As we prepare to commemorate our beautiful nation, we’re conscious of the fact that this year’s holiday will probably be somewhat different than what we’re used to.  Fireworks and barbecues will be balanced with the need to “flatten the curve.”  Songs and celebrations will have to take place amid social distancing.  Indeed, our country is faced with challenges most of us have never experienced before.  

But recently, we came across a quote that reminded us of something important: No matter how different this Independence Day may feel, the most important thing about our nation is still the same:

“I am an American, free born and free bred, where no one is my superior, except for their own worth, or my inferior, except for their own demerit.” – Theodore Roosevelt

Many things have changed since then, but his words still apply.  For that reason, there is nothing – not even a pandemic – that can dampen our love for our country.  And nothing can stop us from having a wonderful Independence Day.  A day spent giving thanks for this land we live in.  The home of the free and the brave.    

From all of us at Minich MacGregor Wealth Managment, we wish you have a safe and wonderful Independence Day, too.   

Imagine this: 

You’re on the highway, drumming your fingers along the steering wheel and humming to the music on your radio when suddenly you look at the speedometer.  Woah!  You’re driving 83 miles per hour – and the speed limit is 65.  Hoping the highway patrol isn’t around to see, you immediately press the brakes.  Has that ever happened to you?  (Yeah, us either.  Wink-wink.)  

Well, on Thursday, June 11, that’s exactly what happened to the markets.    

The Dow plunged over 1800 points.  The S&P 500 fell by almost 6%.¹  It’s the largest selloff since April.  It’s also a sign that investors have realized the markets may have been climbing too fast – well beyond the speed limit the economy has set.

Here’s what we mean.  Remember the brief-but-brutal bear market in March?  Thanks to the coronavirus, the S&P fell from 3,386 points on February 19 to 2,237 just over a month later.²  What started as anxiety over disrupted supply lines morphed into full-blown terror over the prospect of skyrocketing infections, bankruptcies, and unemployment.  It was one of the fastest bear markets in history.

But in its wake came one of the fastest bull markets in history.  From March 23 to April 8, the S&P rose roughly 22%.²  And for the most part, the markets have kept climbing.  By June 8, the S&P had climbed 44% in only two-and-a-half months!²  It was an absolutely stunning turnaround.  

But was the turnaround real?    That’s the question our clients have all been asking us.  Because as the markets climbed, the economy fell.  

As you know, we’re in a historic recession right now.  Since March, over 44 million people have filed unemployment claims.³  The jobless rate currently sits at 13.3%.⁴  (Although the Department of Labor has admitted that the real numbers are even worse than that.  Thanks to a “misclassification error”, previous months’ rates should have been several points higher.⁴)   And yet, the markets surged ahead.  What gives?  

What gives is that the rally was largely driven by two things: hope and fear.  If that seems contradictory, bear with us.  It will make sense in a moment.  

The “hope” part of the equation was simple: After weeks of scary headlines, investors began to acclimatize to the coronavirus.  When that happened, hope took over.  Hope that government stimulus would work.  Hope that jobs would return.  Hopes that “the curve” would flatten and the pandemic brought under control.  Hope that a vaccine would be discovered in record time.  Hope that the economy would recover in a classic “V-shape”, meaning it would be rebound out of a recession as quickly as it fell into one.  

Once hope established itself, fear quickly followed – the fear of missing out.  FOMO, as it’s popularly known, is a completely normal emotion, but it’s also the bane of many a rational investor.  The more the markets climbed, the more investors feared missing out on a historic rally, and all the on-paper profits that come with it. Even some companies that recently declared bankruptcy have seen their stock price rise nearly 50%!⁵  

To be clear, a market rally was not really a surprise.  History tells us that the stock market usually recovers fairly quickly after a pandemic.⁶  Furthermore, because the markets move largely on what investors expect will happen in the future – as opposed to what’s only happening right now – the bad economic data we saw in April and May was already priced in.  If investors know we are in a recession but expect that recession to end quickly, a market rally is a natural result.  

