Tombstones and Face Masks: Life Lessons from Memorial Day, COVID-19 Version

Tombstones and Face Masks: Life Lessons from Memorial Day, COVID-19 Version

This past Memorial Day, I was reminded of a story about a child living through the Battle of Britain.

It’s 1940. The Nazis are intensifying their evening bombing attacks on London, so that each nightfall brings the terrifying anticipation of indiscriminate destruction and sudden death. During this most extraordinary of times, a young boy is asked a quite ordinary question: “What do you want to be when you grow up?” Rather than answering “A pilot” or “A policeman” or even “A soldier”, the boy instead simply replies, “Alive.”

That incident strikes a chord with me, having just commemorated Memorial Day during a pandemic. Each year at this time when we honor the sacrifice of our fallen warriors, I wonder what we should tell children who are surrounded by the intense images of mortality they see on television—the rows of tombstones, the laying of wreaths, the playing of Taps. But this year that question is even more salient. Before, during, and after Memorial Day, our children have been bombarded with additional reminders of the fragility of life—the omnipresent face mask, the relentless instructions to keep six feet away from another human being, the obligatory announcements of the latest COVID-19 death toll.

In 2020, we recognize not just our military heroes, but another type of hero as well. The heroes fighting the virus are armed not with guns and artillery but medicine and ventilators. And the threat they are fighting is not safely confined—in a child’s mind—to another time or place, but is here now, in our backyards, parks, and playgrounds, affecting our way of life, mocking our usual frivolity at holiday barbeques, shutting down our schools.

It seems to me this must be a bit much for a child.  Between the graves of Memorial Day and the masks of COVID-19, are today’s children silently wondering if they will make it to adulthood alive? And, if so, is there an opportunity for us to calm their fears by focusing their attention away from mortality and toward the positive life lessons these images can teach them?

I believe this is such an opportunity. I believe we can help young children learn to process what they see and hear into positive messages about how to tap into the virtues that are inside of them. That is, I believe we can use the challenges of our time to teach children the traits that each of us needs in order to overcome challenges, defeat adversity, and become heroes ourselves.

What are these virtues? We all know of many, and each of us can teach them in our own way. Here are just a few:

  • I think this is the virtue that leads to all others. If one establishes the daily habit of recognizing what one is thankful for, life’s bountiful opportunities are more likely to shine clearly. Foremost among our many blessings is the protection provided by our heroes. The best way to express our gratitude is to live like them, and to carry on their mission to help assure our future will be a bright one.
  • Resilience. This means never giving up. Whatever challenges come along, our military and medical heroes deal with it. Yes, this comes from training and experience. But resilience also comes from the confidence we have in ourselves, despite moments of failure and despair. Heroes accomplish amazing feats by looking adversity in the eye and overcoming it.
  • But how can we be resilient? One tool we can use is our own ability to adapt—to enhance the skills we need in the circumstances and use our creativity to find new ways to solve new problems. If you never give up—resilience—you will find a way to succeed—adaptability.
  • Heroes risk their lives because they care about others. But most of the time we can help others with little risk to ourselves. Everyone deserves to be treated as a valuable individual. We wear a mask not just to protect ourselves but to protect other people. And we treat the stranger with respect because they have needs and feelings just like us.
  • There is nothing more important than family, friends, and community. Ultimately, our love for each other is what gives these virtues their power and significance. And encourages us to remember our fallen heroes.
  • Optimism and Faith in the Future. If we all try to adhere to these and other virtues, then there is every reason to believe the future is bright—for us, our families and our country. We owe it to our heroes to go forward with the attitude best expressed by Winston Churchill: “For myself I am an optimist—it does not seem to be much use being anything else.”

Of course, this is a very short sample of virtues that our children should learn about. What other virtues would you discuss with a child and how would you teach those virtues?  Would you use examples from your own life, from history? Would you ask the child to think of how they could put each virtue into practice?

We should use the challenges of today and the sacrifices of our fallen heroes to help our children learn important life lessons. And, of course, the very best way to teach our children is by example, to practice these virtues ourselves.

