Managing Your Finances During the Covid-19 Crisis
An interview with George Bowen ’92
What advice do you have for alumni on managing debt at this time?
For those alumni with Federal student loans, the CARES Act has suspended payments and interest on those loans until September 30, 2020. For those with other types of student loans, you should inquire about alternate repayment options like changing to an income-driven repayment plan. Deferment or forbearance should be considered for those in a short-term financial bind.
Alumni impacted by the COVID-19 pandemic may seek forbearance of payment on their federally backed mortgage for a period of up to 180 days. Owners of multi-family homes with a federally backed mortgage may seek forbearance of payment for up to 90 days, provided they do not attempt to evict a tenant or charge late fees.
How can the CARES Act help alumni?
The CARES Act covers a lot of ground. In addition to $1,200 checks going out to those that qualify, there are provisions for individuals and businesses. For those in need, the borrowing limit from your 401(k) has been increased from $50,000 to $100,000 for the 180-day period following March 27th, 2020. Hardship distributions limits from those same plans have also been increased to $100,000 without a penalty.
Our retired alumni that were required to take a distribution from their retirement accounts in 2020 no longer have to do so. And the deduction available on cash contributions to charitable organizations has been increased from 60% of a taxpayers Adjusted Gross Income to 100%.
For our alumni business owners, there are two loan programs administered through the Small Business Association. The Paycheck Protection Program and the Economic Injury Disaster Loan details can be found here: www.sba.gov
Do you have any advice for alumni regarding their investments?
Many of you may be avoiding opening your March 31st statements on purpose. For those of you that went into this year knowing how you are invested and comfortable with it, just stay the course. However, if you don’t know what your allocation is, or how you are invested, you should open up those statements and take a look. There is never a bad time to get educated on your portfolio.
Retirees may want to make sure they have a cash bucket equal to a year or so of distributions, if they take them. Younger alums should take advantage of the market disruption by contributing a little extra.