Every four years, the United States votes to elect a new House of Representatives, one-third of the Senate, and potentially a new president. The two political parties have different agendas, and policies implemented with new representatives and a new administration will affect your financial life. It’s normal to feel anxious or nervous about the election, regardless of whether or not your chosen candidates win or lose; financial markets don’t like uncertainty, and that uncertainty can create volatility. Luckily we have over 200 years’ worth of election history to examine, and past results can teach us a thing or two about what to expect in November and beyond.

Will the next president crash the stock market?

Fidelity went all the way back to 1789 using a combination of S&P 500, Dow Jones Industrial Average, and Cowles Commission data. They found that the first two years of a presidential term tend to have slightly lower stock market returns than average, but found no partisan difference in market returns. No matter whether a Democrat or Republican was in office, market returns over the long-term were nearly identical. The political makeup of Congress didn’t matter much either; whether Republicans swept the House and Senate, Democrats did the same, or there was a divided Congress, stock market returns were remarkably consistent over time.

History tells us that stock market returns have little to do with which political party controls the White House, Senate, or House of Representatives. The market does care about fundamentals, such as corporate earnings, interest rates, labor growth, and economic productivity, and although these factors may impact stock market returns, they are all out of your control. So what can you control, and what is really impacting your financial life?

Focus on what you can control

The return of the investments in your portfolio are largely outside of your control, but there are certain elements of your portfolio you can and should control. “Risk tolerance” and “risk capacity” are terms that get thrown around a lot when discussing investment portfolios, but what do they actually mean? Risk tolerance is your personal tolerance for risk, or the degree of uncertainty you are willing to accept in exchange for the opportunity for higher returns. Risk capacity is the amount of risk you must take to achieve your financial goals; sometimes risk tolerance is lower than risk capacity and sometimes it is higher.

When the stock market is doing well, we are vulnerable to taking on a distorted view of our own risk tolerance. When the market is seemingly only going up, it’s easy to accept more risk because our fear of missing out outweighs our fear of the market going down. When the stock market is doing poorly, the opposite is true: it is more difficult to accept a greater amount of risk when it appears that it is a losing bet. Your portfolio should be designed for all types of market conditions, both good and bad. When the market is going up it’s normal to feel like you may want to take on more risk, and when the market is going down it’s normal to feel like you want to move everything to cash. Fighting our own cognitive biases is perhaps one of the most important elements of being a successful investor.

How to election-proof your finances

No matter who wins the election this year, or in future years, the outlook for continued growth and innovation remains positive. With the amazing world we live in today, where our watches are miniature computers and our smartphones are more powerful than computers that took up entire rooms just a few decades ago, it’s easy to imagine that our society may have plateaued. How can it get any better than this? Although we may not be able to conceptualize exactly what innovations we’ll see in coming years, the Law of Accelerating Returns says they are coming, and they are coming fast. Innovation is actually accelerating, not slowing down; going by this Law of Accelerating Returns, the 21st century could achieve 1,000 times the progress of the 20th century.

Our minds think linearly instead of exponentially. It’s hard for us to understand the drastic rate of growth and innovation we’ll continue to see moving forward in the same way it’s difficult to conceptualize the return of money over a long period of time. The good news is we don’t have to fully understand this concept to take advantage of it; saving a little bit of today for tomorrow, and investing in the future of accelerating innovation and growth, has paid dividends in the past (no pun intended) and will continue to in the future.

“Is the next recession around the corner?” Every four years, we get this question without fail – and this year is no exception! No matter your candidate or preferred party, it’s easy to fall into worrying about the election’s impact on our economy and your personal portfolio. Let’s debunk some lies, examine history, and make sure your finances can weather the political storm!

In this episode, you’ll learn:

• How past elections have impacted the market
• Whether or not one party is better for the economy than the other
• How you should structure your financial portfolio to weather the next four years
• How your age affects your personal financial strategy

Research and resources from this episode:

• Presidential elections and stock returns (Fidelity)
• The AI Revolution: The Road to Superintelligence (Wait But Why)

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How can you maximize the money available to you through the CARES Act? This legislation is a fluid situation, but through lots of research, we broke down exactly how you can take advantage of these new benefits. Whether you’re an individual or a small business, there are provisions you need to be aware of and instructions you need to keep in the forefront of your mind. We walk through every detail we could uncover in this episode.

