HEROES CAMPAIGN: “HAVEN”

Contributed by: Center for Financial Planning, Inc.®

The Center’s Hero Campaign aims to spotlight local nonprofits amid the COVID-19 outbreak. Our goal is to raise awareness and support the community. This is our 4th post in the Q+A series featuring HAVEN. 

What is your nonprofit?

HAVEN is the only agency in Oakland County that provides comprehensive services to survivors of domestic violence and sexual assault. Our mission is to empower survivors, spread awareness, and prevent violence. We provide services through an innovative model that fully integrates our residential, counseling, advocacy, and educational programs under one roof. Each year, HAVEN serves about 30,000 people through a wide range of empowerment-based programs and services.

Who do you serve? 

HAVEN provides free services to survivors and their children. Although HAVEN is located within Oakland County, our services are available to survivors no matter their current residency. Approximately 35% of our residents come from Detroit.

How have the communities you serve been impacted by COVID-19? 

COVID-19 has greatly increased the lethality for many survivors. Due to the Stay Home, Stay Safe order, many survivors have been forced to quarantine with their abusers. We haven’t experienced a decrease in calls, which signifies that the survivors in our community are still in need of the critical and necessary services that we provide.

How has your nonprofit been impacted by COVID-19?

Like most organizations, HAVEN has been impacted, but the dedication of our staff and the outpouring community support has been beneficial. The majority of our staff is working remotely. Some are still meeting with clients in-person while following social distancing guidelines. We’ve transitioned many of our programs to telehealth, via phone or video conference.

What can people and businesses do to support your organization and nonprofits generally during this unique environment?

During this time community supporters can donate monetarily directly on our website. Critical need items are needed as well, such as cleaning products, masks, sanitizing wipes, hand sanitizer, Kleenex or items from our General Wish-List.

Read more blogs in this series:

1. Beyond Basics

2. MOTCC

3. Focus: HOPE

COVID-19 and Your Money: Know These 4 Easy Financial Tips

Contributed by: Sandra Adams, CFP®

The coronavirus pandemic has taken us by storm. The virus has been devastating both financially and psychologically for many across the world. It has changed the way we will likely live our lives forever and forced us to slow down and think about things differently. Here are the top financial lessons that COVID-19 has helped us to see a little clearer...lessons that may be worth holding onto even after the pandemic is behind us.

1. Stick To A Budget

   It is easy for budgeting to take a backseat when times are good. We may find ourselves spending money on unnecessary items because we aren’t paying attention. The pandemic forced many to take a hard look at their expenses due to loss of income and free time. Many cut back on those “extras” they didn’t need, didn’t want, or weren’t using. They found ways to be more frugal without impacting the quality of life. Also a major plus: family time at home didn’t cost anything.

2. Have An Emergency Reserve Fund

   As in any financial crisis or economic slowdown, having emergency reserves can save you if hours are cut or a job is lost. While you can collect unemployment, there is often a gap in it getting paid out. Having emergency reserves, enough to get you through several months’ worth of expenses can be a lifesaver in these situations. The truth is, the majority of the U.S. population does not have this. If you do not have an emergency reserve fund…make this your goal before the next crisis!

3. Update Your Estate Plan

   People of all ages suddenly realized it might not be too soon to make sure their estate planning documents are in order. Durable Powers of Attorney and Wills (and potentially a Trust if applicable) used to put off most younger folks until they started to have families or until they felt like they had accumulated “enough” in assets. The sudden threat of a virus that could take your life at any age suddenly made these documents more important. Even more so with anyone over the age of 18 needs to have their Durable Powers of Attorney as their parents are no longer able to make legal, financial, or medical decisions on their behalf. Many COVID-19 patients were taken to facilities alone and not allowed to have a family member accompany them.

4. Get Life Insurance

   The pandemic caused a surge of folks to wonder if they were sufficiently covered from a life insurance standpoint. Many were younger families who had not yet accumulated sufficient assets to support their spouses and children long-term. While less common, COVID-19 deaths have appeared in the young adult group. If those families did not have sufficient life insurance, their surviving members were left in a devastating financial situation. It’s extremely important to make sure one always has sufficient life insurance coverage until they have the time to accumulate assets to support their families later in life. More young folks need to get life insurance; middle-age clients need it if asset accumulation is behind schedule. 

