Our Blog

DWM is committed to learning for its team, clients and friends. In this changing world, it’s extremely important to stay current in all areas impacting your financial future.

We encourage all of team members to “drill down” on current topics important to you and contribute to our weekly blogs.  Questions from our clients and their families are often featured in our blogs.  

Financial literacy for clients and their families is very important to us.  We generally hold an annual wealth management seminar for all of our clients.  We encourage regular, at least semi-annual, meetings in person with our clients to review family updates, progress on financial goals, asset allocation and performance of investments.  We’re happy to assist younger members of the family as part of our total wealth management program.

Here’s our latest blog:

 

 

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Perhaps a Silver Lining- Time to Refinance?

Written by Les Detterbeck.

silver lining cloud

The coronavirus has been brutal. There are now over 1 million cases and 54,000 deaths worldwide. Left to itself, the covid-19 pandemic doubles every few days. Millions have lost their jobs. Most of America is on lockdown. We’re certainly in a recession right now. Worse yet- there continues to be a huge uncertainty as to when the coronavirus will stop its path of destruction and when we can all start to return to some form of normalcy.

We sincerely hope you and your family are safe and healthy. And, we hope all the other Americans and fellow citizens of Planet Earth that have been impacted will get through this crisis quickly and successfully.

At the same time, the equity markets have crashed since February 19th, ending an 11 year bull run. We were probably due for a pullback or correction after the huge run-up in 2019. The coronavirus seemed to provide the tipping point. Economic growth in 2020 will certainly be less than 2019, though we don’t know how much less.

With all of this gloom, here is one possible “Silver Lining.”

With many investors running for safety into bonds and the Fed dropping rates, the fixed income markets are showing huge drops in interest rates. 10 year treasuries are near .6%. 30 year U.S. treasuries are at 1.25% interest. These rates foretell less economic growth and lower inflation in the future.

The Mortgage Bankers Association is forecasting lots of business this year for new purchases and refinancings. They expect $2.6 trillion in new mortgages this year, a 20% gain over 2019. Refinancings are the key drivers of the change and are expected to be up 37% in 2020. Bloomberg reported yesterday that the average rate for a 30-year mortgage loan was 3.33%, down from 3.5% last week.

Because there are typically costs to refinancing, doing so makes the most sense for people who plan to stay in their house for some time and where the cost to refinance is less than the interest expense that can be saved. In addition, if inflation will be lower in the future, then nominal investment returns should be lower as well. For example, if your nominal investment return is 6% and inflation is 3%, then your “real” return is 3% (the amount above inflation). If inflation is 1.5%, then a 4.5% nominal return produces the same 3% real return.

If you have a mortgage with an interest rate of 4% or more, you likely should be looking at refinancing it or paying it off. Because of the increase in the standard deduction and the limitations on state and local income taxes, 90% of households no longer itemize deductions. If you are in that 90%, you get no tax benefit from your mortgage interest.

So, if it is time to look into refinancing, check around and keep your eyes open for low mortgage rates. At this point, there is no reason to believe that rates will be going up anytime soon. And, if you would like a second set eyes to help you determine if it is time to refinance, give us at DWM a call. We are always happy to talk. Stay well.

Stay safe and stay healthy during this pandemic. And, if appropriate, take advantage of one of the few silver linings of the pandemic by refinancing at a new low rate.

https://dwmgmt.com/

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CARES Act Brings “Pennies from Heaven”

Written by Les Detterbeck.

pennies from heaven dropping from the sky 

We hope each and every one of you and your families are safe and healthy. In response to the unfolding COVID-19 global pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act last Friday. This $2 trillion emergency fiscal stimulus package (“Pennies from Heaven”) was designed to help ease the economic damage caused by the virus. Below are some of the key provisions that can offer relief to individuals, families and businesses. In a number of situations, it’s important for you to act quickly. Items with time urgency are underlined. The objective is to provide short overviews of the provisions. If there are any questions, we at DWM will try to help.

