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Zach Abraham

How COVID-19 Has Impacted Retirement Confidence

By | Retirement

The Transamerica Center for Retirement Studies recently conducted an online survey of more than 6,000 people in the U.S. and found that many are feeling financially vulnerable.

Americans are feeling a distinct lack of confidence, particularly when it comes to retirement. Whether employed or unemployed, the survey found that 23% of workers are no longer certain they can retire comfortably following the coronavirus pandemic.

Not unsurprisingly, the insecurity was highest for baby boomers, born between 1946 and 1964, who are closest to retirement—32% said their confidence in their ability to retire has gone down due to COVID-19. Meanwhile, 25% of Generation X, those born between 1964 and 1978, said their retirement confidence has declined, and 20% of millennials, people born between 1979 and 2000, said the same.

The research also uncovered the average amount that each generation has put away in savings toward their retirement years. While millennials have a median of $23,000 saved in all household retirement accounts, Gen Xers had a median of $64,000, and boomers $144,000.

The study found that survey respondents also had some money saved to use toward emergencies. Millennials had a median of $3,000 set aside, while Gen Xers had $5,000 and boomers had $15,000 in emergency funds.

Despite having some emergency money, around 22% of survey respondents said they have taken or plan to take a loan or withdrawal from a 401(k) or other workplace retirement savings account to pay for living expenses like their mortgage, rent or food during the pandemic. Millennials were most likely to take such withdrawals, at 33%, compared to 15% of Gen Xers and 10% of baby boomers.

In part, this may be because recently-enacted legislation, the CARES Act, allows those impacted by the coronavirus to withdraw funds from 401(k)s up to $100,000 without the 10% IRS penalty for withdrawals for people under the age of 59-1/2.

Keep in mind that even though there is no 10% IRS penalty for withdrawals from workplace retirement plans, income taxes will still be due on the money withdrawn, which can be paid to the IRS over a period of three years if needed. Or the withdrawn money can be returned to the plan over three years with no taxes due per the CARES Act.

It’s important for people considering withdrawing money from their retirement accounts to remember a couple of things. One, the CARES Act doesn’t actually mandate that a workplace retirement plan has to allow hardship withdrawals for those impacted by coronavirus—it is up to each individual plan administrator whether or not they will allow withdrawals.

Two, the rules about who will qualify for these withdrawals if allowed by the plan are: being diagnosed with COVID-19, having a spouse or dependent diagnosed with COVID-19, or experiencing a layoff, furlough, reduction in hours, or inability to work due to COVID-19 or lack of childcare because of COVID-19.

Experts remind people that those taking withdrawals need to follow all rules, or they will have to pay income taxes on the money withdrawn and owe the 10% penalty.

 

If you have any questions about the current retirement situation in America and what you can do now to protect yourself and your retirement savings, please contact us for a complimentary consultation.

Retirement planning is one of our focus areas, and we are here to help you as well as your family members and friends.

 

Contact Bulwark Capital Management in the Seattle area at 253.509.0395.

 

Source:

https://www.cnbc.com/2020/06/01/how-the-coronavirus-pandemic-is-hurting-retirement-confidence.html

Zach Abraham Featured by Business Insider

By | Geopolitical Affairs, Market Risk

Zach Abraham was one of the industry experts quoted in the recent Business Insider story, “The European Union’s $826 billion stimulus plan to battle the coronavirus is ‘too small and too late.’”

Zach Abraham told Business Insider that the EU fund is a mere “stop gap” plan of action.

“While the EU relief package will certainly help things in Europe, it appears to be more of a stop gap measure and pales in comparison to actions taken by the US government,” said Zach Abraham, chief investment officer at Bulwark Capital Management.

In its current structure, Abraham said, the EU cannot survive. What will likely happen is that Germany will back down on European Central Bank guidelines that restrict quantitative easing and other forms of monetary stimulus, and countries such as Italy and Spain will be forced to leave, he said.

Other comments from the article

While analysts at Bank of America believe the EU fund is a decent starting point to negotiations, they say it is “too small and too late” for urgent economic needs. Compared to the Franco-German proposal, Bank of America analysts called the EU’s latest recovery fund “tentative good news.”