 

Best regards,

  

Bryan E. Kelly, CFP®

Managing Partner

 

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Registered Broker/Dealer, Member FINRA/SIPC.  Advisory services offered through investment advisor representatives of Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. The Kelly Group and Cambridge are not affiliated. 48 East Gordon Street, Bel Air, MD 21014

 

Tombstones and Face Masks: Life Lessons from Memorial Day, COVID-19 Version

A Conversation on Rebalancing

As a follow up to our recent correspondence regarding the current volatility in the market, I want to let you know that The Kelly Group is taking this opportunity to selectively rebalance client portfolios.

In general, The Kelly Group rebalances the bulk of our clients’ portfolios annually, usually in January of each year including 2020. There are also times when we find it appropriate to rebalance during the year as a result of major market moves, up or down. In light of the recent extensive market volatility, The Kelly Group’s Investment Committee has decided to rebalance has many of our client portfolios. As a result, you may have recently received, or shortly be receiving, trade confirmations reflecting our adjustments.

In determining our rebalancing strategy, we take into account various factors such as: whether the portfolio is in accumulation or distribution mode; tax considerations; and the overall asset allocation shifts.

Let me use this notice as a reminder of the potential benefits of rebalancing.

Rebalancing is valuable for two reasons. First, it helps maintain the original investment weightings in a portfolio. To take a simple example, suppose together we concluded that you should hold 60% of your portfolio in stock funds. Assume that, over the course of the year, those funds decline relative to fixed income. As a result, your stock funds are now 40% of your portfolio. Meanwhile, your bond funds, originally 40% of your portfolio, now constitute 60%. To return your portfolio to the allocations you started with, we sell a portion of your fixed income funds and increase holdings of equity funds. This returns your portfolio to the allocations we originally agreed upon.

Note a second advantage to rebalancing: We have sold investments that have outperformed and bought more of those that underperformed. While at first blush, that action might appear counterintuitive to some–we’re decreasing the “winners” and increasing the “losers”–for long-term investment success, this is exactly what a wise investor should do. Rebalancing helps to reinforce an investment discipline essential to long-term financial success.

When and how often should we rebalance? There is no one magical time of year or frequency. As mentioned, we rebalance once a year, in January. This way, we are avoiding the tendency to “time” the market. But when the market is unusually volatile–either up or down–allocations become misaligned more than usual. This offers an opportunity to take advantage of overreaction, locking in gains of investments that have moved unreasonably high and purchasing investments that have fallen unreasonably low. We have determined that this is such an opportunity.

If you have any questions about your portfolio, please feel free to contact your financial advisor.

Best Regards,

Bryan E. Kelly, CFP®

Managing Partner

Rick Fletcher serves as Economic Outlook panelist

Rick Fletcher serves as Economic Outlook panelist

On April 23, Rick Fletcher served as a panelist on the Harford County Chamber of Commerce virtual Economic Outlook event.  Rick shared insight and information on today’s markets, how The Kelly Group plans for economic downturns and the importance of adhering to a well-constructed financial plan.

Social Security and COVID-19 – should your benefit strategy change? 

Social Security and COVID-19 – should your benefit strategy change? 

Commentary by Jodi Davis, April 2020 

If you are at least age 62, you are eligible to start receiving Social Security benefits. But for many people, it is often a wise strategy to defer those benefits until at least Full Retirement Age (“FRA”) if not beyond to increase the amount of monthly benefits. This is particularly so if you are still working and may not need the additional income.  Also, if you claim benefits prior to FRA, $1 in benefits are withheld for every $2 earned over the annual threshold (currently, $18,240).

But what if you have recently been laid off due to COVID-19 and your household income has come to a screeching halt? If you are in that situation, you may want to consider claiming your Social Security benefits early to provide much needed cash flow. While claiming an early age benefit is not optimal, it is an immediate source of income that may truly be needed. And if you are not currently working, the annual earnings cap will not apply, and your benefits will not be withheld.

So, what’s the downside? Good question!  If you claim benefits prior to full retirement age (FRA), your benefit check is reduced permanently.  Unless you reverse your decision and pay back benefits within twelve months, you have essentially started a claim status and all benefits paid (current and future) are reduced. However, don’t let this stop you from claiming an early benefit if there are no other options available to meet budgetary demands.

