The past few weeks have been a whirlwind of information on what is really going on with the spread of COVID-19. Continent to continent, state to state, person to person, we are learning more about this highly contagious and deadly virus every single day. More recently the federal government has approved a $2 Trillion stimulus package to help ease the economic backlash of social distancing and the resulting shut down of so many businesses. In a time when things are tight, many people are looking for ways to decrease their risks and increase their liquidity.
Here are a few tips to help you find that liquid cash and minimize your risks while you maintain the health and wellbeing of yourself and your family:
If you need to tap into your individual retirement accounts for cash, you are able to access up to $100,000 without paying the 10% penalty if you are under age 59 ½. You also do not have to worry about paying taxes on the amount that you take out right away. The stimulus package (CARES Act) gives you up to 3 years to either pay the funds back or pay the taxes on the withdrawal.
If you have a 401(k) account with your current employer and are still employed, you can take a loan from the account of up to $100,000 or 100% of the account value. Under normal circumstances, you are only allowed to take up to $50,000 or 50% of the account value.
If you have a small business, there is a chance that you are eligible to take out a small business loan that you may not have to pay back. As long as the funds are used for things like rent, mortgage, utilities and payroll to keep the business afloat through June 30th, the loan does not have to be repaid. Check with your local bank to apply for the program.
If you own a home and have equity, you may be able to take out a home equity line of credit. Another option if you own a home and your interest rate is on the high side, you may want to check rates and see if refinancing makes sense for you.
It is a good idea to contact all of your creditors and ask what they are doing for people who have been impacted by the recent events. Many creditors are deferring payments, allowing waivers of late fees, and finding ways to work with you during this time.
If you have lost your job and need to file for unemployment, the CARES Act allots an additional $600/wk for the next four months. The $600/wk is above and beyond the regular unemployment benefits. Also unemployment usually lasts only 26 weeks. As part of the response, unemployment has instead been extended to 39 weeks.
You may be eligible for a one-time stimulus payment of $1200 plus $500 per child under age 16. Eligibility depends on your tax filing status and income. If you earned an adjusted gross income of $75,000/year or less, you are most likely eligible for the full payment. For a married couple, that amount is $2400 as long as the income is $150,000 or less.
If you have a non-retirement investment account, you may be eligible to take out a securities based line of credit. A securities based line of credit allows you to borrow against the value of your securities without having to actually sell them. The rates are usually based on LIBOR plus a spread and are significantly lower than using a credit card.
It may be time to revisit your risk profile and take an assessment of your goals. However, this is not the time to make rash decisions and sell based on fear. Carefully consider your short, mid-range, and long-term goals and decide if you are in the right types of investments to meet those goals. The more you focus on your goals, the less you will worry about the day to day movements in the market.
Expect a significant amount of volatility in the months to come while the world adjusts to a new normal and the economy begins to reopen.
Above all stay safe and healthy and try to remain as calm as possible. Take seriously the stay at home orders and social distancing when out. This will eventually pass, but not without leaving its historical mark.
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