While COVID-19 has greatly impacted our lives, we can certainly learn from it. Consider implementing these 4 lessons. We are certain to learn more lessons from COVID-19, but this is a good place to start!

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

HEROES CAMPAIGN: "MOTCC"

Contributed by: Center for Financial Planning, Inc.®

The Center’s Hero Campaign aims to spotlight local nonprofits amid the COVID-19 outbreak. Our goal is to raise awareness and support the community. This is our 3rd post in the Q+A series featuring the Michigan Opera Theatre Children’s Chorus (MOTCC).

What is your nonprofit?

Michigan Opera Theatre Children’s Chorus (MOTCC) is a world-class training program that provides exceptional choral music and theatrical performance instruction in a professional environment to young people. Each season, MOTCC produces two major performances on the Detroit Opera House stage: A Winter Fantasy, the annual December showcase concert, and a full-scale opera in the spring, which is performed solely by the children’s chorus. Frequently, opportunities arise for choristers to perform with the Michigan Opera Theatre (MOT) mainstage international singers, directors, and conductors too. Many of our MOTCC alumni have gone on to prestigious conservatories and universities majoring in vocal performance or musical theater. Some have already established distinguished careers in music. 

Who do you serve? 

MOTCC offers this unique training program to 80 boys and girls with unchanged voices ages 8-16 years old from the five southeast Michigan counties, as well as Windsor, Ontario. Through our concerts and opera performances, we serve audiences of all ages throughout lower Michigan. MOTCC opera has become an annual tradition and a popular field trip for teachers wishing to introduce children to opera and live theater. What makes this experience even more significant is that all the lead roles and chorus are sung by children. Each show attracts more than 2,000 students not only from southeast Michigan but many other cities within a 100-mile radius. 

How have the communities you serve been impacted by COVID-19? 

In mid-March 2020, all rehearsals and performances of the children’s chorus had to abruptly halt due to COVID-19. This meant that not only were the individual MOTCC members impacted by the cancellation, but also the audience members who were to attend our opera The Very Last Green Thing. MOTCC received grants for tickets and buses for under-served students to attend the children’s opera free of charge. The cancellation resulted in a missed opportunity for those children. 

How has your nonprofit been impacted by COVID-19? 

Due to forced closure and social distancing, MOTCC created a 30-minute virtual opera performance of The Very Last Green Thing and presented it on MOT’s and MOTCC’s Facebook pages and websites. This project gave our choristers an opportunity to use the musical training they gained through MOTCC and the ability to express themselves artistically in a different medium. Since it was a free performance, we were not able to make up lost revenue that we would have earned in a live performance. Additionally, we had to issue refunds to our ticket holders for the canceled staged version. Currently, we are unable to announce auditions, rehearsal schedules, or commit to any production for next season due to government guidelines for public health.

What can people and businesses do to support your organization and nonprofits generally during this unique environment?

Making a donation will help MOTCC’s ability to continue to offer our music education program. With social distancing and in consideration that singers are potentially “super spreaders” of COVID-19, MOTCC may not be able to offer in-person training unless precautions through government guidelines are met. Many of these guidelines will require additional funding to provide a safe environment for our singers and staff. If we cannot have in-person contact, we will need to adapt this program for digital student engagement and distribution. The curriculum will include more individual musical instruction from our directors, conductors, and voice and dramatic instructors and require more online platforms. Your donations will subsidize the cost of this adapted program to fit government requirements for safe program delivery and keep the cost of the tuition affordable. It also supports our scholarship fund and removes the barrier for low-income families so their children may participate with full-tuition scholarships. 

MOTCC’s goals are to provide unique educational opportunities that:

• Create high-quality opera and cultural arts experiences that are accessible, affordable, and engaging for schoolchildren

• Tap the children’s creativity and imagination

• Inspire the next generation of artists, and opera and cultural arts audiences.

We appreciate all your support in helping us reach our goals!

