1. Make sure your budget is on track. A solid budget is the centerpiece of any good financial plan because it will give you a clear picture of how much money is coming in and how much is going out. Hopefully, you’ve been able to stay the course during the pandemic and your budget is still on track. If you’ve experienced a loss or reduction in income, you may have to cut back on discretionary spending or look for ways to lower your fixed costs. Budgeting websites and smartphone apps can help you analyze your saving and spending patterns.
2. Maintain healthy spending habits. During the height of the pandemic, your spending habits may have changed dramatically. With restaurants closed, vacations postponed, and events canceled, many Americans found themselves spending less. If you were fortunate enough to save money during the pandemic, keep up the good work. If you spent more than you would have liked (e.g., takeout, online shopping), try to cut back and save what you can. Even small amounts can add up over time.
3. Check your emergency fund. If the pandemic has taught us anything financially, it is the importance of having an emergency fund. If you’ve had to dip into your cash reserve at some point over the past year to cover expenses, you’ll want to work on building it back up. Ideally, you should have at least three to six months of living expenses in your cash reserve. A good way to accumulate emergency funds is to earmark a percentage of your paycheck each pay period. When you reach your goal, you may still want to keep adding money — the more you can save, the better off you could be in the long run.
4. Deal with your debt. It is always important to stay on top of your debt situation and pay down debt from student loans, a mortgage, and/or credit cards as quickly as you can. If the financial impact of the pandemic has made it difficult to manage your debt, contact your lenders to see if they offer COVID-related financial assistance. Many may be willing to work with you by waiving interest and certain fees or allowing you to delay, adjust, or skip some payments.

1) Pew Research Center, 2020

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Travel.

While confined to their homes for several months, people discovered the benefits of virtual get-togethers via video calls. The same survey cited above found that many people who used videoconferencing technology reported that they connected more with loved ones during the lockdown than before restrictions were put into place.² This holiday season, if you can’t be with your loved ones, consider scheduling a virtual gathering to open gifts or share a meal together. An added benefit of less time and money spent on travel could be lower stress overall.

Experience vs. “stuff.”

Of course, sharing experiences in person can be more rewarding than a video chat. Stay-at-home orders prompted many people to reflect on how much they took for granted, especially the opportunity simply to spend time with loved ones they don’t see on a regular basis. As many grandparents would likely contend, time spent with family can be a much more valuable gift than the latest gadget or fashion trend. Moreover, while in lockdown, many families discovered they could actually live without many of the material goods they purchase on a regular basis. Rather than spending a lot on “stuff” this season, consider intentionally downsizing the piles of gifts exchanged and focusing more on the shared celebrations and traditions.

Food.

During the lockdown, many people rediscovered the simple joy of preparing and eating home-cooked meals and baked goods. And because ingredients were often limited due to supply-chain disruptions, creativity became a valuable kitchen skill. This holiday season, instead of spending a small fortune dining out, why not put some of that pandemic culinary prowess to work? Simple meals that the whole family helps prepare can be cost-effective as well as memory-making. Wrapped up with a beautiful bow, your creations can also make thoughtful, inexpensive, edible gifts. (You might also consider supporting local businesses by having food gifts delivered or purchasing gift cards.)

1-2) OnePoll, studyfinds.org, May 23, 2020; 3) U.S. Bureau of Economic Analysis, June 30, 2020

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What Is an Advance Medical Directive?

The laws of your state may allow you to adopt one or more advance medical directives to manage your future medical care. There are three main types of advance medical directives:

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• Living will
• Durable power of attorney for health care
• Do-not-resuscitate order

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Each has unique characteristics and is useful under specific circumstances. You may find that one, two, or all three advance medical directives are necessary to express all your wishes regarding medical treatment.

Living Will

A living will is a legal document that specifies the types of medical treatment you would want, or not want, under particular circumstances. In most states, a living will takes effect only under certain circumstances, such as a terminal illness or injury. Generally, one can be used solely to decline medical treatment that “serves only to postpone the moment of death.”

