Over the past couple months, we’ve written blog posts on a number of coronavirus-related topics, including ones targeted at those who are struggling with finances, sickness, or childcare during this time. Individuals across the country have faced different levels of personal or financial hardship as a result of the coronavirus, but one thing that many Americans have in common right now is… time. While you are cooped up at home for weeks on end, why not check a few boxes on your personal finance to-do list?
If you do not already have a financial plan to help you meet your financial goals, this might be a good time to engage a financial adviser and invest some time in developing one. With the amount of change and uncertainty this spring, having a comprehensive financial plan—and an appropriate investment strategy—might help you sleep better at night (even in the face of a drop in income or assets), knowing that you have a clear path toward meeting your financial goals. If you already have a plan and investment strategy in place and need suggestions on what to include on your financial to-do list, we offer below several recommendations particular to this coronavirus era. Sure, taking a walk every day is good for your mental health, but perhaps on rainy days, you could take some of the following actions in the interest of your financial health!
1) Investments. Consider whether the movement in the stock market has presented opportunities to rebalance your portfolio, invest extra cash, harvest tax losses, or do Roth conversions. See our blog from mid-March for details (and warnings) on taking advantage of market declines.
2) Refinancing. Evaluate whether to refinance your mortgage considering the continued decline of mortgage rates over the past month. (Hint: If you live in Northern Virginia and have a rate over 3.5% on a 30-year fixed loan, you should at least investigate whether a refi makes sense for you.) If you have held your current loan for only a couple of years (or less) and you are likely to stay in your home for more than 5 years, you are likely to be a good candidate for refinancing.
3) Auto Insurance. If you are not using one or more cars– and do not anticipate using the car for the next several months– call your insurance agent to ask about a low mileage discount. For example, State Farm offers a discount if you average less than 7,500 miles per year of driving. Even if you anticipate only being a “low mileage customer” for the next 6 months, you can still lower your insurance premiums by switching your driving status during that time. (Note that this is distinct from the refunds and credits that many auto insurers are offering automatically as a result of the reduction in accidents during the spring.)
4) 529 Accounts. Do not forget to pay attention to your 529 accounts if you are using them to pay for kids’ college expenses. Hopefully, any 529 assets are invested appropriately given your children’s age, so that the recent market decline hasn’t significantly hurt the value of your assets when you are close to needing them. If your 529 accounts are aggressively invested despite your kids approaching college age, you will likely want to wait (and hope) for a further market rebound before changing the allocation, if possible. Also, if you used 529 assets to pay for college expenses this year and received a refund from your child’s school, be sure to review the rules on putting funds back into the 529 account.
5) Consolidating Accounts. Tread carefully if considering a retirement account rollover during this time. Market volatility spiked in March and remains relatively high. (For context, the Chicago Board Options Exchange’s Volatility Index spent most of 2019 between 10 and 15. In mid-March, it jumped past 80. Recently, it’s been hovering between 30 and 40.) If a retirement account is a small part of your overall portfolio, is mainly invested in bonds, or can be transferred in-kind (without selling the investments), it’s relatively safe to do a rollover. If not, however, it would be prudent to wait until the market volatility subsides before pursuing a rollover, since the funds will spend a few days (or more) out of the market while the custodians are processing the transfer of your assets.
6) Tax Planning. Consider whether the waiver of Required Minimum Distributions or any changes in income this year create tax planning opportunities. If you have significant assets, a loss in income could create opportunities for Roth conversions, realizing capital gains at a 0% tax rate, etc.
7) Life Insurance. With serious illness taking center stage in our society today, it is a fitting time to consider whether your life insurance coverage is sufficient given your level of income and dependents. In light of social distancing, some companies are offering life insurance policies without a paramedical exam for individuals that meet certain age and health requirements. They are requiring additional statements of good health before final approval of policies though to confirm that individuals have not experienced any changes in health since the start of the application process (and there are additional requirements for those who have been exposed to or diagnosed with COVID-19).
8) Estate Planning. Similarly, it is an appropriate time to ensure that you have estate planning documents in place and that they reflect your current wishes. First and foremost, if you have minor children or other dependents, ensure that you have provided for their care and communicated your wishes to others. In addition, make sure that your beneficiary designations are up-to-date, and your accounts are titled properly considering your family and financial situation. Finally, if you have not completed estate planning documents recently (e.g. within the last 10 years, especially since there were major changes to estate planning laws in 2010), engage an attorney to create a will, trust (if needed), durable power of attorney documents, and advanced medical directives.
If you have questions or need help implementing any of the items on this list, please do not hesitate to call or email. The current environment can be a source of anxiety, but it can also present opportunities to ensure that your personal finances are on solid ground.
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