News

The team at CPS Investment Advisors is here to help. If you have questions or concerns, please don’t hesitate to reach out to us. We are fully operational and available during normal business hours while applying social distancing best practices for everyone’s safety. Our tax department is still processing returns, so if you’re one of the lucky few due a refund, don’t wait, go ahead and file!

Last Wednesday, (March 25th, 2020), the U.S. Senate passed a $2 trillion coronavirus stimulus bill known as the CARES Act or Coronavirus Aid, Relief and Economic Security Act and the U.S. House of Representatives approved the landmark bill today (March 27th, 2020). The CARES Act is legislatively known as U.S. Senate Bill 3548 (S. 3548) / U.S. House of Representatives Bill 748 (H.R. 748). Considering the bill is over 600 pages in length, we will be working diligently to understand the new laws and deliver the information to clients as soon as possible. Even though the full impacts of COVID-19 are still unknown, individuals, businesses, and investors can rest a little easier knowing help is here.

Below are some of the relief items contained in the bill that you can expect to see once the logistics of the new laws are in place:

CARES ACT OVERVIEW

  1. Income for American Households: The bill includes language that will provide a one-time direct deposit of $1,200 per individual, $2,400 per couple and $500 per eligible child into the same account used for tax refunds/payments. If there’s no account on file, a check will be issued. The credit is phased-out for taxpayers with Adjusted Gross Income (AGI) above $75,000 for single filers, $112,500 for heads of household and $150,000 for joint filers. Deposits are expected to occur within a few weeks from the bill being passed. For tax purposes, this ‘income’ will be treated as an advanced refund of your 2020 Tax Credit.
  2. Small Businesses: The bill includes an SBA-backed loan program to help small businesses pay expenses with potential for those loans to be forgiven. Forgiveness will only be considered for proceeds used to keep employees on payroll, to include certain non-profit organizations. Additional loan forgiveness may be available for 8 weeks of cash flow, rent and utilities at 100% up to 2.5x average monthly payroll.
  3. Assistance to large businesses (job creators): The bill includes language that will provide loans, loan guarantees, grants and investment authority totaling $529 billion. This money will be used by the U.S. Treasury and the Federal Reserve Bank for all sectors, with additional focus on helping airlines, logistical companies, and businesses critical to national security.
  4. Increased Access to Health Care & Direct Funding to combat COVID-19: The Bill contains $340 billion in additional budget allocated to local governments, hospitals, research of new treatments and vaccines, and other entities directly involved in combating the pandemic.
  5. Early Access to Retirement Plans: If you, your spouse or a dependent are diagnosed with COVID-19 or if you’ve experienced adverse financial hardships as a result of the Pandemic you may qualify to withdraw (borrow) up to $100,000 or 100% of your account value, whichever is less, from your retirement accounts penalty free so long as you pay it back within 3 years. Note that income taxes will still be due, over the next 3 years, on hardship withdraws. Before withdrawing funds from your retirement account, call your financial advisor or tax professional to discuss ramifications or alternatives.
  6. Required Minimum Distributions (RMDs) waived for 2020: The bill also gives retirees the option to not take their 2020 RMD to allow their portfolios to recover from the market volatility. The amount of RMD is based off the account balance at the end of the prior year and considering we are down from near-record highs of December 31, 2019, this is a huge relief.

Overall, the bill contains very timely measures to ensure America continues to thrive through the uncertainty of COVID-19. There will be more details available once the bill has been thoroughly reviewed by legal and tax professionals and lending institutions establish their guidelines for processing the CARES Act benefits. We will continue to update you on the options available to best navigate the current environment as the details become clearer.

While the logistics of the CARES Act are still being figured out, the following items are already in place to help combat the pandemic and stabilize the economy.

2019 Federal Tax Filing & Payments Extended to July 15th, 2020
According to IR-2020-58, an Internal Revenue Service’s News Release, the new 2019 Tax Filing & Payment deadlines have been extended to July 15th, 2020 regardless of the amount owed and without interest or penalties. The extension applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers, including those who pay self-employment tax. As it stands now, the IRS is still processing tax returns and is estimating a 21-day processing time. So, if you’re due a refund, don’t wait, contact your CPS Tax Professional and get filed! For tax payers who pay quarterly, please note that there has not been any guidance or information released extending the 2nd Quarter payment deadlines.

