The CARES Act

Here is what you need to know about the COVID-19 stimulus bill.  We discuss key provisions of the $2 trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act.

Transcript

Tommy:   0:03
Just a few days ago, I saw a headline that said 1/3 of the world's population was on

Tommy:   0:08
lock. All right, well, thank you so much for tuning in to the central podcast. We're looking for Thio unpacking some details about Cares act. Today there are a ton of details and we're gonna pick out some

Tommy:   0:31
of the highlights specifically as it relates to investing, retiring and your money mats here with us to discuss How you doing? Man,

Matt:   0:41
I'll do a good Tommy. Crazy times with covert 19 forcing a lot of people to be quarantined. So it's ah, definitely interesting times.

Tommy:   0:52
Just a few days ago, I saw a headline that said 1/3 of the world's population was on lock down, and that's just staggering to think about.

Matt:   1:00
Yeah, that is, I know I wouldn't gas yesterday, and I don't think I've ever paid $2 for gas and quite a while. And that's because it's premium. So regular is probably what, 1 60 something? Yeah,

Tommy:   1:13
I got some for, I think, 1 50 ish just this week. Nice. I was talking to my wife and I said, You know, gas is cheap, but we can't go anywhere toe. Use it up. But this too shall pass. And we've talked about that a lot. We've been doing webinars to keep everybody updated and provide our perspective. When did a special Bolton podcast on kind of bear markets and what's going on? A lot of that information is still accurate. Although the number of cases and stuff is changing every day, the long term outlooks are largely the same. But something that has happened since we last came to you with a podcast is the Corona Virus Aid Relief and Economic Security Act. That's abbreviated cares, which is clever, and this act was passed and signed in. The law has been designed to help people that have been most impacted by the pandemic provides business relief and coverage for treatments that maybe the insurance wouldn't cover. But there are some key provisions that may benefit investors and retirees, and those are some of the things we want to pull out today and talk about so $2 trillion. There are discussions around maybe a phase two, so we'll see what happens. But just to put this in perspective in 2008 during the financial crisis, the Economic Stimulus Act of 2008. I only saw an $800 billion earmark federal funds, and this is two trillion so uncertain times and some desperate measures here from the Fed government at large.

Matt:   3:00
Yet Tommy, that's about what, 3.5 times the relief package of what it was in 2008. But, you know, if you if you know, just as we were talking at the beginning of this, there are a ton of small businesses that have no way to get revenue, which means ultimately they're having either shut their doors or lay off people when I think we're starting to see a lot of that. I think the number I saw yesterday was about 10 million people have been laid off in two weeks.

Tommy:   3:30
Yeah, unbelievable. Jobless claims was, like historic, measured against any week to week unemployment. 3.5 1,000,000 nearly last week, 6.5 1,000,000 this week, just staggering. So

Matt:   3:44
tell me, why don't we jump into the bill and talk about what's all in it and how it can benefit if your small business owner or an investor, or maybe someone who has unfortunately been recently let go.

Tommy:   3:56
Yeah, let's do. We're just gonna unpack some of the highlights for you because there's so much here, you know, say, encourage you to read it. But that's not something that you probably want to do but definitely reference it. Look for headlines and highlights and bullet points that may be specific to your situation, but we want to talk about some of the ones that have jumped out to us and apply it to the majority of our community and our clients. But the 1st 1 that everybody has probably been paying attention to is the stimulus check. So direct payments of up to 1200 bucks a person with an additional 500 per child are coming out to the majority of Americans. As they say, there are reductions or exclusions based on income. But, hey, the big thing here is this is automatic, so you don't have to do anything. You don't have to apply or request. It's all gonna happen automatically. If they have given you a tax refund and they have an account on file with the I RS. It'll just be deposit automatically. If you don't, then that'll come via mail. But if you're curious and Matt and I were talking about this this week, there are calculators online so that you can see how much you should be getting or if you qualify for what amount based on maybe income limitations. The 1st 1 that comes up when you just search for it is from The Washington Post. So just look for a reputable source and you can punch in just a few details toe. See how much you might be getting. But again, you don't do anything. This is automatic. You'll get it.

