By Haddon Libby
Times like these create different challenges for everyone. Whether you personally are unemployed, a business owner or an investor, you most likely know people who are. Below are some basic ideas that you and those you care about can use to come out the other side of this economic coma being initiated to control the spread of COVID-19.
Advice for the Unemployed
If someone you know has lost their job due to COVID-19, first thing to do is file for unemployment. In the next few weeks, the Federal government will be sending out checks to help people in paying bills. More assistance will be coming if the crisis lasts longer.
If you are concerned that you will not have the cash needed to buy necessities until relief comes, officials advise you to suspend rent or mortgage payments as eviction and foreclosure proceedings are unlikely during the crisis. Here in California, the Governor has ordered the utility companies to suspend any discontinuations due to non-payment while the crisis is ongoing. Lastly, most cities have set up food banks and places to get a meal while the crisis is underway.
Access your Retirement Account
Revised retirement account rules will allow people to withdraw funds from their retirement accounts without the 10% penalty that typically accompanies early withdrawals. As these funds will still be taxable, consider taking out a loan from your 401k of up to $50,000 until government relief arrives as you are paying yourself the interest. If you feel that you will need more than government relief provides, consider the loan before withdrawing funds.
Advice for Impacted Businesses
The Small Business Administration (SBA) has activated their Economic Injury Disaster Loan Program. While the program is referred to as a loan program, funds can become a grant in full or in part. As the terms of the program are changing as conditions in the economy weakens, visit www.sba.gov for specifics as it relates to your situation. If you need assistance, feel free send me an email and I can direct you to the right folks in the SBA.
Advice for Investors
This economic event feels particularly bad as we reached historic highs in the stock markets in mid-February. To move from expectations of a strong economic year to an immediate worldwide recession caused by a pandemic in weeks is breathtaking and scary for many.
Whenever there has been a decline of this magnitude in the past, it turned out to be a great time for investors will a long-term timeline. If history is any indication, this will turn out to be one of the best stock-buying opportunities of your lifetime once life gets back to normal.
Retired or Retiring Investors
To those nearing retirement or in retirement, if you are just selling equities now, you may be falling into the trap of buying high and selling low. Don’t sell stocks now unless you need to. Focus your efforts at increasing the income from your retirement savings while reviewing expenses for ways to reduce spending. Where you might have received 1.5% on a one-year bank certificate of deposit last month, you could buy the one-year debt of JPMorgan Chase and receive a 3.5% return as of February 20th. Unless you think Chase is going away, this is a huge increase in what you can earn.
When looking to invest in equities, focus on companies with strong balance sheets in businesses that are minimally impacted by the shutdowns or those that will benefit the most once the world gets back to work. While you probably don’t want to buy the stock of an airline right now, a package delivery company like UPS that pays more than a 4% dividend and should do well because of a change in consumer shopping patterns. You also want to replace high dividend paying companies that have lots of debt with companies with lower debt levels and payout ratios. Use this time period as one to improve the quality of your holdings.