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FINA N CI AL FOCU S
CARES Act Offers Help for Investors,
Small Businesses April 1, 2020
As we go through the coronavirus who qualify for COVID-19 relief and/or
crisis, we are all, first and foremost, in plans that allow COVID-19 distribu-
concerned about the health of our loved tions. Withdrawals will still be taxable,
ones and communities. But the econom- but the taxes can be spread out over
ic implications of the virus have also three years. Still, you might want to
weighed heavily on our minds. However, avoid taking early withdrawals, as
if youâÂÂre an investor or a business owner, youâÂÂll want to keep your retirement
you just got some help from Washington accounts intact as long as possible.
â and it could make a big difference, at ⢠Suspension of required withdrawals âÂÂ
least in the short term, for your financial Once you turn 72, youâÂÂll be required to
future. take withdrawals from your traditional
Specifically, the passage of the $2 IRA and 401(k). The CARES Act waives
trillion Coronavirus Aid, Relief and these required minimum distributions
Economic Security (CARES) Act offers, for 2020. If youâÂÂre in this age group,
among other provisions, the following: but you donâÂÂt need the money, you can
let your retirement accounts continue
⢠Expanded unemployment benefits âÂÂ
growing on a tax-deferred basis.
The CARES Act provides $250 billion
for extended unemployment insur- ⢠Increase of retirement plan loan
ance, expands eligibility and provides limit â Retirement plan investors who
workers with an additional $600 per qualify for COVID-19 relief can now
week for four months, in addition to borrow up to $100,000 from their
what state programs pay. The pack- accounts, up from $50,000, provided
age will also cover the self-employed, their plan allows loans. We recommend
independent contractors and âÂÂgig that you explore other options, such as
economyâ workers. Obviously, if your the direct payments, to bridge the gap
employment has been affected, these on current expenses and if you choose
benefits can be a lifeline. Furthermore, to take a plan loan work with your
the benefits could help you avoid liq- financial adviser to develop strategies
uidating some long-term investments to pay back these funds over time to
youâÂÂve earmarked for retirement just to reduce any long-term impact to your
meet your daily cash flow needs. retirement goals.
⢠Direct payments â Individuals will ⢠Small-business loans â The CARES
receive a one-time payment of up to Act provides $349 billion to help small
$1,200; this amount is reduced for businesses â those with fewer than
incomes over $75,000 and eliminated 500 employees â retain workers and
altogether at $99,000. Joint filers will avoid closing up shop. A significant
receive up to $2,400, which will be re- part of this small business relief is the
duced for incomes over $150,000 and Paycheck Protection Program. This
eliminated at $198,000 for joint filers initiative provides federally guaranteed
with no children. Plus, taxpayers with loans to small businesses who maintain
children will receive an extra $500 for payroll during this emergency. Sig-
each dependent child under the age of nificantly, these loans may be forgiven
17. If you donâÂÂt need this money for an if borrowers use the loans for payroll
immediate need, you might consider and other essential business expenses
putting it into a low-risk, liquid account (such as mortgage interest, rent and
as part of an emergency fund. utilities) and maintain their payroll
during the crisis.
⢠No penalty on early withdrawals âÂÂ
Typically, youâÂÂd have to pay a 10% WeâÂÂll be in a challenging economic en-
penalty on early withdrawals from vironment for some time, but the CARES
IRAs, 401(k)s and similar retirement Act should give us a positive jolt â and
accounts. Under the CARES Act, this brighten our outlook.
penalty will be waived for individuals This article was written by Edward Jones
for use by your local Edward Jones Financial Advisor.
Katrina M Johnson, AAMSî
Financial Advisor edwardjones.com
1141 South State St., Suite 23 Member SIPC
Davison, MI 48423
810-653-6307