In this episode, you’ll learn:

• What rebates do you qualify for and how much?
• Should you take advantage of these benefits?
• Are there any drawbacks?
• How do you apply?
• What’s the best strategy for my business?
• What impact does it have on your retirement savings?

Research and resources from this episode:

• Everything You Need to Know About the $2 Trillion Stimulus Package (Money Guy)
• Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
• Business Loan Program Temporary Changes; Paycheck Protection Program (SBA)
• Paycheck Protection Program Borrower Application Form (SBA)

Enjoy the Show?

• Get FREE downloads full of financial advice from our Resource Page!
• Subscribe on YouTube or wherever you listen to podcasts.
• Leave us a review on Apple Podcasts.
• Send us your questions or share your story.

If you have any questions (or just want to say hi!), join the conversation on Facebook, Twitter, or Instagram!

The largest relief package in American history was recently signed into law by President Trump. The stimulus bill will provide much needed aid to Americans and businesses suffering economic loss as a result of the coronavirus. Millions of Americans have lost their jobs over the past few weeks, and businesses across the country have been forced to shut down, temporarily or permanently, due to the coronavirus. Whether you’re recently unemployed, just retired, or are only wondering about the stimulus checks, here’s what you need to know about the coronavirus stimulus bill.

Eligibility for recovery rebates

Most Americans will be eligible for a full or partial recovery rebate. For an individual, the maximum rebate is $1,200 and for a married couple it is $2,400. For every qualifying child age 16 or under, you may receive an additional $500. Not everyone will qualify for a rebate, and income is not the only excluding factor. These groups may also be ineligible for a rebate:

• Adults who can be claimed as dependents.
• Children age 17 or 18.
• Many college students age 19-23.
• Taxpayers who file using an Individual Taxpayer Identification Number (ITIN) instead of a Social Security number.
• People who haven’t filed 2018 or 2019 tax returns.
• Estates.
• Individuals with an AGI greater than $99,000 or married filing jointly taxpayers with an income greater than $198,000.

We aren’t exactly sure when the stimulus rebates will arrive, but Treasury Secretary Steve Mnuchin says the money should start going out in the next few weeks. If you still aren’t sure if you’re getting a rebate (or how much you’re getting), you can use our flowchart below to see if you may be eligible for a recovery rebate.

RMDs may be deferred

The stimulus bill will allow many Americans with required minimum distributions (RMDs) to defer those RMDs if they so wish. This is great news for retirees who don’t need to take RMDs but would otherwise be required to. The broad stock market is down over 20% this year, and withdrawing money from a retirement account when the market is down can be especially harmful to the portfolios of retirees. 

To qualify for deferring RMDs, you, your spouse, or a dependent must be diagnosed with COVID-19 or suffer adverse financial consequences from conditions related to coronavirus. This includes being quarantined, furloughed, laid off, reduced business hours, or being unable to work for other reasons. This list is not all-inclusive, so many Americans should be able to qualify to defer RMDs if they wish.

Relaxed withdrawal rules

If you are eligible to defer RMDs, you may also be eligible to take an aggregate distribution of up to $100,000 from all retirement accounts without the normal 10% early withdrawal penalty. This is only applicable to distributions taken in 2020. The income tax on distributions may also be spread evenly over three years or it may be repaid to an eligible retirement plan within three years. Rules for loans from retirement plans have also been modified for 2020, and loan repayments may now be delayed for one year.

Charitable deductions

The new stimulus bill has great news for charitable organizations and taxpayers who take the standard deduction: a new above-the-line charitable contribution deduction of up to $300. Taxpayers will be able to claim up to $300 in cash contributions without itemizing on their 2020 tax return. Cash contributions for those itemizing deductions can now be up to 100% of AGI for 2020 instead of the previous limit of 60%.