But now we return to my “speeding” analogy from the beginning of this message.  A rally is all well and good, but the higher stock prices go, the further they get from their underlying fundamentals.  In investing, fundamentals are what you use to value a company or security.  Earnings, revenue, assets, liabilities – the stronger these are, the more highly a company is likely to be valued.  The economy has its own fundamentals, too.  (Think unemployment, GDP growth rate, inflation, etc.)  Right now, our economy’s fundamentals are not particularly strong.  By extension, many companies’ fundamentals aren’t particularly strong right now, either.  While we at Minich MacGregor Wealth Managment don’t rely on fundamental analysis alone to choose investments – we use also use technical analysis – when the markets get so far ahead of their fundamentals, it’s like a driver who suddenly realizes he’s speeding way beyond the limit.  

So, what prompted investors to look at their speedometer? Several things. First is the simple realization that, despite the warmer weather and the easing of quarantine restrictions, COVID-19 is not going away anytime soon. We know – you’re probably as sick of hearing about the pandemic as we are. But the fact remains that several states are seeing a dramatic increase in cases. In fact, fourteen states “have recorded their worst week yet for new coronavirus infections.”⁷ Hospitalizations are also on the rise. 

Second is a sobering report from the Federal Reserve.  Ever since the financial crisis, our nation’s central bank has taken an increasingly important role in propping up the economy.  So, when the Federal Reserve speaks, people listen.  Last week, chairman Jerome Powell warned that interest rates would probably be kept near zero for years to come – and that by the end of the year, the unemployment rate would still be around 10%.⁸  On the heels of this statement came the news that, while the May job report was better than expected, and that jobless claims have dropped 10 weeks in a row, 1.5 million more Americans filed claims in the last week alone.³

Essentially, the markets woke up last Thursday to a healthy dose of reality.  A v-shaped recovery is not guaranteed.  The story is not over.  Investors looked at their dashboard and realized they were speeding.

So, what does this all mean for us?  Is another market correction due?  Or will the markets simply take a breather, and then keep climbing?  

You can probably guess our answer: There’s no way to know for certain.  You see, trying to predict what the markets will do means we have to predict exactly what the virus will do.  And no one – not even the most experienced epidemiologist or grizzled virologist – can do that.  So, as investors, it doesn’t make any sense to try.  It just doesn’t work!  That’s why we don’t invest using economic predictions, or companies’ fundamentals, or just holding onto everything we own and hoping our portfolio will eventually go up.  

The fact of the matter is that the markets are going to leap ahead and fall behind like they always do.  As financial advisors, we don’t want you to participate in that kind of rollercoaster ride.  Rollercoasters always end where they started.  Buy-and-hold investing tends to leave you where you started, too!  (Remember, after all was said and done, the S&P 500 finished 2013 almost exactly where it finished in 2000.²  That’s thirteen years of bull markets and bear markets, just to go around in circles.)  That’s why we’re not going to invest based on hope for a vaccine or hope for a swift recovery.  Instead, we’ll continue to use indicators like relative strength, supply and demand, and trendlines.  We’ll continue to follow the rules we’ve put in place: Getting in the markets when they trend above a certain point and getting out when they trend below a certain point.  

It helped us avoid the worst of March’s market crash.  It will help us in the future, too.    

So, rather than thinking of investing as a game of predictions, think of it like driving your car.  Whenever you drive somewhere, you probably have a decent idea of when you’ll arrive.  But you can’t predict the traffic lights you’ll hit along the way.  You can’t predict any accidents you’ll encounter, or whether you’ll get a flat tire, or be forced to take an entirely different route.

Instead, experienced drivers know that, whether you’re going on a long road trip or just your morning commute, you should always:

• Plan ahead and familiarize yourself with the route
• Leave early and give yourself plenty of time
• Buckle your seat belt
• Keep your eyes on the road ahead and not on your phone
• Be mentally prepared to change your route or even sit in traffic for a bit
• Keep a spare tire handy

When you do that, you’re giving yourself the best chance of arriving where you need to be, when you need to be there.  You’re preparing, not predicting.  

