Newsletter 05/14/2020

SAS Financial Advisors, LLC |

Shelter in Place presses on, businesses reopening begins and life continues. I often lean on the “pebble in the pond” analogy to demonstrate the ripple effect of decisions and subsequent intended and unintended consequences.

The financial planning world is punctuated by the cadence of calendar deadlines and event driven triggers alike. Normally, calendar deadlines include end-of-year due dates as they relate to income, deductions and retirement funding and ‘Tax Day’ deadlines for funding individual retirement account types and submitting tax filings along with any tax payments due. Tax filing due dates are different for individuals versus corporations and filing extensions, allowing more time to file, are permitted for both.

The CARES act passed earlier this year in response to the coronavirus pandemic, included a postponement of both the tax filing date and the tax payment date. Also amidst shelter in place (SIP) and stay-at-home extensions, there is discussion of postponing the tax filing and tax payment due date yet again.

Part of our responsibility as your financial planners is notifying our clients of approaching deadlines and any resulting changes that occur leading up to these dates. It is important to pay attention to due dates especially now as we are in a time of rapid change.

The next date to pay attention to is the deadline to contribute to individual retirement accounts. The approaching deadline is the same as the new revised Tax Day July 15, 2020. There is some discussion of delaying that date until September in line with a considered tax filing due date change, but we do not know yet if any postponement will result.

Another important provision included in the CARES act is a waiver of Required Minimum Distributions for 2020. In addition to the RMD waiver for the calendar year 2020, the age to begin RMDs has also been moved to age 72. The move to 72 has no impact if you have already started to take RMDs. RMD schedules that started pre-age-postponement remain in effect, the only exception for 2020 is that no RMDs are required this year across the board for everyone who has met the age requirement.

Today May 13th, 2020, the Federal Reserve Chairman Jay Powell warned that more needs to be done to support the economy in order to prevent long lasting damage. The majority of the impact so far has been on individuals earning under $40,000. Despite grim long-lasting effects looming on the economy, Chairman Powell also speculated that once the public health problem is solved, we should see a rapid, large recovery across all income levels.

The House is moving forward with a substantial follow up to previous economic triage bills totaling $3 trillion. These newly proposed bills include provisions for extending unemployment compensation, distributing another $1,200 stimulus check to individuals and many other additional spending goals including aid for states and municipalities. The Senate Majority Leader has indicated no interest in moving forward on this potential bill expressing the feeling that we need to wait to see how the initial economic recovery acts play out. Time and more data analysis will continue to shape subsequent decisions.  

The adage, “one day at a time” has never been more appropriate. For SAS managed client investment portfolios, we continue to look to municipal bonds which continue to feature historic mispricing in the investor’s favor, however, yields are still modest because of overall low interest rates.

In summary:

  • ‘Tax Day’ 2020 is July 15th, 2020 (for now)
  • Many counties postponed property tax payment due dates. This year, SF delayed the property tax deadline from the usual April 10th, 2020 to May 4th, 2020.
  • No 2020 RMD requirements from pre-tax ‘qualified’ retirement accounts (pre-tax IRAs and orphaned workplace retirement accounts such as 401(k)s and 403(b)s)
  • RMD beginning age increase from age 70 to age 72
  • 2020 deadline to contribute to IRA accounts moved to July 15th, 2020 (for now)
  • Speculated Phase Two of stimulus checks and expanded unemployment benefits
  • For client portfolios, SAS still looking favorably on municipal bonds investments
  • SAS will keep you apprised of further changes to deadlines, due dates, and policy revisions

We’re here for you. Do not hesitate to reach out with your questions.

Thank you,

Your SAS Team