Navigating through financial challenges

Navigating through financial challenges

Over 3 million people in the U.S. have recently filed unemployment claims as a

result of the severe economic impact of the coronavirus.

• Be careful with the 401(k). “When sources of funds are limited, people should withdraw only the amount they need from their 401(k),” Kruman says. “You want to look for other sources that would be accessible without taking on the major tax hit of raiding the 401(k). Home equity loans are great, and they are at rates much lower than the tax rates of the 401(k). Also, cash value life insurance policies are good sources to borrow from as well. For those who lost their job but have adequate reserves, it’s advisable to roll their 401(k) money over to an IRA at the earliest possible opportunity.”

• Don’t panic in the stock market. ”Don’t sell now,” Kruman says. “People who are being induced into panic are selling, and somebody else is buying those shares for when prices recover. The stock market always has fluctuations. It comes down to risk tolerance. You have to be prepared for volatility and be diversified.”

• Don’t rely on group life insurance anymore. Many people have the majority of their life insurance through their job. But when you lose the job, you lose the life insurance.

Kruman says. “It’s vital to have a well worked-out plan of personal life insurance, which means not tied to a job.”

• Find an independent financial advisor. “An independent advisor doesn’t have a company telling them what to invest clients’ money in,” says Kruman. “A client’s best interest should always be the number one priority for an

advisor, and it’s easier to maintain that focus by being independent of any parent company’s fee goals or investment selection limitations.”

• Consider making a Roth conversion now. When you move money from a tax-deferred retirement account into a Roth account, the money is taxed at that time. “But by making that conversion, you are putting yourself in a position to get tax-free income for life if you comply with two requirements,” Kruman says. Those requirements: be at least age 59 ½ and don’t take any gains out of the Roth for five years. the end of 2025 for personal rates. “So paying the taxes now at a lower rate when you make the Roth conversion is the better bet for the long run,” he says.

Steve Kruman is a financial planner-investment advisor

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