This is all true of investing for your financial goals.  We cannot predict exactly whether last Thursday’s drop was the start of a market correction or just a blip.  That’s why we must remain prepared for more periods of volatility over the coming months.  More good weeks and bad days.  We should be prepared to speed up or hit the brakes depending on the road conditions.  

As always, please let us know if you have any questions or concerns.  We always love to speak with you.  In the meantime, we hope you enjoy your summer!     

Sources:

¹ “U.S. Stocks End Sharply Lower as Coronavirus Worries Return,” The Wall Street Journal, https://www.wsj.com/articles/global-stock-markets-dow-update-6-11-2020-11591853228

² “S&P 500 Historical Prices,” The Wall Street Journal, https://www.wsj.com/market-data/quotes/index/SPX/historical-prices

³ “Another 1.5 million Americans filed for first-time unemployment benefits last week,” CNN Business, https://www.cnn.com/2020/06/11/economy/unemployment-benefits-coronavirus/index.html

⁴ “The May jobs report ‘misclassification error’ explained,” PBS, https://www.pbs.org/newshour/show/the-may-jobs-report-misclassification-error-explained

⁵ “Even bankrupt stocks soared in the latest market rally,” CNN Business, https://www.cnn.com/2020/06/11/investing/bankrupt-stocks-surge/index.html

⁶ “How the stock market has performed during past viral outbreaks, as coronavirus spreads to Italy and Iran,” MarketWatch, https://www.marketwatch.com/story/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22

⁷ “More than a dozen US states see record high of new cases,” The Guardian, https://www.theguardian.com/world/2020/jun/09/coronavirus-cases-uptick-detected-some-us-states

⁸ “Fed Officials Project No Rate Increases Through 2022,” The Wall Street Journal, https://www.wsj.com/articles/fed-debates-how-to-set-policy-for-the-post-pandemic-economy-11591781402

 “Houston, we’ve had a problem.”

It got lost in the shuffle of current events, but this past April marked the 50^th anniversary of one of the most compelling dramas in recent history: the events of Apollo 13. 

It was April 14, 1970.  What would have been the third mission to land on the moon was going swimmingly.  The astronauts – Jim Lovell, Fred Haise, and Jack Swigert – had just filmed a televised tour of their spacecraft.  Music played, jokes were swapped, and Haise even played a prank on Lovell by hitting a button that caused a startlingly loud bang. 

Two minutes later, another bang resounded throughout the spacecraft.  But this one was no joke.  It was an explosion.  Here’s a transcript of what happened next.¹    

No one knew it yet, but at that moment, the astronauts were flying a dying spacecraft.  Over the next several days, they would have to manage with limited food and less sleep.  They’d contend with falling temperatures and rising carbon dioxide levels, with dehydration and urinary tract infections.  Back on Earth, hundreds of flight controllers, engineers, scientists, and other astronauts worked around the clock, trying to improvise an entirely new mission than the one they planned for: Bringing the crew home alive.      

If you had never heard of Apollo 13 before, and you looked at the transcript of the incident, you would never guess there was any real danger at all.  Despite the crew being 178,000 nautical miles from Earth, and despite the spate of alarms and warnings confronting both the astronauts and flight controllers in Mission Control, there was no panic.  No cursing.  No shouting.  No finger-pointing.  Instead, there was only one thing: teamwork. 

“When bad things happened, we just calmly laid out all the options, and failure was not one of them.  We never panicked, and we never gave up on finding a solution.” ² – Jerry Bostick, Flight Controller

Between the fateful explosion that crippled Apollo 13’s spacecraft and the time the astronauts landed in the Pacific Ocean, this amazing team of professionals had to work together to figure out:

• How to use the craft’s Lunar Module (the section that was supposed to physically land on the moon) as a lifeboat
• How to conserve desperately-needed power to keep the astronauts alive while still leaving enough to return home
• How to filter carbon dioxide out of the Lunar Module (famously devising a way to “fit a square peg in a round hole” using plastic, paper, duct tape, and a sock) 
• Because there wasn’t enough power, how to keep the spacecraft on a proper course despite not being able to use their guidance computer (they figured out how to use the line between night and day on Earth as a reference point)
• How to power up the Command Module from full shutdown in order to re-enter the atmosphere, even though it had never been done before and getting it wrong would have been disastrous.

