Investing during COVID-19 FAQ

Tips for Maintaing Good Financial Health as an Artist

A market downturn might feel like a strange time to be thinking about your investments, but there are critical steps you can take to maintaining good financial health as an artist with investments. We invited friend of Pentacle, Julian Schubach, to answer a few Frequently Asked Questions for our series of Financial Resources blogs. Check out his answers below to learn more about investing and how it can relate to unemployment.

 

1. What are some ways that I can access cash right now in the short-term?

If you need cash right now, there are three intelligent options available to you….

  • The first is using cash you have in your savings and checking account as well as non-qualified money you have invested which you can access with no penalties.
  • Second, if you are a participant in a corporate retirement plan like a 401(k), you can take a loan (assuming your plan allows for them) or a hardship distribution. A loan you would pay back and a hardship distribution would need to be included in your ordinary income when filing taxes for 2020.
  • Lastly, new rules allow for those with IRAs to withdraw up to $100,000 from their accounts with the ability to pay themselves back within three years. Your CPA can explain the details of the IRA withdrawals in greater detail.

 

2. Should I withdraw all my investments due to the economy?

Assuming you are working with an advisor, your investments should have been allocated properly based on your personal goals and time horizon. If that is the case, stay the course. If you did not benefit from professional assistance, it is important to consider your personal tolerance for risk and ensure the way you have invested is in portfolio’s which meet your short- and long-term goals.

 

3. What are the benefits of investing when the market is down?

When the market falls from all-time highs, investors have the benefit of building portfolios at reduced prices. If you have an optimistic, long-term view of the economy, it is always a good time to put money into the market.

 

4. Should I log in and check the status of my investments every day?

The only people who should be viewing investments daily are professional money managers and financial advisors. If that is not you, don’t add additional anxiety where it is not necessary. The value of investments and portfolios fluctuate by the second during the week and watching every day can be very stressful. It is best to review your holdings from time-to-time and schedule review calls with an advisor to help you understand any changes to your holdings.

 

5. How much liquid cash should I have in my account?

While it is strongly encouraged to have 6 months in an emergency fund, for many that is not a possibility. It is important, once you begin generating revenue again, to start putting some money aside each time you get paid into an emergency fund, so if something like this happens again, you are better prepared. Emergency funds take time to build and even if you begin small, your emergency savings will grow and make a big difference next time.

 

6. Is my cash at the bank safe?

Yes and no. Checking and savings accounts are covered by FDIC insurance, so those accounts are ‘safe’. On the other hand, if you opened an investment account with a financial advisor at the bank, those portfolios are most likely not FDIC insured. They may have risk and could fluctuate.

 

7. What can past market downturns tell us about what to expect?

Markets have always returned from previous downturns. Since 1980 we have had 6 bear markets: 1980, 1987, 1990, 2000, 2007 and 2020. Those bear markets have seen downturns of 20% to 57%. Despite those losses, the stock market, over time, has continued to grow and continuously make new all-time highs. Given the benefit of time, there is no reason to believe the market will not once again reach new all-time highs down the road.

 

8. Should I stop my automatic deposits into my retirement fund?

Only if you are unemployed and not earning income. It is wise to always continue auto deposits in some capacity to either your retirement or non-retirement accounts. You can always adjust the amount(s) down if you need to hold onto more cash.

 

9. Should those retiring or close to retiring do anything special with their retirements?

Now is a good time to review your retirement accounts and ensure they are allocated and invested in-line with your time horizon and risk tolerance. If you are close to retirement, or retired, it is not a bad time to take a conservative approach to investing. If you have an advisor, call them to see if your account was properly allocated prior to the downturn.

 

10. When is the deadline for 2019 IRA contributions?

Up until your CPA files your return, or July 15th, 2020 at the latest. 2019 IRA contributions are limited to $6,000 plus an additional $1,000 if you are over 50 years old. There are different types of IRA’s available, so speak to your CPA about which may be best for you.

 

11. Are there stipulations for how to spend/invest my CARES Act Money?

There aren’t currently any stipulations about saving or spending restrictions on CARES Act money. It is important to keep in mind things can change and if you have any questions once you receive your funds to speak to your CPA or advisor.

 

Julian Schubach | 04.17.2020

For more information on this subject, you can contact Julian directly!

Julian Schubach

Partner, ODI Financial

(877) 357-7570 x105

(516) 551-6353 (m)

Julian@ODIfinancial.com

Pentacle’s nextSteps is supported, in part, by public funds from the National Endowment for the Arts, the New York State Council on the Arts with the support of Governor Andrew M. Cuomo and the New York State Legislature, and the New York City Department of Cultural Affairs in partnership with the City Council. Pentacle receives private support for nextSteps from the Rockefeller Brothers Fund and The Howard Gilman Foundation.

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