Click to view the virtual performance of The Very Last Green Thing

Read more blogs in this series:

1. Focus: HOPE

2. Beyond Basics

3. HAVEN

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The Michigan Opera Theater Children's Chorus (MOTCC) is not affiliated with or endorsed by Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

What You Need to Know About the RMDs Deadline Extension

Contributed by: Robert Ingram, CFP®

To combat the economic impact of COVID-19, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020.  The more than 2 trillion dollar stimulus package contained numerous provisions including an expansion of unemployment benefits, tax credit direct payments to qualified individuals, financial support to small businesses/healthcare facilities/state and local governments, and some changes to retirement account rules.  One of the provisions affecting retirement accounts was to suspend Required Minimum Distributions (RMDs) for 2020.  Individuals subject to RMDs for qualified retirement plans such as 401(k), 403(b) and IRA accounts are not required to take distributions this year (including beneficiaries owning inherited IRAs who were still subject to annual RMDs).

What does this suspension of RMDs mean for individuals who have already taken distributions prior to the CARES Act, but would not have if given the choice? If you have taken a distribution before March 27 is there a way to reverse or ‘undo’ the distribution?

Expanding The 60-Day Rollover Window For 2020

A retirement account owner that takes possession of a distribution from the account has 60 days from the date of withdrawal to complete a rollover into another eligible retirement account, for example, a rollover to an IRA.  Doing so excludes the distribution from income that could be subject to taxes and penalties.  This is referred to as the 60-day rollover rule; the IRS allows this one time per 12-month period. Please note that the one time per year rule does NOT apply to direct rollovers such a direct 401(k) rollover to an IRA.

Individuals who took a retirement account distribution prior to March 27 and were still within the 60 days since taking the distribution could have used the 60-day rollover rule to put their distribution back into their respective accounts, classifying it as a rollover.  However, this window was very limited.

In April, the IRS issued the first notice of guidance extending the 60-day rollover rule in 2020:

What qualified?

Distributions taken on or after February 1, 2020 could be rolled over into the retirement account.

When must the distribution be rolled over into the retirement account?

The later of

1. 60 days after receiving the distribution

2. July 15, 2020

This provided greater flexibility for individuals that had taken an RMD after January 31.  However, it still did not cover those that received an RMD in January.  Individuals that had already completed a once per year 60-day rollover within the last 12-months would also have been ineligible to use this rollover rule again to reverse their RMD.  In addition, this rollover window would not apply to non-spouse beneficiaries with inherited IRA accounts, since rollovers are not allowed for those accounts.

IRS Extends Rollover Deadline For All RMDs Made In 2020 To August 31st

In June, the IRS issued further guidance that essentially allows all RMDs that have been taken in 2020 to be repaid.  This IRS notice 2020-51 does the following:

• Rollover deadline has been extended to August 31, 2020 and covers RMDs taken any time in 2020.  This allows those who have taken RMDs as early as January to put the funds back into their retirement accounts by rolling over the funds if it is completed by August 31st.

• This rollover to reverse RMDs taken in 2020 does not count as part of the once per year 60-day rollover. This would allow individuals to use the rollover to prepay their RMDs regardless of whether they had already used a 60-day rollover within the last 12 months.

• Provides an exception allowing non-spouse beneficiaries to return RMDs to their Inherited IRAs in 2020.

A couple of points of note when considering repaying your RMDs taken this year

• The IRS notice 2020-51 only applies to distributions representing your Required Minimum Distribution amount.  Distributions other than your RMD amounts would be subject to the once per year 60-day rollover rule.

• If you had federal or state taxes withheld when you took your required minimum distribution, these amounts cannot be reversed and returned from the federal or state treasuries.  You could return your total gross RMD back to your retirement account, but it would have to be made out-of-pocket.  Any excess withholding would be resolved next year when you file your 2020 tax returns.

While reversing this year’s required minimum distributions may provide some great benefits such as potentially lowering your taxable income in 2020 or allowing for a Roth IRA conversion as an alternative, everyone’s financial situation and tax planning needs are unique.  For some folks, it could make sense to take RMDs if they expect higher income in the future that could fall in a higher tax bracket, for example.

Having a good conversation with your advisors can help you decide what is right for you.  As always, if you have any questions, please don’t hesitate to reach out!