Goldman Sachs analysts praised the plan as more “ambitious” than the Franco-German proposal valued at €500 billion. Analysts said that it was “close to the Franco-German proposal, but somewhat more ambitious on the loan-based mechanisms for investment.”

Read the whole article here:

https://www.businessinsider.com/what-eu-826-billion-covid-19-stimulus-package-means-2020-5

The story was also republished by MSN Spain and Libertatea, a top-tier publication in Romania:

https://www.msn.com/es-es/dinero/economia/el-plan-de-est%C3%ADmulo-de-750000-millones-de-euros-de-la-uni%C3%B3n-europea-contra-el-coronavirus-es-demasiado-peque%C3%B1o-y-llega-demasiado-tarde-dicen-los-analistas/ar-BB14Oh1r

https://www.libertatea.ro/stiri/ce-se-intampla-lume-era-covid-3019159

 

 

Zach Abraham Weighs in On the EU’s Historic Coronavirus Stimulus Package

By | Geopolitical Affairs, Investments, Stock Market

Zach Abraham’s comments on the historic European Union’s $826 billion coronavirus stimulus package (750-billion-euro) were recently featured on both Bezinga.com* and Yahoo! Finance.

 

The European Union is proposing a ($824 billion) coronavirus recovery plan to assist the bloc with its recovery. The funds, as well as targeted reinforcements to the long-term EU budget for 2021-2027, will bring the total financial firepower of the EU budget to 1.85 trillion euros, according to the European Commission.

EU Must Evolve To Survive, CIO Zach Abraham Says

“While the EU relief package will certainly help things in Europe, it appears to be more of a stop gap measure and pales in comparison to actions taken by the U.S. government,” said Zach Abraham, chief investment officer and principal at Bulwark Capital Management.

“Although we are keeping a watchful eye on all ECN and EU relief measures, we are far more focused on recent comments by Macron and Merkel that point to a willingness or at least an openness to a tighter fiscal union.”

In Abraham’s view, the EU cannot continue as it is structured today.

“Either Germany will have to relent on ECB guidelines which restrict the central bank from applying unilateral QE and other forms of monetary stimulus (currently the ECB can only apply monetary stimulus evenly across all member countries) or more countries, specifically Italy and Spain, will be forced to leave.” This issue is far more critical to the economic prospects of the EU as a whole, the professional investor said.

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Interestingly, Germany announced it was seeking a fresh $112 billion coronavirus stimulus package, just days after the EU launched its historic $826 billion plan: https://markets.businessinsider.com/news/stocks/germany-economy-112-billion-coronavirus-stimulus-rescue-plan-2020-6-1029271636

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You can read the original articles here:

https://finance.yahoo.com/news/european-union-sets-750-billion-192730975.html

https://www.benzinga.com/news/20/05/16115773/european-union-sets-out-750-billion-euro-coronavirus-recovery-plan

* With an estimated unique monthly visitor count of almost 1.5 million, Benzinga is a news and analysis service that focuses on global markets. It provides original, accurate and timely global financial content and features articles from industry experts and experienced analysts.

How a Furlough (or Layoff) Affects Your Finances…and Retirement

By | Financial Planning, In The Headlines

Here are six things you need to know if you or a family member has been furloughed—or laid off—from their job

 

A furlough is an unpaid leave of absence. You don’t report to work, you don’t get paid, and you may lose some of your benefits. Getting fired or laid off is different because it is permanent; whereas, being furloughed means your employer wants you back as soon as things get back to normal, typically at the same position and income level as before the furlough. Here are six things you should know:

 

  1. Filing for unemployment

Whether furloughed or laid off, you should file for unemployment as soon as possible because the CARES Act adds to the amount your state provides weekly, but only through July 31. For instance, the average benefit among the 50 states is $215 per week—the CARES Act adds an additional $600 per week through the end of July. Self-employed, independent contractors and gig economy workers, who typically are not allowed to file for unemployment, can also apply. Learn more here.

  1. Healthcare insurance

If you are furloughed, you may still be able to keep your healthcare insurance. Be sure to check with your employer about how to arrange to pay your contribution amount, if any. If you are laid off, you can continue benefits through COBRA, or you may find a cheaper option through the exchange http://healthcare.gov website—if your state has chosen to open up enrollment due to the pandemic.

