Emergency Fund, FICO, Insurance, Investing, Retirement
March 29, 2020
Listen to Podcast Episode:
In this podcast, Suze explains what you need to know about the COVID-19 Stimulus Package passed by Congress on March 27, 2020.
It's March 29, 2020. As I am recording this podcast, it is early in the morning, and as I'm sitting here, I can hear the birds chirping outside the window. And hopefully, maybe one will chirp loud enough so that you can hear it as well because somehow, it just reminds me that life still does go on. That there are still some things in life that are enjoyable to hear because not all the news today is enjoyable. Now, I know I told all of you that I would be talking about corporate bonds and preferred stocks. I've changed my mind again. I'm changing my mind a lot these days because I do think that there are more important things that you need to hear rather than investing at this point in time. On Friday, the stimulus bill was signed into law, so I think it's very important that we go over this bill and you understand what you can do, what you can't do, and also some of the things that you're allowed to do in this bill, should you do them or should you not? So that's what we are going to do today. But before I go over all of those things, here's what I also want to say to you. This is so beyond the stock market, it's not even funny. This really is about how long this is probably going to go on. As you also probably heard, we released the unemployment numbers last week and 3.3 million people applied for unemployment. Just to give you a perspective on that, and that was in one week. In the worst week ever in the history of the United States when they started to record these numbers, the worst week ever of people applying for unemployment was in 2008 and it was approximately 685,000 people. 685,000 people in 2008 and 3.3 million this week, and that's only the start of it. You know, when this all started, everybody, we were at a 3.5% unemployment rate, the lowest ever. Everything was great and a few weeks ago I said, don't be surprised if you see unemployment go up to 12%. Well, now I'm going to say to you, do not be surprised if you see unemployment going up to 30%. So, this is something that even though I know that they just passed this bill this last week, that what will happen here is we're going to need a fourth, and a fifth, and a sixth bill probably that needs to be passed because $2.2 trillion is not even close. As I also said a few weeks ago, we should be looking at $5 trillion, $6 trillion, $7 trillion...were going to need a lot of money for all of us to get through this. And we need to look at, that it is all of us, that whether you're currently living in a place right now where the virus has not hit and it is not going crazy, chances are it's going to come there. I hope it doesn't, but it seems as if this virus absolutely does not have any walls. It's like this invisible evil that just somehow appears and nobody even knows how it got there. Therefore, this is the time, and I've never been more serious about this in my life and all of you know, you know that I've always said you need to save money, you need to do this. All right, fine, the past is the past. This is the time now that every single penny that you get from this stimulus package, from unemployment, from the money that you may have on your credit cards, your home equity lines of credit, in your retirement accounts and everything. This is the time that you watch every single penny that you spend. Do not go sitting there and thinking, oh, my God, I feel so bad for my kids, they have nothing to do, so you order something from Amazon for them to entertain them. No. Get out some paper, get out some pens, whatever it is, let them draw, let him do something. But this is not the time to spend one cent, and the reason that I say that is that realistically, this isn't going to end by Easter. Realistically, this is not going to end very shortly here. It very probably will go on until at least May or June. So, whatever you're doing right now, chances are you're going to be doing it until June. Now, I hope I'm wrong, but I've also always said to you, you have got to hope for the best but plan for the worst. And therefore, I'd like you to just imagine that. I mean, I know and KT and I know all right, we aren't going anywhere until at least June, possibly July. And I said to KT this morning, I said, I sure hope hurricane season postpones itself because if a hurricane comes, where do we even go? What do you do? And I'm like, almost praying to God, it's like God, please, you know, don't send any natural disasters right now because this world really cannot take it. But we really are all stronger than any of us have any idea. In the past podcasts, I've told you some of my mantras. Again, one of my most favorite is, "I am a warrior and I'm not going to turn my back on this battlefield." And as I've also said to you, we've been at war, we are at war. We're at two wars, a health war and a financial war. Before I go on, I just want to say to all the health care workers out there, the doctors, the paramedics, the nurses, everybody, I send so much