But what happens if you are fortunate enough to return to work, especially in the not too distant future? You will then have two options to consider. First, if you no longer need the additional cash flow, you can choose to repay the benefits within twelve-month time of receipt.  By simply filing a form with Social Security and attaching a check for the full amount received, your claim record is cancelled and recalculated as if you never started benefits.

Second, you can simply allow your W-2 income to exceed the earnings test. Although some of your Social Security benefits will be withheld, your FRA primary insurance amount will be recalculated for those withheld benefits, thus increasing your benefit formula while also improving your earnings record. Once you reach FRA, you can voluntarily suspend at any time and begin earning delayed retirement credits.

If, despite being laid off, you would still prefer to defer receiving Social Security benefits, you may have other options. First, consider a part time job in positions that are hiring during this pandemic crisis. Second, consider temporarily tapping cash reserves and pulling funds from liquid accounts, such as savings, checking and money market funds to fill in the budget. Be careful about obtaining funds from investment accounts; in this market, you may be selling low and thereby locking in losses.

Third, until you return to work, consider reducing your expenses to the bare minimum. Finally, postpone expenses that are not as time sensitive, such as travel, big-ticket purchases and lifestyle choices.  Even small wins can make it easier to cover those bills that will not wait.    If you ultimately conclude that filing for early benefits is your best option, be strategic in how you go about it.  If married, to get income started now, the lower-earning spouse may want to go ahead and file early.  This way, the higher earning spouse’s benefit can be maximized, while household income is still supplemented, and reductions for early claiming aren’t as significant as they would be for the higher-earning spouse. If you are divorced or a widow(er), auxiliary benefits may be your best option.

Be careful, the rules of the road need to be considered and it may be prudent to call our office for a full social security analysis, so you do not fall into filing traps. A full needs analysis will break down two or three scenarios to best suit your short-term and long-term income needs. As a financial planning firm, we will also look at filing decisions holistically, keeping in mind your long-term financial plan and goals. Clearly, our clients appreciate when we get creative and offer to tangibly improve their situation, and although these strategies may take time to put together and execute, it will be well worth it. This decision is important. We are here to walk you through these types of claiming decisions that could fill a short-term need but may have a long-term impact on the success of your retirement plan.

Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisor, Inc., a Registered Investment Advisor. The Kelly Group and Cambridge are not affiliated. 48 East Gordon Street, Bel Air, MD 21014.

 

Medicare and COVID-19

Medicare and COVID-19

Commentary by Charlie Wolpoff, April 2020

If you are at least age 65, you are covered by the Medicare rules. You are also at a higher risk than younger people of suffering from serious effects of COVID-19. The combination of these two issues raises several questions. First, how comprehensive is Medicare’s coverage of COVID-19-related costs? Second, if you have been able to defer Medicare because you (or your spouse) were covered by an employer plan, but you have now been temporarily laid off, what do you do? And what happens with your health insurance if you go back to work after the crisis has receded?

To learn more about Medicare in general, go to medicare.gov or review the government booklet, Medicare & You.

What COVID-19 Costs Does Medicare Cover?

Medicare Parts A and B (“Original Medicare”) offers very comprehensive medical coverage, particularly when combined with supplemental insurance (usually Medigap) and a Part D prescription drug plan. And Medicare has broadened its coverage of services related to COVID-19 as follows:

Testing. Medicare fully covers lab tests for COVID-19. You do not pay any deductibles or other out-of-pocket costs.

Hospitalizations. Medicare Part A covers all medically necessary hospitalizations related to COVID-19. Outside of this pandemic, if you are considered an outpatient, even if you are in the hospital, the often less advantageous coverage of Medicare Part B would apply. But with COVID-19, Medicare Part A will cover the costs if you are diagnosed with COVID-19 and might otherwise have been discharged from the hospital after an inpatient stay, but instead are required to stay in the hospital under quarantine.

Skilled nursing. In normal circumstances, Medicare Part A covers up to 100 days in a skilled nursing facility (SNF) only if you have been hospitalized first. After the first 20 days in a skilled nursing facility, Medicare Part A imposes a daily coinsurance amount of $176. Most Medigap policies cover that out of pocket cost for days 21 through 100. There is no coverage after the 100th day.

