COVID-19 Pandemic Week #3: Financial Implications

On January 15, 2020, the Dow Jones Industrial Average index crossed 29,000 for the first time. In February, the first American died of COVID-19 and, on March 11, COVID-19 was officially declared a pandemic by the WHO (World Health Organization). The Dow closed out Q1 on March 31 at 21,917.16 and over 5,000 Americans to date have died from COVID-19. Congress passed, and the president signed, a $2 trillion emergency stimulus packagecalled the CARES Act.
It is at times like this that numbers can become overwhelming. In addition, nobody knows the duration, severity, and lethality of the pandemic virus. Let’s step back and focus on six things that we do know financially to guide our decisions and actions:

¨       Most Americans Will Get Cash- According to the Tax Foundation, over 90% of tax filers (singles with a 2018 or 2019 adjusted gross income less than $99,000 and married couples with an AGI less than $198,000) will receive at least some stimulus payment(technically called a recovery rebate) based on a sliding scale. Singles earning up to $75,000 and couples earning up to $150,000 will receive full $1,200 and $2,400 payments, respectively. Use this calculatorfrom the Washington Post to see what your payment will be. Good uses of stimulus money (as well as income tax refunds) in tough times are paying bills, reducing debt, and setting aside savings for emergencies.
¨       COVID-19 Scams Are Rampant- Scams always follow current events. Among those related to COVID-19 are fake cures, vaccines, and treatments; fake charities; phishing scams purporting to come from the WHO or Centers for Disease Control; and malicious apps and websites that use COVID-19 “click bait” to install malware or access victims’ devices.
¨       Tax Deadlines are Delayed– The new deadline for filing 2019 tax returns is July 15, 2020. Estimated tax payments that were due on April 15 are also delayed until July 15. State income tax deadlines vary; some states have pushed back their deadlines also. In addition, required minimum distributions (RMDs) for older taxpayers are suspended during 2020.
¨       Financial Breathing Room is Now Available- Student loan borrowers can stop making monthly payments without any penalties through September 30 and investors can withdraw money from retirement savings account penalty-free. For homeowners with FHA mortgages, there is also a 60-day foreclosure and eviction freeze. Some landlords, utilities, and credit card companies are also offering some leniency provisions or may do so if their clients reach out and ask.
¨       Investments Are Volatile– History never repeats itself exactly, but it rhymes. COVID-19 has been described as a cross between the Spanish Flu of 1918 and the Great Recession. While the cause of market volatility is a pandemic, rather than a housing bubble, we have evidence from history (93 years of asset class performance data) to suggest that investment values will eventually bounce back. While past performance is no guarantee of future results, we can only project from past data because that is all that we have. The alternative (that financial markets will never recover) is unthinkable.  
¨       Estate Planning is Important– Many people have more time on their hands now and death and dying are more salient topics now with the death of 5,000+ fellow citizens (more people than died from 9-11). This is a good time to reach out to an attorney (maybe virtually) to prepare a will, health care advance directives, and a power of attorney for financial matters. It is also a good idea to periodically review and update a list of your beneficiary designations and digital assets.

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