love and support to all of you because I know you are going through this as well. I know you have kids at home, I know you can't stay at home to take care of them, and it's probably harder on you than most. Even though you have a paycheck coming in, you're also facing death every single day, and you're voluntarily going right in to fulfill your duty and facing that death. So all of us, really, are sending all of you our love and our protection to keep you safe and sound. So let me now just briefly go over everything that you really need to know. If you have an income of $75k a year or less, an adjusted gross income of $75k a year or less, and you are single, and you filed a tax return in either 2018 or 2019, and you are a United States citizen and have a social security number, the government starting in about three weeks from now, will send you a check for $1200. If you are married and have adjusted gross income of $150k or less, obviously, you will get a check for $2400. They will send that check, now listen closely, to the bank account that is associated with your tax returns. So the I.R.S. will send that check directly to the bank that's associated with your tax return. If you haven't filed a tax return for 2018 for whatever reason or 2019, you need to do that right away. If you didn't have a bank account associated with your tax return, then they will send it to the address that's associated with your tax return. Now, if you do not get a check in about three weeks or so after you should have gotten a check, you will get a paper receipt to your home address saying that this is where they sent the money. If you didn't get the money, they will give you instructions on that sheet as to who you should contact to follow up on where did that money go? So you should be watching out for this. If you haven't filed in 2018 or 2019, can you file today? Just go online, get one of the programs and just do it yourself because you need to have filed because that's an important thing to continue to get these stimulus checks because chances are, that will not be the last one that you will get. Also, if you have children who are under the age of 17, you will get $500 for each child as well. So that will help you. How long will that help you? It depends on what you do with that money. I personally think you should save every single cent of it if you possibly can. There are many programs in place right now that are allowing you to postpone your mortgage, postpone your student loan payments, postpone your car payments, postpone your insurance payments. You just have to go online to your insurance carriers, you're automobile lender, your credit unions, your banks, your credit card companies. Most of them have set this all up online for you. So, if you just go to them online, you will see what kind of program they have in place for you not to have to be able to pay your bills. But don't just assume that you don't have to pay your bills. Please make sure that officially, they have made a statement of how long you are postponed for and what can go on there. Now, can you get less than that $1200? Yeah. So, if you make more than $75k of adjusted gross income as a single or $150k as a married couple, that $1200 starts to phase out. It goes down until you make $99k of adjusted gross income or $198k as a married couple. And then you no longer qualify for the $1200. By the way, head of household, if that is how you file, then your adjusted gross income to get the full $1200 is $112,500 for the year. Now, what's sad is that don't go thinking well Suze, I made that last year, but I'm not going to make any money this year, so why don't I qualify? I made $200k last year, I'm going to make $5k of that this year, I should qualify. It doesn't work that way, just so you know. Let's now talk about unemployment. Unemployment has seriously changed. It used to be that you only got unemployment if you work for somebody and they fired you. So, if you had your own business or you were a part-time worker, they're called gig workers. You know, I have a gig driving lift, whatever it may be. Or, you were a part-time worker, gig worker, or self-employed, you didn't qualify ever for unemployment. That is no longer true. So, all of you should apply for unemployment right now if you are not getting sick leave, family leave. If you're not being paid, you should absolutely apply for unemployment. Unemployment has also changed. You know, normally, unemployment will go for 13 weeks or for 26 weeks, it depends on the state. But now, the new package has extended unemployment to 39 weeks, they've given you an extra 13 weeks. For those of you who do apply for unemployment as well, you will get an extra $600 a week from the federal government. So, in essence, $600 a week is $2400 a month. That, attached to your normal unemployment, which could be $1k a month, it could be right in there, everybody, that will give you approximately $4k a month. That will hopefully help you get by. What's important about that is when you get that money, again, just like this stimulus check of $1200, I am begging you to save it, to save it, to save it. You are not to take these checks and