While the title may take you back to the classic rock era and create a sense of nostalgia and fond memories of how things used to be, the reality is that life as we know it has changed. Yes, we said it. Each day, we see and feel the effects the current pandemic has on our lives. Things we never before had to think about are our new normal. We now ask ourselves, “Did I remember my mask to wear to the grocery store?” or “Did I review my child’s lesson plan before they attend class via Zoom?” One thing that is certain: 2020 is a year that most of us did not expect.

A natural byproduct of this is the literal pause in many areas of our lives. Some of these hiatuses are dictated by the restrictions in effect, and others are borne out of fear of the unknown or a desire to wait for things to “return to normal.” But something that has not changed, or could be more important than ever, is the need to navigate the current financial landscape.

My friends, we are afraid we may be watching opportunity pass us by if we wait for things to get back to where we were. It is commonly accepted that the reopening of society will not take us back to where we were as we welcomed 2020. Social distancing will remain the norm, and we will all have to adapt to how we manage our daily lives.

A good example of this can be found in something as simple as checking the mail. Previously, if someone in our office was away for a couple of days, there was a healthy pile of unopened mail to greet them. However, when they were away potentially for a week or more, there was relatively little. When we pondered the lack of logic in this outcome, we were struck with a realization — when the rest of the team knew the employee would return soon, it was acceptable to delay action, so the mail piled up. But when the team knew it was a longer trip, they knew items had to be completed to not delay or miss an opportunity. Indeed, with today’s news changing not only daily, but almost hourly, these are the times to not just wait but to take advantage and move forward.

Here are some of the items we have helped our clients through during these unprecedented times to not miss an opportunity:

1. Low Interest Rate Environment
   • Mortgages — Some major banks offer a one-time rate adjustment to your mortgage. You might have to pay a fee up front, but you are able to reduce your mortgage rate without the hassle of doing a total refinance and go through underwriting. But if this is not an option, it is a good decision to weigh the costs of doing a refi vs. your current mortgage rate. This could lead to big savings compounded year over year.
   • Intrafamily loans — The IRS publishes rates every month known as Applicable Federal Rates (AFR), and these dictate the amount of interest needed to be paid for a loan to not be considered a gift. These rates are at unprecedented lows, between 0.25%-1.15% (May 2020), depending on the term. If you currently have any of these loans outstanding, a refinance should be reviewed, or it’s also a great opportunity to maybe help your child purchasing their first home.
2. Roth IRA Conversion — If you believe your taxes will be higher in retirement or you have irregular income streams, you should look at converting a portion of your IRA to a Roth. This can take advantage of the current market decline and potentially pass on reduced taxes to your heirs.
3. Grantor Retained Annuity Trust (GRAT) — If you currently hold low value assets (either liquid or illiquid like a closely held business) but want to take advantage of the anticipated recovery, maybe a GRAT would be right for you. In basic terms, a GRAT is a trust that receives a gift of assets and repays the transferor an annuity for a term while the appreciation stays captured within the trust. Low interest rates and decreased valuations of securities make this an ideal time to consider this strategy.
4. Tax Loss Harvesting — This is the act of selling losing investments to offset capital gains and then reinvesting the cash in a similar yet different investment to take a tax loss but also to be invested when the market rallies. An advisor with a keen tax eye can review your portfolio with an eye for efficiency. Even if your portfolio doesn’t have capital gains, you can deduct $3,000 against ordinary income and carry it forward into future years. We often see advisors who only review portfolios for this opportunity in December, but it should be evaluated whenever there is volatility, such as we saw in March and early April.

If your advisors are not helping you to identify opportunities such as these, then a change may be in order. And while we would prefer things to return to normal in order to pursue this, we are facing the same predicament as it relates to important decisions. While we all prefer to make important decisions with input from our advisors and in-person meetings to reach these decisions, our ability to do that is going to be limited or completely impaired for an undetermined amount of time. We must, for the foreseeable future, adapt to conducting our business and decision-making in new ways via phone, video chat, etc. to ensure an opportunity is not left untapped.

Further, the very uncertainty that is creating this challenge is the same uncertainty that is presenting opportunities for our advantage that will, when things get back to normal, have evaporated. So, while our current situation is far from ideal, we must remember to surround ourselves with a team who will help guide us to accept our new normal.

