With Stormy Economic Times Ahead – Americans with Retirement Funds Are Jumping on Gold and Silver
2020 has already become a tumultuous and challenging year for investors and is expected to bring continued thrills and chills with the increased likelihood of a slowing financial machine and an oncoming recession. The unfolding of coronavirus and the response to it have taken many thru many challenges, but, the losses from the recent high levels in the markets and the potential for a continued reversal off this recent bump up from the March 23 bottom and potentially bring trillions of greenback losses to those in the stock markets and everyone’s retirement account.
To ease some of the weight, Congress has taken it upon itself to provide a few new advantages to holders of retirement money owed which, coupled with cutting-edge changes and stimulus packages that are set to roll out and help companies and individual during the next 12 months, as well as artificially prop up the market to help spare everybody’s portfolio performances in 2020. However, with the mounting unemployment claims rising in the millions each week in and financing programs being reduced or hard to access for most, the effective of the Federal Reserve’s money printing and handouts are not providing the benefit that everybody is hoping for or expecting. Here are hot points to consider for your retirement plan and how they may be impacted this year in 2020 and what you’ll want to look at out for.
Here’s the good news:
1. No Required Minimum Distributions (RMDs) in 2020
Investors in traditional 401Ks, IRA, and comparable retirement debts recognize that they’re required to begin taking RMDs at a certain age. Until the current day, the age was designated as 70 ½ years old. However, Congress finally handed out a nice little act of comfort as as a part of an omnibus spending bill, raising the RMD age to seventy two. That bought investors some extra time and peace of mind to grow their nest eggs longer than they have been required to begin taking RMDs and paying taxes on their distributions.
Because of the terrible average performance of most retirement accounts and the hardships imposed through the coronavirus and accompanying stay at home policies and increasing unemployment rates, Congress has waived the RMD requirement for 2020 in its modern-day stimulus bill. This means that folks who ought to have needed to take RMDs this year don’t have to. Of course, in case you nevertheless need to take a distribution from your retirement payments, you can do so, you would genuinely pay the regular taxes you will otherwise need to pay. And as with any tax topics, make certain to consult with your tax adviser to find out how this might impact you.
2. Penalty-free Distributions
One of the biggest issues and and troubling rules of retirement accounts is the penalties that come with early withdrawals, i.e. folks that take a distribution in advance of being 59 ½, incur a ten percent penalty on top of taxes owed. That’s to deter those not yet in retirement age from treating retirement money owed like ATMs.
The CARES Act stimulus bill lets folks suffering from the corona virus to take an early withdrawal in any amount up to $100,000 from their IRA retirement account without having to pay the early withdrawal penalty. You will nevertheless still have to pay taxes on those distributions, however they may be deferred up to three years to pay those taxes, and that they also can return the money or pay back the money that was taking out of their IRAs within 3 years and keep from having to pay taxes on the distribution.
The corona virus is already torturing us enough – and each person’s circumstances are different. Whatever you plan to do with your IRA, we of course make the recommendation that you seek advise from your tax specialist so you understand the implications and find out how making an early distribution may affect your taxes and penalties.
3. Higher 401K Borrowing Limits
Retirement account holders can now borrow as much as $100,000 from their 401K retirement account, double the amount they had been capable of borrow formerly. As with IRAs, the 10% early withdrawal penalty has been waived. And yet again, this is supposed to be those that bave been affected by the coronavirus, so make certain to speak with both your tax adviser and your 401(k) plan administrator in advance of taking money out against your retirement account.
Here’s the bad news:
Unfortunately, with the good news that comes with the recent stimulus package and new rules, there are a few big drawbacks that come with it as well.
1. Increased Inflation
Adding a whopping $2 trillion to the national debt within the blink of an eye in an attempt to fix the stock market as well as prop up the Federal Reserve’s balance sheet due to its new Quantitative Easing (QE) programs and adding billions of dollars to the nightly repo markets, its practically guaranteed that the result will be greater inflation.
When looking back to 2008 you may notice that the financial stimulus did not really produce much, if any inflation and are probably thinking there will not be any inflation this time around either. However, you have to consider that the Fed’s QE back then was largely neutralized by way of it showing up on the banks and financial institutions as additional monetary reserves. However, considering that is not the case here and a lot of this money is circulating throughout the market and economic machine to acquire assets and increase prices, which creates the enviroment for there to be increased inflation a very likely reality.
2. Bigger Bailouts
The CARES Act become simply step one that Congress took closer to bailing out the United States with over $2 Trillion dollar, now there’s talk of a $2 trillion infrastructure stimulus package in additional to checks being written out to people all over the nation. Now that the precedent has been set, there’s no cause for Congress no limit it further spending more money. Seriously, what’s any other trillion dollars to a country that’s extensively in debt already which is expected to shoot up well over $25 trillion this year? So long as the Fed keeps printing money and people appear to be OK with that, people and businesses will continue to ask for and take more and more handouts to keep the party going.
3. Its the Wild West out there! – What’s next?
As it currently stands, no one knows how long the prolonged corona virus lock-downs will last until, or what the economic impact will be and when it turns around. With that being said – Congress will practically do anything to seemingly fix it, regardless of what the long-term consequences are. More stimulus checks for people. More big bailouts to companies that go bankrupt or declare monetary damages to their business from the downturn of the economy. While there is still a lot of uncertainty and it will realistically take years for all of this to unwind into a new normal – basically anything goes and nobody knows right now…
Congress is so scared right now and only sees the immediate term issues which results in them writing checks now and not necessarily how they will be paid for later. However, the only reality in this scenario is that we’ll all be paying for it later with increased taxes, or increased prices for goods, particularly with a devalued US Dollar that has been printed to infinity with trillions of new money floating around. We are definitely in strange times where money can be manufactured and circulated into the market in quantities that make this event the single largest act of socialism in world history, and don’t really think about or consider the consequences. Throughout history and repeated many times over, wanton money printing, massive debt overhangs and inflation together do not end well, and we will all have to face the music when that happens, unfortunately to the detriment of many people.
In all honesty, the government is only able to do so much as to help with the economy, prop up the stock market, and help people from tax and regulatory issues. At some stage of all this, the reality of it is that we’re responsible to take care of ourselves and we can’t “control” the market or how we have to be the ones responsible for managing and maintaining the value of our investments. Unless you’ve made smart choices to protect your assets, like investing in gold and silver, and having diversification, many people will be at risk of losing huge portions of their retirement account as the market continues to slide into a full-blown recession.