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Conversions from IRA to Roth may be subject to its own five-year holding period. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

HEROES CAMPAIGN: “Beyond Basics”

Contributed by: Center for Financial Planning, Inc.®

The Center’s Hero Campaign aims to spotlight local nonprofits amid the COVID-19 outbreak. Our goal is to raise awareness and support the community. This is our 2nd post in the Q+A series featuring Beyond Basics.

What is your nonprofit?

Beyond Basics is a 501(c)(3) literacy nonprofit dedicated to one-on-one reading intervention and holistic literacy enrichment programs for students and families in Metro Detroit. Our proven methods have unlocked the miracle and power of reading and opened a whole new world and future to those who need it most. We developed this model by partnering with principals and schools in Detroit since 2002, to work with children who were farthest behind to get them reading at grade level. Our holistic literacy programming also engages mentors, art and writing to help students in vulnerable communities learn to read. This intervention has transformed thousands of lives.

Illiteracy is a silent epidemic, yet America's most solvable disability. It is a crisis because it has gone unaddressed for decades, leaving thousands of children attending school each day who can’t read. The good news is there is a solution. While low literacy levels can be found at all income levels and backgrounds, poor and minority students are more likely to be affected. Beyond Basics sets up our programming in the communities that need it most. 

Who do you serve? 

Students and adults in Metro Detroit —including Detroit, Pontiac, and Taylor. We serve students of all ages (from elementary through high school). We also have recently opened at Family Literacy Center in the Durfee Innovation Society to reach those in neighboring communities that need help with literacy.

How have the communities you serve been impacted by COVID-19? And how has it impacted your nonprofit?

The pandemic has closed schools (which is where we typically saw our students), as well as causing high levels of unemployment, illness, and deaths. The students have been subject to great change during these unprecedented times.

Our nonprofit has been impacted as well. We had to convert our tutoring system into an online platform quickly, so that we could reach our students. It was crucial for us to continue to deliver literacy intervention to the students that need it most.  

What can people and businesses do to support your organization and nonprofits generally during this unique environment?

You can support our organization, and other nonprofits, financially by funding our online tutoring program and families with financial hardship.  Donate here.

Read more blogs in this series:

1. Focus: HOPE

2. MOTCC

3. HAVEN

Second Quarter Investment Commentary 2020

Contributed by: Angela Palacios, CFP®, AIF®

As the economy slowly opened and our grocery store shelves were restocked, the second quarter became one of the best in decades.  Tailwinds such as government stimulus, positive trends in “flatting the curve”, economic reopening, good news on virus treatment, and hope of a vaccine gave investors the confidence they needed to flock back into stocks.  This comes in stark contrast to the first quarter with a dizzying correction for the S&P 500 down 34% in about one month.

Many are left wondering if this is too good to be true and there are several different and all very valid view points on this matter. 

How can equities be back to near-peak levels when we are still in a pandemic?

As indexes recovered much of what they lost in the first quarter, some investors are left scratching their heads wondering how this could be when businesses lost out on so much during the shutdown of the economy.  At first glance, this does seem to be strange.  There are several possible reasons this has occurred.

1. The hardest hit companies were small businesses not reflected in large indexes like the S&P 500.  When people couldn’t frequent their local small businesses for the goods they needed during the shutdown they turned to online shopping from big box places in droves.  So, what small businesses have lost, large businesses have gained (at least in the short term).

2. Government provided assistance in the form of forgivable debt to small businesses and issuing checks directly to individuals.  So, not only, were people stuck at home with nowhere to spend their income (other than fixed bills), but they were also given stimulus checks.  For many, this provided a much needed back stop to pay important bills like a mortgage or car payment.  However, the data also shows that much of this has been put away for a rainy day.  Check out the historical chart below of the M1 Money Stock (the amount of money held by individuals that is ready to spend. ie. currency and checking account deposits in the US).  We have never seen a spike of this magnitude.

As businesses have reopened, many goods and services are in high demand like automobiles and home improvement.  People are now spending the money they couldn’t spend while stuck at home and the market is pricing this into results that should be reflected in the next quarter’s earnings reports.

3. Lower interest rates mean home owners can refinance debt at lower interest rates, putting more money in their pockets and less in the bank’s pockets.  People can also buy new cars with 0% financing.  Lower interest rates also leave those seeking income on investments with very few places to turn other than equities to replace the loss in income.

What could cause the markets to head right back down?

