Category: Coronavirus economic news

CARES Act: Unemployment Benefits

Due to the economic shutdown from the Coronavirus many Americans have been laid off, furloughed, or had their hours cut dramatically.

Typically between 200,000 – 300,000 new people file for unemployment benefits each week, while a record-breaking 3.2 million filed for benefits with the week ending March 21, and that number will continue to go up as more and more companies are laying off or furloughing employees.

The passage of the CARES Act is opening up unemployment benefits for more people, increasing the length time they can get unemployment, and increasing the amount they can get each week.

Who qualifies for unemployment benefits?

The CARES Act makes more people eligible for unemployment, including self-employed, gig workers (such as Uber or Lyft drivers), part-time employees, independent contractors, freelancers, and others. In many cases even workers who have had their hours cut, but they are not totally unemployed, will qualify for partial benefits.

Career One Stop, which is an unemployment site sponsored by the U.S. Department of Labor, states that under the new law, states can pay benefits where, “An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work; An individual is quarantined with the expectation of returning to work after the quarantine is over; and An individual leaves employment due to a risk of exposure or infection or to care for a family member. In addition, federal law does not require an employee to quit in order to receive benefits due to the impact of COVID-19.”

How much can I get in unemployment benefits?

The benefit level is determined by the state, with the lowest being Mississippi at $235 per week, and the highest being Illinois at $1,495 per week, with most states paying between $300-$500 per week.

Most states have a similar calculation – they take the worker’s highest earning quarter over the last year and divide that by 26, capped at a maximum amount. For example, if a worker earned $12,000 in their highest quarter they would get $461 per week ($12,000/26 = $461). If their state caps benefits at $420, they would get $420 per week.

Under the CARES Act all those who are unemployed will get an additional $600 per week, which will last up to four months through July 31. In the previous example where an unemployed person was receiving $420 per week they will now get $1,020 per week.

How long can I get unemployment benefits for?

Each state provides benefits for different lengths of time, but the average (before the CARES Act) was 26. Some states, such as Florida and North Carolina, only provided benefits for 12 weeks, while Massachusetts provided benefits for 30 weeks. The CARES Act extends unemployment benefits by an additional 13 weeks (making the maximum length in most states 39 weeks). The extended benefits will last through December 31, 2020.

The CARES Act also eliminates the one-week waiting period, which means you can get a check starting on the first week instead of the second week.

How do I apply for benefits?

Each state has a different process to apply. You can learn about unemployment benefits here and find a list of state offices here.

Looking for a job

While many employers have had to lay off employees, others are hiring part and full-time workers, including Amazon, Costco, CVS, pizza chains, Dollar General, Walmart and more. USA Today has an article that links to many of the major employer’s websites who are hiring. Be sure to check in your local community and state as well. Many communities have Facebook pages where employers looking for help post the job.

Small business forgivable loans

If you own a small business (from one employee up to 500 employees) you can apply for a loan through the Small Business Administration, and, if certain stipulations are met, that loan can be forgivable. The loans can be used to pay payroll, payroll expenses (such as health insurance), interest on mortgage loans, rent, and a few other expenses. Small business owners can learn more and apply for a loan here.

This article will be updated as more information becomes available.

CARES Act: Stimulus Checks

As a result of the CARES Act, which became law on March 27, 2020, most Americans will receive stimulus checks.

Single taxpayers will get $1,200; married taxpayers will get $2,400; and for each child under the age of 17 parents will get $500.

Of course, there are some stipulations.

  • College students who are claimed as dependents on their parents tax return will not get a check.
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  • College students who live on their own and are NOT claimed as dependents will get a check.
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  • Even though the checks are being sent now, they are treated like a tax refund for 2020. More on this provision below.
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  • President Trump wants payments issued by April 6, but the IRS and Treasury Department are estimating that it will take until May.
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  • Money will be direct deposited based on most recent filing direct deposit number, or mailed to the most recent address the IRS has on file.
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  • There will be systems set up to get checks to those who earn under the amount required to file a tax return, but these checks will likely take much longer to get to them due to logistical issues.
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  • You must have a Social Security Number to qualify, not a Taxpayer Identification Number (TIN).
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  • There are income phase-outs. More information below.

