The coronavirus pandemic is hitting working parents hard. With many schools still closed for in-person classes, parents have to juggle work, childcare, and help their children with remote learning. A recent survey found that 40% of parents have changed their work situation because of these demands, and 15% of parents quit their jobs.

If you and your spouse or partner are now having conversations about whether or not one of you should quit your job to be at home with your kids, make sure you do your due diligence to understand the cost versus benefit of this decision. To help, I’ve put together this checklist to weigh the options:

1. Take-home pay 

First, work out the math and see at the end of the day how much you are taking home and decide if that amount is really needed or if you’ll be ok without it. Even before the pandemic hit, I would have conversations with dual-income families, and many didn’t realize how much it cost them to both be working. For example, one spouse may have a salary of $50,000, but once you subtract taxes, commuting costs, work wardrobe costs, and childcare costs, they’d discover they are only netting $12,000 a year. For some families, that $12,000 is a difference-maker. For others, it’s not. 

2. Retirement

Assuming you are currently contributing to an employer-sponsored retirement plan like a 401(k) and getting a match, you have to figure out if there is a way for you to make up that money or at least some of it after you quit your job. Can you open a spousal IRA and put some money towards retirement there? Or can the spouse who is still working increase their contribution to a retirement account? The other option is to know you will lose out on that money for retirement and factor it into your financial plan.

 Leaving the workforce may also lead to a reduction in the Social Security benefits you’re entitled to later in life. Social Security is calculated by your average indexed monthly earnings during the 35 years in which you earned the most. You are entitled to your own benefits or half your spouse’s, whichever is higher.

3. Healthcare

If you quit your job, will you and your family still have health insurance? Can you get onto your spouse’s plan, and if so, will it cost more money to do so? Every company is different with what they offer and what your out-of-pocket costs are. Your company’s human resources department may be able to give you an analysis that says what your total compensation is including benefits and other options like an FSA or HSA. This can be helpful to see and will allow you to do an apples to apples comparison with your spouse. 

4. Rehiring repercussions

Could quitting your job and being out of the workforce for a period of time hurt your chances of being rehired in the future? This is a long-term consideration if skills are lost over time. If you have plans to reenter the workforce down the line, consider continued education or other options to stay on top of trends in your industry.

5. Life insurance

If you are going from two working parents to one, that remaining working parent needs to make sure they have life insurance to take care of the family, financially. If they already have life insurance, you might need to consider increasing the amount to replace two incomes, not just one.

6. Disability insurance

Can you afford for the new sole breadwinner in the family to become incapacitated? Disability insurance can help make up for that loss of income. Without disability insurance, the non-working spouse may be forced to reenter the workforce, and you could be back to square one with having a working spouse and another on disability and still needing help with childcare and remote learning.

7. Emergency fund

An emergency fund is necessary to provide some insurance against job loss, disability, or some other reason why you may not be able to work for a period of time. If the sole breadwinner loses their job, the emergency fund now has to cover everything for the whole family. It won’t just be replacing one person’s income, but two. A general rule of thumb is to have three to six months of living expenses saved in your emergency fund. But if you’re going down to just one income, my advice is at least to have six months’ worth of living expenses.

8. Credit score

Maintaining your credit score will still be important even without an income. You’ll want to keep a few credit cards and bills in your name so that your credit doesn’t get dinged for a long period of no activity.

 The bottom line, you can’t account for everything, but you want to make sure you are thinking through possible risks and covering as many as you can.

About the Author:

Bill Engel, CFP®
Senior Vice President
Fort Pitt Capital Group, LLC
680 Andersen Drive, Pittsburgh, PA 15220
(412) 921-1822 | bengel@orchid-ibex-388317.hostingersite.com

The post 8 Things to Consider Before Quitting Your Job Because the Kids Are at Home appeared first on Fort Pitt Capital Group.

We’re pleased to announce that we have been included in the Financial Times 300 Top Registered Investment Advisers list. Financial Times based its ranking on assets under management, asset growth, the company’s age, industry certifications of key employees, SEC compliance record, and online accessibility. The top factors used in the scoring process are AUM, which accounts for an average of 72% of each adviser’s score, and growth rate, which accounts for an average of 15% of the score.

The entire team at Fort Pitt Capital Group is proud to be included with industry peers and recognized for our growth and commitment to our clients.