  1. Bills and debts

There is a provision for mortgage forbearance if you have a single-family residence mortgage loan backed by the federal government, and renters can avoid eviction for more than 120 days if their landlord has a government loan on the property rented. Learn more here. Student loans held by the federal government will not require payment and will not accrue interest through September 30.

In any case, it is recommended that you call creditors to discuss your situation. Ask them what they have to offer people who are experiencing a temporary reduction in income, and take notes and ask about any fees, additional interest, and whether they report any postponed payments to credit bureaus.

  1. 401(k) or similar retirement plan – contributions

If you are furloughed, your 401(k) accounts should remain in place, but your contributions and matching contributions won’t happen during the furlough unless your employer chooses to make a discretionary contribution. If you are not yet fully vested, there is a scenario that could happen if you are furloughed for an extended amount of time or ultimately laid off. If an employer terminates 20% or more of its workforce, a “partial plan termination” could be triggered, in which case the IRS could decide that all affected employees would become 100% vested.

If you are let go, you can leave your money in the company’s 401(k) plan if you have more than $5,000 in it, although you can’t add additional money to the account. If you have $5,000 or less, your employer has the option of removing you and distributing the funds, so be sure to ask what they intend to do. See some of your other options below.

  1. 401(k) – loans

If you are furloughed, or laid off but leaving your 401(k) with the company, you may be able to take a loan or withdrawal from your 401(k) due to the coronavirus outbreak, depending upon your company plan rules—be sure to check with your plan administrator.

If so, the CARES Act allows up to $100,000 to be taken without penalty, although you will have to either repay the money or pay taxes on the amount withdrawn over the next three years. NOTE: You can do this even if you are under the age of 59-1/2, there will be no 10% penalty, and there will be no mandated 20% withheld by the 401(k) administrator for taxes. In order to meet the eligibility provisions of the CARES Act, you, your spouse or dependent/s must have contracted COVID-19, or must have experienced adverse financial consequences as a result of quarantine, furlough, lack of childcare or closed or reduced hours of business.

If you already have an outstanding 401(k) loan, your repayments will stop while you are furloughed, since those are typically held out from your paycheck. Ask your employer about how you can make repayments or get the loan repayments suspended temporarily.

Taking 401(k) loans or cashing out should be a last option for most people since it can jeopardize your retirement nest egg and your future. After the 2008 financial crisis, most people who stayed in the market experienced financial recovery from their losses.

  1. 401(k) – rollovers

If you are laid off, you do have the option of rolling over your 401(k) money into your own self-directed IRA account. This offers many options, since an IRA can be a mutual fund, annuity, ETF, CD or almost any other type of financial instrument.

You need to choose between a tax-deferred traditional IRA, or pay taxes on the money you roll over and start a Roth IRA. With a traditional IRA, you will have to begin withdrawing a certain amount out every year starting at age 72 and pay ordinary income taxes on the money withdrawn. (These are called Required Minimum Distributions (RMDs)—which are not due in 2020 per the CARES Act.)

With a Roth IRA, you pay taxes up front. You don’t have to withdraw money during retirement, but if you do, it is usually tax- and penalty-free after you’ve owned the account for five years. Your kids can inherit the money tax-free as well.

It’s usually best to work with a financial advisor who can outline some of the tax ramifications, rules and timing requirements so you don’t miss any rollover deadlines or get hit with any penalties or taxes you weren’t expecting. They can fill you in on other options, such as, if you are age 59-1/2 and still working, you may be able to do an “in-service rollover” with part of your 401(k), moving that portion into your own IRA, potentially helping you avoid market risk as you get closer to retirement.

 

If you have any questions, please call us. Contact Bulwark Capital Management in Tacoma, Washington at 253.509.0395. We look forward to speaking with you!

 

This article is provided for informational purposes only, and is not intended to provide any financial, legal or tax advice. Before making any financial decisions, you are strongly advised to consult with proper legal or tax professionals to determine any tax or other potential consequences you might encounter related to your specific situation.