I have this feeling that the economy is balancing on the edge of a knife right now.  The momentum is forward toward recovery but several risks could slow or undermine that momentum:

• A resurgence of the virus – COVID-19 alone isn’t the cause of a potential market pull back, but this does increase the probabilities of parts of the economy having to close for periods.  A good case in point is the recent closure of indoor bar service in parts of Michigan after several bar gatherings have been identified as sources of local spikes in cases.  I don’t think we will see widespread shut down of economies again but there will be pockets of this occurring.

• Expiration of supplemental unemployment benefits – If people are unable to go back to their jobs, or find new ones, the loss of the extra unemployment income at the end of July could be a significant hit to consumer confidence.  This means that the e-spending habits that are currently boosting the economy, could go away very quickly.  I view this as the largest risk to the recovery right now because unemployment is at 11.1% nationally with Michigan being one of the hardest-hit states for job loss.  As shown by the chart below, we have not experienced such widespread job loss in a recession in recent history.  The jobs data from the Bureau of Labor Statistics for June shows that we are adding a large number of jobs back so, for right now, we appear to be improving on this front.

• Governments failing to provide more stimulus if needed – How politics play out is always an unknown that cannot be predicted but if shutdowns become more widespread again, people will look to the government for more assistance.  If this isn’t provided we could see a swift correction.  I believe, if needed, we will see more stimulus in the future as the government has proven with it’s actions that it does stand ready to support the economy.

• How many small business will survive?  This is a question that only time will tell but the risk is high that many will not.  They represent a large employer in the economy so major closures will have a highly negative impact on employment numbers.

What are we doing in response?

The Investment Committee is discussing topics like “How to invest through periods of low to negative interest rates?” and “How do we best help clients achieve their financial goals when deficits and current valuations could be a long term anchor to portfolio returns?”  Our Jaclyn Jackson, CAP® recently wrote the blog How To Invest In Turbulent Markets where she articulates what we can control, representing a great summary of what we do behind the scenes for our clients. 

Not long ago the markets and the economy seemed to be in freefall, but we just had one of the best quarters ever for market returns.  It is important to remember that investors look at whether things are getting better or worse; this is a large driver of markets.  At the end of the first quarter, things were getting worse and investors had no idea where a bottom could be or how long we would be shut down.  Since then, much has improved, we have more knowledge on this virus and the economy continues to improve which explains why the markets are up (even though the magnitude may not make intuitive sense).  These vast swings in sentiment have created many opportunities for changes in portfolios.  If you ever have questions regarding the addressed topics and how it relates to your portfolio, please don’t hesitate to reach out to discuss.  We are here for you and thank you for your continued trust.

Angela Palacios, CFP®, AIF®

Partner & Director of Investments

Angela Palacios, CFP®, AIF®, is a partner and Director of Investments at Center for Financial Planning, Inc.® She chairs The Center Investment Committee and pens a quarterly Investment Commentary.

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Opinions are those of the author and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance doesn't guarantee future results. Investing involves risk regardless of the strategy selected The S&P 500 is an unmanaged index of 500 widely held stocks that's generally considered representative of the U.S. stock market. You cannot invest directly in any index.

HEROES CAMPAIGN: “Focus: HOPE”

Contributed by: Center for Financial Planning, Inc.®

The Center’s Hero Campaign aims to spotlight local nonprofits amid the COVID-19 outbreak. Our goal is to raise awareness and support the community. This is our 1st post in the Q+A series featuring Focus: HOPE.

What is your nonprofit & who do you serve? 

Focus: HOPE is a nationally renowned civil and human rights organization and a trusted member of the community for five decades. Founded in 1968 by Father William Cunningham and Eleanor Josaitis, Focus: HOPE provides an intergenerational, holistic mix of services to disrupt the effects of racism, poverty, and other forms of social injustice in southeast Michigan.

Early Learning

Focus: HOPE Early Learning aims to build a cradle to career pipeline of opportunity by providing quality early childhood education for newborn to five-year-olds through evidence-based models. More than 244 students and their families are educated and supported by our Early Learning programs.

Youth Development

Youth Development includes education, recreation, social justice, and leadership development activities for more than 250 students - including a 21st Century Community Learning Center, Excel Photography, summer camp, and Generation of Promise.