Rankings and recognitions by unaffiliated publications should not be construed by a client or prospective client as a guarantee that Fort Pitt Capital Group LLC will provide a certain level of results in client accounts nor should they be construed as current or past endorsements of Fort Pitt by clients. Such publications base their selections on information prepared and/or submitted by the recognized entities.  Additional details regarding the criteria and process utilized in formulating these rankings are described above.

The post Fort Pitt included on the Financial Times 300 Top RIAs list appeared first on Fort Pitt Capital Group.

The Pittsburgh Emergency Medicine Foundation launched the PEMF Pandemic Grant Program on Monday, April 6, 2020. The grant will serve area EMS agencies and is being launched to provide the agencies and their first responders with basic-needs-items in response to the Covid-19 pandemic, and they need more help. The PEMF Pandemic Grant Program has already raised $15,000 in personal donations from PEMF board members. The foundation is also establishing a crowdfunding page via Great Giving in an attempt to increase the funds available through this effort to local EMS agencies in Western Pennsylvania.

Shortages at stations like hygiene items, food, and essential everyday supplies may be overlooked during these times and are often underfunded or left to individual workers to procure at their own expense. These basics help our emergency responders manage the long and challenging hours that this national emergency requires. All area EMS agencies are eligible to apply for funding.

So far, PEMF received 31 applications and paid out over $11,000 in grants. PEMF has reached eight counties including and surrounding Allegheny County thus far, with the assumption that this will most likely expand as the program gets more awareness and the needs become greater. Not only will they be receiving food, but they will be receiving the disinfectant and cleaning supplies to keep them safe.

How can you help?

You too can help Katharine and her fellow board members support the brave first responders. Visit the website to learn more about PEMF and this initiative. You can also find the direction to the donation page should you want to contribute. If you or anyone you know would be interested in applying for this grant, please contact Beth Wolf at wolfeba@pemf.net for an application. Click here to donate. 

The post Fort Pitt In the Community – Helping Pittsburgh’s First Responders appeared first on Fort Pitt Capital Group.

1. As a retired client, if I don’t need to withdraw money for my mandatory Required Minimum Distribution (RMD) from retirement accounts, can I reduce or stop altogether my distributions for 2020 and not get penalized?

Under normal circumstances, if you are 70.5 you are required to take a minimum distribution from your retirement account, and if you don’t do so by December 31, you would incur a 50% penalty on the RMD. However, for the 2020 tax year, the IRS is suspending the penalty and giving retirees the option to not take their withdrawal or reduce it if they don’t need the funds.

The benefit is two-fold: Investors won’t be required to withdraw assets while portfolios are depreciated due to market valuation and it can help save on taxes. If retirees don’t use their RMD for income, they can simply pause the distribution for this year. If retirees do need income and are used to taking distributions from their retirement account, they have the option to withdraw from other brokerage, savings, or non-qualified accounts instead of taking from a retirement account for potential tax savings. Make sure to consult your financial and tax advisor to make sure plans are aligned across the board.

The Fort Pitt Capital Team has already seen this benefit our clients. For example, one client who is a retiree typically takes their income needs out of their IRA, about $16,000 a month. They also have an after-tax account, so we connected with their accountant to see if it would make sense to take income from their non-qualified investment account for the rest of 2020. After doing the calculations, over nine months, the client could save $70,000 in Federal income taxes and avoid $15,000 in state taxes, a total of $85,000 in savings. We were able to make these savings happen due to a joint effort with the client’s accountant and demonstrate the power of financial and tax advisors working together to make sure decisions align across the board.

 2. I am a business owner. What is the best way for me to apply for the Economic Injury Disaster Loan (EIDL)?

The EIDL is a loan from the Small Business Administration (SBA) that is providing an advance of up to $10,000 in relief to business owners that apply and are experiencing temporary financial difficulties due to COVID-19. Business owners should contact the bank they have their business relationship with to take the necessary steps to apply for this loan. The application is open and the bank will have the necessary information to help process the loan faster. Time is of the essence as it’s first-come-first-serve so working closely with your bank is key.

If you’re a sole proprietor, you have to wait another week to apply so use this time to get your ducks in a row, to make sure you’re in the queue sooner rather than later.

Reference the SBA website for additional updates and information about this process.

3. I give to charity. Are there any additional provisions that are applicable to me in the new CARES Act?

For those who itemize their deductions, the CARES Act allows individuals to get a federal income tax deduction up to 100% of their adjusted gross income (AGI) in qualified cash contributions; the limit was previously 60% of their AGI. This offers an additional incentive to contribute more in times of need, like so many organizations do right now. Make sure you’re giving to a qualified organization and work with your tax advisor.