Durable Power of Attorney for HealthCare/Health-Care Proxy

A durable power of attorney for health care (DPAHC), also known as a health-care proxy, is a legal document in which you appoint a representative to make medical decisions on your behalf if you become unable to make or communicate them yourself. It allows you to exercise control over your health care through this representative, who will have the authority to make most medical care decisions for you. You may want to appoint such a representative to act on your behalf. If you don’t, medical professionals will generally be compelled to do everything possible to save and sustain your life. A DPAHC can resolve conflicts and help ensure that your choices regarding medical treatment are respected. A DPAHC may not be practical in an emergency — your representative must be present to act on your behalf.

Do-Not-Resuscitate Order

A do-not-resuscitate (DNR) order is a legally binding order, signed by both you and your physician, that directs medical personnel not to perform cardiopulmonary resuscitation (CPR) or other invasive procedures on you if you stop breathing or your heart stops beating. A DNR is the only advance medical directive specifically intended for use in an emergency. There are two types of DNRs: One is effective only while you are hospitalized; the other is used by people outside the hospital. ID bracelets, MedicAlert® necklaces, and wallet cards are some methods of noting DNR status.

More to Consider 

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• The laws on advance medical directives vary considerably from state to state. If you spend a significant amount of time in a state other than where you live, you may want to research that state’s laws as well.
• Review your advance medical directives periodically to ensure they reflect your current wishes and attitude.
• Discuss your advance medical directives with appropriate persons (perhaps your doctor, your DPAHC representative, your family, and your friends).
• If you have multiple advance medical directives, make sure your instructions are stated consistently throughout. In many states, the most recent document prevails in case of a conflict

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Incapacity and Advance Medical Directives

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Penalty-Free Withdrawals

The newest exception to the 10% early-withdrawal penalty allows IRA account holders and retirement plan participants to take distributions of up to $100,000 in 2020 for a “coronavirus-related” reason.* These situations include a diagnosis of COVID-19 for account owners and certain family members; a financial setback due to a quarantine, furlough, layoff, or reduced work hours, and in the case of business owners, due to closures or reduced hours; or an inability to work due to lack of child care as a result of the virus. This temporary exception augments the other circumstances for which a penalty-free distribution is typically allowed:[cb_styled_list class=”” cols=”1″]

• Death or disability of the account owner
• Unreimbursed medical expenses exceeding 7.5% of adjusted gross income (increases to 10% in 2021)
• A series of “substantially equal periodic payments” over your life expectancy or the joint life expectancy of you and your spouse
• Birth or adoption of a child, up to $5,000 per account owner
• Certain cases when military reservists are called to active duty [/cb_styled_list]

In addition, IRAs (but not work-based plans) allow penalty-free withdrawals for a first-time home purchase ($10,000 lifetime limit), qualified higher-education expenses, and payments of health insurance premiums in the event of a layoff.

Five Industries Most Likely to Offer Retirement Plan Loans

Work-based plans allow exceptions for those who separate from service after age 55 (50 in the case of qualified public safety employees) and distributions as part of a qualified domestic relations order.

Tax Consequences

Penalty-free does not mean tax-free, however. In most cases, when you take a penalty-free distribution, you must report the full amount of the distribution on your income tax return for that year. However, the income associated with a coronavirus-related distribution can be spread over three years for tax purposes, with up to three years to reinvest the money.1

Retirement Plan Loans

If your work-based retirement plan allows loans, you typically can borrow up to the lesser of 50% of your vested balance or $50,000. Most loans must be repaid within five years, but if the money is used to purchase a primary residence, the repayment period may be longer. The CARES Act permits employers to increase this amount to the lesser of 100% of the vested balance or $100,000 for loans to coronavirus-affected individuals made between March 27, 2020, and September 22, 2020.* Affected participants who have outstanding loans on or after March 27, 2020, will be able to delay any payments due in 2020 by one year.2

Hardship Withdrawals

Many work-based retirement plans also permit hardship withdrawals in certain circumstances. Although these distributions are not exempt from the 10% early-withdrawal penalty, they can be a lifeline for people who need money in an emergency.