It was a laundry list of seemingly insurmountable problems.  In many cases, NASA had only hours to solve them.  At a glance, it may seem like the astronauts survived due to sheer good fortune.  In reality, they survived thanks to their training, preparation, discipline, foresight, attitude, and values.  These values were summed up three years earlier by Gene Kranz, the legendary flight director who helped guide Apollo 13 back home.  In a speech to his flight control team, Kranz said:

From this day forward, Mission Control will be known by two words: ‘Tough’ and ‘Competent’.  Tough means we are forever accountable for what we do or what we fail to do.  We will never compromise our responsibilities.  Every time we walk into Mission Control we will know what we stand for.  Competent means we will never take anything for granted.  We will never be found short in our knowledge and our skills.  Mission Control will be perfect.  When you leave this meeting today, you will go to your office and the first thing you will do there is write, ‘Tough and Competent’ on your blackboards.  It will never be erased.  These words are the price of admission to the ranks of Mission Control.³

Fifty years later, we think there’s a lot for us to learn from Apollo 13.  You see, we will all face crises in our lives.  Some will be physical, some emotional, some professional, and some financial.  We are facing a crisis right now due to the coronavirus pandemic.  The question is, how should we deal with these crises?  Will we panic and point fingers – or will we be tough and competent?    

We think the answer can be found by remembering Apollo 13.  When crises happen, we deal with them the same way they did: Through planning and preparation.  Through discipline and attention to detail.  By finding ways to take responsibility instead of assigning blame.  And most of all, through teamwork.  Like the three astronauts, we don’t have to deal with crises alone.  We have people all around us – friends, family, neighbors, and even trusted professionals – who can help us solve even the most difficult of problems.  When we find ways to work together with others, there’s no challenge that can’t be overcome. 

Despite never reaching the moon, Apollo 13 has frequently been described as “NASA’s finest hour.”  Fifty years later, if we apply the lessons those heroic astronauts, controllers, and engineers taught us, we know we can turn adversity into our finest hour, too.     

¹ “Apollo Flight Journal,” NASA History, https://history.nasa.gov/afj/ap13fj/08day3-problem.html

² “Failure is not an option,” http://www.spaceacts.com/notanoption.htm

³ “Gene Kranz,” Wikipedia, https://en.wikipedia.org/wiki/Gene_Kranz

Think about any profession or business.  Chances are, much of the real work gets done when there’s no one else around to see.  Grocery stores do most of their stocking after hours.  Teachers do their grading and lesson prep after students go home.  Doctors conduct research and scrutinize test results before the sun comes up; musicians practice their instruments long after the sun goes down.  As a financial advisors, we often build financial plans and study investment analysis after the office is locked up for the night. 

In the pursuit of excellence, most of the heavy lifting goes on “behind the scenes.”  But since we don’t see it, we often don’t think about it – and thus, we fail to appreciate it. 

Lately, we’ve been thinking about all the work that goes on “behind the scenes” to make society function.  It made us realize something: We don’t appreciate our mothers enough.  Truly, we don’t!  Because no one works harder “behind the scenes” than mothers. 

Don’t get me wrong – almost everyone loves their mom.  And it’s not like motherhood in general goes unnoticed.  That’s why we celebrate Mother’s Day, after all!  But so much of what moms do takes place when we’re not looking.  For example, let’s imagine all the things our moms were doing when we weren’t around to see, because we were at school, at practice, or in bed.  We bet the list would look something like this:

Wake up before everyone else.

            Make breakfast 

                                                                                    Pack lunch 

Organize family schedule for the day

                                                            Work her day job/run her own business 

      Plan meals. 