Unemployment compensation

The new bill significantly expands unemployment compensation to provide relief to millions of Americans that recently lost their jobs. Self-employed and part-time workers may now qualify for benefits under the expanded program. Gig workers, freelancers, and independent contractors are included as self-employed workers. Eligible workers will receive an additional $600 per week from the federal government in addition to any state benefits they are eligible to receive. 

Unemployment benefits will also last longer than usual; the bill provides workers with an additional 13 weeks of compensation, and many states offer 26 weeks of unemployment compensation, which means eligible workers may be covered for up to 39 weeks. For more information on benefits and to file a claim, you will need to contact your state unemployment office.

Student loan relief

Americans with federal student loans may be eligible to defer payments until September 30, 2020. No interest will accrue during this period, either. (Note: this does not apply to private student loans, only federal loans.) Many borrowers have recently lost their job, and this student loan relief will help free-up additional money in their monthly budget at a time when it is needed the most. Borrowers who are able to continue making payments may want to consider doing so to get their debt paid off earlier.

Healthcare benefits

If you have an HSA or an FSA, you may benefit from an expanded definition of medical expenses. Funds may now be used for feminine products and over-the-counter medications like Tylenol. Insurance policies that offer coverage for tele-health services must now waive deductible requirements. The deadline for 2019 contributions to an HSA or FSA has been extended as well, until July 15th, the same date as the deadline for 2019 contributions to IRAs and as the tax-filing deadline.

Our most recent show, “Stimulus Checks: How to Maximize Your Money (Important Information),” covers benefits available to businesses as well as benefits and planning opportunities for individuals. Watch it now on YouTube below.

Many businesses have been forced to close down during the coronavirus outbreak and some may never reopen. As a result, millions of Americans are temporarily unemployed. The largest stimulus bill in U.S. history was recently signed into law, and for some Americans relief can’t arrive soon enough. Unfortunately there are people and companies out there looking to take advantage of the desperation that many people are feeling right now. Some of these rip-offs and scams can be hard to recognize since they’re so new. Here’s what you need to look out for and avoid during the coronavirus outbreak.

Stimulus check scams

The stimulus bill that was just signed into law is sending many Americans direct relief in the form of a direct deposit or a check from the federal government. According to the IRS, no action is required for most people. However, some seniors and others who do not typically file a tax return will need to file a simple tax return to receive the stimulus payment. Money should start going out in the next few weeks, according to Treasury Secretary Steve Mnuchin.

Be very wary of anyone claiming to work for the government or IRS asking for your personal information. They may try to use the recovery rebate as leverage to get your information or steal your identity. For example, they may say something like “We just need to confirm your bank account information to ensure there are no delays in sending your stimulus check.” Never provide your personal information to anyone unless you can verify who they are and who they’re working for. If you receive a call from someone claiming to be from the IRS or your bank, you can always hang up and call them back. By calling the official number listed on their website or your bank statement you can ensure you are talking to who you think you’re talking to.

Most Americans will receive a partial or full recovery rebate. If you aren’t sure how much you’ll receive or if you’ll receive anything at all, you can use the flowchart we created below to help determine what you may be eligible to receive.

Predatory loans

Many Americans that recently became unemployed need money quickly to pay for housing, food, and other living expenses. There are some lending companies offering loans to those in need, but every other option available should be evaluated before taking out a loan.

The federal government recently expanded unemployment compensation with the stimulus bill, so many people, including self-employed, who lost their income or job will qualify for unemployment compensation. There are also now more options available for those who are forced to withdraw money from retirement accounts to pay for expenses. If you are currently making payments on a federal student loan, you may be able to temporarily stop making payments until September 30th, 2020 if you need extra money to pay for living expenses.

If you are struggling to make your mortgage payment or rent payment, it is worth talking with your bank or landlord directly to see what options are available to you. There are also resources out there if you are having trouble paying for groceries, utility bills, and other expenses. Check with your local governmental authority for information on programs that help those in need of assistance.

