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Michael Christodoulou

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

The COVID-19 pandemic may end up changing our lives in some significant ways. To cite one example, it’s likely we’ll see a lot more people continue to work remotely, now that they’ve seen the effectiveness of tools such as videoconferencing. Education, too, may be forever changed in some ways. Perhaps just as important, though, is how many people may now think more about the future – including how they invest.

If you work with a financial professional, you may have connected with this individual over the past several months through a videoconferencing platform, rather than in person. Some people like this arrangement because it offers more scheduling flexibility and eliminates the time and effort of traveling to and from an appointment. Others, however, still prefer face-to-face contact and look forward to when such arrangements will again be practical and safe for everyone involved. But if you’re in the first group – that is, you prefer videoconferencing – you may now wish to use this communication method in the future, at least some of the time.

But beyond the physical aspects of your investing experience, you may now be looking at some changes in your investment strategy brought on, or at least suggested, by your reactions to the pandemic.

For example, many people – especially, but not exclusively, those whose employment was affected by the pandemic – found that they were coming up short in the area of liquidity. They didn’t have enough easily accessible savings to provide them with the cash they needed to meet their expenses until their employment situations stabilized. Consequently, some individuals were forced to dip into their long-term investments, such as their 401(k)s and IRAs. Generally speaking, this type of move is not ideal – these accounts are designed for retirement, so, the more you tap into them early, the less you’ll have available when you do retire. Furthermore, your withdrawals will likely be taxable, and, depending on your age, may also be subject to penalties.

If you were affected by this liquidity crunch, you can take steps now to avoid its recurrence. Your best move may be to build an emergency fund containing three to six months’ worth of living expenses, with the funds held in a separate, highly accessible account of cash or cash equivalents. Of course, given your regular expenses, it may take some time to build such an amount, but if you can commit yourself to putting away a certain amount of money each month, you will make progress. Even having a few hundred dollars in an emergency fund can help create more financial stability.

Apart from this new appreciation for short-term liquidity, though, the foundation for your overall financial future should remain essentially the same. In addition to building your emergency fund, you should still contribute what you can afford to your IRA, 401(k) and other retirement plans. If you have children you want to send to college, you might still explore college-funding vehicles such as a 529 plan. Higher education will still be expensive, even with an expansion in online learning programs.

Post-pandemic life may contain some differences, along with many similarities to life before. But it will always be a smart move to create a long-term financial strategy tailored to your individual needs, goals and risk tolerance.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS®

Financial Advisor from the STONY BROOK EDWARD JONES

Edward Jones. Member SIPC.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Sadly, identity theft happens throughout the year – but some identity thieves are particularly active during tax-filing season. How can you protect yourself?

One of the most important moves you can make is to be suspicious of requests by people or entities claiming to be from the Internal Revenue Service. You may receive phone calls, texts and emails, but these types of communication are often just “phishing” scams with one goal in mind: to capture your personal information. These phishers can be quite clever, sending emails that appear to contain the IRS logo or making calls that may even seem to be coming from the IRS.

Don’t open any links or attachments to the emails and don’t answer the calls – and don’t be alarmed if the caller leaves a vaguely threatening voicemail, either asking for personal information, such as your Social Security number, or informing you of some debts you supposedly owe to the IRS that must be taken care of “immediately.”

In reality, the IRS will not initiate contact with you by phone, email, text message or social media to request personal or financial information, or to inquire about issues pertaining to your tax returns. Instead, the agency will first send you a letter. And if you’re unsure of the legitimacy of such a letter, contact the IRS directly at 800-829-1040.

Of course, not all scam artists are fake IRS representatives – some will pass themselves off as tax preparers. Fortunately, most tax preparers are honest, but it’s not too hard to find the dishonest ones who might ask you to sign a blank return, promise you a big refund before looking at your records or try to charge a fee based on the percentage of your return. Legitimate tax preparers will make no grand promises and will explain their fees upfront. Before hiring someone to do your taxes, find out their qualifications. The IRS provides some valuable tips for choosing a reputable tax preparer, but you can also ask your friends and relatives for referrals.

Another tax scam to watch out for is the fraudulent tax return – that is, someone filing a return in your name. To do so, a scammer would need your name, birthdate and Social Security number. If you’re already providing two of these pieces of information – your name and birthdate on social media, and you also include your birthplace – you could be making it easier for scam artists to somehow get the third. It’s a good idea to check your privacy settings and limit what you’re sharing publicly. You might also want to use a nickname and omit your last name, birthday and birthplace.

