COVID-19's Financial Impact - 1 of 5

Will the CARES Act help?

Absolutely! (Especially in the short term.) Yet, in the middle-and-long-term this is a complex question with several possible outcomes. Certainly, and especially in the short term, with its cash payments, its suspension of things like RMDs and mortgage payments, and its increase in unemployment benefits (just to name a few facets of the new bill), the CARES Act is going to have a positive impact and provide relief for millions of Americans.

A potential downside of such a sweeping and quickly conceived bill is that it could encourage people to take larger-than-needed loans from their retirement accounts, thus triggering a big future tax bill while simultaneously negatively impacting their preparation for retirement. We encourage people to seek help from a credentialed advisor who can work with you to create a plan that enables you to maximize the benefits of the CARES Act while minimizing any negative impact that could result from things like borrowing from your retirement accounts (when there might be other options available to you).

What is the CARES Act?

A government stimulus bill. Signed into law on March 27, 2020, the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act stimulus bill, or CARES Act, was created to provide relief and assistance for the millions of Americans who have been impacted by the coronavirus pandemic. The benefits include (but are not limited to), direct cash payments for taxpayers, temporary changes to the rules governing retirement accounts, a suspension of RMDs for 2020, a change to tax laws regarding charitable contribution limits, mortgage forbearance (for mortgages that are insured by the federal government) for up to 360 days, enhanced unemployment coverage, and changes to student loan debt requirements, just to name a few. 

The CARES Act will probably be the first in what could be a series of steps taken by Congress to help individuals (and businesses) who have been impacted by the pandemic, and to assist the broader economy as a whole, to both weather the storm and recover more quickly once the worst has passed and a sense of normalcy and safety has returned.