If you or anyone you know is considering taking out a loan to pay for expenses they can no longer afford, make sure they are aware of the terms of the loan, interest rate, and any other options that may be available to them. There are companies offering short-term loans to pay rent with interest rates as high as 99.99%, and that doesn’t include the additional fees they charge when the loan is disbursed. Taking out a temporary loan to pay for expenses may not seem like a bad idea now, but the financial consequences down the road could be very harmful.

Fear-based purchases

Anyone that has shopped at a grocery store in the last month has witnessed fear-based purchases being made. We are living in uncertain times, and some people are coping by stocking up on food and toilet paper. When we are faced with a situation we can’t control, like the coronavirus outbreak, we will do anything we can to get that feeling of control back.

There is no need to buy an excessive amount of food or toilet paper. We have an incredibly strong supply chain, and empty shelves in grocery stores are not caused by shortages but by people hoarding more goods than they need. Only purchase what you need until the next time you visit the store to make sure you’re leaving enough for your neighbors. Many fear-based purchases are both unnecessary and a waste of money.

There are some companies and people out there who will inevitably take advantage of that fear and desire to be in control by offering a solution. One televangelist is now being sued by the state of Missouri for selling a fake coronavirus cure. Beware of any purchases made out of fear, and make sure you’re buying things for the right reasons. The CDC has provided guidelines to slow the spread of the coronavirus, and your local, state, and federal health agencies will provide the best information and guidance on the outbreak.

We recently unpacked the recent coronavirus stimulus bill in our latest “Ask The Money Guy” episode and answered a bunch of questions related to the bill. Watch “Coronavirus Stimulus Bill: What You Need To Know” on YouTube below for information on the stimulus bill and how it may affect your finances.

A huge legislation just passed called the CARES Act. This new stimulus bill promises to ease the extra financial burden brought on by the coronavirus. In case you don’t have time to read and decode a 335 page bill, we did it for you! Let’s unpack what you need to know about the CARES Act and how it affects your personal finances.

In this episode, you’ll learn:

• How much money you can expect to receive from the government
• How to get your stimulus check
• New benefits available for people with student loans, retirees, and people who are unemployed.
• How the Payroll Protection Program can save your job or small business
• What options are available to help small businesses stay afloat during quarantine

Research and resources from this episode:

• Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

Enjoy the Show?

• Get FREE downloads full of financial advice from our Resource Page!
• Subscribe on YouTube or wherever you listen to podcasts.
• Leave us a review on Apple Podcasts.
• Send us your questions or share your story.

If you have any questions (or just want to say hi!), join the conversation on Facebook, Twitter, or Instagram!

Our world is changing rapidly! We want to help you break down the changes that have happened over the past week and hone-in on how each one affects your finances. How should you respond to these economic and emotional fluctuations? We talk through it in this week’s Q&A episode.

In this episode, you’ll learn:

• How to tell if your financial plan can weather the storm
• What policy changes are now in place and how they affect your finances
• Where you are in the Cycle of Market emotions and what’s coming next

Research and resources from this episode:

• Delivering on President Trump’s Promise, Secretary DeVos Suspends Federal Student Loan Payments, Waives Interest During National Emergency (U.S. Department of Education)
• Tax Day now July 15: Treasury, IRS extend filing deadline and federal tax payments regardless of amount owed (IRS)
• Will I ever have more than I put in? (Bogleheads.org)

The SECURE Act was recently signed into law by President Trump in December. The biggest change in the SECURE Act is the treatment of inherited retirement accounts. They must now be fully distributed (or emptied) by the end of the 10th year following the year of inheritance. There were many other changes in the SECURE Act as well, some small and some big.

Major changes in the SECURE Act

• Inherited IRAs must now be emptied by the end of the 10th year following the year of inheritance; previously, the distributions could be spread across the life of the beneficiary.
  • There are some exceptions (if you are an “Eligible Designated Beneficiary”); spouses, disabled, chronically ill, those who are not more than 10 years younger than the decedent, and minor children of the original owner (until they reach the age of majority) may be eligible for exceptions.
• The 70.5 begin date for Required Minimum Distributions (RMDs) is now 72.
  • This is a beneficial change for those who have not started taking RMDs yet; if you turned 70.5 last year and began taking them, you are grandfathered in and can’t go back to not taking RMDs. 