To learn more about tax scams, visit the IRS website (irs.gov) and search for the “Taxpayer Guide to Identity Theft.” This document describes some signs of identity theft and provides tips for what to do if you are victimized.

It’s unfortunate that identity theft exists, but by taking the proper precautions, you can help insulate yourself from this threat, even when tax season is over.

Michael Christodoulou, ChFC®, AAMS®CRPC®, CRPS®

Financial Advisor from the STONY BROOK EDWARD JONES

Edward Jones. Member SIPC.

Photo from Pixabay

By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

We’re now well into what’s known as “Tax Season.” If your income in 2020 was affected by the COVID-19 pandemic, your tax return will reflect it. However, if your earnings were fairly normal last year, you might look at your tax situation and wonder how you could improve it in 2022. One area to look at may be your investment-related taxes.

To help control these taxes, consider these moves:

  • Take full advantage of tax-deferred investments. As an investor, one of the best moves you can make is to consider contributing as much as you can afford to your tax-deferred accounts – your traditional IRA and 401(k) or similar employer-sponsored plan – every year. If you
  • Look for tax-free opportunities. Interest from municipal bonds typically is exempt from federal income tax, and, in some cases, from state and local income tax, too. (Some municipal bonds, however, may be subject to the alternative minimum tax.) And if you qualify to contribute to a Roth IRA – eligibility is generally based on income – your earnings can be withdrawn tax-free, provided you’ve had your account for at least five years, and you don’t start taking withdrawals until you’re at least 59-1/2. Your employer may also offer a Roth 401(k), which can provide tax-free withdrawals. Keep in mind, though, that you contribute after-tax dollars to a Roth IRA and 401(k), unlike a traditional IRA and 401(k), in which your contributions are made with pre-tax dollars.
  • Be a “buy and hold” investor. Your 401(k) and IRA are designed to be long-term investments, and you may face disincentives in the form of taxes and penalties if you tap into them before you reach 59 ½.  So, just by investing in these retirement accounts, you are essentially pursuing a “buy and hold” strategy. But you can follow this same strategy for investments held outside your IRA and 401(k). You can own some investments – stocks in particular – for decades without paying taxes on gains. And when you do sell them, you’ll only be taxed at the long-term capital gains rate, which may well be less than your ordinary income tax rate. But if you’re frequently buying and selling investments you’ve held for one year or less, you could rack up some pretty big tax bills, because you’ll likely be taxed at your ordinary income tax rate.
  • Be prepared for unexpected taxes. Mutual fund managers are generally free to make whatever trades they choose. And when they do sell some investments, they can incur capital gains, which may be passed along to you. If this is a concern, you might look for funds that do less trading and bill themselves as tax efficient.

While taxes are one factor to consider when you invest, they should probably not be the driving force. You need to build a diversified portfolio that’s appropriate for your risk tolerance and time horizon. Not all the investments you select, and the moves you make with them, will necessarily be the most tax efficient, but by working with your financial and tax professionals, you can make choices that can help you move toward your long-term goals.

This article was written by Edward Jones for use by Michael Christodoulou, ChFC®,AAMS®,CRPC®,CRPS® of the Stony Brook Edward Jones.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

During the COVID-19 pandemic, many of us have been forced to work from home. But once we’ve moved past the virus, many workers may continue working from home. More than one-third of companies with employees who started working from home now think that remote work will stay more common post-pandemic, according to a Harvard Business School study. This shift to at-home work can affect people’s lives in many ways – and it may end up providing workers with some long-term financial advantages.

If you’re one of those who will continue working remotely, either full time or at least a few days a week, how might you benefit? Here are a few possibilities:

  • Reduced transportation costs – Over time, you can spend a lot of money commuting to and from work. The average commuter spends $2,000 to $5,000 per year on transportation costs, including gas, car maintenance, public transportation and other expenses, depending on where they live, according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. If you are going to work primarily from home, you should be able to greatly reduce these costs.
  • Potentially lower car insurance premiums – Your auto insurance premiums are partially based on how many miles you drive each year. So, if you were to significantly reduce these miles by working from home, you might qualify for lower rates.
  • Lower expenditures on lunches – If you typically eat lunch in restaurants or get takeout while at work, you could easily be spending $50 or more per week – even more if you regularly get coffee drinks to go. By these figures, you could end up spending around $3,000 a year. Think how much you could reduce this bill by eating lunch at home during your remote workday.
  • Lower clothing costs – Despite the rise in “casual dress” days, plenty of workers still need to maintain appropriate office attire. By working from home, you can “dress down,” reducing your clothing costs and dry-cleaning bills.

