debt exceeds $23.4 Trillion.  It is estimated that this could grow another $13 Trillion by 2028.  Tax rates will likely go up and we/you can stay a step ahead by strongly considering these 5 financial moves NOW!

  1. Refinance Your Debt: Whether it is a home mortgage, business loan, and/or a student loan, there has never been a better time to refinance.  If you or your children have any loans over 4%, consider refinancing now.  Yes, interest rates should stay low next year; however, banks want to close new deals now to boost their 2020 year-end revenues. 
  2. Take Some Profit Off the Table:  Some advisors call this “tax harvesting.”  Remember, gains are only “paper gains” until you sell, and they are sitting in cash.  If you have doubled your money in an account, why not reposition half in cash and let the rest ride “on the house” so to speak?  With the upcoming election on the horizon, choppy waters lie ahead.  Double-check this with your investment professional and CPA.
  3. Consider Doing A Roth IRA Conversion: If you convert all or a portion of your IRA to a “ROTH IRA” in 2020, you are permitted to spread out the current tax burden over the next 3 years, your choice as to what percentage to declare each year.  Many people have less income this year, so you would be paying less tax this year in a lower tax bracket in 2020.  What is a little more pain for a big long-term gain?
  4. Consider Buying Life Insurance Now:  Consider buying before premiums go up (due to Covid-19 death rates) as many life-insurance companies have filed for rate increases with the state.  The NEW life insurance policies have “chronic Illness” riders that function similar to long-term care policies, allowing policyholders to tap into their death benefit while living, to pay current “qualified” ongoing chronic health issues and bills.  They are called “living benefits” which most OLD policies do not have.  There are 2 companies in New York State that include these critical riders FOR FREE on inexpensive term insurance policies which can now run to age 80.  Current cash-value life policies can be “rolled-over” into a new life insurance policy.  This is called a 1035 exchange, similar to a 1031 exchange in real estate.
  5. Revisit Your IRA’s, Trusts & Estate Plans NOW!: There are people sitting on their IRA’s, 401K’s (which can be converted to a self-directed IRA) thinking that they will pass the IRA down to multiple generations just like their parents did. 

THINK AGAIN!  Beginning in the 2020 tax year, The 2020 SECURE ACT (Setting Every Community Up for Retirement Enhancement Act) made some positive changes such as the ability to make IRA contributions after age 70.5 (if you are still earning income) and deferring RMD’s (required minimum distributions) to age 72. 

The 2020 “Secure Act” has eliminated the “Stretch Ira” also known as “Super Ira” or “Inherited Ira.”  Spouses can inherit this money then their heirs MUST TAKE IT ALL OVER 10 YEARS!  These changes will cost children and grandchildren dearly.  It also makes it a better idea to consider taking the IRA money now (with low current tax rates) and buying life insurance which goes TAX-FREE and LUMP SUM to named beneficiaries while bypassing probate.

These tax changes can also render existing “Trusts” obsolete, so they should ALL be reviewed.   In addition, ALL existing wills and beneficiaries should be updated.  If this is the first you are hearing about the SECURE Act, perhaps it is time to change advisors.

Feel Free to reach out to me at Rob@InsuranceDoctor.us for more information and to be added to our e-newsletter and briefing email list.

Stay Safe and KEEP THE FAITH!

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