(318) 324-8000
Questions & Answers
We have gotten this question a lot from our clients and every person's answer might be different. A lot of information goes into making investment decisions such as risk tolerance and time horizon to name a few. However, one of the most important tasks of a financial planner is to help clients take emotions out of the investment process. The adage of buy low sell high in truth turns into people selling after market downturns and then deciding to get back in after the market has rallied. Let us look at the S&P 500 last two 20% decreases of the 4th quarter of 2018 and March 2020. So, if an investor panicked after the S&P 500 dropped 19.6% in the fourth quarter of 2018 and decided to sell stocks that person most likely missed out on the 20.5% increase in the first quarter of 2019 from the market low on Christmas Eve. As for the COVID-19 market downturn, the S&P 500 was down 30% on the low of March 23rd and as of May 20th it is down 8%. That is a 33% market rally from the lows in the last two months. Markets are volatile and market swings happen quickly. Missing out on the market swings after panicking could have a huge impact on your financial future. Therefore, investor emotions need to be taken out of the investment process and make sound long-term investment strategy calls and stick with it. Stock market investing is for your long-term goals.
The CARES Act has changed some distribution rules for 2020. The first point on distributions is that there are no required minimum distributions (RMDs) for 2020 from IRAs, Beneficiary IRAs, and employer-sponsored plans. If you already took your RMD between February 1st and May 15th and would like to put your RMD back, you have until the tax filing deadline of July 15th to do so. The next point on distributions is that the 10% early withdrawal penalty is waived for COVID-19 related distributions taken in 2020 up to $100,000 per individual across all company-sponsored plans and IRAs. Please talk to your advisor or plan sponsor for COVID-19 related distribution&rdquo qualifications. You will have to self-certify that you qualify for COVID related distributions. Distributions are still taxable, but the taxes may be spread evenly over the next three years, beginning in the year the distribution is taken. Alternately, the taxpayer has three years to roll the funds back into the plan or IRA. We are going through an unprecedented time relating to COVID-19. This Act has been passed to help lessen the blow of the economy and country being shut down. We wanted to help summarize some of the key distribution related points of the Act that individuals could take advantage of during these hard times. If you have an advisor, please discuss with them before taking money out of IRAs and 401ks. If you do not have an advisor or would like to learn more about the Act or discuss the opportunity cost risk or investment strategy of how to take money out of the market, please contact our office. The short-term need might do more damage to your long-term future by taking money out after market selloffs.
For more information call 324-8000 or email jmailhes@argentadvisors.com
Source: https://www.congress.gov/
