U.S. lawmakers have reached a deal on the $2 trillion stimulus package, also known as phase three of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The package is purposed to provide financial relief to American workers and businesses hurt by the coronavirus pandemic. More than 3 million Americans filed for unemployment during the second week of March as companies large and small closed their doors or pulled back. How quickly those jobs come back remains to be seen. The package is part of a multipronged approach, including moves by the Federal Reserve to prop up the economy and ensure debt markets remain liquid. More may have to be done, depending on the length of the pandemic.
Details of the bill have yet to be fully disclosed. Clients, already concerned about their portfolios, are asking advisors for guidance on how to take care of their employees, handle a decline in income or how to tap emergency resources if they’ve been laid off. Advisors have been monitoring the updates to the stimulus package to gather the appropriate information for their clients. Not surprisingly, they have strong opinions about what they see.
Below are some advisor responses to phase three of the CARES Act:
Joe Conroy, owner and financial advisor at Harford Retirement Planners, Bel Air, Md.
"I like required minimum distributions (RMDs) being waived for 2020. Most investors have money invested in the stock market, and now is not a good time to be forced into selling stocks. Keep in mind that most investors should be diversified and have until the end of the year so it shouldn’t be a big deal to most retirees taking RMDs.
I don’t like waiving the 10% early penalty on premature distributions from retirement accounts. People are hurting around the country, financially, myself included, but this provision runs the risk of being abused. Investors might talk themselves into premature withdrawals because it’s easy but not always in the best interest of the investor, long term. This provision should be considered only as a last resort, not a first choice.
I like that the payments are based on income brackets. Full payments will go to individuals with under $75,000 of income, reduced payments go to individuals making between $75,000 to $99,000, and no payments for anyone earning more than that. Couples will get double the payments and their phaseout numbers are exactly double that of individuals. I like this because it’s the average American who will need direct assistance, not the high-income earners. Everyone will feel the pain from this event, but the lower-income earners will feel more of it.
Payments and interest on federal loans will be waived for six months. The money will have to be paid, but it gives folks half a year of breathing room to figure out where things go from here. If someone isn’t affected by the current environment, use the six-month hiatus as an opportunity to get ahead. You can save that money, or invest it and shore up your financial situation.”