None of us could have planned perfectly for 2020. This year has delivered a marked departure from the norm, as the COVID-19 pandemic has changed the routines, finances, and sense of security of many. As summer begins to fade and we naturally look towards year-end, we always recommend a check-in with your investment counselor to make sure your portfolios are well positioned to line up with your goals. This kind of planning may prove even more important this year. COVID-19 has changed not only some of the rules that inform our investment work but also our individual circumstances and values.
"COVID-19 has changed not only some of the rules that inform our investment work but also our individual circumstances and values."
First, certain legislative changes enacted in response to the coronavirus may impact your financial plans. Notably, as part of the CARES Act passed earlier this year, all required minimum distributions (“RMD’s”) from retirement plans in 2020 have been waived. In other words, investors of a certain age who are typically required, per Internal Revenue Service rules, to make annual withdrawals from IRAs and/or defined contribution plans like 401(k)s or 403(b)s no longer have to this year. For some clients, this may mean more flexibility in planning and also a smaller income tax liability. Additionally, if you or a dependent of yours has been diagnosed with the coronavirus, or if you have experienced other certain financial hardships as a result of the virus, there is some favorable tax treatment available in relation to retirement plan withdrawals, should you choose to make them. It’s worthwhile to discuss these scenarios and particulars with your investment counselor.
"...certain legislative changes enacted in response to the coronavirus may impact your financial plans."
Second, you may find that your income or expenses have changed. Are you earning or spending money differently than you have in the past? COVID and the related shutdowns have affected everyone’s bottom line differently. For some of us, income and employment may have been reduced. For others, reduced discretionary spending on items like travel and entertainment may be contributing to a cash surplus in our budgets. Some of us may have increased care burdens for parents or children that require additional resources. For many of us, technology spending has become a priority, as we rely on our computers, cameras, and internet more and more. For our institutional clients, fundraising efforts may be changing in this current environment, or perhaps there is a desire to increase spending to support your mission this year.
"COVID and the related shutdowns have affected everyone’s bottom line differently."
Third, 2020 seems to be an opportune time to revisit our values and goals, to make sure our investments, earnings, and spending line up with our priorities. Focusing on the controllable in our financial lives—and applying those decisions towards our values and planning efforts—can be cathartic in what feels like an increasingly chaotic world. For some of us, this may mean revisiting our estate plans to make sure that our wishes are accurately translated and understood by our families or heirs. For others, this may mean financially supporting causes that are important to us, whether they are charitable, local, or political. And perhaps saving for a future splurge, like a family trip or reunion, can provide some escapism and excitement in our planning efforts this year.
"...2020 seems to be an opportune time to revisit our values and goals, to make sure our investments, earnings, and spending line up with our priorities."
At Clifford Swan, we know that all our clients have unique circumstances. We also know that 2020 has been a challenge for many. We welcome the opportunity to strategize together with you to ensure we’re all working towards a financially successful tomorrow.
The above information is for educational purposes and should not be considered a recommendation or investment advice. Investing in securities can result in loss of capital. Past performance is no guarantee of future performance.