2019 IRA & HSA Contributions ALSO Extended to July 15th, 2020
Under normal circumstances, contributions can be made to an Individual Retirement Account (IRA) for the prior year “by the due date for filing your return for that year” per IRS Publication 590-A. Due to the extension of the filing deadline to July 15th, 2020, IRA contributions for 2019 are also extended to that date. The same goes for your Health Savings Account (HSA) contributions, per IRS Publication 969. The IRS officially confirmed these contribution extensions in the Q&A section of IRS Notice 2020-18.

As a reminder here are the 2019 & 2020 contribution limits for HSAs and IRAs.

  • 2019 HSA contribution limit is $3,500 for an individual and $7,000 for a family.
  • 2020 HSA contribution limit is $3,550 for an individual and $7,100 for a family.

Note that HSAs are only available to those who are part of a High Deductible plan. Prior year funding can only be made if you were an eligible participant during the prior plan year. Check with your advisor or health plan administrator to determine your eligibility.

  • 2019 IRA contribution limit is $6,000, plus $1,000 for anyone over 50.
  • 2020 IRA contribution limit is $6,000, plus $1,000 for anyone over 50.

Note that IRA deductions have phaseout rules for participants of employer sponsored plans; be sure to check with your advisor or tax professional to find out more.

Relief to Employees and Small to Mid-Size Businesses
On March 18th, 2020 President Trump signed into law the Families First Coronavirus Response Act. This act is designed to “combat and defeat COVID-19 by giving American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members.” With refundable payroll tax credits, employers will be quickly and fully reimbursed dollar-for-dollar for paid leave (up to 80 hours) given to employees related to Coronavirus. “Businesses with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or childcare is unavailable in cases where the viability of the business is threatened.” IR-2020-57

Bridge Loans Available to Florida Small Businesses
On March 16th Florida Governor Ron DeSantis made funds available with the Florida Small Business Emergency Bridge Loan Program for small businesses (2 – 100 employees) impacted by COVID-19. The loan program will provide up to $50,000 in short-term, interest-free funds to small businesses economically impacted by COVID-19. Visit http://floridasbdc.org/disaster/ for more information on this and other programs available to small businesses.

RIRA Conversion Opportunity
Due to the sharp decline in the equity markets, now may be an opportune time to do a Roth Individual Retirement Account (RIRA) conversion. The 3 primary benefits to converting from a traditional IRA to a RIRA are:

  1. Growth of your investments inside the RIRA and distributions from the RIRA are tax free so long as you’ve held the converted assets in the RIRA for at least 5 years and you are at least 59 ½ years of age.
  2. Gives access to ROTH IRAs for high wage earners who are phased out from contributing to a RIRA.
  3. There are no limits to the amount you are allowed to convert.

Due to the taxable nature of converting a RIRA, please consult with your Financial Advisor or Tax Professional to see if this opportunity is right for you.

Steady As You Grow

Michael A Riskin | CPA/PFS, CFP®, MST
Vice President | Treasurer | Partner

If you’re like one third of the world’s population as I write this article, you’re most likely staying indoors to keep yourself and your family safe and healthy due to COVID-19. Besides becoming a master of your streaming digital subscription or DIY home improvement champion, here are a few positive financial tasks you can check off your list with that newly acquired time.

Review Your Expenses

For some, income may be hard to come by as of late, so take the time to review your expenses to see if you can do without them during these slim moments in your life. Cancel that magazine subscription you’ve been putting off. Instead of your morning coffee from that big chain, buy a cheaper cup from a local coffee shop and support small business as the same time. Focus your income draws on the necessities like food, rent/mortgage, and utilities.

Review Your Debts
It is ideal to not carry a revolving debt balance on your credit card, but if you do, consider finding ways to minimize that interest payment each month. Look for 0% interest cards with incentives to transfer that debt to give you time to pay it off without interest. Even with interest rates at low levels, credit card companies are still charging a hefty amount. The same goes for other loans you may have outstanding.

Think About Refinancing Your Mortgage
Mortgage rates are still historically low compared to five, ten or twenty years ago. We could all use a bit more discretionary cash right now. Find a trusted mortgage officer to help guide you through the process of what a refinance looks like, what closing costs you may or may not incur, and how much the refinance would save you on a monthly basis and in the long-run. Other options are now available as well to consolidate a first mortgage and line of credit on your home at a locked in fixed rate.