Matt:   5:24
And one thing I would say to be cautious about Tommy is when you're out there looking for these calculators and starting to see it a little bit, too, is there's people setting up scam websites to scam people, even on the digital map. By John Hopkins. You know how many people have been affected where they are in the nation on their scams going out. So if you're putting in your information again, only used reputable sources. Washington Post one is good, and I wouldn't put in any more details than I believe it asked for your marriage status. If you have any kids and what your adjusted gross income

Tommy:   6:01
was. Yeah, that's all they need to know in that calculator will give you the output of what you need. And same with these maps, Matt mentioned tracking their apparently fake checks coming already. So lots people preying on the the vulnerable right now in light of all of this. So just be aware. And I think we'll probably see that even continue with the next thing we talked about, which is business on relief and fake sites from the SP A where you'd put in sensitive information to apply for a relief. And this could be being done on a fake site. Pay attention, make sure at the right place and don't give any more info than is necessary. So the 2nd 1 can already mentioned beyond the stimulus check is tThe e Act allocates $500 billion for loans, loan guarantees, investments to business and then also for states and municipalities so that business on relief is gonna look a lot different for a lot of people that were impacted. It does cover sole proprietors, and it covers people with employees of 500 or less. So there's a lot of benefits and availability there in the form of loans and grants. And this is to help obviously blocked the economic impact of these small business owners and their employees being laid off and furloughed. And the large companies as well, so far, far reaching economic impact from the shutdown essentially of the nation in the nation's economy in most ways. And there's a lot of relief here set aside to help keep a lot of this. If

Matt:   7:33
you tell me if you've got any business owners listening here, what's the best place to go to get some more information on that?

Tommy:   7:40
Yeah, Matt. So there are a couple of things to keep in mind here. There are PPP loans, which is the paycheck protection program. And then there is the E. I. D L program, which is the economic injury disaster loan. So the PPP loans are gonna be through banks. If you already work with the bank as a business owner, they've probably reached out to you the larger banks air just coming online as of Friday, April 3rd, and that'll be rolling out. But the E I d. L is something you would apply with for relief directly from the S B A and that is sp a dot gov. That's the U. S. Small Business Administration, s B a dot gov, and you can get links there straight to the relief options. And resource is and apply for that direct relief from just impact from the virus itself. It's an evolving program, and more and more people in resource is coming online. But it's important to make sure you're going to the right place and looking at the right thing. Those are the two main options available to a business owner clients right now. So we've talked about the stimulus check and individuals on a personal level. We've talked about business owners in the relief available to them. Let's talk about the investing side of this a little bit. How this relates to retirees and retirement accounts. The first point is around the RMDS or the required minimum distributions. So these are distributions that the IRS requires for people ages 70 and up, and that just changed this year to 72. But a lot of people were already there. It also applies to people who have inherited IRAs, so this could be a younger person who inherited something from a parent or an uncle, and it's being required to take distributions from those plans. The R M D's for all of those plans has been suspended from April 1st through the end of the year, so there was no real guidance says to what was available for anything that has already been taken January 1 to April 1st, we're looking for maybe some clarification there, but for sure, April 1st there into the year. Rmds can be opted out of and are not required, which is thinking help a lot of people and could save you some tax money, too. So

Matt:   10:03
no different Tommy than them. Extending the tax deadline for filing your taxes. You