Income-Phase Outs

Single filers who earn between $75,000 – $99,000 will get a reduced amount. For every $100 earned over $75,000 their check will be reduced by $5. Here are some numbers for :

YOUR INCOMEYOUR CHECK
$75,000$1,200
$80,000$950
$85,000$750
$90,000$450
$95,000$200
$99,000+$0

Married filers who earn between $150,000 – $198,000 will get a reduced amount. For every $100 earned over $150,000 their check will be reduced by $5. Here are numbers for married filers:

YOUR INCOMEYOUR CHECK
$150,000$2,400
$160,000$1,900
$170,000$1,400
$180,000$900
$190,000$400
$198,000+$0

Payments will be increased by $500 multiplied by the number of children in the home.

Examples:

  • A married couple earns $125,000 and has 4 children ages 18, 15, 7, and 4. This couple will get:
    • $2,400
    • $500 x 3 (one child does not qualify because they are too old): $1,500
    • Total: $3,900
    • NOTE: The 18-year old is most likely claimed as a dependent on the couple’s tax return, which means that neither the child nor the parents get a check.
  • A single filer earns $40,000 and has one child. He or she will get:
    • $1,200
    • $500
    • Total: $1,700

Tax Return for 2020

The money will be paid out based on 2019 taxes, or if 2019 taxes have not been filed yet, on 2018 taxes. This will have an adverse effect on taxpayers who earned high incomes in 2018 or 2019, but are no longer earning as much because they have been laid off or had hours reduced due to the Coronavirus shutdown. Let’s say that a single taxpayer earned $85,000 in 2019. They will get a check for $700 now. If they lost their job in 2020 and earned $40,000 in 2020, they will get the other $500 when they file their 2020 taxes (which will be due April of 2021).

There are also going to be many children that will be born during 2020, but the parents will not get the $500 until they will their 2020 taxes.

What about the taxpayer who qualifies now for a larger check, but they have a child that turns 17 in 2020, or they get divorced, or they are earning more in 2020? They will get to keep the extra amount and not have to pay it back when they file their 2020 taxes.

Here’s an example:

Martha has one child, Missy, who turned 17 on January 1, 2020. Martha will get a check for $1,200 for herself and $500 for Missy, for a total of $1,700. Technically she should only get $1,200 since Missy turned 17 on January 1. Martha will not have to pay the $500 back when she files her 2020 taxes.

Do you have any questions about the stimulus checks? If so, post them below.

This post will be updated as more information becomes available.

CARES Act: Changes to Student Loans

NOTE: This article will be updated as new guidelines or laws are passed about economic support during the Coronavirus pandemic.

NOTE: Updated 3/27/2020 due to the passage of the CARES Act.

There have been some significant developments to the federal student loan program during the pandemic and as a result of the CARES Act, which was signed into law on 3/27/2020. I will continue to update this post as new information is announced.

Here are all of the current changes:

  • Student loan payments are automatically suspended until September 30, 2020. Only Direct or FFEL loans that are owned by the Department of Education are included in this, which means that payments for FFEL owned by lenders, Perkins loans, and private student loans are not included.
     
    NOTE: There has been some confusion about whether or not the payments are automatic or if the borrower needs to apply for it. This article from the Consumer Financial Protection Bureau clears it up and states that the payment suspension is automatic.
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  • Involuntary payments, such as wage garnishments and tax refund seizures, will stop until September 30, 2020.
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  • Interest is set to 0% during the payment suspension so included loans will not accrue interest.
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  • Borrowers can make voluntary principal payments during the payment suspension. The bill did not clarify whether or not accrued interest needs to be paid off before payments reduce the principal balance. More clarification will come from the Department of Education, and this post will be updated as information is released.
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  • Suspended payments are considered payments for loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF). Borrowers in this circumstance should NOT pay extra during the payment suspension.
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  • Suspended payments will be reported as full payments to credit bureaus, which will be helpful to some borrower’s credit reports.
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  • Rates on private loans are low right now as well, so a number of borrowers are asking if this is a good time to refinance their loans. Refinancing loans only makes sense if borrowers have a high federal rate and they know for sure they won’t be using any of the federal benefits, such as forgiveness, deferment, or forbearance. With 0% interest and no payments for now, though, I would just focus on paying the principal balance down.

If you want help navigating these changes and setting up a student loan plan visit my website https://studentloanplanning.com/.

What to do if you lost your job or income

NOTE: This article will be updated as new guidelines or laws are passed about economic support during the Coronavirus pandemic.

NOTE: Updated 3/27/2020 due to the passage of the CARES Act.