But during the COVID-19 pandemic, even if you haven’t been to the hospital, Medicare A will still cover the costs of an SNF. This is to save hospital space.

Vaccines. Currently, there is no vaccine for COVID-19. However, if one becomes available, Medicare will cover it.

Telehealth. Medicare Part B has temporarily expanded its coverage of telehealth services. These allow for doctor visits via computer or smart phone. Prior to this expansion, to use telehealth, a patient was required to connect form a health facility with approved technology. For COVID-19, you will be able to connect from home using video on a digital device.

Outpatient services. Medicare Part B covers other medical services a client might need in connection with or apart from COVID-19, including physician visits, emergency ambulance transportation, and emergency room visits.

Medicare Advantage and Part D (prescription) coverage: The government has provided guidelines to help Medicare Advantage (which is more of a managed care approach than Medigap) and Part D (prescription coverage) respond to COVID-19, but plans will differ in how they apply these guidelines. You will need to check with your individual plans for details.

At a minimum, Medicare Advantage and Part D plans must:

  • Allow beneficiaries to receive health care services at out-of-network doctors’ offices, hospitals, and other facilities without additional charges;
  • Waive gatekeeper referral requirements;
  • Suspend rules that require beneficiaries to tell the plan before obtaining certain kinds of care or prescription drugs, if failing to contact the plan ahead of time would limit access to care;
  • Cover the maximum supply of drug refills if requested.

Part D plan sponsors are also required to ensure that their enrollees have adequate access to covered Part D drugs at out-of-network pharmacies when enrollees cannot reasonably be expected to use in-network pharmacies. Part D plans may also relax restrictions they may have in place with regard to various methods of delivery, such as mail or home delivery, to ensure access to needed medications for enrollees who may be unable to get to a retail pharmacy.

Private plans: How have private insurance plans, such as your employer’s plan, reacted to COVID-19? Many private insurers have waived out of pocket costs for COVID-19 testing, but not other related services. Review your policy to determine what would be covered and what your out of pocket costs would be if you need COVID-19 testing, to be treated as an outpatient for symptoms, or to be hospitalized. Specifically, check your deductibles, copays, and coinsurance amounts.

What If I’ve Been Laid Off?

If you are older than 65 and lost your job, you must sign up for Medicare if you haven’t done so already. Keep in mind that COBRA coverage and retiree coverage are not acceptable as primary coverage. Make sure you sign up within 8 months after you lose your job, but it is best to have Medicare in place as soon as possible. If retiree coverage is not available, enroll in supplemental coverage in a timely fashion as well. For Medigap, there is a guaranteed issue period (no medical underwriting) of six months beginning the month you are covered by Part B. For Part D prescription coverage, you will pay a penalty in the form of a higher premium if you wait to sign up more than 63 days after losing previous prescription coverage.

What If I Enrolled in Medicare but Then Get My Job Back?

If you enrolled in Medicare because you lost your job, but then returned to work and once again had access to your employer’s health insurance, should you disenroll from Medicare and take back your employer insurance? Or should you just stay with Medicare? Keep in mind, you have every right to keep your Medicare plan even if you are employed, there are more than 20 employees, and you have access to their health plan. The starting point of this decision is a comparison between your employer plan and Medicare. But other factors are now involved.

When you initially enroll in Medicare Part B, you have a 60-day guaranteed issue period to obtain Medigap as your supplemental insurance. That means, during those 60 days, the Medigap provider cannot make the availability of the policy contingent on any medical conditions. But if you disenroll from Medicare, you would have to drop your Medigap policy. And when you reenroll, that guaranteed issue policy will not be applicable. (Only four states– New York, Connecticut, Maine, and Massachusetts– require Medigap insurers to take everyone.)

Another factor you should consider in deciding whether to get back on your employer’s plan is if you would like to restart contributions to your Health Savings Account (“HSA”). To do so, you would have to disenroll from both Parts A and Part B. And you would need to make sure that you made no contributions for any month you are enrolled in any part of Medicare. If you have a high-deductible plan but cannot make HSA contributions, you may want to switch to a different employer plan or keep Medicare.

