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How Can the CARES Act Can Help You and Your Family?

As you know, the U.S. Congress recently passed the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This law, which provides wide-ranging financial and regulatory relief related to the ongoing Covid-19 public health crisis, represents a response of unprecedented scope and scale. Below we have given a summary of highlights that may be relevant to you and your family. We hope this helps clarify how you can receive assistance during this pandemic.

  1. Direct payments to individuals and families – Individuals receive up to $1200 and married couples receive $2400 if you file a joint income tax return. Families with children receive an additional $500 for each qualifying child.  You qualify for the full payment if your adjusted gross income as shown on your 2019 tax return (or 2018 return if you haven’t filed 2019 yet) is $75,000 or less ($150,000 if married filing jointly).  You can qualify for a smaller amount if your AGI exceeds $75,000 but you get nothing when you reach $99,000 annually and $198,000 if married filing jointly.
  2. Deferring mortgage payments and renter protection – If you have a federally backed mortgage you can write to your lender to ask for a 6 month deferment on making your payments (you may also request an additional 6 month extension as you approach your first 6 month deadline).  There are no penalties allowed by your lender when deferring this loan. It is simply added to the end of your mortgage term. The Act also provides for a 120 day moratorium for eviction proceedings if you are a tenant in a federally subsidized housing unit or a dwelling covered by a federally backed mortgage loan.
  3. For Americans age 59 ½ and younger who have directly been affected by the coronavirus and are experiencing financial hardship, the CARES Act waives the 10-percent penalty for withdrawing funds from IRAs and defined benefit contribution plans, like 401(k) plans. Taxes must still be paid on these withdrawals, however, they may be paid evenly over the next three years. Contact your plan provider to verify that your plan has been updated to allow these revisions before you withdraw to prevent future headaches.
  4. You can also now borrow up to $100,000 from a 401k if you take the loan no later than 9/22/20 but there are tax ramifications if you then are unable to pay the loan back before you leave your employer or lose your job.
  5. The need to take required minimum distributions (RMD) is waived for 2020.  This may be helpful to retirees who don’t need the money which is just accumulating in a non-retirement account.  However, for those needing the money to pay bills, this will not be helpful since you are still required to pay taxes on the withdrawals.
  6. Payments on federal student loans have been suspended through 9/30/2020.  This is helpful for parents and grandparents who are making payments on student loans for a child or grandchild. The Department of Education automatically will enact the temporary suspension on federal student loans that are owned directly by the Federal Government for the six-month reprieve so there is no need to shut off any automatic debits. Be wary of scams that ask for payments to start the suspension. Borrowers who are able to continue making payments on the principal during the six-month pause will whittle down the balance that much faster. Those wishing to continue any automatic debit they have set up or who have any questions about how this affects their loans should contact their servicer.

Please take care to be extra cautious about fishy scams that prey on seniors with investment schemes. Listen to trusted financial advisers and check with loved ones if it sounds too good to be true. As always we are here to help you and your family plan for the future and get through this difficult time in our country.

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