pay off your credit cards in full. You are to right now, conserve every single penny for as long as you possibly can. So, if that means you only have to pay the minimum payment due on your cards, fine. Hopefully, you've called your credit card companies or, more likely, gone online because everybody's calling where they will have instructions of what they will let you do and not. But hopefully, the credit card companies and everybody are postponing payments as well. Just conserve your money. Again, I asked you to talk to your landlords, your mortgage companies and everything, many of them are postponing. Student loans, especially if you have a federal student loan, are postponed until September 30, 2020, so you will not have to make any payments and no interest rate will be added to that loan. If you have a private student loan, it may be different. But I want you to conserve your unemployment checks, big time. Now, if you already have unemployment, hopefully, this will apply to you as well, the automatic extension. Some people say yes, some people say no, so, we're just going to have to see what really happens there. However, if you currently are on unemployment before this had ever happened and your unemployment benefits expire, please apply for unemployment again. Got that? Because then at that point, you absolutely, if you're eligible, they will pay you. But, it will depend on the state that you live in if they're going to extend you. But even if they don't extend you, you still then at that time will qualify for that $600 a week for 13 weeks of extra money, which is probably more than you are getting on unemployment right now. Next, part of this legislation allows you to take out up to $100k from your 401ks, your 403bs, your IRAs, or, take out up to $100k loan. If you take money out of your 401k, obviously, if it's not a Roth that I've been begging you all to do, but if it's a pre-taxed 401k, you will owe income taxes on that money. The 10% penalty will be waived, and you will have three years to pay the income taxes on that money. You don't have to take out all $100k, maybe you want to take out $10k or $20k to help get you by. But you will owe taxes on that money. You also will be allowed to pay it back. Here's what I just want to say about that. If you are really on the brink, the brink of not having any money. If you really have a gut feeling that your job probably is never going to come back and that you've gotten yourself in such a situation where you already have $20k of credit card debt, you already are way underwater in the car that you bought because it was too expensive of a car and you couldn't afford it even when you had a job. If you have a mortgage, somehow you got yourself into a home and you're underwater there too because you haven't been able to make your payments. Whatever your situation may be, if it is dire, please don't take money out of a retirement account just to get yourself by because I need you all to remember, that unlimited amounts of money in a 401k, or an employer-sponsored retirement plan (those are called ERISA plans), are protected against bankruptcy. If you have money in an IRA, a Roth IRA, a Sep IRA, a Simple IRA, so forth, you are only protected in bankruptcy in those accounts up to $1,362,800. And that number last until March 31, 2022 where at that point it might be adjusted. However, that is a lot of money, and I'm sure if you really are just struggling, I doubt highly you have $1.3 million in an IRA. But please think twice before you access money in a retirement account, especially one that you will owe taxes on if you make a withdrawal. Roth IRAs again, I would love it if you didn't touch them at all. But a Roth IRA, remember, you can withdraw any money that you originally contributed without any taxes or penalties, regardless of your age, it does not have to be paid back. So if you really are in a situation where you have absolutely no money for whatever reason, you're out of money and this lasts longer than you ever thought, then what you would do is you save the money that you're getting, you put all of your charges on credit cards. Hopefully again, your credit cards will defer payment for quite a while. If not, you simply pay the minimum payment due on those cards. You then, if you have a home equity line of credit, if you own a home, you would probably go to that and use that. If you don't own a home or you rent and you have used up all your cash, everything, all your credit limits, if you have any money in your Roth IRA, you would go to the Roth IRA and only take out the amount of money that you originally put in. You can take out up to $100k in any retirement account and have three years to pay the taxes on that if you want, as well as repay the money. But just be careful here. Also, if it gets really extreme, you might want to have to start taking money out of the 529 plans that you have for your kid's college education because it just might be more important that you can feed the kids, house the kids, and everything rather than to send them to school. So, I know those are extreme, and right now there's no nod to money in 529 plans to be able to take it