Workforce Development

With an extraordinary record of success in working with underserved and underrepresented adults in Southeast Michigan — having trained over 500 students in 2019 — we offer high-quality work readiness, pre-apprenticeship, and apprenticeship programs in a range of in-demand career fields.

Food Justice

Our Food Program provides 41,000+ low-income seniors with monthly food packages to assist with independence and healthy living while addressing basic needs. Our program also provides important infrastructure for health screenings, income support, and tax preparation for seniors and the community at large.

Advocacy, Equity & Community Empowerment

Focus: HOPE pursues leadership as an antiracism organization by advocating for systems change, and by integrating racial equity and community empowerment offerings across all program areas. Focus: HOPE serves as a one-stop hub providing financial coaching, free tax prep, utility payment assistance, on-campus DHHS access, health screenings, a clothing closet, peer support circles, and more.

How have the communities you serve been impacted by COVID-19? And how has it impacted your nonprofit?

Focus: HOPE was founded to unite the community at a critical time. We remain committed to living out our mission to overcome racism, poverty, and injustice – no matter what. Programming has evolved due to the crisis, but we’re still serving more than 42,000 community members every month. 

• Our Food for Seniors program has shifted to a contactless pickup system – staff place food boxes directly into seniors’ cars. We’re also making more home deliveries, so seniors can stay safe at home.

Early learning students are receiving virtual home visits to make sure they and their families are getting the support they need (including food and diapers), and teachers are sharing educational content students can work on at home. 

• Workforce development training has moved online too. Some classes have been able to transition to fully online instruction, and all students have access to e-learning resources and virtual support. 

Additionally, Focus: HOPE is committed to using our assets and abilities to support our community’s current needs. Special initiatives include: 

• Manufacturing face shields and masks through our 3D-printing capabilities

• Distributing cash payments to support local families’ economic stability

• Equipping our IT graduates to assist companies in adjusting to remote work

• Assisting community members navigating the unemployment process

What can people and businesses do to support your organization and nonprofits generally during this unique environment?

Even COVID-19 can’t stop our mission of intelligent and practical action to overcome racism, poverty, and injustice - and we’d be honored if you’d join us with your support.

Give

Donate to support our work with individuals and families throughout Southeast Michigan during this crisis. Give here.

Volunteer

There is a great need for volunteers to pack boxes and deliver food to seniors. We provide masks and gloves and strictly follow social distancing guidelines. Learn more and sign up here.

Start Your Fundraiser from Home!

Create a fundraising page to support our COVID-19 response efforts.

Read more blogs in this series:

1. Beyond Basics

2. MOTCC

3. HAVEN

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Raymond James is not affiliated with and does not endorse the opinions or services of Focus: HOPE. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

Michigan Auto Insurance Reform: What You Need To Know

Contributed by: Kali Hassinger, CFP®, CDFA®

As of July 2020, legislation has gone into effect that changed Michigan’s no-fault auto insurance law.  Residents now have the option to elect their preferred level of Personal Injury Protection (PIP).  Personal Injury Protection is the piece of your insurance that pays for expenses if you’re injured in an auto accident, such as medical costs and lost wages.  Michigan’s law was unique to other no-fault states because residents were required to maintain insurance that provides unlimited medical benefits and covers the lifetime of the injured person. This became cost prohibitive over time, and an average of 20% of Michigan drivers are uninsured.

The new legislation now provides 6 different choices when electing your PIP medical coverage.  Under the new limits, the amount shown below is what the insurance company will pay per person per accident.  A slight premium reduction can also be expected with each choice, because in conjunction with these options, each auto insurance company is required to reduce PIP medical premiums for the next eight years. This may sound promising, but the Personal Injury Protection portion of your insurance only accounts for a small percentage of your overall premium.

1. Unlimited Coverage – Although this is the same coverage as required in the past, drivers can expect an average PIP premium reduction of about 10%

2. Up to $500,000 in PIP coverage – Drivers can expect a 20% reduction in PIP premium costs

3. Up to $250,00 in PIP coverage - Drivers can expect a 35% reduction in PIP premium costs

4. Up to $250,000 in coverage with PIP medical exclusions – This option is available for those with non-Medicare health insurance that covers auto injuries

5. Up to $50,000 in PIP coverage – Drivers can expect a 45% reduction in the PIP portion of their overall premium, but this is only available to individuals covered by Medicaid. Family or household members are required to maintain other auto or health insurance that will cover auto accident injuries.