                                                                                    Clean out refrigerator

                                    Go grocery shopping

                        Put away groceries

And that’s just morning through early afternoon! 

______________________________________________________________________________

      Figure out how to get us to our doctor/dentist/orthodontist appointment on time

Figure out how to get us to our soccer/dance/gymnastics/band practice on time

                                    Meet with PTA/coordinate fund-raising for our band/team/dance squad

        Get dinner started

Wash laundry.           Fold laundry.                        Spend an hour trying to match each pair of socks.

                                                          Help with homework

                        Lay out clothes/uniforms for tomorrow

DO ANYTHING WE WERE SUPPOSED TO DO BUT DIDN’T

Study for her degree

                                                Get everything ready for tomorrow

______________________________________________________________________________

Of course, this doesn’t even describe half of what moms do behind the scenes.  In all likelihood, our moms also spent each day:

Wiping down kitchen counters.  Making beds.  Paying bills.  Signing medical documents, permission slips, and registration forms.  Planning family vacations/fun activities for us.  Breaking up fights.  Reminding us to be polite.  Loading the dishwasher.  Unloading the dishwasher.  Researching new recipes.  Reading books on how to be an even better mom even though she was already perfect.  Tearing the house apart to find that one missing book of ours that was due back at the library yesterday.  Feeding/walking/washing pets.  Clipping coupons.  Wondering if she was a good enough mom.  Organizing play dates and birthday parties.  Learning new skills.  Saving every spare dollar for Christmas.  Turning off every light we left on.  Writing thank you notes.  Remembering every food preference, allergy, and intolerance. 

And of course, worrying, worrying, worrying, worrying.  About us.

That’s what moms do.  All after hours when we’re sleeping soundly in bed.  All behind the scenes when we’re not there – or simply not paying attention.   

The next time you go somewhere, take a moment to think about everything going on behind the scenes.  We bet it will make you even more appreciative of how hard people work even when we can’t see it.  And for this Mother’s Day, take a moment to think about everything your mom did behind the scenes, too.  Because when we do that, we realize how much mothers do for us, even when we don’t notice or appreciate it. 

When we do that, we realize what true love really is. 

From everyone at Minich MacGregor Wealth Management, we wish you a very happy Mother’s Day!

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“When I was a boy and I would see scary things in the news, my mother would say to me, ‘Look for the helpers.  You will always find people who are helping.’” – Fred Rogers

How are you?  We hope this note finds you safe and well.  This is a scary and uncertain time for many people, a time unlike any most of us have ever experienced.  Every day, we’re beset with new headlines and social media posts about the pandemic.  While we know this will all end eventually, sometimes eventually can feel very far away.

During times like this, it’s easy to let fear and despair creep into our hearts.  That’s why it’s good to remember the wise words of Mr. Rogers – yes, that Mr. Rogers – who, for over thirty years, taught children to “look for the helpers” whenever times were tough or the news scary.  When we do that, we realize that amidst all this uncertainty, people are still demonstrating courage, charity, and sacrifice.  With that in mind, we thought we’d share a few stories we recently came across that show how even a virus can’t stop helpers from doing what they do best. 

In San Francisco, young Kieran was about to turn 10.¹  It’s a major milestone for any child, but due to the pandemic, Kieran’s planned birthday trip to Legoland had to be canceled.  Under normal circumstances, he might have invited his friends and schoolmates over for a party — but social distancing made that impossible, too.   So, it looked like Kieran’s birthday celebration would have to be less memorable than he hoped.

But on the day of his birthday, Kieran walked out onto his balcony to a huge surprise.  On the street below was a gigantic fire engine!  Was something wrong?  Was there a disaster?

Quite the opposite.  The San Francisco fire department had heard about Kieran’s disappointment, so they decided to pay him a special visit.  The firefighters extended the truck’s ladder to its full height of 110 feet.  Then, they delivered a bag full of presents!  Suddenly, what might have been a subdued, low-key event turned into the most memorable birthday Kieran ever had.