As you can see, it may be possible for you to save quite a bit of money by working from home. How can you use your savings to help meet your long-term financial goals, such as achieving a comfortable retirement?

For one thing, you could boost your investments. Let’s suppose that you can save $2,500 each year by working remotely. If you were to invest this amount in a tax-deferred account, such as an IRA or your 401(k) or similar employer-sponsored plan and earned a hypothetical 6% annual return for 20 years, you’d accumulate more than $97,000 – and if you kept going for an additional 10 years, you’d have nearly $210,000. You’d eventually pay taxes on the amount you withdrew from these accounts (and withdrawals prior to age 59½ may be subject to a 10% IRS penalty), but you’d still end up pretty far ahead of where you’d be otherwise.)

You also might use part of your savings generated by remote work to help build an emergency fund containing a few months’ worth of living expenses. Without this fund, you might be forced to dip into your retirement accounts to pay for something like a major home repair.

Becoming an at-home worker will no doubt require some adjustments on your part – but, in strictly financial terms, it could lead to some positive results.

This article was written by Edward Jones for use by Michael Christodoulou, ChFC®,AAMS®,CRPC®,CRPS® of the Stony Brook Edward Jones.

Edward Jones, Member SIPC

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Many of us probably felt that 2020 lasted a very long time. But now that 2021 is upon us, we can make a fresh start – and one way to do that is to make some New Year’s resolutions. Of course, you can make these resolutions for all parts of your life – physical, emotional, intellectual – but have you ever considered some financial resolutions?

Here are a few such resolutions to consider:

  • Don’t overreact to events. When the coronavirus pandemic hit in mid-February, the financial markets took a big hit. Many people, convinced that we were in for a prolonged slump, decided to take a “time out” and headed to the investment sidelines. But it didn’t take long for the markets to rally, rewarding those patient investors who stayed the course. Nothing is a certainty in the investment world, but the events of 2020 followed a familiar historical pattern: major crisis followed by market drop followed by strong recovery. The lesson for investors? Don’t overreact to today’s news – because tomorrow may look quite different.
  • Be prepared. At the beginning of 2020, nobody was anticipating a worldwide pandemic and its terrible consequences, both to individuals’ health and to their economic well-being. None of us can foretell the future, either, but we can be prepared, and one way to do so is by building an emergency fund. Ideally, such a fund should be kept in liquid, low-risk vehicles and contain at least six months’ worth of living expenses.
  • Focus on moves you can control. In response to pandemic-related economic pressures, some employers cut their matching contributions to 401(k) plans in 2020. Will some future event cause another such reduction? No one knows – and even if it happens, there’s probably nothing you can do about it. Instead of worrying about things you can’t control, focus on those you can. When it comes to your 401(k) or similar employer-sponsored retirement plan, put in as much as you can afford this year, and if your salary goes up, increase your contribution.
  • Recognize your ability to build savings. During the pandemic, the personal savings rate shot up, hitting a record of 33% in April, according to the U.S. Bureau of Economy Analysis. It fell over the next several months, but still remained about twice as high as the rate of the past few years. Of course, much of this surge in Americans’ proclivity to save money was due to our lack of options for spending it, as the coronavirus caused either complete or partial shutdowns in physical retail establishments, as well as dining and entertainment venues. But if you did manage to boost your own personal savings when your spending was constrained, is it possible to remain a good saver when restrictions are lifted? Probably. And the greater your savings, the greater your financial freedoms – including the freedom to invest and freedom from excessive debt. When we reach a post-pandemic world, see if you can continue saving more than you did in previous years – and use your savings wisely.

These aren’t the only financial resolutions you can make – but following them may help you develop habits that could benefit you in 2021 and beyond.

This article was written by Edward Jones for use by Michael Christodoulou, ChFC®,AAMS®,CRPC®,CRPS® of the Stony Brook Edward Jones.