Additionally, for individuals who claim the standard deduction, they can deduct up to $300 of qualifying cash contributions to charitable organizations.

4. In the unforeseen event that I or an immediate family member are diagnosed with COVID-19 or experience financial distress from being unable to work as a result of COVID-19, what provisions in the new law provide me relief in order to access my retirement plan (of course, with the understanding that this would have to be an extreme or severe reason for me to want to withdraw from the retirement plan)?

While we don’t want individuals taking large sums of money out of their qualified accounts that are earmarked for retirement, this is an option for severe cases of financial hardship. Individuals under age 59 ½ can withdraw up to $100,000 without penalty from a retirement plan (IRA or company sponsored plan) if they or an immediate family member is diagnosed with COVID-19, or if they are experiencing financial distress as a result of not being able to work because of the pandemic. It’s critical to work with a tax advisor if you’re planning to utilize this feature because you must be able to prove to the IRS that you have a legitimate reason to use this money. The distribution is still taxable at a normal income rate over three years, but there’s also an option to repay the amount in a three year period.

5. I find myself unemployed due to the pandemic. How has unemployment compensation changed for individuals?

If you receive unemployment benefits, the provision allows an additional $600 a week in compensation starting March 29 until July 31. This is a nice addition to those who are struggling, but it’s important to be patient, as there is a high number of unemployment claims right now (Pennsylvania has over one million unemployment claims). If you need these benefits, apply as soon as you can but be patient when it comes to receiving compensation.

6. My grown daughter has a young family and the tax rebates being offered would help her greatly. How does she know if she is eligible?

The direct payment to taxpayers will be helpful to many individuals and families. She can determine if she is eligible by looking at her AGI in 2019. If she is married with AGI for 2019 that is less than $150,000, she and her spouse will receive $2,400. She would also receive an additional $500 for each qualified child (children that she claims on their joint tax return under the age of 17).

Families with income above the threshold will see their payment reduced by $50 for every $1,000 in AGI. For individuals to be eligible, they must have a Social Security number (and not be claimed as a dependent), they do not have to have reportable income in 2019. If she has not filed a 2019 return yet, it’ll be based on the 2018 return.

If you have specific questions about the CARES Act that we haven’t answered, please reach out to us — we’re here to help.

The post The CARES Act: Questions & Answers appeared first on Fort Pitt Capital Group.

What do we mean by interest rates turning negative? Imagine an investor in ABC Money Market Fund. ABC Money Market is seeing redemptions rise (people want their money out) due to fearful selling in the markets in general. In order to slow this cascade of selling (which could bankrupt the fund), the fund must put up a “gate” of some sort – which slows or stops the release of cash to investors. One way to do this is by price. In order to get their money out, investors might be forced to accept less than $1 per share on their holdings. Instead of receiving $1,000 in their monthly withdrawal, for example, they might get $999. They’re effectively getting negative interest.

There are a lot of moving parts to this negative interest issue. At the heart of it is the need for liquidity, and the most liquid security on earth is the U.S. Treasury bill. Companies, endowments, money funds, and individuals are all moving away from (less liquid) corporate obligations and toward Treasury-backed funds in this time of crisis. Essentially, everyone is trying to go through the same door – and the door is too small. Also, access is not first come first serve, but rather who is willing to pay the most to get through. If someone is willing to take a major haircut (willing to accept less than dollar-for-dollar through a negative interest rate) to get out, the people in charge of the door can give priority to the haircut-takers. This is what accentuates negative interest rates, and allows them to be sustained in a time of crisis.

In time, this supply/demand imbalance will fix itself as the Fed adds more short-term Treasury Bills to the market, and people get more comfortable with taking other forms of collateral. Contrary to what some news sources are saying, this has happened before – and ultimately resolved itself. To do so again will require Fed intervention, and the willingness of investors to wait their turn to get through the door.

Unfortunately, we’ve seen some media outlets sensationalizing this short-term imbalance and spreading false information about the situation. The U.S. is not issuing Treasury Bills at negative interest rates like Germany, Japan or other foreign countries – and it is not (yet) our policy to do so. We can never say never, but the U.S. policy is to not go below zero, as our policymakers have stated so many times. The most important thing for investors to do here is to stay calm, and not rush the door. We anticipate that rates will stabilize – back in positive territory – soon.

The post Understanding Negative Interest Rates appeared first on Fort Pitt Capital Group.