Light at the End of the Tunnel?
This is what I wrote in January to someone asking me what I thought the future would bring:
“So you think I am psychic. Or you think someone is psychic and you’re hoping it’s me? So, let’s be clear about two things. First, no one is psychic. And the ones who claim to be able to predict the directions of stock/bond markets are delusional or criminal – sometimes both. Second, I most certainly am not psychic – psychotic has been used on occasion – never psychic.”
As I write this to you more than 900,000 virus patients worldwide have recovered. Many parts of America are reporting data that seems to indicate the virus has passed its peak and we are moving to resolution. Hospitals are returning to some semblance of normal. Many parts of our country are beginning to reopen. These are all glimmers of light at the end of this long tunnel.
The stock market has seen a recovery of about half of the declines we saw starting in late February. While jobless claims are historically high, the word furlough is being used more and more rather than jobs ‘lost’ to indicate these losses are temporary. Millions of those currently receiving unemployment have jobs waiting for them when it is considered safe to return. Hundreds of thousands of businesses have found a way to provide their goods and services ‘remotely’ and keeping ‘social distance’. These are all glimmers of light at the end of the tunnel.
Psychic – no. What we’re all trying to do is make educated guesses and then act accordingly. Action is an excellent defense against fear and uncertainty.
The following list is only a checklist. Please talk to your financial advisor, tax planner, or attorney before you decide to take any action. And please call us with your questions.
14 Actions You Might Want to Take Right Now
Distributions from IRAs and 401(k)s are not required in 2020.
- If you don’t need the cash to pay bills, don’t take the cash.
- If you already took some/all of it – you might be able to return it.
- If you don’t mind paying the tax – convert the distribution to a Roth IRA.
Convert from standard IRAs and 401(k)s to Roth IRAs
- You will still pay income tax – the tax will (likely) be on a smaller amount.
- If you are subject to RMDs – you can convert those funds to a Roth this year only.
- Roth’s will produce tax free income in the future – when rates are likely higher.
Secure life insurance to provide your loved ones with income tax free money
- With the new laws, inherited IRAs might be taxed at an uncomfortable level.
- Life insurance can provide income tax free dollars at your passing.
- Your IRA beneficiaries can use that money to pay their income tax bill.
Push your 401(k) contribution to the highest level you can afford
- You might find you are buying into investments at ‘bargain’ prices.
- You are creating serious tax advantages within your investment plan.
- You will see an increased opportunity for a successful retirement.
Get your investment program on auto-pilot
- Payroll deduction plans – like 401(k)s – let you invest automatically.
- Your investment is made before you ever ‘see’ the money.
- You can do the same thing with your IRA or savings program.
Create a cash flow plan (don’t call it a budget)
- Take the time to examine where your money really goes.
- Decide how your cash flow should best be spent to meet your goals.
- Set up an effective tracking system to help (lots of online programs).
Invest in your IRAs and 401(k)s now rather than next April
- Lots of people fund their retirement accounts when they file their taxes.
- The markets are in a belly right now – take advantage of that belly.
- Change your 401(k) instructions so more money goes in now rather than later.
Get your estate planning documents in place
- Have a phone conference/virtual meeting with a trusted estate planning attorney.
- Be clear about your goals prior to your meeting.
- Be sure the final documents reflect what you want and get them signed.
Review all your beneficiaries
- Life insurance, IRAs, annuities, 401(k)s, HSAs, (and more) have beneficiaries.
- Dig out everything and make sure you have primary and contingent beneficiaries.
- Be sure you know how these fit into your estate documents.
Review your insurance protections
- Meet (phone/Zoom) with a trusted insurance advisor – not salesman.
- Review your life insurance, disability insurance, and LTC insurance.
- Get the right amounts, flavors, and premiums to fit your goals and needs.
Lock in some tax losses now
- Some of your investments have dropped and are not likely coming back.
- Sell investments that don’t fit your goals or needs now to lock in deductions.
- Discuss with your trusted tax planning advisor how to use deductions effectively.
Examine the many flavors of Long Term Care Insurance
- If you are over age 50 you should discuss LTCi with a trusted advisor.
- LTCi comes in many formats and requires careful examination and comparison.
- Take your time, do your homework, select what fits your goals and needs.
Consider shifting 401(k) and IRA contributions to Roth 401(k)s and Roth IRAs
- Many people expect future income tax rates to rise (significantly?).
- Roth accounts produce tax free income.
- Examine if paying tax now is better than paying (higher?) taxes later.
Get a second opinion on your financial plans
- Meet with a trusted financial advisor to examine your current plans.
- A phone conference or Zoom face-to-face works well.
- Most quality advisors will provide a second opinion at no cost.
- Meet with an advisor (fiduciary if possible) rather than a salesman.
- Look for the right fit for you and your goals and needs.
- One size definitely does not fit all.
Maybe a Little Smile Would Help?
Over the years I’ve often included some informational/inspirational quotes to end my newsletters. I thought this month I would share a couple of smiles that have been sent to me by my readers. I hope they bring smiles to your face as well.
- ‘I just tried to make homemade hand sanitizer and it came out as a gin and tonic’
- ‘A wife reports – yesterday my husband thought he saw a cockroach in the kitchen. He spent the whole day spraying and cleaning.
Today, I’m putting the cockroach in the bathroom.’
- ‘Wife calls downstairs to her husband, ‘Honey, do you ever get a sharp stabbing pain like someone’s sticking a needle in a voodoo doll?’
He answered no.
A few seconds later she called down again, ‘How about now?’
Stay in the Loop
We continue to broadcast live every Saturday from 8:05 AM until 10:00 on WAEB AM790 or listen through our website (www.MoreThanMoneyOnline.com) via our iHeartMedia link.
And tune in to PBS39 Tuesday evenings at 7:30 for a full half hour of practical answers to your most important questions on More than Money.
And check out our web site frequently for updates, information, and resources.
Please stay well. We keep all of you in our prayers.
P.S. Shoot me an email with your questions and comments – [email protected]