In response to the ongoing Corona Virus (COVID-19) pandemic, the US Federal government passed the Coronavirus Aid, Relief and Economic Security (CARES) Act.
The CARES ACT is meant to provide relief for various individuals and groups to better weather the ongoing health, economic, and financial storm.
Background
CARES Act funds are distributed across different recipients and segments of the economy.
Here is a summary of the allocations by category.
Highlights of the Relief Package
Composed of various other sections of legislation, here are some noteworthy components of the CARES Act (among others).
Unemployment Benefits: Expanded Amounts and Extended Coverage
In addition to unemployment benefits paid by the States, the federal government will pay an additional $600 a week through July 31, 2020. State unemployment benefits vary widely by state but average around a few hundred dollars. The $600 per week under the CARES Act is in addition to state amounts.
Typically, state unemployment benefits last for 26 weeks. The CARES Act provides for an additional 13 weeks through December 31, 2020. The CARES Act will allow employees to obtain unemployment benefits immediately without typical waiting periods; furloughed workers are also eligible to receive unemployment benefits.
Paychecks / Income: Cash Payments
Not everyone will receive a check from the US Federal government, but most will. Here are some details to qualify based on tax status.
Individuals making less than $75,000 will receive $1,200; payments are reduced by $5 for every $100 over $75,000 and phased out at $99,000.
Married couples making less than $150,000 will receive $2,400; payments are reduced by $5 for every $100 over $150,000 and phased out at $198,000.
The government will allow an additional $500 payment for each child under the age of 17.
The Payroll Protection Plan (PPP) also “…authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone.”
For further details on PPP, refer to the Fact Sheet from the US Treasure website.
Retirement Accounts: Rule Changes
Typically, penalties exist for withdrawing money from retirement accounts before the age of 59 and 1/2. This is intentional. It prevents us from spending the money outside of the traditional retirement age.
In times of hardship, such as now, rules can change.
The CARES ACT will waive the 10% early withdrawal penalty on withdrawals up to $100,000. Any amount withdrawn can be paid back into retirement account within 3 years without regard to contribution limits. The amount of available loans has been increased from $50,000 to $100,000.
If you’re able to, it’s likely best to not borrow from your retirement accounts. Keep in mind, this is especially the case when account values are likely down now and will – hopefully – go back up!
Home Owners and Renters: Extended Relief
Real estate plays an important part in my portfolio. Nonetheless, even this asset class is still impacted by ongoing events.
To provide some relief, the CARES Act requires that servicers of federally back mortgages for homeowners must agree to postpone mortgage payments up to 180 days at the request of the borrower if that borrower affirms financial hardship due to COVID-19. 180-day extensions are available.
Landlords with mortgages backed by the US Department Housing and Urban Development (HUB), Fannie Mae, Freddie Mac or other federal entities cannot pursue evictions for 120 days.
Student Loans: Some Adjustments
To provide some additional shorter-term relief, school loan payments are automatically suspended through September 30, 2020, without interest accruing or penalties through the period of suspension.
What Should I Do? 5 Things to Consider
Depending on your personal situation, here are some things to ponder.
1) Cover Your Basics
Food, Shelter, Clothing. Are your needs being met?
We need food to eat, a place to sleep, and clothing on our backs. Be thankful if you’re able to provide the essentials for you and your family.
Here are some other items of interest that have changed in terms of e-commerce.
2) Shore Up Your Emergency Savings
If you’re fortunate enough to cover the essentials and still have a source of income, another option is to save the funds for a rainy day.
Consider a place to park your extra cash – something liquid and safe.
Related: Less is More: Updated Balanced Dividends Ecosystem
3) Invest It
If you already have an ample supply of cash to cover your expenses for a certain number of months (depending on many personal variables), consider putting the money to work. Look for growth and/or income.
Leverage your investment horizon, risk tolerance, and purpose for investing the cash.
Related: 5 Ways to Balance Account Types To Balance Life’s (Un)known Milestones
4) Plan Your Next Vacation
In addition to one’s basic needs, we all need to unwind. With the various travel restrictions across the globe, travel right now is difficult (if even possible). Regardless, start planning and/or shopping for your next trip!
You might not feel comfortable booking right now, but start thinking about where you’d like to see and do. We likely have the time right now.
5) Do Nothing (For Now)
Patience can lead to opportunity. Sometimes sitting back and waiting can be the best course of action.
Take your time and assess your options.
Looking Back and – More Importantly – Ahead
One can argue that wealth without health is meaningless. I’d put health ahead of wealth, but wealth – whether money or some other means – can enable one to achieve better health.
Both are important. The CARES Act is intended to help people get through this difficult time. Hopefully, you’ll find some benefit from it.
Stay healthy and safe.
Readers, how are you handling the current COVID-19 event? Does the CARES Act impact you? If so, how?
Disclosure & Disclaimer: Please remember, all content found on this website is provided for general informational or entertainment purposes only. This content should NOT be considered direction or advice. You should always consult a qualified and certified professional for your unique circumstances or specific situation. For more details, please view our Disclosures page.
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15 Years Later: 5 Things I Wish I Knew Sooner
Tax Reform & Your PFUI: Applying the 10 Heuristics
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