I had to pick up some things at my office recently and as I walked the halls, generally full of students heading to classes, studying, eating, and just hanging out, I was struck by the quietness. I walked by the empty food court and locked computer labs. This is a familiar scene all over the world right now – businesses closed and many people working from home. Unfortunately, this is not the case for many workers. If their workplace is closed, they are not working from home. They are simply not getting paid.

If you are facing the loss of income because of the Coronavirus you are not alone. CNN reported that half of American workers are at risk of layoffs, furloughs, fewer hours or wage cuts, with about 20% of all jobs in America at high-risk.

Employees in the transportation, travel and tourism, hospitality, temporary help, and restaurant workers are going to be the hardest hit. While many employees are able to work from home, workers in these industries generally do not have that option. After all, if no one is getting their hair cut, or staying in hotels, or flying, or eating in restaurants, these service workers don’t have a job.

What should you do if you find yourself in a situation where your paycheck is affected?

Emotional support

If you are in this situation you are likely feeling a lot of emotions. Overwhelmed, panic, anger, sadness, and hopeless are the terms I most often hear. Allow yourself to feel those emotions, but if they start to become overwhelming reach out to someone for help. Don’t go through this alone – talk to a therapist, a religious leader, or a friend. If you or a loved one is having suicidal thoughts, contact the National Suicide Prevention Lifeline at 1-800-273-8255.

Assess where you are now

Take some time and start to make a list of resources that you have available, including food, medicine, and other supplies. Do you have friends or family that you could stay with if needed? Do you know how to make low-cost meals? What about intangible resources such as a skill you could use to make some additional money?

The list below will have many additional resources that you may be able to utilize.

File for unemployment

The CARES Act expands unemployment insurance for four months and increases the benefit amount by $600 per week. It also eliminates the one-week waiting period, and it includes many workers who typically may not qualify, such as furloughed employees, freelancers, and gig economy workers.

It can take some time to work through the unemployment process, so if you are in this situation get your request in right away. You can find information about unemployment benefits here with a list of state offices here.

Temporary work

While many employers have had to lay off employees, others are hiring part and full-time workers, including Amazon, Costco, CVS, pizza chains, Dollar General, Walmart and more. USA Today has an article that links to many of the employer’s websites who are hiring.

Tax return

While the deadline to file taxes has been moved to July 15, if you are expecting a refund get your taxes filed right away. If you owe money you may want to consider waiting to file. If you need help filing your tax return, there are some Volunteer Income Tax Assistance sites open (they are all practicing social distancing and limiting the number of people that can come in) or you can use IRS Free File. Information about both resources can be found here.

Student loan payments

Student loan payments are automatically suspended until September 30, 2020, and no interest will accrue during that time. Only certain loan qualify. More information about student loans can be found in my article Changes to Student Loans During the Coronavirus Pandemic.

Mortgage or rent payment

The CARES Act allows borrowers with loans owned by Fannie Mae, Freddie Mac, FHA, VA, and RHS to suspend payments for 180 days, with a second 180 day extension available. During that time only regularly scheduled interest can accrue.

The CARES Act places a moratorium on certain eviction as well.

More information to follow about this topic.

Refinance

If your credit is good and your mortgage rate is at about 3.75% or above, contact several mortgage lenders to see if you can qualify for a lower rate with minimal out-of-pocket costs. If you have some equity in your home you may even be able to take some cash out to pay off some debt. Rates vary from day-to-day (or in some cases, hour-to-hour), but it is likely worth your time to contact some lenders. In addition, if you do refinance, you generally skip a payment in the process.

Utilities

While there are no specific federal guidelines regarding payment or shut-off of utilities, many states and companies have agreed to a moratorium on phone and utility terminations. Companies include Ameren, Dominion Energy, PG&E, Xcel Energy and many others. Contact your service providers if you are having trouble making your payments.

Food Stamps or SNAP

If you need help with food, file for Food Stamps, or SNAP (Supplemental Nutrition Assistance Program) right away. The CARES Act provided additional money to the SNAP program to ensure the program can provide for those who need Food Stamps. You can find information here.

Government checks

Under the CARES Act many individuals and families will be getting checks. Individuals will receive $1,200 checks, married couples will receive $2,400, and families will receive $500 checks for each child under the age of 17. These amounts are phased-out for individuals who earn between $75,000 – $99,000, while married couples will be phased-out for those who earn between $150,000 – $198,000.

As an example, a family with a married couple and two children who earn $75,000 per year will get $3,400.

