We asked Ashley Gonzalez a Financial Advisor with Edward Jones to highlight some benefits of the CARES Act. This is not a comprehensive list, just a few highlights that may help our community.
“Obviously, our biggest concern is for the well-being of everyone in our community,” Financial Advisor, Ashley Gonzalez of Chula Vista says. “And we hope everyone is practicing social distancing and doing everything they can to keep themselves, their loved ones and their neighbors safe and healthy. But beyond the physical worries caused by the coronavirus, there have been deep economic concerns, and the CARES Act is an important move toward addressing some of these.”
Direct payments – Individuals will receive a one-time payment of up to $1,200; this amount is reduced for incomes over $75,000 and eliminated altogether at $99,000. Joint filers will receive up to $2,400, with this amount reduced for incomes over $150,000 and eliminated at $198,000 for joint filers with no children. Plus, taxpayers with children will receive an extra $500 for each dependent child under the age of 17.
“One possible idea for this money is to use it as part of an emergency fund,” Gonzalez says. “By putting it in a low-risk, liquid account, you’ll have it available when you need it for any large, unexpected expenses during the next several months.”
Expanded unemployment benefits – The CARE Act provides $250 billion for extended unemployment insurance, expands eligibility and provides workers with an additional $600 per week for four months, in addition to what state programs pay. Unemployment benefits will also be extended through Dec. 31 for eligible workers. And the provisions also cover the self-employed, independent contractors and “gig economy” workers.
“These benefits can provide a lifeline to many workers,” Gonzalez says. “And they may be able to help people avoid liquidating some long-term investments earmarked for retirement just to meet their daily cash flow needs. So, in that sense, the money can help individuals feel more secure today and in the future.”
No penalty on early withdrawals – Typically, individuals must pay a 10% penalty on early withdrawals from IRAs, 401(k)s and similar retirement accounts. Under the CARES Act, this penalty will be waived for individuals who qualify for COVID-19 relief for distributions up to $100,000 in aggregate from IRAs and plans that allow COVID-19 distributions. Withdrawals will still be taxable, but the taxes can be spread out over three years.
Suspension of required withdrawals – Owners of traditional IRAs and 401(k)s are usually required to start taking withdrawals from these accounts once they reach 72. The CARES Act waives these required minimum distributions for 2020.
Increase in retirement plan loan limit – 401(k) investors who qualify for COVID-19 relief can now borrow up to $100,000 from their accounts, up from $50,000, provided their plan allows loans.
Another key part of the CARES Act provides $349 billion to help small businesses – those with fewer than 500 employees – retain workers and avoid closing up shop. A significant part of this small-business relief is the Paycheck Protection Program. This initiative provides federally guaranteed loans to small businesses that maintain their payroll during this emergency. Significantly, these loans may be forgiven if borrowers use the loans for payroll and other essential business expenses (such as mortgage interest, rent and utilities) and maintain their payroll during the crisis.
“Small businesses are really the economic backbone in many of the communities in which we have our offices,” Gonzalez says. “I would certainly encourage our clients who are business owners, and any business owner, to explore this opportunity.”
Ultimately, Gonzalez says, the CARES Act may be seen as another steppingstone on the road back to recovery, from a financial standpoint.
“We’ve still got some major challenges, but it’s encouraging to see our lawmakers coming together to offer some concrete steps to provide relief to investors and business owners,” Gonzalez says. “We all need to work together to get through this challenging time, and I’m confident we’ll do just that.”
Edward Jones, a Fortune 500 company headquartered in St. Louis, provides financial services in the U.S. and, through its affiliate, in Canada. Every aspect of the firm’s business, from the investments its financial advisors offer to the location of its branch offices, caters to individual investors. The firm’s 18,000-plus financial advisors serve more than 7 million clients and care for $1.3 trillion in assets under management. Visit our website at edwardjones.com and recruiting website at careers.edwardjones.com. Member SIPC.
NOTE: The financial opinions expressed in this article are those of Ashley Gonzalez & Edward Jones and not those of Our Hometown Online or Our Hometown Magazine.