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How to Strengthen Your Financial Plan During a Pandemic

Jessica Caruso, CFP®

Sr. Managing Director


Even during a crisis like COVID-19, there are things you can do to strengthen your financial position. Protecting your cash flow, reviewing your debt, and harvesting investment losses are just a few financial planning actions you can take to improve your long-term financial outcomes.

How to Strengthen Your Financial Plan

Take action now to put yourself in a stronger financial position

Any investment advisor worth their salt will tell clients to remain disciplined, avoid selling at the bottom, and make sure they are invested for the recovery. While this advice to essentially do nothing is incredibly valuable, I have found that in the midst of so much uncertainty, it is natural for people to want to do something. As an advisor speaking with many clients during this crisis, I am here to tell you that there are several actions you can take to ensure your financial plan survives these unprecedented times and comes out even stronger on the other side.


1. Protect your cash flow

Shelter-in-place mandates have shuttered many small businesses and left millions of Americans out of work. For those who have at least 3-6 months’ worth of emergency cash reserves, this has allowed them to focus on their health, family, and communities, while avoiding the stress of a cash flow crunch. Nevertheless, you may want to consider temporary adjustments to your budget and contact lenders to defer loan payments. You should also review liquidity sources and have a plan in case it takes longer for society to start reopening. Ideas include tapping into a home or business line of credit, pulling from non-retirement investment accounts, and taking advantage of flexible retirement account loan and distribution options offered under the CARES Act.


2. Keep saving

If your cash flow has not been affected, look for ways to invest into the market at prices that are still 15-20% lower than they were 2 months ago. The best way to do this is by continuing automated savings as part of your long-term financial plan. In addition, consider investing cash that is sitting on the sidelines or front-loading some of your savings goals, especially to tax-advantaged accounts like 401ks, IRAs, and 529 plans. Have we reached the bottom of this bear market? It remains to be seen. What we do know is that the market rewards discipline and sticking to your investment plan during these uncertain times is more critical than ever.


3. Harvest investment losses

After the recent market declines, your equity investments may have dropped below their original purchase price. By actively selling those positions and reinvesting in similar holdings, you can book capital losses to offset other income. This tax benefit allows for a lot more flexibility to diversify concentrated positions, swap out of outdated investment vehicles, or rebalance the portfolio at no tax cost. Having an efficient investment allocation is particularly important going into an eventual economic recovery and market upswing, and loss harvesting allows us to get closer to that optimal portfolio for much less tax cost.


4. Accelerate a Roth conversion

Many clients are finding themselves with lower taxable income this year due to business losses, reduced capital gains, and the elimination of RMDs. This is a great time to convert tax-deferred IRA assets to a Roth IRA. Such conversions can reduce your total lifetime tax paid, potential estate tax, and future tax to beneficiaries. Furthermore, completing the conversion while the market is down allows for more shares to be converted, ensuring any recovery in those assets occurs in a tax-free environment.


5. Review your debt

Recent interest rate cuts mean a continuation of low rates. This is a great opportunity to consolidate high-interest-rate debt, review home and real estate refinancing options while they are low, and restructure debt so more of it is tax-deductible (e.g., held in a business, secured by income-producing real estate, used to finance primary home purchase up to $750,000).


6. Update your estate plan

The current health crisis is forcing many to confront the uncomfortable possibility of a premature death or incapacity. Now is a good time to review your estate plan, especially your healthcare and financial powers of attorney, HIPAA authorization, and advance health care directive. If something were to happen to you, does your family know who to call, where to locate your personal and financial information, and who has legal authority to make decisions on your behalf?


7. Give to charity

Being surrounded by so much loss and financial hardship has caused communities to find ways to support one another. This can be a good time to financially help those affected by the global pandemic, and completely offset your 2020 tax liability, by taking advantage of the 2020 elimination of charitable deduction limits.


8. Reconsider your long-term financial priorities

Sometimes a change of pace can help to clarify what is and isn’t important in your life. Here are some questions to ask yourself:

  1. What have you had more time to prioritize during the crisis that you want to continue? How can we align your financial resources to accommodate this?
  2. Is there anything you had to let go of, but don’t miss and don’t want to add back to your budget?
  3. What do you miss most about your pre-COVID-19 life that you want to have again when it’s safe to do so? How can we help you plan for that financially?

While we can’t control the markets, there are several behaviors we can control during these times, including many opportunities that can ultimately improve long-term financial outcomes.

Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate, but is not guaranteed or warranted by Mercer Advisors. Content, research, tools, and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors. Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy or product made reference to directly or indirectly, will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance and results of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. This document may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to market conditions. Readers are cautioned not to place undue reliance on these forward-looking statements. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Mercer Advisors’ control. Mercer Advisors is not a law firm and does not provide legal advice to clients. All estate planning documentation preparation and other legal advice is provided through its affiliation with Advanced Services Law Group, Inc.