Income phase-outs will be determined by 2019 tax returns if they are filed, and 2018 taxes if not. If you do not file taxes there will be alternate methods to determine how to get checks.

While these checks will be helpful for many in making some payments or stimulating the economy, the IRS is saying it will likely take until at least May to get checks out.

I would urge consumers to consider using these checks to 1. get caught up on bills; 2. pay off debt; 3. establish an emergency fund; and 4. build up your food supply.

Plan for the future

As this pandemic passes and the economy starts to return to normal I would encourage you to start to make preparations for the future. We may or may not face something like this again, but many of us will face periods of economic uncertainty.

It makes sense for everyone to do a few things to prepare:

  • Get high interest debt paid off.
  • Build up an emergency fund with 3-6 months worth of expenses.
  • Build up a supply of food and other supplies you will actually use (dry beans, canned goods, etc.). Don’t panic buy – but build this up over time.

Conclusion

Hopefully this article has given you some resources/support that you can utilize to help you or a loved one get through this crisis.

If you have questions or comments, let’s start a conversation in the comments below.

I will update this article as more updates are released.

The Stock Market Rollercoaster

These graphs show the S&P 500 and DOW Jones averages since the beginning of 2020 through the close of the market on March 20, 2020:

Some “experts” are predicting it could go down another 20% before this is over. Maybe they are right. Maybe they are wrong. Maybe it will start going back up tomorrow, maybe it will drop another 30% or more. No one knows for sure. My crystal ball is out of order, so I certainly don’t know.

Investors are panicking and pulling money out of the market. I hear people use words like “stressful” “scared” and “worried” with only the occasional investor using the word “opportunity.”

Let’s address the stressed, scared, worried, panicking investors first.

If you have a financial advisor, this would be the time to call them. Actually, if they are a good financial advisor, they should have contacted you already. If they are avoiding you, it’s time to find a new advisor.

I could give you all the statistics about not missing the up days in the market, or not buying high and selling low, but stress and worry and being scared are emotions, not logic. Our brains have been wired to “fight, flee, faint, or freeze” when we deal with stressful situations, including stressful financial situations. Getting out of the market is our way of fleeing as we see our balances going down.

I would encourage you to pause. What are you investing for? Most people would say retirement or college or some other goal. What values are those goals based on?

Our behavior should be framed by our goals, which should be framed by our values. If your financial planner hasn’t done this with you, or if you don’t have a financial planner, here is an important question for you:

  • Why is money important to me?

Write down whatever answer comes to mind first. Let’s say you thought “security.” Write down security then ask:

  • Why is security important to me?

Keep this process going until you dig down to the deepest reason money is important to you. Don’t dismiss this as simplistic and unimportant! Pause the panic and do this exercise.

For me, money is important because it represents security, freedom, time, and the ability to support and spend time with my family. Money is simply a tool to help me live these values, and I invest in the market to help it grow. That is true in up markets, and honestly it is even more true in down markets.

For the average 40-year old they have years until they will need the money invested in the market, and years in retirement.

What about someone who is 60 and planning to retire in the next few years? First of all, you should probably be moving towards a more conservative portfolio if you don’t have time to weather the ups and downs of  the market. If that describes you, it is time to talk to a financial planner. Remember, however, that you likely have 20 or more years in retirement. Don’t panic and sell now or you lock in the losses that are just on paper now.

Many people can’t understand how some investors see this as an opportunity. How is it an opportunity? The stock market is on sale! You can buy additional shares of stock or mutual funds right now at a steep discount. America and the world will recover from this, and the market will go back up. Maybe not tomorrow, maybe not next month, and maybe not this year, but it will recover.

Let’s say the stock of a company was trading at $30 a share and it is down to $15 right now. Instead of buying one share at $30 you can now buy two shares for that same $30. When the market recovers to $30 you now have two shares worth a total of $60. You can make much more money during a down market because of the discounts.

Can I share a few good investing principles with you to think about during the down times?

  • Only look at your balance once a quarter, at the most. How is my portfolio doing? I have no idea. I haven’t looked at it. Not because I am worried or scared, but because I don’t care. I’m not investing for the short term.
  • If you can put any extra money in the market right now, go for it!
  • If your financial advisor is avoiding you or not dealing with the emotions of investing, it is time to start looking for a new advisor. Ask any potential advisor lots of questions and make sure you feel comfortable with them.

If you have questions or want to talk more, let’s have a conversation. Contact me or leave a comment below.