Update That Resume
Some of us may have been laid off or furloughed during tough times. Updating your resume to begin the search for a different path could create new and exciting opportunities. At the same time, hiring managers are not just looking at your resume anymore. Find some time to go through your personal social media pages for images and statements a new employer might not find as appealing. Remember to be true to yourself, but think twice about posting those pictures from that St. Patrick’s Day party a few years back.

Final Thoughts
Remember that times may be tough now, but know there is light at the end of the tunnel. The economy comes back and it will before you know it. Ensure you’re saving for retirement, spending less than what you bring home, saving that extra amount for a rainy day (or a few months), and take time for personal self-care every once and awhile.

Derek M Oxford | CFP®️
Financial Advisor

It’s Not 2008 All Over Again

Posted on March 25, 2020 in

After enduring the largest decline the stock market has seen in a decade, many investors are wondering if 2008 is happening all over again. Turmoil in the stock market has brought back fearful emotions that many investors haven’t felt in years. Although in some ways it may feel like 2008, our present situation is actually very different.

The seeds of the great financial crisis began years before the crisis came. Headed into 2008, there were bubbles in housing and construction. Weak regulation of banking and lending left the financial system vulnerable. When the housing bubble burst, it caused unemployment in those parts of the economy and created big problems for the banking system. Many of those unemployed workers were forced to find employment in new occupations.

Heading into the current crisis, there were no obvious bubbles in the economy. Banking regulations are much stronger than they were before the great financial crisis. The banking system was in very good financial condition when the current crisis began. Once this crisis passes, the vast majority of people who are out of work today will be able to go back to their occupations.

Policymakers were slow to respond as the 2008 crisis developed. The 2008 stimulus bill was about $150 billion dollars, much less than the $1.5 trillion Congress is expected to approve this week. It took the better part of a year for policymakers to understand the size of the economy was facing.

In contrast, the policy response today has been both rapid and massive. The Federal Reserve has been quick to re-deploy many of the tools used in 2008. Unlike 2008, these programs were launched within weeks of the crisis starting, not months or years later.

The Fed is also creating innovative new tools to help parts of the economy that weren’t reached by its measures in 2008. The Main Street Business Lending Program is one example of new programs by Federal Reserve to help small businesses.

These measures are unprecedented in both their speed and scale.

What will happen in the next few weeks is uncertain, but we already know what will happen in the long run.

The US economy will survive! American businesses are rising to meet the challenge of defeating COVID-19, just as they have every previous crisis. Manufacturers are rapidly retooling to produce needed supplies and equipment. Healthcare companies are hard at work creating treatments and searching for a vaccine. We don’t know exactly how long it will take, but things will get better.

The US economy has survived far worse problems than the one we currently face. The past 150 years have seen world wars, civil war, a depression, and financial panics. There were pandemics in times when medicine was far less advanced than it is today. Students of history know that the markets and the economy recovered from those shocks, and it will recover from the current crisis.

History teaches us that at the darkest moments, things usually aren’t as bad as they seem. The markets tend to figure this out long before the news headlines turn positive. This is why investors who try to time the market usually end up selling low and buying high. Wise investors know best way to build wealth is to own great companies, and to continue to own them when others are afraid.

The markets will recover. They always have.

Matthew A Treskovich | CPA/PFS, CITP, CMA, CFP®, AEP®, MBA, CLU, ChFC, FLMI
Chief Investment Officer

Last night, the U.S. Senate and White House agreed to a $2 trillion coronavirus stimulus bill. While the details of the bill are still in the works, Wallstreet responded positively. It is anticipated the House will vote on the Bill later this week. Even though the full impacts of COVID-19 are also still unknown, businesses, employees and investors can rest a little easier knowing help is on the way.

2019 Federal Tax Filing & Payments Extended to July 15th, 2020

According to IR-2020-58, an Internal Revenue Service’s New Release, the new 2019 Tax Filing & Payment deadlines have been extended to July 15th, 2020 regardless of the amount owed and without interest or penalties. The extension applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers, including those who pay self-employment tax. As it stands now, the IRS is still processing tax returns and is estimating a 21-day process time. So, if you’re due a refund, don’t wait, go ahead and file!