Come with us now from San Francisco to Bethlehem, Pennsylvania, almost 3000 miles away.²  The local hospital system, tasked with the monumental responsibility of caring for the sick, found itself worryingly short on supplies.  Specifically, the brave doctors, nurses, and other professionals needed facemasks – up to 15,000 of them – to protect themselves from the virus.  So, they posted an urgent request on their website: Was anyone able to donate?

Sheri Yeisley, an interior decorator, didn’t hesitate to become a helper.  While she didn’t have any masks to donate, she did have her own two hands.  An enthusiastic sewer, Sheri coordinated with her friends to start making masks by hand.  She taught herself how to sew hospital-grade masks, then created a video to show others how to do it, too.  Soon, she began receiving donations of fabric and elastic from local businesses.  By the end of March, Sheri and her fellow volunteers had made over 1,000 masks for their local-area hospitals, which can be washed and reused.³  While they don’t offer the protection of a high-end mask, they’ll at least help the hospitals get by until more supplies arrive.   

As Sheri explains it, “If [healthcare workers] get sick, who’s going to take care of us?  I’m just trying to stand in the gap until the cavalry comes.”

Finally, let’s go up north to Canada, where a woman named Valentina Harper was tired of the fear and negativity she was seeing on social media.⁴  So, Valentina decided to replace all that scaremongering with something better.  She calls it “caremongering.” 

With her friends, Valentina helped set up 35 different Facebook groups within 72 hours, each devoted to helping people in need.  These “caremongering” groups work to give what they can to those who can’t get it for themselves.  From baby food for single mothers to cooked meals for the elderly.  From gift cards for those who have been laid off their jobs to hand sanitizer for those required to go into work every day.  Some “caremongers” will even brave grocery stores at 5:30 AM, standing in long queues to buy groceries for those who are sick or most at risk.  

“We thought we’d have a couple dozen people,” Valentina says.  “It’s grown to thousands.” 

As you can see, despite all the uncertainty we face right now, one thing is still certain: Basic human decency is alive and well.  This pandemic has caused adversity on a global scale – but it has also revealed how love and generosity still abounds.  It has shown people for what they really are: Helpers.  As Mr. Rogers said,

“In times of disaster, I remember my mother’s words. I’m always comforted by realizing that there are still so many helpers – so many caring people in this world.”

Hopefully, this pandemic will end soon.  But for however long it lasts, or however bad it gets, let’s all look for the helpers.  They’re out there, just around the corner or down the street.  And when we find them, let’s all remember what Mr. Rogers would want us to do next:

Be helpers, too.   

¹ “10-year-old sheltering at home gets birthday surprise,” CBS News, April 8, 2020.  www.cbsnews.com/news/coronavirus-10-year-old-sheltering-at-home-birthday-surprise-from-san-francisco-fire-department/

² “People around the country are ewing masks,” CNN, March 24, 2020.  https://www.cnn.com/2020/03/24/us/sewing-groups-masks-coronavirus-wellness-trnd/index.html

³ “Volunteers work with hospitals to make emergency face masks for workers,” Today, March 31, 2020.  https://www.today.com/health/volunteers-sew-homemade-face-masks-hospital-workers-t177079

⁴ “Coronavirus: Kind Canadians start ‘caremongering’ trend,” BBC News, March 16, 2020.  https://www.bbc.com/news/world-us-canada-51915723

As you know, the coronavirus pandemic has created both a health crisis and an economic crisis.  As of this writing, there are over 160,000 known cases.¹ By the time you read this, there will certainly be more – and that number does not reflect those who have been infected but not tested.  The economic cost, meanwhile, has resulted in millions of Americans losing their jobs.  Some economists at the Federal Reserve estimate the unemployment rate could rise as high as 32%!² 

To help address both crises, Congress recently passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  It’s a massive, $2 trillion stimulus package designed to help everything from hospitals, to individuals, to businesses large and small.  Time will tell if it will be enough to blunt the impact of this pandemic, but the fact Congress was able to pass something so significant, so quickly, is a rare feat worth celebrating. 