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By Leah Chiappino

One of the most trying aspects of COVID-19 is the financial turmoil it has brought on both national and local business sectors. Financial adviser Michael Christodoulou of Edward Jones Investments in Stony Brook answered some commonly asked questions about how to secure investments and resources for small businesses, and the types of financial assistance offered through the recent stimulus package.

Q: What is your advice for people, especially those that are retired or nearing retirement, regarding their stocks and 401(k) plans?

A: For one thing, ask yourself this: When do you really need the money from your investment accounts, such as your IRA and your 401(k) or similar employer-sponsored plan? These are retirement accounts, so, depending on your age, you may not need to tap into them for 20, 30 or even 40 years. If so, your losses may be “paper” ones only for now and aren’t subjecting you to imminent financial jeopardy. This isn’t to minimize the effect this downturn will have on you, of course — it always takes time to recover lost ground, and there are no guarantees with investing. However, although past performance does not guarantee future results, it is useful to note that, over its long history, the U.S. stock market has typically trended in one direction — up — despite serious and sometimes lengthy declines such as we saw in the Great Depression and, to a lesser extent, the bursting of the dot.com bubble of the early 2000s and the financial crisis of 2008-09.

Nonetheless, you may have shorter-term goals — a wedding, down payment on a home, overseas trip, etc. — for which you need to save. For these goals, though, you wouldn’t want to touch your IRA or 401(k), anyway, as you’d likely face taxes and penalties. Instead, you’ll want your money invested in liquid, low-risk accounts that will be minimally affected, if at all, by declines in the financial markets. These vehicles might include Certificates of Deposit (CDs), money market accounts and even good old-fashioned U.S. savings bonds, all of which offer the protection of principal and can pay higher rates than traditional bank savings accounts.

Q: Should people stop contributing to retirement during this time?

A: Every investor has a different time horizon and risk tolerance. Depending on their time horizon and risk tolerance there may be a number of different recommendations.

For example, if a client has a longer-time horizon until retirement it may make sense to continue investing periodically in their retirement plan. But for someone who is looking to retire relatively soon, they might want to stop contributions or start saving those assets in low-risk accounts.

I highly recommend they work with their financial adviser in order to have a personalized strategy designed based on their goals for retirement.

Q: How would you advise small businesses go about applying for governmental assistance, especially through the federal stimulus bill?

A: Small businesses should work with their tax professionals/CPA and financial adviser in order to review their individual situation. I recommend they start by logging onto www.sba.gov/disaster. During this time, they should also be very cautious about scams. 

Q: The economic effects of this virus are already enormous, and will get exponentially worse. How do you think people can financially cope if this crisis continues?

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) offers help for investors and small businesses. As we go through the coronavirus crisis, we are all, first and foremost, concerned about the health of our loved ones and communities. But the economic implications of the virus have also weighed heavily on our minds. However, if you’re an investor or a business owner, you just got some help from Washington, and it could make a big difference, at least in the short term, for your financial future. Specifically, the passage of the $2 trillion CARES Act offers, among other provisions, the following:

  • Expanded unemployment benefits: The CARES Act provides $250 billion for extended unemployment insurance, expands eligibility and provides workers with an additional $600 per week for four months, in addition to what state programs pay. The package will also cover the self-employed, independent contractors and “gig economy” workers. Obviously, if your employment has been affected, these benefits can be a lifeline. Furthermore, the benefits could help you avoid liquidating some long-term investments you’ve earmarked for retirement just to meet your daily cash flow needs.
  • Direct payments: Individuals will receive a one-time payment of up to $1,200, although this amount is reduced for incomes over $75,000 and eliminated altogether at $99,000. Joint filers will receive up to $2,400, which will be reduced for incomes over $150,000 and eliminated at $198,000 for joint filers with no children. Plus, taxpayers with children will receive an extra $500 for each dependent child under the age of 17. If you don’t need this money for an immediate need, you might consider putting it into a low-risk, liquid account as part of an emergency fund.
  • No penalty on early withdrawals: Typically, you’d have to pay a 10 percent penalty on early withdrawals from IRAs, 401(k)s and similar retirement accounts. Under the CARES Act, this penalty will be waived for individuals who qualify for COVID-19 relief and/or in plans that allow COVID-19 distributions. Withdrawals will still be taxable, but the taxes can be spread out over three years. Still, you might want to avoid taking early withdrawals, as you’ll want to keep your retirement accounts intact as long as possible.
  • Suspension of required withdrawals: Once you turn 72, you’ll be required to take withdrawals from your traditional IRA and 401(k). The CARES Act waives these required minimum distributions for 2020. If you’re in this age group, but you don’t need the money, you can let your retirement accounts continue growing on a tax-deferred basis.
  • Increase of retirement plan loan limit: Retirement plan investors who qualify for COVID-19 relief can now borrow up to $100,000 from their accounts, up from $50,000, provided their plan allows loans. We recommend that you explore other options, such as the direct payments, to bridge the gap on current expenses and if you choose to take a plan loan work with your financial adviser to develop strategies to pay back these funds over time to reduce any long-term impact to your retirement goals.
  • Small business loans: The CARES Act provides $349 billion to help small businesses — those with fewer than 500 employees — retain workers and avoid closing up shop. A significant part of this small business relief is the Paycheck Protection Program. This initiative provides federally guaranteed loans to small businesses who maintain payroll during this emergency. Significantly, these loans may be forgiven if borrowers use the loans for payroll and other essential business expenses, such as mortgage interest, rent and utilities, and maintain their payroll during the crisis. Please visit sba.gov/disaster for more information.

We’ll be in a challenging economic environment for some time, but the CARES Act should give us a positive jolt — and brighten our outlook.

Q: Do you have any information on how residents will know the exact number on their stimulus check for those above the $75,000 income threshold?

A: I would advise individuals to contact their tax professional/CPA. They will be able to give more accurate guidance based on their clients’ taxable situation and possible qualifications for the CARES Act direct payment program.

Q: What is your advice for those that have recently lost jobs and need to prioritize their loans? How can people cut back, and are there any specific loans that should be paid over others?

A: In the unfortunate event that you or a family member loses your job there are some easy steps to follow to help you better prepare yourself for this event. The federal government has taken a big step in protecting renters by issuing a 120-day moratorium on evictions from federally subsidized housing and property with federally backed mortgage loans. Some states have barred evictions for a few weeks. Please check with your landlord and or mortgage company.

Q: With stocks dipping, is now a good time to buy?

A: Before investing we recommend that investors understand their time horizon with the asset they are thinking about investing. What will that money be used for in the future? At what point in the future will you need the money?

For investors with a long-term outlook and time horizon, we remain confident that a rebound will take shape. It may take a while longer to materialize, but we think it will be robust and fueled by a return of confidence in the post-virus outlook. Long-term investors don’t need to capitalize on the pullback all at once but should consider opportunities to benefit from this decline. Consider:

  1. Rebalancing: Trimming overweight allocations and filling gaps in underrepresented asset classes and sectors.
  2. Systematic investing: Taking advantage of the ongoing volatility by systematically investing at regular intervals, reducing the “timing” aspect as the selloff plays out.
  3. Look for good buying opportunities, because they are certainly out there. A well-managed company with a solid business plan that produces quality products and services is going to be that same company after the coronavirus and oil price panics subside and, right now, that company’s stock shares may literally be “on sale.”

We recommend you consult with a financial adviser in order to make sure you completely understand your level of risk and time horizon.

Q: Do you have any recommendations for a set amount people should have in savings in case of an emergency? What is the best way to do so?

A:  I believe everyone should have an emergency fund. Unfortunately, there isn’t a universal dollar amount that applies for everyone.

If you don’t already have an emergency fund, take these first steps to prepare:

  1. Detail your current financial situation including your income, expenses, assets and debts and any money previously set aside for unexpected expenses.
  2. Create a detailed budget in order to figure out what your monthly and annual living expenses add up to.
  3. Consider saving between three and six months of living expenses if you are still working; 12 months or more if you are retired.

This is just a starting point. Depending on your age, your list may look considerably different. Your financial adviser can help you put together your cash flow analysis related to your financial goals and help you calculate how much cash you may need for your next unexpected event.

Q: How do you think people should go about negotiating with credit card companies and banks if they need relief?

A: If someone is facing some financial hardship, they should contact their credit card company or bank directly. In most cases these companies can provide guidance and options so the individual understands their options and can make a decision based on all the information provided to them.