Tommy:   10:09
have very similar. And there was a similar rule in 2009 that gave some flexibility around this as well. Not uncommon to see some of these things happen just to help people navigate what's coming out of their accounts and what the tax implications may would be in the same, like you mentioned for the tax filing deadlines being extended just to give people options, to not focus and think about that right now and maybe not to have to come off that cash to pay if there Oh, if they owe taxes and it kind of leaves to the last point, which is specifically relating to your IRAs. So with that tax deadline being extended, you still have the ability to contribute to the IRA's for 2019. So that deadline is usually tax day, April 15th that has been extended to July 15th as well. And then probably the more significant piece of this is they are waving withdrawal penalties for distributions up to $100,000 from retirement plans for one K's IRAs, 43 B's. They're waving the 10% penalty if you're taking this money out before 59 a half. So that sounds pretty good. Two people at first glance, but there are some things to be aware of. Here

Matt:   11:27
you tell me this is one that we've covered in a previous podcast. Actually, forget which one I think it was in Season one. Where we talked about it is an early withdrawal, a good idea or hardship withdrawal, a good idea, and the I think the overwhelming evidence or conclusion that we came to is unless it is ah 100% dire need. It's not a great idea to handcuff your future because you're gonna end up. Let's say you do take out $100,000. That's not just $100,000 today. Could have been whatever that money grew to in 5 10 15 20 years.

Tommy:   12:03
Yeah, you're exactly right. And from what I understand about this piece of the Cares act that applies, what you just said applies as well. Is there a lot of things that are working against you here? This is exactly as it's framed. Aah! Relief measure. This would be a dire strait, an absolute emergency because they're waving this 10% penalty. But you still owe the tax. I think you have three years to repay it, but it is taxed as income if it's not fully repaid. And then the bigger issue is that withdrawals from accounts and changes in strategies they're not really considered in this light with most investors but making a withdrawal. Making these changes is really a form of market timing. So when you take this money, how it is leaving the investments, and at the time of this recording, we've seen substantial Pullbacks in markets and most investments has kind of been nowhere to hide. So this money's coming out of investments. Then you're selling quote unquote at these Pullbacks after these Pullbacks, it probably locking in some losses. And you're gonna miss out on recoveries when they occur. And that's the timing of the market and what you alluded to of, you know, maybe 100,000. Now, even if you pay it back, you know it's not gonna be able to participate fully in these recoveries cycles. And if you don't pay it back, then that's just money lost from a long term perspective, innit? It would be thousands and thousands of dollars, depending on how you're investing in the time frame in which you're doing it. So all of these accounts are long term plans. If you're looking at this and looking at this benefit than you're under 59 a half, and it's a case by case, we could look at it in light of your plan if you're close to retirement anyway, and those kinds of things are worth considering. But the majority of Americans that are gonna find appeal here, and maybe the people that are losing their jobs. And looking at this as an option, keep it on the back, Back, back burner. Because this is worst case scenario. Type of option, in our opinion,

Matt:   14:06
Yeah, I think you really have to look at your situation carefully. Um, and do some planning before definitely locking in a decision there. Well, tell me this is a good summary. Why don't you, ah, again touch on the bullets and then we'll wrap this thing up?

Tommy:   14:21
Absolutely. So it kind of touched three categories. We talked about kind of direct personal impact from the stimulus check. There's not a lot to know or do there we talked about the relief that's been set aside and available is available to business owners. And we talked about specific stuff around your investments. Retirement accounts, rmds, withdrawal penalties being way, taking me out for one case, those things there at the end. But there's a lot more here, and we have a resource that you may find helpful. So you want to revisit any of these things we've talked about and get more detail? We have a checklist of issues to consider as you're looking at the emergency relief options that have been made available, and you can get that from our website is barco financial dot com slash cove in 19. We've emailed out about this as well. There a few other checklists that are on there for you that may be of interest. Thanks for tuning in. As always,

Matt:   15:12
stay safe, Stay healthy, stay out of trouble until next time. Go. And thanks for

Tommy:   15:38
sticking around after the music. We just have a quick disclosure for you. Securities are offered through S a Stone Wealth Management Inc and advisory service is or offered through S a Stone Investment Advisors Inc.