out without the 10% penalty on your growth. But let's just see, maybe they will think about that here shortly. Now, a lot of you are writing me in and you're saying all right, Suze, what do I do? How do I even apply? You know, how do I go to unemployment? Listen, unemployment is from the Department of Labor, and they do have a website that tells you where you can go depending on your state. So, you might want to go to www.CareeOneStop.org and there you will find out where you go, how you do it, and everything that you need to know about that. Again, for a lot of you who maybe have a mortgage, you don't know what to do and you just want to figure this out. You could always go to the Consumer Financial Protection Board, which has a site called www.ConsumerFinance.gov, and they will hopefully give you instructions about currently what's allowed for mortgages and what isn't as well. Again, on your credit cards, every one of your credit card companies is really trying right now to help you, so go to their websites. They all have a website and see what they're telling you that they can or cannot do. Obviously, their phones are really busy, but what you want to ask them is for temporary relief, and these are all things that I've told you now over the past month or two. And so, ask them for temporary relief, all right, if you can. Also, as I've said in previous podcasts, it doesn't hurt you to try to get more credit cards. Just one, maybe two. Don't apply for a lot at once, because if you do, that will hurt your FICO score and that is not something you want to see happen right now to you. So, try to get more credit cards if you can, or at least increase your credit limits by just asking if they will do that for you Now, these are some of the things, but the most important of all is your health insurance. Are you going to continue to be getting health insurance or not? Because this is absolutely no time for any of you to be caught without health insurance. When you lose a job that you had health insurance at, under law, you could apply for something known as COBRA, where for 18 months you have to assume all payments for it, but you can continue on with health insurance, but this has to be done within 60 days of you losing your job. You might, because COBRA can be very expensive, you might want to check the marketplace in your state or the national one, you would go to www.HealthCare.gov. Now, normally you cannot apply for insurance at the HealthCare.gov site unless it's open enrollment. But when you are laid off during times like this, you absolutely can apply, so you don't have to wait for open enrollment. But at least contact your insurance companies, find out what's happening and go from there. Many of the life insurance companies, automobile insurance companies, long term care insurance companies, all of them are postponing payments, but you can not just assume that they are going to do that. So, you absolutely have got to contact every single insurance company, and again, as I said before, ask them, is the virus covered? Will they wave their co-pay? What is going on? And again, if you don't have insurance, this is the time that some of the money that is coming to you, you get insurance. You don't want to not have insurance. There was a 17-year-old, and this one breaks my heart, who didn't have insurance, went to the hospital, the hospital refused to see him. He went to another hospital and that hospital refused to see him and he ended up dying, all because he didn't have insurance. So it is really, really important that you do that. Also, one last thing, because I know we have people of all ages that listen to this podcast. Required minimum distributions, if you are on them where it is required that if you are of a certain age, you have got to start taking money out of your retirement accounts for the year 2020. You do not have to take out any required minimum distributions, and the reason that they did that is that you don't sell while the markets are low the stocks that you may have. Very briefly about the market, the market went way up, recovered almost 4k points, then went down another 1k points in the last four days, that's the trading. Again, I will say in the long run, the markets will be just fine. You can expect extreme volatility for a long time probably in these markets. Do not expect that this is over right here and right now, so just keep doing everything that I've told you about the markets. But I want to say one other thing. When these markets do go up like they went up three days in a row, did you find if you looked at your emotions were like, oh god, why didn't I buy? I know I should have put more money in, I'm so sorry I sold, oh look at all the money that I lost. And then the markets go down almost 1k points on Friday, and you're like, oh, thank God, oh, maybe it's going to go down. I find all of you are wishing that it goes up. Some of you are wishing that it goes down so you can get in. The only thing you should be wishing for is your health, that your family is protected, that the world is protected and that this virus stops. Your money will come and go, but it will come back as well. Once