As promised, below are ten planning opportunities to explore further during the Coronavirus Crisis. Some of these were discussed during our client-wide conference call earlier this week. We’ve expanded on that discussion while adding a few more opportunities to consider. If you would like to discuss any of these in greater detail, feel free to reach out to our team.
1. Assess Your Cash Reserves: Do you feel you have enough saved to defend against the impact of reduced income, a lost job, or increased expenses? A good rule-of-thumb is to have savings that can provide funding for 3-6 months of your fixed, non-discretionary expenses; three months for single individuals and six months for couples & families. Expense examples include gas, groceries, bills, insurance premiums, and debt payments.
2. Adjust Your Budget: Whether you are working or retired, examining your expenses is a sure-fire way to keep your bottom line healthy during a downturn. Often people try to slash the budget aggressively when having to “tighten the belt.” Instead of biting off more than you can chew, start with what we call “just manageable challenges.” Can you cut back on takeout or delivery and make a few more meals at home? Are there any subscriptions or services you are paying for that could be paused or canceled? These are just examples but start small and find success with cutting back on a few items before trying to undertake a major standard-of-living change.
3. Consider Opening or Increasing Your Credit Lines: Assess whether you need to provide yourself a last line of defense to your cash reserves. Increasing credit card limits or opening a home equity line of credit can provide financial cushion in an emergency. While we never want to encourage the use of debt unnecessarily, increased credit limits can provide much needed flexibility and optionality for an uncertain future.
4. Talk with a Mortgage Banker about a Re-finance: Since the mortgage market has changed a lot over the last month, assessing if you are a good candidate for a re-finance is a prudent move while rates are close to historic lows. Let us know if you would like to be put in touch with one of our Mortgage Banking Strategic Partners to learn more.
5. Fund Roth IRAs: If eligible, think about adding dollars to a Roth IRA. Dollars in Roth IRAs grow tax-free long-term and are a great source of retirement savings. Since the market has pulled back from all-time highs and 2019’s tax filing deadline has been extended to July 15th, now is a great time to consider adding dollars to a Roth IRA.
6. Convert Dollars in Traditional IRA Accounts to Roth IRAs: This strategy is known as a “Roth Conversion.” Essentially, you can move pre-tax dollars to tax-free dollars long-term. The strategy won’t make sense for everyone as there is a lot of tax ramifications to consider, but it will for many of you. As such, our team is currently analyzing client situations where this makes sense. Expect to hear from us if we feel you are a good candidate to complete a Roth Conversion. In the meantime, if you are interested in this strategy, reach out to Connor directly.
7. Fully Fund Eligible Health Savings Accounts for 2019: Since the tax deadline has been extended, the timeline for HSA contributions has been extended as well. Given our current crisis is one of health, making sure you have enough dollars saved for future medical expenses—if you have an HSA or are eligible for one—is a good source of savings that also provides you an immediate tax break.
8. Review Your Estate Plan: It’s never a bad time to make sure your estate plan reflects your wishes. Now more than ever, it is important to conduct a review, especially of Healthcare Directives or Powers of Attorney. If you have not completed an estate plan or need assistance in reviewing your current plan, we can connect you to one of our team’s Estate Planning Strategic Partners.
9. Freshen-up Your Resume: For our clients who are still in the workforce, consider reviewing your resume. While we hope the effects of COVID-19 do not impact you directly, making sure your resume is competitive is a no-brainer move in the event you find yourself unexpectedly in search of a new job.
10. Assess Your Personal Resources: During a crisis, knowing who you can rely upon for any form of assistance provides fantastic peace-of-mind. Whether it is family, friends, coworkers, or someone in your network, checking-in with who you need for help—or checking-in on who you can help—is a positive measure towards getting yourself, your loved ones, and your communities past this crisis.
One quick note: as mentioned during our conference call, our team is analyzing the recently passed Stimulus Bill. In our preliminary research, there are many changes as a result of the bill that will open-up other planning opportunities. As we parse through these changes, we will communicate more about any and all new rules, laws, or expectations that will impact you.
We sincerely hope all the above helps during an unprecedented time. Please reach out if we can be of any assistance in general or in implementing any suggestions listed here. In the meantime, stay safe and healthy!