 

Sources:
https://www.fool.com/investing/2020/04/23/how-a-furlough-affects-your-401k.aspx
https://www.immediateannuities.com/roll-over-ira-or-401k/
https://www.washingtonpost.com/business/2020/04/03/unemployed-coronavirus-faq/?arc404=true
https://www.cbsnews.com/news/furlough-versus-layoff-unemployment-aid-coronavirus/
https://money.usnews.com/money/retirement/401ks/articles/what-to-do-with-your-401-k-if-you-get-laid-off
https://www.businessinsider.com/what-you-need-from-your-job-get-laid-off-furloughed-2020-4#if-you-have-no-other-choice-but-to-withdraw-from-your-retirement-funds-know-the-new-cares-act-updates-8
https://www.thestreet.com/how-to/how-to-roll-your-401k-into-an-ira-while-you-re-still-working-14379206
https://www.investopedia.com/articles/personal-finance/092214/guide-401k-and-ira-rollovers.asp

Zach Abraham On April 17: ‘We’re Seeing a Bear Market Rally’

By | In The Headlines, Market Risk, News, Stock Market

Zach Abraham, Chief Investment Officer and Principal at Bulwark Capital Management, appeared on Cheddar.com again on Friday, April 17, live from the New York Stock Exchange, to discuss the effect that the coronavirus outbreak was having on stock markets. At that time, markets were at their highest point since March 10.

“Right now, the market is trading based on coronavirus news, which we think is a mistake. We equate it to focusing on a hurricane—nobody’s obsessed about when the hurricane will be over, the question is, what damage is left will be left in its wake?”

Zach went on to make the point that the market being up is, of course, a good thing, as is news of a potential vaccine being announced by Gideon, “We’re all cheering for that.” Also, he doesn’t have a crystal ball—no one does. But he urges caution since a vaccine could take 11 months or longer, and he encourages investors to start looking more closely at underlying market fundamentals being exacerbated by the coronavirus. “They’re bad, they’re really bad. You’ve got the S&P at a 22 price-to-earnings (PE) ratio going into the most severe economic shock in history. I’m just going to bet that doesn’t last; it’s not warranted.” Zach said he expects some potentially shocking earnings reports in the upcoming year from companies who simply cannot forecast sales accurately at this time, or what may happen with some of their divisions due to unpredictable future economic fallout.

Watch the full episode here: https://cheddar.com/media/stocks-close-higher-dow-hits-for-first-time-since-march

 

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ABOUT CHEDDAR.COM

Cheddar is a streaming digital video service that broadcasts live from the floor of the New York Stock Exchange (NYSE) daily. Focused on business-minded millennials, the service highlights tech and consumer stocks while also covering the intersection of tech, media, news and culture.

 

Follow this link to the Cheddar.com web page: https://cheddar.com/media/stocks-close-higher-dow-hits-for-first-time-since-march

Zach Abraham: Coronavirus’ Effect on Cryptocurrency ‘Unpredictable’

By | Investments, Market Risk, News, Stock Market

Zach Abraham was recently quoted by Decrypt Debrief in their article, “Coronavirus, Bitcoin and the economy: what can we expect?”

Zach Abraham, Chief Investment Officer of financial services firm Bulwark Capital Management, agreed that the current economic situation is “incredibly unique,” and hard to predict.

“This is a different situation than 2008 but in some ways it’s much more unpredictable as the problems caused by excess are in every market,” he said. “The variables are endless and most of them aren’t looking too hot at the moment.”

You can read the full article HERE.

 

 

The CARES Act: 10 Things You Should Know

By | News

The $2 trillion coronavirus economic stimulus bill is the single largest relief legislation in U.S. history, aimed at providing help for individuals and businesses affected by the outbreak. It was signed into law on March 27, 2020. The CARES Act is also known as “Phase III,” because it follows a $104 billion package passed March 18 for workers and families, and a smaller $8 billion bill to increase funding for medical treatments and testing. There is already talk of a fourth and fifth package in development in Congress.

Here’s what you should know:

  1. Direct Payments to Taxpayers

Americans are set to receive a one-time direct deposit^ of $1,200 estimated to occur mid-April, based on their most recent tax return on file with the IRS from 2018 or 2019^^. Joint tax filers will receive $2,400. Heads of household and joint filers with children will receive an additional $500 per child under age 17.