For more information about your options, contact your IRA or retirement plan administrator.

*Employers do not have to adopt the new withdrawal and loan provisions.

1) Amounts reinvested may reduce your tax obligation on the distributions; however, due to the timing of distributions and required tax filings, you may have to file an amended return to seek a refund on any taxes previously paid on withdrawn amounts.

2) The original five-year repayment period will be extended for the delay, but interest will continue to accrue.

3) Source: Plan Sponsor Council of America, 2019 (2018 data)

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Schemes related to economic impact payments

The IRS recently issued a warning about various schemes related to economic impact payments that are being sent to taxpayers under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.1 The IRS warns taxpayers to be aware of scammers who:[cb_styled_list class=”” cols=”1″]

• Use words such as “stimulus check” or “stimulus payment” instead of the official term, “economic impact payment”
• Ask you to “sign up” for your economic impact payment check
• Contact you by phone, email, text or social media for verification of personal and/or banking information to receive or speed up your economic impact payment[/cb_styled_list]

In most cases, the IRS will deposit the economic impact payment directly into an account that taxpayers previously provided on their tax returns. If taxpayers have previously filed their taxes but not provided direct-deposit information to the IRS, they will be able to provide their banking information online at irs.gov/coronavirus. If the IRS does not have a taxpayer’s direct-deposit information, a check will be mailed to the taxpayer’s address on file with the IRS. In addition, the IRS is reminding Social Security recipients who normally don’t file taxes that no additional action or information is needed on their part to receive the

$1,200 economic payment — it will be sent to them automatically.

Fraudulent treatments, vaccinations, and home test kits

The Federal Trade Commission is tracking scam artists who are attempting to sell fraudulent products that claim to treat, prevent, or diagnose COVID-19. Currently, the U.S. Food and Drug Administration (FDA) has not approved any products designed specifically to treat or prevent COVID-19.

The FDA had warned consumers in March to be wary of companies selling unauthorized coronavirus home testing kits. On April 21, 2020, the FDA authorized the first coronavirus test kit for home use. According to the FDA, the test kits will be available to consumers in most states, with a doctor’s order, in the coming weeks. You can visit fda.gov for more information.

Phishing scams

Scammers have begun using phishing scams related to the coronavirus pandemic in order to obtain personal and financial information. Phishing scams usually involve unsolicited phone calls, emails, text messages, or fake websites that pose as legitimate organizations and try to convince you to provide personal or financial information. Once scam artists obtain this information, they use it to commit identity or financial theft. Be wary of anyone claiming to be from an official organization, such as the Centers for Disease Control and Prevention or the World Health Organization, or nongovernment websites with domain names that include the words “coronavirus” or “COVID-19,” as they are likely to be malicious.

Charity fraud

Many charitable organizations are dedicated to helping those affected by COVID-19. Scammers often pose as legitimate charitable organizations in order to solicit donations from unsuspecting donors. Be wary of charities with names that are similar to more familiar or nationally known organizations. Before donating to a charity, make sure that it is legitimate and never donate cash, gift cards, or funds by wire transfer. The IRS website has a tool to assist you in checking out the status of a charitable organization at irs.gov/charities-and-nonprofits.

Protecting yourself from scams

Fortunately, there are some things you can do to protect yourself from scams, including those related to the coronavirus pandemic:[cb_styled_list class=”” cols=”1″]

• Don’t click on suspicious or unfamiliar links in emails, text messages, and instant messaging services.
• Don’t answer a phone call if you don’t recognize the phone number — instead, let it go to voicemail and check later to verify the caller.
• Never download email attachments unless you can verify that the sender is legitimate.
• Keep device and security software up-to-date, maintain strong passwords, and use multi-factor
• Never share personal or financial information via email, text message, or over the phone.
• If you see a scam related to the coronavirus, be sure to report it to the FTC at ftc.gov/complaint. [/cb_styled_list]

1. Internal Revenue Service, IR-2020-64, April 2, 2020

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

July 01, 2020. Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020

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