Minor changes in the SECURE Act

• You may qualify for a $5,000 penalty-free (but not tax-free) distribution for a qualified birth or adoption.
• Small businesses that are establishing a retirement plan (this does not apply to small businesses that already have a retirement plan) may qualify for a credit of $500 or $250 per employee, max of $5,000 tax credit.
• Businesses that adopt an auto-enroll provision for their qualified retirement plans may be eligible for a tax credit.
• There’s a provision in the SECURE Act that will make it easier and more economical for small businesses to offer retirement plans through pooled retirement plan providers. Formerly, Multiple Employers Plans (MEPs) were only for businesses with a prior relationship, like being owned by the same person. This provision in the SECURE Act gets rid of that restriction.
• Taxable amounts paid to students in graduate or postdoctoral studies will now count as compensation. This means that these students can now contribute funds received from fellowships, stipends, and more can now be contributed to an IRA.
• Money borrowed from employer-sponsored retirement plans can no longer be distributed through credit cards or similar vehicles without counting as a taxable distribution.
• The Tax Cuts and Jobs Act Kiddie Tax has been retroactively repealed to the former rate. A portion of a child or young adult’s income may have been taxed at the trusts and estates tax rate. Now things are back to the way they were, and amounts subject to the Kiddie Tax is taxed at the parent’s marginal federal income tax rate.
• 529 plan distributions can now be used for eligible apprenticeship costs (up to $10,000) and to make up to $10,000 in student loan payments.

The SECURE Act has many small positive changes (although most of them won’t affect many people) and one major negative change. The SECURE Act has been on our minds all week; if you’re thirsty for more SECURE Act content, we just did a full episode about all of the changes in the Act, how it will affect your retirement, and even a look at the numbers to see how much your beneficiaries could lose. Watch it now on YouTube below.

On December 20th, a big piece of legislation was passed called the SECURE Act. It will affect retirement, IRAs, taxes, and more! Don’t worry, in this episode, we break down everything you need to know about the SECURE Act and how your strategies may need to change. Plus, we make it fun!

In this episode, you’ll learn:

• How the SECURE Act stole money from your kids
• The positives and negatives of the new rules
• The best planning opportunities made possible by the SECURE Act
• Legal “loopholes” to help you make the most of your investments

Resources and research from this episode:

• U.S. retirement assets at $28 trillion in Q1, little changed from end of 2017 (Pensions & Investments)
• RMD Rules for Inherited IRAs (Fidelity)
• Department of the Treasury Internal Revenue Service (IRS)
• Financial Architects, LLC
• SECURE Act And Tax Extenders Creates Retirement Planning Opportunities And Challenges (Kitces)

Enjoy the Show?

• Get FREE downloads full of financial advice from our Resource Page!
• Subscribe on YouTube or wherever you listen to podcasts.
• Leave us a review on Apple Podcasts.
• Send us your questions or share your story.

If you have any questions (or just want to say hi!), join the conversation on Facebook, Twitter, or Instagram!

With the Tax Cuts and Jobs Act of 2017 (TCJA) taking effect on January 1, most people are wondering what the GOP tax plan means for them specifically. In today’s show, we go over what you need to know about TCJA and the different ways you can leverage the changes. Tune in so you know how to make smart money choices and tax moves going forward.

In this full episode of The Money Guy Show, we cover everything from:

• Who wins big under tax reform and who potentially loses out
• How to find out if your taxes will go up or down
• The biggest changes with the new tax plan compared to the current one
• The potential long-term effects of TCJA
• Tax planning opportunities to move on before the end of this year
• Tax planning opportunities to take advantage of after the New Year
• The big macro-level changes across the country we expect to see as a result of TCJA
• Point by point review of current policy versus the new policy

Resources Mentioned on the Show

• NY Times Tax Bill Calculator

Tune In and Go Beyond Common Sense with the Money Guys

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