Financial Planner Checklist for COVID-19 Related Planning Opportunities

I don’t know about you, but I’m so grateful for the opportunity over the last several weeks to use my skillset as a financial planner to help others. I’m energized by the opportunities to tangibly serve clients, friends, and family – helping them navigate short-term changes to their finances, feelings of uncertainty and fear, governmental benefits, and for some, opportunities to improve their financial situation amidst this pandemic. 

Given that there are so many planning opportunities to navigate, here’s the quick checklist I’m using to help my clients. 

If Income Is Down:

• Does applying for unemployment make sense? Recipients will get regular state benefits plus an extra $600/week through the end of July. If the client makes $50,000 annually or less, they’ll likely make as much, if not more, on unemployment as they did previously. 
• What are the next best places to get cash to cover expenses and how long will they last? Options include emergency fund, other cash savings, low interest home equity loan or line of credit, low interest personal loan, expanded 401(k) loans, Roth IRA principal, penalty-free IRA distributions, credit cards, etc.
• Let the client know that most tax deadlines have been extended from April 15, 2020 to July 15, 2020. If they’re anticipating a refund, filing sooner rather than later makes sense. But if they’ll owe, they have extra time to pay. 

If Expense Reduction is Needed: 

• Does it make sense to apply for temporary mortgage relief? Be careful because some banks are requiring all payments to be made up at the end of a 90 day forbearance period. Others are allowing the mortgage term to be extended which is much more favorable.
• Does it make sense to negotiate other bills downward? Be sure to look into the repayment parameters to ensure it doesn’t hurt the client once repayment is required.
• Let the client know that Federal student loan payments are on hold until the end of September. Help the client determine the highest and best use of those funds which may be to increase savings, add to retirement accounts while the market is down, pay off high interest debt, etc. 
• Is the client already saving on expenses like childcare, private school, preschool, housekeeping, personal care, travel, etc. since those things are largely unavailable currently? Help the client determine the highest and best use of those funds.

If Increased Savings Is Needed (and funds aren’t needed to cover immediate expenses): 

• Temporarily cease putting extra amounts toward debt (especially debt under 5%) and redirect towards savings.
• Redirect the amount that would have gone towards Federal student loan payments to savings.
• Does it make sense for the client to use their stimulus check to increase savings? Funds are beginning to show up in client bank accounts as of the week of April 13, 2020.

Reduce Interest on Debt:

• Is there an opportunity to refinance the mortgage? Ensure income is solid and rate reduction would result in net savings over time for the client, which is likely if their interest rate is over 4% and they are in the first 5 years of their loan.

Investments:

• Is the client’s asset allocation still in alignment with their target allocation? Rebalance the portfolio if necessary.
• Does the client have capital losses that can be harvested?
• Does a Roth conversion make sense this year given that account values are down and income may be reduced as well? Ensure the client can pay the tax on the converted amount.  
• Has the client taken an RMD (including from inherited IRAs) they don’t need for 2020? If so, they can redeposit it. 
• Is the client due to take an RMD (including from inherited IRAs) they don’t need for 2020? If so, they can skip it this year. 
• Does the client need to access investments to cover expenses? Non-qualified accounts are a good option, but look out for potential capital gains. Clients can access up to $100,000 from retirement accounts without penalty, redeposit the funds over three years if they don’t end up needing it or can repay it, or spread the tax liability triggered by the withdrawal over 3 years.
• Does the client need to access a loan from their 401(k)? 401(k) loan limits have increased from $50,000 to $100,000, and from 50% to 100% of account balance. 

Self-Employed/Small Business Owners:

• Does it make sense for the client to apply for a Paycheck Protection Program loan? These funds can be used to cover payroll and some other expenses and is eligible for forgiveness if qualifications are met. Interest rate is super low at 1% if the loan is not eligible for forgiveness. 
• Does it make sense for the client to apply for an Economic Injury Disaster Loan (EIDL)? These funds can be used for various business expenses and carry a 3.75% interest rate. This program can be combined with a PPP loan in certain circumstances. Make sure the loans are not used to cover the same expenses. 
• Is the client eligible for unemployment? In some cases, especially if the client doesn’t have employees, has low overhead, and makes under $50,000-$75,000, applying for unemployment could be the easiest way for them to temporarily replace business income. 
• Does it make sense to recalculate estimated quarterly payments? If business income for 2020 will be lower than projected at the beginning of the year, the client’s accountant can recalculate quarterly estimates to reduce the amount required for 2020.
• Let the client know that Q1 and Q2 estimated quarterly payments are delayed until July 15, 2020. This gives them more time to see how business income changes and potentially reduce quarterly estimates. 
• Could the client benefit from the Employee Retention Tax Credit? Be careful as this one can’t be combined with a PPP loan. 
• Can the client benefit from deferring the employer portion of payroll taxes? If the client gets a PPP loan forgiven, they can no longer defer the employer portion of payroll taxes after the forgiveness decision has been made. 
• Are there local small business grants and loans available to the client?

This checklist isn’t exhaustive, but it covers the things I’ve found to be most impactful for my clients. I hope it’s helpful for you, too!