Recovery Rebates. Perhaps 90% of Americans should receive some amount of Recovery Rebate. The rebate can be as much as $1,200 for a single, $2,400 for a married couple plus $500 for each child under age 17. The only limitation is your Adjusted Gross Income (“AGI”). Singles with AGI of $75,000 or less will receive $1,200 plus extra for eligible children. Married couples with AGI of $150,000 or less will receive $2,400 plus extra for eligible children. Incomes above that will get a lesser amount until completely phased out. The IRS will use the latest tax return filed to make their calculation. If your 2018 tax return has a lower AGI, wait to file your 2019 tax return until the rebates are made. If 2019 is a lesser year than 2018, get 2019 filed immediately. Please understand that the rebate will be “trued up” based on your 2020 return. So, if your income in 2018 and/or 2019 disqualified you from the rebate, you can still get the rebate in 2021 if your 2020 tax return shows you are below the $75,000 or $150,000 threshold. And, for those who received a rebate but ultimately had a larger income in 2020 that would have disqualified them-no worries. The IRS will not “clawback” any rebates. Checks and direct deposits are promised “as soon as possible” which hopefully will be in April.

Covid-19 Distributions from IRAs and Loans from 401ks. Distributions up to $100,000 from IRAs and $100,000 loans from 401ks can be made without tax penalty for those impacted by the virus. The income tax of the distribution can be split evenly over 2020-2022. Distributions are not subject to withholding and can be repaid (rolled back in) in 3 years, in a lump sum or installments which will produce a refund of the tax paid.   Loans from Company Retirement Plans can be made up to 100% of the vested balance up to $100,000. Repayments on the loan may be delayed for up to one year.

Required Minimum Distributions (“RMDs”) are waived and can be returned. RMDs for 2020 are specifically eliminated for owners and beneficiaries. Owners, not beneficiaries, that have already taken a 2020 RMD and would like to return it, need to act quickly. If the distribution took place in the last 60 days, you can roll the money back in (note, if withholdings were made, you’ll need to “gross up” the net distribution) and save paying the tax. If the 60 day window has passed, you can still complete a valid rollover for up to 3 years if you can show you were impacted by the coronavirus crisis.

Charitable Contributions. To encourage contributions to charity, Congress has provided that individuals can make and deduct contributions up to and in excess of 100% of their AGI. Hence, they could wipe out their taxes and even get a carryforward for 5 years. In addition, individuals who use the standard deduction (90% of taxpayers) can get up to a $300 charitable contribution deduction “above the line” in the addition to their standard deduction.

Relief for Student Loan Borrowers. Required payments on Federal student loans are deferred until September 30, 2020, during which time no interest will accrue. Furthermore, this period of time will continue to count towards any loan forgiveness. Hence, any student borrower who intends to qualify for a program that will ultimately forgive the entirety of their Federal student debt should immediately pause payments. Any payments made in this period will simply reduce principal and therefore are reducing a debt that will be forgiven. In addition, through the end of the year, employers who provide employees with up to $5,250 of student debt payments may exclude those payments from the employee’s W-2.

Additional Unemployment Compensation Benefits. Unemployment benefits have been increased from 26 to 39 weeks. Futher, Self-employed individuals will now be eligible. Plus there will not be the typical one week of "waiting time" for unemployed employees of self-employed individuals without work. Additionally, the weekly benefit is increased by $600 per recipient for up to 4 months. Since the average weekly unemployment benefit is about $400, this will increase the average benefit to $1,000 for those 4 months. Therefore, employees and self-employed individuals who have lost their job or don't have work, could qualify for up to 9 months of unemployment benefits, with an extra 17 weeks of $600 payments - meaning, an average worker could get as much as $26,000 in the first 9 months.