For individuals with incomes from $75,000 – $99,000, heads of household earning $112,500 – $146,500 and joint filers earning from $150,000 – $198,000, the payment is reduced by 5% ($50 for every $1000 in AGI), and will not be made for those earning more than that. Social Security recipients will receive their checks based on information from the Social Security Administration; they needn’t file tax returns to receive the money.

^Payments will be deposited to the last bank account used for IRS refunds and/or Social Security direct payments or mailed to the last known address. NOTE: Mailed checks may take up to 20 weeks or longer; the IRS can only process about 5 million per week; they are to provide a phone number for issues with payment addresses and bank account changes.

^^NOTE: The payment is based on anticipated 2020 income. If taxpayer income in 2018 or 2019 was too high to qualify, but meets thresholds in 2020, the payment will be made in 2021. If taxpayer income in 2018 or 2019 was low enough to qualify but turns out to be higher than thresholds for 2020, the taxpayer gets to keep the payment; there will be no claw-back.

  1. Unemployment Benefits

Unemployment benefits for those affected by the coronavirus will be increased to an additional $600 per week for four months on top of state benefits. Temporarily through July 31, under a measure called “Pandemic Unemployment Assistance,” this will also apply to self-employed, independent contractors and gig economy workers who typically aren’t allowed to file for unemployment. Regular state unemployment benefits will be extended beyond the normal 26 weeks and will be paid by the federal government through December 31 for those eligible who remain unemployed. Employers who reduce employee hours instead of laying off workers and employees with reduced hours can also receive up to 26 weeks of pro-rated benefits.

  1. 401(k) / 403(b) / Traditional IRA / Qualified Retirement Plan Loans

The loan limit from qualified retirement plans for workers who contract COVID-19 or are otherwise adversely affected is doubled to $100,000 without the 10% penalty for workers under the age of 59-1/2.  There is no mandated 20% withhold by the 401(k) administrator for taxes; income taxes will be due on the distribution amount spread over three years unless the taxpayer returns the money to the account over the three-year period.

  1. RMDs Suspended for 2020

Required Minimum Distributions are suspended for 2020 for retirees as well as heirs and/or beneficiaries; funds can stay invested without penalty. Voluntary distributions are still allowed, including tax-advantaged Qualified Charitable Distributions (QCDs).

  1. Student Loans / Mortgage Forbearance

Student loan payments will not be due and interest will not accrue on federal student loan debt (not private) through September 30, 2020, but voluntary payments can be made toward existing principal and interest. Temporarily through December 31, 2020, employers may pay for an employee’s student loan debt up to $5,250, excluding that amount from both the company’s income and the employee’s income, thus making it a desirable, income tax-free benefit.

Those with single family mortgages backed, insured and/or guaranteed by federal government agencies may be eligible to request 180 days of mortgage forbearance due to financial hardship as a result of COVID-19. Penalties, fees or extra interest during the forbearance period may not be assessed. This may be extended another 180 days at borrower’s request. The hardship must be documented by the loan servicer, and payments will be due later. With some forbearance programs, you may owe all of your missed payments at one time, or additional payments at the end of the mortgage might be required, so it’s important to be familiar with the final terms. If renting from an owner who has a federally backed mortgage, the CARES Act provides for a suspension or moratorium on evictions. More information here: https://www.consumerfinance.gov/about-us/blog/guide-coronavirus-mortgage-relief-options/

  1. Health Care Provisions

All coronavirus testing and potential vaccines for COVID-19 will be covered at no cost to patients. Health Savings Accounts (HSAs), Archer Medical Savings Accounts (MSAs), and Healthcare Flexible Spending Accounts (FSAs) are expanded permanently to include over-the-counter medications as well as menstrual care products. Medicare payments are being accelerated, and there is a 20% add-on payment for inpatient treatment as well as increased access to post-acute care. Medicaid scheduled reductions for low-income assistance are postponed through November 30, 2020. Physicians may receive increased payments if labor cost is determined to be below national average through December 1, 2020.

  1. Charitable Giving

Taxpayers may deduct up to $300 in charitable cash contributions to qualified charities if they don’t itemize for the 2020 tax year. On itemized returns, the limit of 60% of Adjusted Gross Income (AGI) to qualified charities is removed for the year; a maximum of 100% of AGI can erase an individual’s tax liability for 2020 and any excess can be carried forward as a charitable contribution for up to five years.