6. PIP Medical Opt-Out – This is only available to those enrolled in Medicare (Parts A and B). Family or household members are required to maintain other auto or health insurance that will cover auto accident injuries. Although this option may seem tempting for those covered by Medicare, remember that long term care costs are not covered, regardless of whether or not they are due to sustained injuries from an auto accident.

Liability is another piece to consider when making your election. Those who select anything but unlimited PIP coverage may need to consider additional liability coverage.  The default minimum bodily injury coverage is $250,000 per person and $500,000 per incident, but there is an option to elect lesser amounts. 

Although it can be easy to focus on the premium reduction when electing your PIP coverage, being sure that you’re appropriately covered is always most important.  If you fail to make a specific election, unlimited PIP protection will be selected as a default. This may not be a bad thing, as medical costs continue to rise and most do not understand exactly what their healthcare insurance would cover in the event of an auto accident.  In most cases, auto insurance is actually more comprehensive in terms of healthcare coverage when accidents occur.  Each person’s situation is unique, but in terms of liability and healthcare coverage, protecting yourself and your family is of utmost importance.

Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

A Checklist For Managing Finances After A Divorce

Contributed by: Jacki Roessler, CDFA®

As a divorce financial planner, my clients often ask what financial tasks should be addressed immediately and which ones can wait. Post-divorce life can feel overwhelming. To achieve long-term financial success, I recommend sorting your financial tasks into 3 categories: those that need immediate attention, those that can wait 3-6 months, and those that should be tabled until more time passes. Although each case is different, there are a few items that always seem to hover at the top of my “Do it now!” list.

Secure spousal support through life insurance

If you’re receiving child support or alimony payments, in most cases your divorce decree would state that your ex-spouse needs to maintain “adequate” term life insurance coverage to secure your interest. However, what most clients don’t understand is that the divorce decree is only binding on you and your ex-spouse. If he or she changes the beneficiary or stops paying the premiums, your child support and alimony could be at risk. Your ex-spouse might be in violation of the divorce decree, but that doesn’t matter much if they are no longer alive. There are steps to take to prevent that from happening. Ask your former spouse to make you the owner of the policy. Only the owner is notified when a premium payment is missed and only the owner can change the beneficiary. If your spouse doesn’t agree, contact the insurance carrier to see if they will copy you on quarterly or even monthly statements so you can take immediate legal action if needed.

Remove your ex-spouse as a beneficiary

Suppose that based on your agreement, your divorce decree says your ex-spouse won’t receive any share of your retirement accounts. Upon your death, if you forget to change your beneficiary designations, your ex-spouse will still receive your retirement account, regardless of what your divorce decree states. As noted in item 1 above, your divorce decree isn’t binding on third parties, such as insurance carriers and account custodians. It’s only binding on you and your ex-spouse. Rather than expose yourself or your heirs to estate litigation, confirm that you’ve changed your beneficiary designations on all retirement accounts.

Get your QDRO

The QDRO (Qualified Domestic Relations Order) is the only legal document that will transfer interest in a qualified (i.e. employer sponsored) retirement plan or pension between spouses pursuant to a divorce. The problem is that most couples wait several months (sometimes significantly longer) to get their QDRO drafted. Why does it matter? If your ex-spouse (the account owner) dies, remarries or retires prior to the plan administrator approving your QDRO, your awarded benefits could be severely diminished or even eliminated. Timing is critical.

Partner up with a qualified financial advisor

Last but certainly not least, I recommend that clients without investment or financial planning experience find an experienced and trustworthy advisor to work with going forward. There are multiple moving parts after the divorce is final. Clients need to open new accounts, transfer assets, obtain health insurance, make sure QDRO are in place, and design a new investment portfolio strategy. The transition process can seem daunting. Enlisting the aid of a financial advisor/advisory team that has experience working with post-divorce transitions can ease the pressure. That partnership will help you complete the “Do it now!” checklist.