Conclusion

Even in the simplest of times, the world of Medicare can be rather daunting. These are not the simplest of times. It is essential that you review the quality of your health insurance. If you are eligible for Medicare but have not yet signed up but you are—or were—still working, now is the time to take another look.

You should particularly consider switching to Medicare if your employer plan is not as comprehensive as Medicare when it comes to potential COVID-19 costs. And if you were able to defer Medicare because you were covered by your employer’s plan but you are no longer employed, you must obtain Medicare. You should never be without health insurance, particularly now.

In helping our clients with their financial planning, The Kelly Group addresses issues regarding health insurance, Medicare, and how to protect their financial goals and dreams from potential medical costs. If you have any questions, feel free to call us at 410-893-0560.

Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisor, Inc., a Registered Investment Advisor. The Kelly Group and Cambridge are not affiliated. 48 East Gordon Street, Bel Air, MD 21014.

 

Medicare and COVID-19

What the CARES Act Means For You: Small Businesses

On March 27, the President signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. This law is designed to provide emergency assistance for “individuals, families, and businesses affected by the 2020 coronavirus pandemic.” It is estimated that the Act will cost the federal government more than $2 trillion, which is about 9% of US GDP in a normal year. The Act affects both individuals and businesses. This article addresses the benefits for small businesses.

The provisions apply to small businesses defined as under 500 employees (unless there is a larger standard under the applicable  NAICS Code). Key benefits under the CARES Act include generous SBA loan provisions, an employee retention credit, and deferral of payroll tax payments.

Below are details about some of these provisions. For benefits targeted toward individuals, see the accompanying article, “What the CARES Act Means For You: Individuals”. We recommend that small business owners consult with their financial advisor or CPA for details.

Special Provisions for Small Business Loans

Small businesses are eligible for liberalized provisions regarding (7a) Small Business Administration loans, otherwise known as paycheck protection loans. The CARES Act provisions include the following:

  • Borrowers must make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions created by COVID-19.
  • The loans are up to a maximum of the lesser of $10 million or 2.5 times the average payroll costs over the previous year (counting only compensation up to $100,000 per person).
  • The loans must be applied for by June 30, 2020.
  • The maximum interest rate is 4%.
  • The maximum maturity is 10 years.
  • The loans will be 100% guaranteed by the SBA.
  • The loans can be used to pay specified types of costs including payroll costs, group health insurance premiums, salaries, rent, mortgage interest (excluding prepaid interest), and utilities.
  • Payments are deferred for a period of no less than six months and no longer than a year.
  • Part of this loan can be forgiven to the extent the business maintains the same number of employees from February 15, 2020 through June 30, 2020, or from January 1, 2020 until February 15, 2020, as it did during the same period the previous year. The extent of the loan that can be forgiven is also reduced if employees with compensation under $100,000 have their compensation cut by more than 25% compared to the most recent quarter.

 

  • The loan is fully or partially forgiven to the extent, during the first eight weeks after the loan is made, the proceeds are spent on any of the following:
    • Payroll costs, excluding amounts for individuals with compensation of more than $100,000;
    • Rent pursuant to a lease in force before February 15, 2020;
    • Certain utilities for services which began before February 15, 2020;
    • Group health insurance premiums and other healthcare costs.

 

Employee Retention Credit

This is available for businesses which either have had their operations fully or partially suspended as a result of a governmental shutdown or received gross receipts in 2020 of less than 50% of gross receipts from the same quarter in 2019. The credit is equal to 50% of wages up to $10,000 for each employee. For employers with more than 100 employees, the eligible wages are only those paid to employees unable to work due to COVID-19. For employers with 100 or fewer employees, all wages count.

 

Deferral of payment for payroll and self-employment taxes

Under the CARES Act, there is a one-year credit against an employer’s share of Social Security payroll taxes through the end of 2020. This applies for any business forced to suspend operations or close its doors due to COVID-19 as long as the business continues to pay its employees.  Half of the payroll taxes owed will be due on December 31, 2021, the other half by December 31, 2022. Self-employed persons can defer half of their tax, which would then be due in two 25 percent portions, on December 31, 2021 and December 31, 2022. Note that this provision is aimed at helping with current liquidity; it does not actually eliminate the tax.