  1. Employer Payroll Tax Delay

Employers may delay paying their portion of 2020 payroll taxes, paying back 50% in 2021 and 50% in 2022. A refundable payroll tax credit may be available for up to 50% of wages paid during the crisis for those who continue to pay employees, but whose businesses were fully or partially suspended due to a COVID-19 shut-down order, or whose gross receipts declined by more than 50% compared to the same quarter of the prior year.

  1. Small Business Loans and Credits / Paycheck Protection Program

A total of $349 billion is dedicated to preventing layoffs and business closures due to the outbreak, and the Treasury Secretary has committed to ask Congress for more should that amount be depleted.

Companies with 500 or fewer who maintain their payroll and who meet other criteria can receive up to eight weeks of cash-flow assistance, which can be forgiven when used for payroll costs, group health premiums, interest on mortgage obligations, rent and utilities. The debt forgiven will not be counted as taxable income to the company.

Size of loans can equal 250% of an employer’s average monthly payroll, up to a maximum of $10 million, with a maximum interest rate of 4%; loans are available through the more than 800 existing Small Business Administration-certified lenders plus more; some loans may be funded the same day. (Find lenders here: https://www.sba.gov/funding-programs/loans.) The first payment will be due after six months and the full loan will be due after two years. NOTE: Businesses with existing SBA loans will not have to pay principal, interest or fees on those loans for six months; the SBA will pay.

  1. Tax Changes for Businesses
  • Net operating loss rules are modified for losses arising in 2018, 2019 or 2020. The 80% rule is lifted, and losses can be carried back five years.
  • Excess loss limitation rules for pass-through entities are suspended.
  • Businesses who invested in Qualified Improvement Properties in 2018 and 2019 can receive tax refunds now.
  • Businesses (especially retail, restaurants and hotels) can immediately write off costs for improving facilities instead of having to depreciate improvements over 39 years. This provision corrects a typographical mistake in the Tax Cuts and Jobs Act.
  • Companies can recover Alternative Minimum Tax credit refunds now.
  • The amount of interest expense that businesses can deduct on tax returns increases from 30% to 50% for 2019 and 2020.
  • Federally backed mortgage loans are prohibited from foreclosure for a 60-day period starting March 18, 2020.
  • Landlords are prohibited from taking legal action to recover possession of a rental property for nonpayment of rent for 120 days if their mortgages are backed by federal agencies or programs.

 

There is much, much more included in this 800-page piece of legislation. Please call us if you have questions, and we will keep you as up to date as possible as things change and clarifications come to light.

Contact Bulwark Capital Management in Tacoma, Washington at 253.509.0395

 

 

 

 

This information is provided as a courtesy and is accurate to the best of our knowledge. However, this is new legislation still being analyzed by experts. IRS clarifications will follow. Do not rely on this information or consider it as tax advice; obtain direct information about your individual situation from your CPA or tax professional.

 

Sources:

https://home.treasury.gov/cares

https://www.consumerfinance.gov/about-us/blog/guide-coronavirus-mortgage-relief-options/

https://www.forbes.com/sites/leonlabrecque/2020/03/29/the-cares-act-has-passed-here-are-the-highlights/#759dfbb068cd

https://www.natlawreview.com/article/president-trump-signs-law-coronavirus-aid-relief-and-economic-security-cares-act

https://www.kitces.com/blog/analyzing-the-cares-act-from-rebate-checks-to-small-business-relief-for-the-coronavirus-pandemic/

https://www.forbes.com/sites/zackfriedman/2020/03/28/student-loans-payments-suspended/#3d8734ae1b10

https://www.washingtonpost.com/business/2020/03/30/heres-how-get-small-business-loan-under-349-billion-coronavirus-aid-bill/

https://www.thinkadvisor.com/2020/04/01/treasurys-mnuchin-vows-to-boost-small-business-loan-pool-under-cares-act/

https://www.benefitresource.com/blog/cares-act/

https://www.npr.org/sections/coronavirus-live-updates/2020/04/02/826187693/stimulus-cash-payments-may-take-up-to-20-weeks-to-reach-some-americans