Moving Forward Financially with Jennifer Carole

I used to do a lot of writing for Financial Engines about saving, investing and retirement planning. I’ve always felt comfortable with money and I’m grateful, that for most of my life, I’ve done a good job earning it. When the virus hit, I knew I was screwed because I’ve been half-ass employed since May 2018 – yes, that aligns with when Joseph DeAngelo was caught (he’s the guy who killed my dad and stepmom).

Now here we are. Many of us unemployed or under-employed and for those with jobs, I’m sure you’re nervous about whether they’ll be here when we’re allowed back out of our homes. That’s a valid concern. With that in mind, let’s do a quick financial review so you can think things through before the panic really sets in (and if it does, be sure to listen to Heidi’s advice from last Friday).


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General Financial Health Check

Here are the top ten things you should think about right now based on the “Jen Carole School of Financial Management” which I’ve put together based on my experience and a little googling. I am NOT a financial adviser, lawyer or expert. There are lots of real experts out there providing advice so please do your homework before you make any big changes.

1. Take this money personality quiz. Yeah, I created this and it’s a good way to have a money discussion with your money partner. The point is, once you identify your money styles, you can have productive discussions about what matters most to you and your partner.

2. Focus on housing. You need this now and you’ll need it later. There are ways to get help if you’re struggling with your rent or mortgage. We also may need to consider renting rooms, sheltering the elderly, doing more to assist one another to get through these times. If you need income, this might be one of the kindest options out there.

3. Evaluate your debt. This matters, no matter what. Some debt you can let ride, other debt is very important because making those payments will ensure you have health insurance or a place to live (long term, right now rent waivers, where they exist, are not for very long). Where you can, negotiate lower payments. I believe making your mortgage payment is vital because this can tank your credit rating very fast. So can department store credit cards. But not paying off a medical bill typically doesn’t have the same impact on your credit score.

4. Do your taxes. Now. The CARES Act payments are based on your 2019 taxes. If they aren’t done yet, it reverts to 2018. If you want to get that money, you must get those taxes done. Tax deadlines have been extended, but remember, tax people get sick too, so expect delays.

5. Determine your approach to cash. In my humble opinion, you want to hang on the cash right now, so where you choose to spend it needs to be thoughtful and strategic. Some people might want to tap cash from their retirement savings (more on that below). If you choose to use that to pay off debt, really think about it.

6. Evaluate subscriptions, memberships. It’s so easy these days to sign-up for a low, monthly fee only to find we forget how many low, monthly fees we’ve signed up for. My credit card lets me look at recurring fees in a single view. You can also do it old school. Go through the list, trim what makes sense. Also, don’t be afraid to call your clubs, gyms, whatever, and see if you can suspend payments for the near term.

7. Continue to contribute to your retirement. This is especially important if your company matches. As long as they are giving you free money, take it. Take as much as you can. While the window for how much we can withdraw from our retirement is limited (see below), the value of free money can’t be ignored. Grab it.

8. Leave your investments alone. I am not an investment advisor, I’ve just been in the market forever and lost my shirt in 2008. But it came back. The advice from financial planners is if you can afford to, let it ride.

9. Watch the US economy. I spend a little time watching the economy and reading assessments of the future, and I have one here from Todd Tucker at the Roosevelt Institute. This is a liberal-leaning think tank – that’s why I find this interesting. I suspect we will see jobs rise in this sector and so we should focus on what will happen for both jobs and investments.

10. Buy with intention. Look at the supply chain (where did it come from, who is employed, does it require extensive shipping) and consider the need (is it plastic, is it just a long walk to the trashcan, is it necessary to sustain you or the ones you love). When choosing vendors, consider what you can buy locally so you keep your community thriving during these strange times.

Now about that 401(k)

The following content is based on a blog from a gentleman I used to work with at Financial Engines. Jeff Schulte is now CEO at ForUsAll, a company focused on making retirement plans cheaper, easier to run, and better at helping business owners and their employees retire comfortably. He wrote the piece for Plan Administrators (the people who run 401Ks). I’ve adapted it for consumers like you and me!

To help with the wide-ranging economic impacts of the Coronavirus, Congress has passed the Coronavirus, Aid, Relief and Economic Security Act, commonly called the CARES Act. The Act has new rules that give us more flexibility to use our 401(k)s to help us deal with financial hardships.

Who is eligible for the new options?

There are two ways to qualify: those who have been diagnosed (or a spouse or dependent) with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention. OR those who’ve experienced adverse financial consequences as a result of being quarantined, furloughed, laid off or having work hours reduced; those unable to work due to lack of child care; and the closing or reducing hours of a business owned or operated by the individual due to the virus. And then, of course, other factors as determined by the Secretary of the Treasury.

The way I read this, there’s a lot of wiggle room and if you’re prepared to fight, you might have a good chance of gettimg what you need.

What are the new options?

The CARES Act gives us two new ways we can use our 401(k) to deal with the impacts of the Coronavirus.

Distribution. Those eligible (see above) can take a distribution by the end of year of up to $100,000, or their full retirement plan balance, whichever is less. The usual 10% penalty is waived and taxes (on the money you’ve withdrawn) will be spread across three years. Remember, these were pre-tax dollars you put away while working, so taxes are due. The idea was based on the notion that when you’re older, your tax rate will be lower. Also, you can redeposit the funds back into the plan (or a related retirement account) over the next three years and in doing so avoid paying taxes or receive a tax refund for the taxes already paid.

Loan. The CARES Act doubles your current retirement plan loan limits to the lesser of $100,000 or 100% of your vested account balance in the plan. It defers payments for the first year and the loan must be taken within the next 180 days. If you already have a loan, if you’re eligible, you can delay those loan payments until January 2021 but interest will continue to accrue.

Required Minimum Distribution Holiday. If you are taking distributions but might be interesting in stopping them right now in an attempt to wait for the market to come back and reclaim your losses, you might be eligible to stop those disbursements for the rest of 2020.

In all cases, you need to work with your Plan Administrator (the people who manage your 401(k)) or your IRA manager (the CARES Act seems to include these as well) to get the explicit details.

Thanks Jeff for the summary. Access to this cash could be a lifesaver.

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