Paycheck Protection and Forgivable Loans.  Businesses, including sole proprietorships, with less than 500 employees can apply for an SBA loan to help with economic suffering on their business caused by coronavirus. The loan is the lesser of $10 million or 2.5 times the monthly payroll costs over the past year and must be applied for by June 30, 2020. Loans will be made on a first come-first serve basis until the total maximum of $10 Billion has been loaned. So, a company with a 2019 monthly qualified payroll of $40,000 could borrow $100,000. And, as long as the business maintains the same number of employees, the loan will be forgiven for all payroll, rent, utilities and healthcare costs incurred in the first 8 weeks after receiving the loan. For example, if payroll remained $40,000 per month, rent was $6,000 per month, utilities $2,000 per month and health care costs $2,000 per month, virtually the entire loan would be forgiven. And, any debt forgiven is not included in taxable income for the year. For the portion of the loan that is not forgiven, interest on the loan will be at 4% or less over a term of 10 years and payments will be deferred for at least 6 months and no longer than one year.

Employee Retention Credit. Businesses who doesn’t qualify for the SBA loan above but suffered a reduction in quarterly revenues in 2020 to 50% or more for the same quarter in 2019, may qualify for a $5000 employee retention credit.

Deferral of payroll taxes. Most employers, other than those who receive the special SBA loans above, qualify to defer the employer portion of payroll taxes for over one year. Their 2020 employer payroll taxes can be paid half by December 31, 2021 and half by December 31, 2022.

Net operating loss rules are loosened. The CARES act allows losses in 2018, 2019 or 2020 to be carried back five years producing tax refunds that can be used now.

Conclusion. The CARES act provides significant funds, programs and tax benefits for individuals, families and businesses. Some of the provisions have time limits as outlined above. DWM will be individually contacting our clients who we think might be able to take advantage of these programs and get their rightful share of the “Pennies from Heaven.” We will also alert them to other financial and/or tax strategies, including Roth conversions and tax loss harvesting, given the CARES provisions and the state of the current markets. If you have any questions, please contact us.

We hope that you, your family and your community stay healthy and we all can get back to normal as soon as possible.

https://dwmgmt.com/

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Keep Your Distance - Socially and From Cyber Fraud

Written by Grant Maddox.

corona

The bear economy is creating a bull market for cyber-crooks. An unfortunate side effect of economic downturns is an increase in cyber fraud. Worldwide cyber fraud has hit an all-time high. For the first time on record, data theft has now surpassed the stealing of physical assets as compared to the past two decades. Given our current global pandemic, cyber fraud has only increased as fraudsters try to take advantage of high demand for information regarding COVID-19. 

Due to recent restrictions placed on communities and social distancing, more and more people are spending their time online. Cybercriminals are taking advantage of the increase in online traffic. According to the cybersecurity firm, MonsterCloud, there has been an 800 percent increase in cyber fraud claims since the beginning of the year.

Here are some of the most common cyber frauds as reported by Charles Schwab: 

 

  • Outbreak maps. Malicious actors have begun spreading malware through online maps claiming to track the impact of coronavirus. As users visit the sites or click the links, they are exposing usernames, passwords, credit card numbers, browsing history, or other nonpublic personal information that is then exploited by the attackers or sold to other criminals on the dark web.
  • Email campaigns. Criminals are also leveraging common forms of fraud like spam email campaigns, using infected attachments or downloads to gather information.
  • Charitable giving. Scammers may pose as organizations in need. It is important to verify where your donations are going to before donating. One important resource here.

 

Fortunately, there are several steps that individuals, businesses, and families can take to prevent a cyber attack. As many continue to work remotely, and as we transfer to a more digital society, please consider the following:

 

  • Make sure everyone is using a VPN, or a virtual private network, to do office work from home.
  • Require devices to have two-factor authentication, which verifies a person's identity before logging in.
  • Only use WiFi networks that are password protected.
  • Companies should maintain a reliable back up for their data on a different network.
  • Organizations should make sure their antivirus software is up to date.
  • Everyone should think before they click on links and emails.

 

"Think before you click" is perhaps the most important measure here. At DWM, we take cybersecurity very seriously. As the majority of us work from home over the next few weeks, we continue to rely on two-factor authentications, virtual private networks through our cloud platform, antivirus software, and secure home WiFi. We also continue to collaborate with our third-party technology providers to stay proactive and increase our security on a daily basis.

 

https://dwmgmt.com/

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