Staying Financially Informed Through the Pandemic

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By: Maurice Stouse

Financial Advisor and Branch Manager

Maurice Stouse

Today many Americans are having their faith and confidence in their health and wealth challenged as never before. While the pandemic continues to bring unexpected events into our lives, it is also seen as important that we stay informed and utilize helpful hints when it comes to our wealth along with the focus on our health.

What are some things you should know right now? The recently passed Coronavirus Aid, Relief and Economic Security – CARES – Act of 2020, a fiscal stimulus bill of over $2 trillion dollars has several provisions many Americans might want to be aware of.

Cash or liquidity needs: Do you have adequate access to cash for short term needs, unexpected financial needs, or emergencies? Most experts suggest a minimum of six months of expenses to be stored away and readily available. What if you don’t have that or don’t want to exhaust it? Investment firms might offer securities-based lines of credit (SBLOC) against stocks that you own. Or, you might qualify for penalty free distributions from your retirement accounts. There are also new provisions available to increase the amount that can be borrowed from a qualified retirement plan. Retirement savers can also pause or reduce their current contributions to their retirement plans. Lastly, Home Equity Lines of Credit (HELOC) might give you access to equity in your home.

Required Minimum Distributions for Retirees: With stock market volatility throughout this year, Americans who normally have Required Minimum Distributions (RMDs) from their retirement plans can waive those for 2020. The benefit is that if they are facing losses to their retirement portfolios they are not having to sell in to that. Many people don’t want to exhaust principal that perhaps could or is recovering and have it work to produce needed income or returns in the future. Also, RMDs used to be required at age 70.5. That was pushed to 72 (for those born on or after July 1, 1949) as a result of the Secure Act, which was passed in 2019.

Tax Loss Harvesting: Many investors have looked at their portfolios mid year and examined those to see if they have losses (in taxable vs retirement accounts) that they could “realize” through selling those positions. Those losses might be able to be used to offset gains not only this year but in future years as well. Many consider this a form of tax efficient investing as potentially reduces taxes that would be owed and hence a better overall return on an investment. And, dependent upon circumstances, losses on financial investments like stocks or bonds can also be applied against other types of gains, like real estate for example.

Roth Conversions: As was explored last month, many investors might have the opportunity to convert existing IRA assets (including Rollover IRA assets) in to a ROTH IRA and hence have those assets grow tax free (with the restrictions that apply with certain time limits). Retirees who waive their RMD for 2020 might want to consider converting that amount to a ROTH IRA.

Update your plans: Many consider now to be a good time to revisit financial and estate plans. It is a good opportunity to review portfolios for rebalancing or if risk tolerance has changed. Estate planning – particularly a review of how assets are titled might be timely as well. When leaving assets to their heirs, investors would want to ensure they have beneficiaries or perhaps trusts and wills in place.

Charitable Giving: The CARES Act has given some added flexibility to charitable giving and might give donors a deduction ($300 in cash as an example) even if they do not itemize. Also, retirees might be able to give their RMDs up to $100,000 to charity and not have that dollar amount excluded from their taxable income. This is a reminder for that rule which was already in place.

Staying informed and making changes and updates as needed are steps Americans can take today during these unusual times. Do your own research and contact a financial, tax or estate planning advisor to assist you as needed.

Maurice Stouse is a Financial Advisor and the branch manager of The First Wealth Management and Raymond James and he resides in Grayton Beach. He has been in financial services for over 33 years. His main office is located at First Florida Bank, a division of the First, A National Banking Association, 2000 98 Palms Blvd, Destin, FL 32541. Branch offices in Niceville, Mary Esther, Miramar Beach, Freeport and Panama City, Pensacola, Tallahassee, and Moultrie, GA.  Phone 850.654.8124. Raymond James advisors do not offer tax advice. Please see your tax professionals. Email: offered through Raymond James Financial Services, Inc. Member FINRA/SIPC, and are not insured by bank insurance, the FDIC or any other government agency, are not deposits or obligations of the bank, are not guaranteed by the bank, and are subject to risks, including the possible loss of principal. Investment Advisory Services are offered through Raymond James Financial Services Advisors, Inc. The First Wealth Management First Florida Bank, and The First, A National Banking Association are not registered broker/dealers and are independent of Raymond James Financial Services. Views expressed are the current opinion of the author, not necessarily those of RJFS or Raymond James, and are subject to change without notice. Information provided is general in nature and is not a complete statement of all information necessary for making an investment decision and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results.

Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Investors should consult their investment professional prior to making an investment decision. Please note, changes in tax law may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we do not provide advice on tax matters. You should discuss tax or legal matters with the appropriate professional. 

A Securities Based Line of Credit (SBLC) may not be suitable for all clients. The proceeds from a SBLC cannot be (a) used to purchase or carry securities; (b) deposited into a Raymond James investment or trust account; (c) used to purchase any product issued or brokered through an affiliate of Raymond James, including insurance; or (d) otherwise used for the benefit of, or transferred to, an affiliate of Raymond James. Raymond James Bank does not accept RJF stock or any securities issued by affiliates of Raymond James Financial as pledged securities towards a SBLC. Borrowing on securities based lending products and using securities as collateral may involve a high degree of risk including unintended tax consequences and the possible need to sell your holdings, which may lead to a significant impact on long-term investment goals. Market conditions can magnify any potential for loss. If the market turns against the client, he or she may be required to quickly deposit additional securities and/or cash in the account(s) or pay down the loan to avoid liquidation. The securities in the Pledged Account(s) may be sold to meet the Collateral Call, and the firm can sell the client’s securities without contacting them. A client is not entitled to choose which securities or other assets in his or her account are liquidated or sold to meet a Collateral Call. The firm can increase its maintenance requirements at any time and is not required to provide a client advance written notice. A client is not entitled to an extension of time on a Collateral Call. Increased interest rates could also affect LIBOR rates that apply to your SBLC causing the cost of the credit line to increase significantly. The interest rates charged are determined by the market value of pledged assets and the net value of the client’s non-pledged Capital Access account. Securities Based Line of Credit provided by Raymond James Bank. Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. are affiliated with Raymond James Bank, a federally chartered national bank.Earnings withdrawn prior to 59 1/2 would be subject to income taxes. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free.

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