Charles Darwin once said, “It is the long history of humankind that those who learned to collaborate and improvise most effectively have prevailed.”  For many years now, that is not a quote you could usually apply to the United States Congress.  Political partisanship has meant that gridlock usually prevails over collaboration.  Thankfully, both sides of the aisle recently proved the institution still works when people put aside their differences and work together for the common good. 

This is major legislation, with benefits for almost every American.  Some of the bill’s provisions are especially important for retirees.  So, to help you understand what the CARES Act does, and how it will impact you, We have prepared a special breakdown.  Some information may apply to you, and some may not.  Please read it carefully, and then let us know if you have any questions.     

As always, we hope you and your family are staying healthy and safe.  Please let us know if there is anything we can do for you! 

Important Provisions of the CARES Act

The CARES Act is designed “to provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.”³ Think of it as a kind of massive care package.  Just as an actual care package is meant to get somebody through a tough time, that’s what the CARES Act is designed to do.  Because so many people have either lost their job, seen their hours cut back, or experienced drastic changes to their daily lives, many Americans must now contend with potential cashflow problems.  The CARES Act contains a number of provisions to help individuals and businesses handle those problems, at least for the short-term. 

What follows is a brief overview of the provisions that could affect you and your finances.  Let’s start with:

Direct Payments⁴

What’s the quickest way to ensure people get the money they need?  Pay them directly.  Perhaps the most newsworthy aspect of this bill is that many taxpayers will receive a one-time direct payment to help them cover expenses. 

Here’s a breakdown of how it will work. 

Individuals who made up to $75,000 in 2019 will receive $1,200. 

Heads of Household (single parents, for example) who made up to $112,500 in 2019 will receive $1,200.

Married couples filing a joint tax return who made up to $150,000 in 2019 will receive $2,400.

On top of this, each taxpayer will receive up to $500 for each child they have under the age of 17.  So, for example, a married couple with two children would receive $3,400.

Note that payments decrease for individuals and married couples with income above their respective thresholds.  Specifically, payments shrink by $5 for every $100 earned above the $75,000/$150,000 limits.  The payments disappear entirely for individuals who made $99,000 or more, and for married couples who made $198,000 or more. 

So, when will this money actually arrive?  It’s unclear.  The IRS could start issuing payments sometime in April or May, but an official schedule has not been released.  (The CARES Act itself only mandates that payments be made “as rapidly as possible.”⁴). It’s likely that those who filed their 2019 tax returns with direct-deposit information will receive payments first.  

Speaking of tax filing…

New Tax Deadlines⁵

This isn’t technically part of the CARES Act, but we are going to cover it anyway because it’s important.  Due to the pandemic, IRS has extended this year’s tax-filing and payment deadlines.  Now, taxpayers have until July 15 – up from the standard April 15 – to file their 2019 tax returns.  The deadline to make IRA and Roth IRA contributions is now July 15 as well. 

Note that this new deadline applies to everyone, not just those who are sick, under quarantine, or materially affected by the coronavirus in some way.  And if you’ve already filed your return, you should still receive your refund around the same time you would during a typical tax season.

Retirement Funds⁴

We said at the beginning of this message that some of the CARES Act’s provisions are especially important for retirees.  Let’s cover those now. 

First up, Required Minimum Distributions, or RMDs.  In a normal year, anyone 72 years or older (remember, this age was increased from 70.5 at the end of 2019) would need to withdraw a minimum amount from their IRA or 401(k).  Not this year.  Under the CARES Act, all RMDs are suspended in 2020.  That means you can leave that money in your retirement account for the year if you don’t need it now.  Note that this applies both to retirement account owners and beneficiaries.  If you have set up an automatic or systematic distribution for your 2020 RMD and do not want to take it, contact our office. Why is not taking your RMD an advantage? Because if you don’t take the RMD, that is income you won’t have to claim, reducing your tax bill!

People who have already taken their distribution for 2020 can potentially return the money to their account if they want.  This could be a slightly complicated process, so we won’t cover it here.  However, if you want further information about it, let us know. 