Disclaimer

We understand that your inbox, news and social media have been flooded with information about the COVID-19 pandemic, the stock market, political posts and countless other topics. We first and foremost hope that you and your families are safe during these unprecedented times. We also hope that you are finding ways to keep yourselves occupied during this pandemic.

We know that it is important to find shows, documentaries, movies, books and activities to keep ourselves from going stir crazy. So, it was an idea of our team member Garrett Frey to put together a Top 10 list of the ways the Waldron team is staying sane during our COVID-19 quarantine.

1. At Home Workouts – this is the clear top activity that our team is doing overall
2. Cleaning and Reorganizing the House
3. Family Walks
4. Watching The Tiger King Netflix Docuseries
5. Taking the dog(s) for a walk
6. FaceTiming extended family members
7. Baking
8. House projects
9. Board Games
10. Planting an indoor garden

We hope that this list might provide some activities that you can incorporate to help you pass the time. If you have any activities that you are doing, we would love to hear them.

Photo by Kelly Sikkema on Unsplash

Disclaimer

The news headlines over the past weeks have been riddled with two serious threats to the health and wellbeing of people across the U.S. The first and obvious threat is the novel coronavirus (COVID-19) outbreak. The less obvious danger, lurking beneath the surface, despite its daily limelight, is the stock market, which entered bear market territory for the first time in 11 years.

History tells us that pandemics like the coronavirus will emerge and are hard to control in the early stages. Once they are here, preventative actions can be taken and vaccines can be developed, but no one can possibly predict when, how or why a health crisis like this will occur.

Bear markets are both similar and different. No one can predict when a bear market is going to begin, but we have observed over time that bear markets are going to happen — about once every three to four years, in fact. And because we can predict that they will happen, we can prepare ourselves to best take advantage of those opportunities when they do happen.

Steer through the curve

In the world of competitive car racing, they say that races are won and lost in the curves. Similarly, in the world of investing, success is driven (or stalled) in times like these through your actions and inactions. There is a tremendous challenge in financial decisions, however, when panic strikes the world like it has recently. Panic — caused by this sudden “curve” in the market — naturally creates added stress and fear for everyone, inhibiting the ability to make sound and opportunistic financial decisions.

But there are wise decisions to be made in the midst of this bear market. As Warren Buffet says, “you should be fearful when others are greedy and greedy when others are fearful.” If you sell now, you are selling at a low point. Now should be the time to hold the course and stick to a well-defined financial and investment plan that is tailored to your particular situation. We often find in times like these that a big part of our job as advisors to wealthy families is to make sure that fear of the unknown does not erode their ability to stick to the plan that has proven to withstand the test of time.

Turn a negative into a positive

The current financial climate actually offers some financial opportunities that can help you grow wealth for generations to come. A few examples:

• This can be a great time for Roth IRA conversions, especially for intragenerational family wealth transfer strategies.
• The low interest rate environment has created a great opportunity to refinance existing long-term debt or intra-family loans and potentially increase principal amount of an intra-family loan for a greater family generational wealth transfer opportunity at these suppressed values. Some of our clients have elected to borrow at these lower rates to invest long term.  You need to realize that borrowing to invest creates its own considerations.
• Executives with non-qualified stock options should strongly consider executing those options today to reduce future tax bills.

For wealthy investors, there are a multitude of other opportunities that, based upon your own situation, could be relevant and build wealth. With a well-constructed plan that is tailored to your unique circumstances, you can turn negative market events like the ones seen today into positive opportunities.

Tune out the noise

One of the biggest hurdles to both sound and opportunistic financial decision is, frankly, the financial media “show business.” In our minds, the proliferation of financial news that constantly barrages the public with the latest shocking development has actually been a contributor to the speed at which bear markets like the current one accelerate. Mere months ago, we were perched upon all-time high markets, with strong earnings and a healthy financial system. Since then, we have experienced the fastest decline ever into bear market territory. The relative speed of these markets, fueled, in part, by panic spread over the airwaves and in social media feeds, makes it even more challenging to make the sound financial decisions and pull the trigger on the opportunistic ones.

Ultimately, in times like these, we all must focus on what we can control to mitigate the threats posed to both our health and our wealth. While knowledge of the coronavirus evolves, we will learn more about how to manage that threat. But we already have the knowledge and tools at our disposal to mitigate any impact that a bear market might have to our and our families’ wellbeing.

Disclaimer