2019 IRA & HSA Contributions ALSO Extended to July 15th, 2020

Under normal circumstances, contributions can be made to an IRA for the prior year “by the due date for filing your return for that year” per IRS Publication 590-A. Due to the extension of the filing deadline, IRA contributions for 2019 are also extended. The same goes for your HSA contributions, per IRS Publication 969. The IRS officially confirmed these contribution extensions in the Q&A section of IRS Notice 2020-18.

Relief to Employees and Small to Mid-Size Businesses

On March 18th, 2020 President Trump signed into law the Families First Coronavirus Response Act. This act is designed to “combat and defeat COVID-19 by giving American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members.” With refundable payroll tax credits, employers will be quickly and fully reimbursed dollar-for-dollar for paid leave (up to 80 hours) given to employees related to Coronavirus. “Businesses with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or childcare is unavailable in cases where the viability of the business is threatened.” IR-2020-57

Bridge Loans Available to Florida Small Businesses

On March 16th Florida Governor Ron Desantis made funds available with the Florida Small Business Emergency Bridge Loan Program for small businesses (2 – 100 employees) impacted by COVID-19. The loan program will provide up to $50,000 in short-term, interest-free funds to small businesses economically impacted by COVID-19. Visit http://floridasbdc.org/disaster/ for more information on this and other programs available to small businesses.

As always, the team at CPS Investment Advisors is here to help. If you have questions or concerns, please don’t hesitate to reach out to us. We are fully operational and available during normal business hours while applying social distancing best practices for everyone’s safety.

Shawn J McCabe | MBA, CFP®
CPAlliance Director

Retirement planning can seem complicated. Everyone has the ability to save money in some sort of a retirement plan, either at work or as an individual. About half of Americans have access to some type of retirement plan through work.  There are many different kinds of plans that employers can offer. The most common plans are the 401(k), 403(b), SEP IRA, and SIMPLE IRA. The most popular place to save for retirement is through an employer-sponsored plan. The most common retirement plan offered by businesses is the 401(k) plan.

401(k) Basics

Employer-sponsored plans are popular because retirement savings can be deducted from your paycheck. Many employers offer perks like matching contributions and profit-sharing that make saving in a 401(k) plan an even better deal. At a minimum, you should save enough to get the full match offered by your employer. For example, if your employer has a “3% match”, you should contribute at least 3% of your gross pay. Some employers have more generous matching. Employer matching is basically “free money” – don’t leave it on the table! Contribute at least enough of your pay to get the match, and if you can, you should save more in the plan.

The most you can contribute in 2020 is $19,500 if you are under age 50, or $26,000 if you are 50 or older. Saving part of your paycheck in an employer-sponsored retirement plan will also save you on taxes. Your savings in the plan are excluded from your income for tax purposes. Money your employer contributes, and earnings on your investments in the plan, are not taxed until you withdraw the money. All of these add up to big benefits for participants who save as much as possible in the plan.

Investing Your Savings

Most 401(k) plans offer a range of investment choices, and it is up to the participants to decide how their savings will be invested. This is good for experienced investors, but many of us will need more help deciding how to invest our savings. The best 401(k) plans offer a variety of low-cost investment options, investment advice from a true fiduciary, and individual financial planning for every participant. A fiduciary is someone who is legally obligated to act in your best interest. If your 401(k) plan doesn’t include personal advice and planning provided by a fiduciary, you should seek the advice of your own advisor.

Watch Out for Fees and Expenses

The investment options in all plans are not equal! Some plans have much higher expenses than other plans. Even within a plan, different investment options can have varying expenses.  Every dollar you pay in unnecessary fees and expenses reduces your long-term wealth.   As with any investment, you should understand what you own, why you own it, and the fees you’re paying for that investment. The default investment options in many plans are expensive mutual funds. If you don’t select your own investment choices, you may be unpleasantly surprised.

Your employer’s 401(k) plan is often the best place to start saving for retirement. The tax benefits of contributing to a plan, tax-deferred growth on plan investments make 401(k) a great idea for savers. If they are available, employer matching contributions can make 401(k) savings even better. Save early, save often, and save as much as you can. When the time comes to live on your retirement savings, you’ll be glad you did!

