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VIDEO: Virus Relief for Railroaders

Video Budgeting Financial Planning Emergency Fund


Transcript:

Welcome everyone to the Highball Advisors Railroad Retirement Whiteboard. My name is John McNamara of Highball Visors. Today, what I want to talk about is, maybe if you see this video in six months, it'll seem kind of irrelevant, but we're just going to talk about the options for relief that railroaders can get with the virus going on, ravaging through the country and in the world.

The US government has come up with some relief mechanisms to help you guys get through these next three, four months, however long it's going to be. A lot of them are geared towards businesses and small businesses, but I thought as individuals, as railroaders and railroad retirees, I'll just talk about the ones that are going to affect you. Let's get started over here.

The first few will be about cashflow, right? We want to manage our cash, probably some of you might be getting laid off or just watching our money. The government is going to do direct checks to all taxpayers who meet certain income requirements, so adjusted gross income. If you're single, 75,000 and below, okay, there will be a $1,200 check coming to you probably in the next few weeks, three weeks. Married, filing jointly, up to $150,000, that would be $2,400.

Then, each child in that family, if you're married and have a child, would be an additional $500 for children under 17. Important to note if you have college students that are home that are on your dime, you're not going to get a $500 tax deduction there, so just to let you know about that. It's under 17, okay? That's direct cash payment from the government to you with the thought of, okay, this will help hold you over as we all stay at home sheltering in place.

The other one here is disruptions in employment. They added to with the, where is it here, with the Families First Coronavirus Response Act, if you have fewer than 500 employees, you can have 10 days of sick leave with either paid or partial paid. Then, they actually extended it to 50 days, up to 50 days of partially paid family leave for workers caring for children and daycare closures. That's if you have a child, you're probably home taking care of them for the most part, so there's that extension to them.

Then, also, for those who unfortunately are unemployed, you can get your regular state benefits from your weekly state benefits, but they'll top up each week an additional $600 a week in benefits and that will go to the end of June. You have these two here as far as cash payments, the $600 in here also if you're unemployed. Also, going back to the direct checks, it's 2018, 2019 taxes had to be filed. Just a little note, if you had a good year, 2019, it's going to bump you above here, wait until the checks come and go off your 2018 so just a little note there.

Let's continue on here. Student loans. As somebody with daughters who pay student loans, this, I thought, was interesting for some of you railroaders still paying off student loans. You get a 60 day waiver on the Federal loans and actually a pause on the Federal loans all the way out to September 30th, so that's a good deal. You don't have to make those monthly payments for the student loans out to November 30th. Also, parents, some of you parents have taken out loans to pay for your children to go to college, if they're Federal loans, I think the Parent PLUS loan, you can go all the way out to September 30th. That will be good to kind of, once again, conserve some cash.

Also, this is interesting one here, I don't know, maybe some of you can bring it up with your employers, is the employer can make a contribution to you, let's say, a benefit of $5,250 tax free in 2020. That'll go right to your student loan tax free, so that's not income to you. They make that benefit to you, right? You're not paying any taxes on it. It goes right to the loan. That's a one time only and maybe that's what we're seeing in the future. I wouldn't be surprised if something like this goes away, kind of that 401k education, 401k type thing to kind of try to bring down some of these people's student loans. We'll keep an eye on that, but I think that's a trial.

Then, we look at retirement accounts. Obviously not a big fan of tapping those retirement accounts, but sometimes they might be necessary. They waive the 10% penalty up to $100,000, so what is the 10% penalty, right? If you take out money out of retirement account before, I think, 59 and a half, there's going to be a 10% penalty in addition to the ordinary income tax you would have to pay on the tax deferred retirement account. The good point on that though is that you can take that income over three years. Let's say, if you take, "Oh, I'm going to need $50,000 to tide me over for rest of the year," you can take that over. That will be $50,000 of income tax in 2020, you can split it up three ways. You can do 20,000 this year, 20,000 in '21, and 10,000 in '22, something along that line. Three years, so that's interesting. Once again, if you need it, that's also there.

Then, also on your 401k, the loans increased up to 100,000, from 50,000 up to 100,000. That's also there. Also, this is ripcord stuff. If it's an emergency, pull it before you tap those retirement accounts. Let's continue on, retirees, railroad retirees, you guys pay income, you're also eligible for direct checks. Some of you will have those required minimum distributions. There are none in... You don't have to take that in 2020, you can just let that sit there. If you actually took it before this came out, you could do a rollover back. You have 60 days to roll it back into your IRA, so that's something to do there.

Then, as far as taxes, finally on the tax planning, it's got extended out to July 15th to do your taxes. What that also does is those IRA contributions, traditional IRAs, Roth IRAs, that also gets extended out to July 15th, that's for the 2019 contributions. You have quite a few more months there to think about that. I'm a big fan of always taking when you could pay less taxes. If you can, between now and July 15th, scrounge up some money to fund those retirement accounts, please do. It's a great deal.

I wanted to get this out. I know some of you are struggling, and I think the government did the right thing. They're stepping up, trying to help everybody out as they shelter everybody in place. We all understand that and we're all making big sacrifices for sure. Anyway, if you have any questions, please reach out to me. I'll try and help you in these trying times, no problem. Also, check out my YouTube channel, subscribe to that, I'll be putting up some more videos along that line. In the meantime, everyone, as I always end, seems more relevant now than ever, please stay safe, stay on track and take care. So long everybody, bye.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved.from Highball Advisors, and all rights are reserved.