Jacki Roessler, CDFA®, is a Divorce Planner at Center for Financial Planning, Inc.® and Branch Associate, Raymond James Financial Services. With more than 25 years of experience in the field, she is a recognized leader in the area of Divorce Financial Planning.

Should I worry if my 401k savings are down?

Contributed by: Robert Ingram, CFP®

It can be scary when financial markets are volatile and selloffs happen. Understandably, many are concerned about how COVID-19 will impact the economy, our health, and our financial security. These fears and the volatile markets that follow can temp retirement savers to make drastic changes to their investment portfolios; some may even cease investing entirely. For example, if you watch your 401(k) continue to lose value, you may want to stop contributing. However, I’ll explain why you should stick with your current long-term savings and investment plan.

Why Its Beneficial to Keep Contributing

Contributing to a retirement plan like a 401(k) or 403(b) is still one of the best ways for most Americans to save and build wealth for retirement, particularly in times of economic uncertainty. 

• Tax Benefits 

  Contributions to most 401(k) plans are made pre-tax, meaning these amounts are excluded from your taxable income in the year they are made. This reduces your current income taxes. It also allows those savings to grow tax-deferred year-after-year until they are withdrawn.

  Employer plans that offer a Roth designated account (i.e. a Roth 401(k) or Roth 403(b)) can present a great opportunity for investing. Roth contributions are made after-tax, so those amounts do not reduce your taxable income like the 401(k) does. However, those savings grow tax-deferred. The withdrawals and earnings are tax-exempt, provided you are at least age 59 ½ and have held the account for at least 5 years. This tax-free growth can be a powerful tool, especially for individuals that may be in a higher income tax bracket in the future.

• Opportunity To Buy Low

  For investors that are still contributing to their plans, a downturn in markets actually presents an opportunity to invest new savings into funds at lower prices. This allows the same amount of contributions to buy more shares. As markets and economic conditions rebound, you will have accumulated more shares of investments that could grow in value.

• Matching Contributions

  Need another incentive to keep those contributions going? Don’t forget about opportunities to receive employer matching with retirement plans. If your employer offers a 401(k) match, you would receive additional savings on top of your own contributions. Let’s say your employer matches 50% on contributions you make up to 6% of your salary. By putting 6% of your income into your 401(k), your employer would contribute an extra 3%. That’s like earning a 50% return on your invested contributions immediately. Those extra contributions can then buy additional shares which can also compound over time. 

Should I Ever Consider Stopping Contributions?

Even in a booming economy and during the strongest bull market, it’s important to have a strong financial foundation in place before deciding to invest over the long-term. Having key elements of your day-day-finances as stable as possible is necessary as we navigate the incredible challenges created by COVID-19. A few examples include:

• Control Over Your Cash Flow

  Do you know exactly how much money you earn and spend? Understanding where your income exceeds your expenses gives you the fuel to power your savings. How secure is your employment? Are you in an industry directly or indirectly impacted by the economic shutdowns due to COVID-19? What would happen to your cash flow if you had a reduced income? If there are other expenses you could cut in order to maintain your contributions, you should still try to contribute. However, if you need every dollar possible to pay your bills, you would have no choice but to suspend your 401(k) contributions.

• Cash For Any Short-Term Needs

  Having cash reserves is a critical part of a sound financial plan. If an unexpected expense occurs or you had a loss of income, be sure to have cash savings to draw from rather than being forced to sell investments that may less valuable or to use credit cards with high-interest debt. If your savings is less than a month’s worth of normal expenses, you should consider focusing your efforts on reinforcing your cash reserve rather than on your retirement plan. Then, ideally, you should work towards building 3 to 6 months’ expenses for your emergency fund as you continue to save for retirement or other goals.

• Tackling Your Debt

  If you have high-interest rate debt that you are working to pay off and are unable to find additional savings in your budget to increase your payment amounts, it could make sense to redirect your retirement plan contributions to pay the debt down first. On the other hand, if your employer offers a company match, you should still consider contributing at least enough to get the full amount of matching dollars (remember that free money could see a return of 50% or more). You could then redirect any amounts you are contributing above that maximum match percentage.

Your situation and needs are unique to you. It’s important to work closely with a financial advisor when making decisions, especially in these incredibly difficult times.

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

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Keep in mind that investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results.