life goes, it does not come back. So please, send your wishes in the right direction.But with that said, if you need this money for something like your kid's college education, all right, they're going to school in September, whatever it may be. And you're really, really just driving yourself crazy when these markets have major rallies where it recouped 4k points in three days, that should probably be the point that you sell if you need this money. And I will repeat, money that you need should not be invested, it never should have been, in the stock market. So a lot of you are writing to me and saying, Suze, I'm going to forgo all these payments. Now is a great time, I know, if I take this money and I put it in the stock market, that I'm going to make a fortune off of it, so I'm just going to do that. Please don't do that. Make sure you have an eight-month emergency fund. For those of you who did have an eight-month emergency fund, you're all writing me and you're telling me, oh, thank God, Suze, I had that, I'm going to be fine. Because this is going to last longer than we would ever want to. So make sure you have an eight-month emergency fund, have your priorities straight, and just stick in there everybody.All right, now, if you made it to the end of this podcast, I have a gift for all of you. You see, it pays to stick through this entire podcast all the time. Now, I know I've been announcing to all of you that if you would like a copy of my new book, The Ultimate Retirement Guide for 50+, a lot of you are writing and saying it has really, really helped you. And I decided to bypass Amazon and everybody, and if you want to purchase it for $10, it is a New York Times bestseller, hardback, 320 pages. You could do so by simply going to www.SuzeOrman.com/womenandmoney and you can get it there. However, if you are taking my advice and you really don't have any money and you really would like to listen to that book, you can go to www.SuzeOrmanAudio.com and you can stream that book for free. Yeah, you heard that right, for free. So this is my time to really try to help you in any possible way, to educate you. So why not listen to 12 hours and 30 minutes of that book while you're at home or doing whatever you're doing, and it doesn't have to cost you anything because I'm giving it to you as a gift. Because I really appreciate how many of you are listening to me every single week and hopefully letting me guide you with the best intentions to keep you all safe and sound. Now, when you go there because this is a podcast, when this offer expires and because this isn't going to go on forever, you'll see that the offer expired. It's not going to expire now until April something or whatever, it's going to go on for a while. But I just want those of you who are listening to this podcast six months after now, or whatever, if you go there and it's expired, sorry, you should have joined me sooner. But I'm sure happy that you're with me now. So just know, though, if you're listening to this today, next week, whatever, absolutely go to www.SuzeOrmanAudio.com and you'll be able to stream it for a period of time. I will be on the Hoda and Jenna show on April 1 in the 10 o'clock hour. I'm doing many appearances, as you noticed. I am not on HSN, we decided that it just won't work technologically this weekend, maybe next weekend or whatever. So, I'll let you know when that happens if it does, but that's just mainly for you to be able to call in and ask questions. And also shortly here, I'm going to tell you how we could be doing a Zoom all together so you can call in, ask questions, and I can answer them live. So that's everything that I wanted you to know for now. It's important that you understand how everything works, so you might want to listen to this podcast over and over again just so you get it straight. But the real thing that I want you to get right is this one. You need to come from a place of love and joy and hope right now. The energy that you have within you does get transmitted out. And if there is ever a time that this world needs your love, needs your hope, it's right now. Don't let fear, don't let fear dominate your life because when you are fearful, your entire system goes down. You start to get full of angst and your body becomes weaker and then disease gets to enter in, and who knows what that means with this virus? So this is the time that you stay rooted in love and kindness and positive thoughts because energy really does transmit out. So may this be a time that you really go within and that you learn how to love being by yourself and you learn how to love having great thoughts. And may everybody who sees you feel joyful when they see you or hear your voice, may they feel the love that really resonates within you. And this is a time, really, that love needs to be the most precious commodity that we can give one another. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information. To find the right Credit Union for you, visit https://www.mycreditunion.gov/. Interested in Suze's Must Have Documents? Go to https://shop.suzeorman.com/checkout/cart/index/.
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