By Jill Nagy
Get your life in order, think about possible tax changes and, above all, don’t panic. That is the advice of area financial advisors for surviving in the age of COVID-19.
“It’s never been more important to attend to your estate plan,” said Jeff Vahanian of Vahanian & Associates in Saratoga Springs. “We are very aggressive about this. People have had to adjust their behavior in many ways. I hope they refocus on things that matter.”
He urges his clients to have a health care proxy, naming someone to make medical decisions if they are unable to; a living will, to indicate their preferences in connection with medical care; and a power of attorney, appointing someone to make decisions in non-medical matters if they are unable to do so.
“In times like these, they are very critical. Nobody should be without them,” he said.
Vahanian said people with young children to should decide who they want to raise them if they are unable to do so.
Dan Hazewski, Jr., of Legacy Planning Partners in Glens Falls, advised, “Don’t change anything. We are in a much better spot than last year.”
Tim Pehl of Luther Forest Wealth Advisors in Malta said the COVID-19 situation should not have much effect on financial decisions.
“It’s a blip on the screen as far as the economy is concerned.”
He is, however, worried about taxes. He suggested “trying to push income into this current year,” contrary to conventional year-end tax advice. He includes capital gains in that advice because that tax rate is also likely to go up.
“Talk to your tax professional or tax advisor,” he said.
Dale Mullin of WDR Financial Services in Queensbury recommended making sure to have enough money set aside for financial emergencies such as furloughs from employment or failure of a business. Set aside cash for at least six months’ worth of expenses, he advises. Think also about putting more money into an IRA or Roth IRA account. Make longer term investments on a gradual basis so that market ups and downs can average out.
Mullin is bullish on IRA and Roth IRA tax-deferred retirement accounts. Up to $20,000 invested in such accounts is excluded from New York state taxable income. The mandatory minimum distribution was waived for 2020 and, in future years, it will kick in at age 72, not 70 1/2. Another recent change is that people who are still working can contribute to an IRA account, regardless of their age.
Except for the waiver of the minimum distribution, these changes are permanent, he noted.
“The rules are more complicated,” he said, “But they create more flexibility.”
He said people should consider taking investment income, including capital gains, in 2020. Even if taxes are not increased next year, the tax reductions in the 2018 income tax bill expire in 2026 and rates return to pre-2018 levels.
Pehl also advised investing in tax-deferred savings funds such as IRA, Roth IRA or 401K. Because of “these crazy market swings, I would probably wait until the last minute” to make investment decisions.
He said the economy will recover from the damage of the COVID pandemic and resulting economic shutdown but it may take a year or more.
Vahanian said life changes are more important than what happens in the world when making financial decisions. “Wait and see,” he advised, and warned that this is not a good time to take on additional overhead.
“No one is un-impacted by what is happening in the country,” he said. “In times like these, some of the best returns are made. Maintain your poise.”
By Jill Nagy