The CARES Act also allows qualified individuals to request penalty-free distributions of up to $100,000 for qualifying coronavirus-related reasons. A qualified individual is a participant (or spouse or dependent) who:

• Was diagnosed with the virus SARS-CoV-2 or with COVID-19 by a test approve by the Centers for Disease Control and Prevention.
• Has experienced adverse financial consequences resulting from quarantine, furlough, layoff, or a reduction in hours.
• Has been unable to work due to a lack of childcare.

CARES distributions are more favorable than hardship withdrawals because:

• Tax on income from the withdrawal may be paid over a three-year period.
• Participants may repay the amount withdrawn to an eligible retirement plan within three years.
• Repayments will not be subject to retirement plan contribution limits.

Unemployment⁴

Let’s get back to the CARES Act.

We said a moment ago that direct payments were the most newsworthy aspect of the bill.  But for the overall economy, the bill’s unemployment provisions are probably the most important.  Unemployment claims rose by 3.28 million between March 15-21.  That’s the highest weekly surge in history.  The previous record?  695,000.⁶ 

To help combat this, the CARES Act provides approximately $260 billion in unemployment assistance for those who lose their jobs.  This includes freelancers, independent contractors, and other self-employed workers.  That’s a major change, because under normal circumstances, they can’t apply for unemployment benefits. 

Generally, workers who lose their jobs will receive $600 per week for four months, in addition to what their state unemployment program pays.  The CARES Act also adds an additional thirteen months of federal unemployment insurance on top of a person’s state benefits.

Conclusion

As you can see, the CARES Act is a loaded piece of legislation.  Time will tell whether more measures are needed, but this is definitely a good start. 

Of course, our team will continue poring over these changes.  If there is anything else we feel you need to know, we’ll reach out to you.  In the meantime, if you have any questions about:

• Getting a direct payment
• Protecting your paycheck and/or income
• Your retirement accounts

Please don’t hesitate to let us know.  Whether we’re in the office or working from our own homes, our team is always here for you. 

Stay healthy, and stay safe!

Sources

¹ “Cases in U.S.”, Centers for Disease Control and Prevention, March 31, 2020.  https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html

² “Coronavirus job losses could total 47 million, unemployment rate may hit 32%, Fed estimates,” CNBC, March 30, 2020.  https://www.cnbc.com/2020/03/30/coronavirus-job-losses-could-total-47-million-unemployment-rate-of-32percent-fed-says.html

³ “Text of S. 3548,” United States Senate, https://www.congress.gov/bill/116th-congress/senate-bill/3548/text

⁴ “Text of the Coronavirus Aid, Relief, and Economic Security Act,” United States Congress.  https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf

⁵ “New Details From the IRS on July 15 Tax Deadline, Audit Relief,” The Wall Street Journal, March 30, 2020.  https://www.wsj.com/articles/new-details-from-the-irs-on-july-15-tax-deadline-11585087948

⁶ “Unemployment claims soared to 3.3 million last week, most in history,” CNN Business, March 26, 2020.  https://www.cnn.com/2020/03/26/economy/unemployment-benefits-coronavirus/index.html

⁷ “What’s Inside the Senate’s $2 Trillion Coronavirus Aid Package,” NPR, March 26, 2020.  https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-trillion-coronavirus-aid-package

We hope this email finds you and your family healthy.  Things are changing by the hour and there is a lot of uncertainty.  You can rest assured that Minich MacGregor Wealth Management is operating at full capacity with no disruption to our business.  

We have made some logistical changes.  As of today, several team members are working in our Saratoga Springs office while others are working remotely.  Should we receive instruction to close the office and work from our homes, we have the processes and technology in place to do so.  

We are committed to the safety of our clients, employees and community.   ​​Many of our scheduled in-person appointments are being changed to telephone appointments to respect the importance of social distancing.  

It is important for you to know that we are here and we continue to monitor the markets.  We will continue to provide updates should things change in the coming days.  If you have questions or concerns, please do not hesitate to contact our office at 518-499-4565.

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