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The CARES Act is a comprehensive bill with several provisions designed to help provide financial support and assistance as we navigate through this challenging environment—including sending out stimulus checks to many Americans. Many are already receiving their payments and we want to help you figure out what this means for you. By prioritizing your needs, you can map out a plan that sets you up for success.
We recommend you consider prioritizing this payment as follows:
1. Address your immediate expenses
If you’re struggling with current expenses, prioritize necessary expenses that you can’t obtain assistance with from public or private programs. You may have additional options to reduce current expenses, such as:
2. Add to your emergency fund and cash reserves for ongoing expenses
Emergency fund – We generally recommend you keep three to six months’ worth of expenses in cash as an emergency fund. You may want to focus more toward the longer side given today’s uncertain environment, using the payment to bolster your emergency fund for additional security later.
Cash reserves – If you’re retired, we recommend having 12 months’ worth of income needs from your portfolio in cash and up to five years in short-term fixed income to provide for your ongoing living expenses. This payment could be used to supplement these cash reserves.
3. Apply to other goals (including reducing debt)
If you have adequate emergency savings/cash and are financially stable, investing the money for retirement, education or other financial goals may be beneficial as the recent market decline could provide an opportunity.
You can also consider reducing debt, starting with high-interest, nondeductible debt, such as credit cards.
4. Apply to charitable contributions
You could consider supporting a charity or organization, as charities may be struggling at this time. The CARES Act also has provisions for making charitable contributions, such as a $300 above-the-line deduction for those who don’t itemize, as well as suspending the 60% of AGI (adjusted gross income) limit for cash gifts made in 2020 for those who itemize charitable contributions.
These charitable benefits from CARES do not apply to contributions made to 509(a)3 supporting organizations or to donor-advised funds.
We're in this together. There are many other provisions within the CARES Act that may help you depending on your specific situation. We know planning for retirement may not be your first concern when facing financial difficulty. But, as your partner, we can help you navigate the above considerations and their possible impacts on your long-term goals and what steps, if any, can help provide for your current needs while keeping you on track for your goals in the future.
If you are already in retirement, we can help you prioritize these and other aspects of the CARES Act to expand or adjust your plan for achieving your financial goals.
Want to talk? Find a financial advisor near you and schedule a virtual meeting today.
These materials are for general education only, and any specific questions related to your individual circumstances should be discussed with your personal financial, tax or legal advisor, as appropriate.
Edward Jones has not independently verified and is not responsible for third-party content.