Nolen B Bailey | CFP®, CRPS®, ARPC
Director | Retirement Plan Services

 

Every day is a roller-coaster with the COVID-19 virus – and we expect that to continue. With the news about closures growing, there will not be a shortage of negative headlines. We expect to see the positive case numbers grow as the virus spreads, and with that, we can expect some troubling economic data to emerge over the coming months. We won’t be surprised to see the unemployment rate rise led by the hospitality industry, as well as see a contraction in overall economic activity in the coming Spring months.

However, there will also be positive headlines and moments to celebrate. The federal government is coming together to put a package in place that could exceed $1 Trillion in new spending and include money for struggling Americans, as well as small businesses and corporations. While the federal government is working on this part of the problem, private American healthcare companies are being innovative and trying to create treatments, cures, and vaccines to fight this virus.

All the news headlines are affecting our personal lives and we are making changes in the way we live. By now, we are all aware of the steps we can take to slow the spread of the virus or shield ourselves against it, including washing our hands frequently and avoiding touching our faces.

These are steps we can take to protect ourselves, but the principles can be applied to our portfolios. If you are concerned that your portfolio is “sick”, call your advisor… not your neighbor. Everyone’s portfolio is different and behaves differently. At CPS, we know that times like this will occur, but we don’t always know when.

In order to prepare for stressful times, we construct portfolios comprised of strong companies that vary in business and location, and whose products are desired through economic cycles. Continue to understand why you own what you own and “wash your hands” of the fear. Above all, try to avoid touching your portfolio. Your portfolio was created to get you through these tough times, as well as the easy ones.

Our country has survived two world wars, the great depression, the tech bubble, a financial crisis, oil embargos, several different strains of the flu, and other diseases. We are confident that we will also conquer this new challenge.

Michael Scott | MBA, CFA
Senior Portfolio Analyst

Last week was the worst week for the equity markets since the 2008 financial crisis. All of the major market indexes lost more than 10% during a week where it seemed everyone wanted to sell, and no one wanted to buy stocks.

Most Floridians are familiar with the panic that happens when a hurricane is on the way. If you’ve ever visited the supermarket a few days before a major storm, the past two weeks’ panic in the financial markets should feel familiar. Most of the time, when the big storm arrives, it isn’t nearly as bad as we imagined it will be.

History of fear

Investors in the US stock market have seen dozens of traumatic events over the past 100 years. We’ve had two world wars, oil shocks, and the cold war. There have been times of civil unrest and great political disagreements. The economy has seen periods of high unemployment, high inflation, and even higher interest rates.

More recently, we’ve seen wars in the middle east and a currency crisis in Asia. After that came the tech stock bubble, and then the housing bubble which burst as the great financial crisis began. We’ve also seen dozens of minor crises, from the SARS virus to the Greek debt crisis. These events seemed terrible at the time. Some were simply speed bumps on the road to economic growth. Others did have significant real impact on the economy. During all of these events, many investors gave in to their emotions and sold stocks when they should have been looking to buy.

During the panic phase of a market correction, shares of top-quality companies decline in lockstep with the rest of the market. Most investors today buy mutual funds and exchange-traded funds, not individual stocks. When fear grips the markets, these investors panic and sell their funds. The fund managers are then forced to sell their holdings, good and bad, to raise cash for redemption requests. These waves of selling create opportunities for wise investors to buy great companies when they are on sale.

Diversification matters

If you are concerned about your investments, the first thing to do is to maintain a well-diversified portfolio. Diversification among different asset classes provides a buffer against market volatility. The second thing to do is to take a step back and look at the big picture. Despite the recent market decline, the major market indexes are still significantly higher than they were a year ago. Economic fundamentals remain strong. Unemployment is low, inflation is low, and energy is inexpensive. Both banks and consumers are both in good shape financially. Keeping the big picture in mind will help you avoid making emotional decisions when the markets are volatile.

Avoiding overreactions during a correction allows you to take advantage of volatility. Investors who remain calm can find opportunities to buy great stocks at lower prices. The best time to buy quality companies is when they are on sale, and other investors are afraid to buy them. Wise investors understand that market panic events create opportunities. The keys are to remain calm, stay diversified, look at the big picture, and invest in quality companies for the long run.

Matthew Treskovich | CPA/PFS, CITP, CMA, CFP®, AEP®, MBA, CLU, ChFC, FLMI
Chief Investment Officer

1 2 3 24