Financial Planning During The Pandemic

by | May 6, 2020 | News and Updates

Since the S&P 500 reached a record high on February 19th, we’ve witnessed a significant downturn over the past two months. Despite some recovery, the long-term impact on the market remains uncertain, given the 29% decline in second-quarter US GDP and historic levels of unemployment reminiscent of the Great Depression.

However, amidst these challenges, there are optimistic points to consider.

Unlike typical financial crises driven by company profitability, the recent stock market decline aimed to raise cash amid pandemic uncertainty. As we gradually reopen, we anticipate a robust market recovery.

Nonetheless, this unprecedented situation lacks a precedent for recovery assessment. While stocks may rebound, fixed investments like bonds and CDs face uncertain prospects, particularly with historically low interest rates. Savings rates, money markets, and CDs currently offer minimal returns, forcing savers into a dilemma: accept low rates or venture into the volatile stock market.

Navigating this market presents a challenge, compounded by another looming issue: the tax implications of qualified retirement accounts (e.g., 401(k), 403(b), IRAs).

Three Key Events Impacting Taxation of Qualified Plans

First, the Trump tax plan (2018-2025) offers an opportunity to withdraw from these plans at historically low rates, aligning with the original strategy of saving in a high bracket and withdrawing in a lower one.

Secondly, the December 2019 Secure Act extended the age for required minimum distributions (RMD) to 72 from 70 1/2. Additionally, it altered the distribution period for beneficiaries, potentially increasing taxes and reducing beneficiary payouts.

Lastly, the COVID-19 pandemic’s fiscal response will likely involve tax implications to fund stimulus efforts. This could entail changes in tax brackets, rates, deductions, or taxation of Social Security benefits, affecting retirees’ tax burdens.

Don’t Let the Pandemic Disrupt Your Retirement Plans

With over 27 years in retirement planning and 15 years as a CERTIFIED FINANCIAL PLANNER™ practitioner, I emphasize minimizing taxes to maximize retirement income. Analyzing retirement account tax implications and proposing tax-efficient alternatives is crucial, especially with the current market downturn providing opportunities for rebalancing and tax optimization.

For those with qualified account balances over $500,000, this tax analysis is particularly critical for long-term income planning. Even for those with lower balances, it remains significant. I’m available to provide personalized analysis to facilitate informed decisions.

At Retirement Resource Management, we’re dedicated to helping clients optimize retirement resources by minimizing taxes, employing qualified money managers, and safeguarding assets through long-term care and life insurance strategies for tax-efficient wealth transfer to heirs.

For a complimentary analysis, please contact me via phone or email. I’m here to assist you on your retirement journey.

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