This is probably our most important share of 2021.
Tell us how well you appreciate this video and we’ll tell you how successful an investor you’ll be.
When an American’s portfolio suddenly declines 14% from a previous peak, he will never calmly announce, “I’m experiencing a perfectly ordinary, unsurprising, and above all temporary correction — indeed, merely the average intra-year correction of the last 65 years — and it will have no lasting effect on my long-term return.”
Instead, he screams, “I’ve lost 14% of my money, and there’s no end in sight!” as CNBC trumpets the apocalypse du moment.
Watch this video and be able to make that exceptionally calm and financially productive proclamation…”I’m experiencing a perfectly ordinary, unsurprising, and temporary…”
So, the next (final?) round of stimulus was signed into law by President Biden.
Let’s dive in.
The $1.9 trillion bill called the American Rescue Plan Act of 2021 includes stimulus checks, child tax credits, jobless help, vaccine-distribution money, healthcare subsidies, and aid for struggling restaurants. What’s not inside? A higher minimum wage.
Here’s a quick visual of how it compares to prior rounds of stimulus.
Here are some immediate takeaways:
More stimulus checks are coming: $1,400 checks could be hitting bank accounts and mailboxes this month, going out to adults, children, and adult dependents such as college students and elders. These adult dependents did not qualify for previous payments, so that’s good news for many.1
Who gets paid? Individual filers who earn as much as $75,000 (or joint filers making $150,000), plus their household members, qualify for the full $1,400 per person.1
Folks filing as a head of household can earn up to $112,500 and still qualify for the full payment. Phaseouts kick in quickly this round, and an individual with an income of $80,000 or a couple earning $160,000 get nothing.1
If you’ve filed your 2020 taxes, your check would be based on that income. If not, it would be based on your 2019 tax filing. If you’re waiting for a missed payment, individual tax returns have an extra line called “recovery rebate credit” to claim your stimulus payment.
Enhanced unemployment benefits are extended through Sept. 6: Folks claiming jobless benefits will receive $300/week on top of what they already get from their state through the fall.2
Some unemployment income is now tax-free: Individuals who earned less than $150,000 in 2020 can shield up to $10,200 in unemployment benefits from taxes. For married couples filing jointly who both received unemployment, the tax-free amount goes up to $20,400, but the $150,000 income cap still applies. Unfortunately, if you earn over $150,000, it currently appears that all of the unemployment benefits become taxable with no phaseout.3
If this applies to you or someone you love, my advice is to wait to file or update your tax return until the IRS issues guidance on what to do.
The child tax credit is larger: The bill increases the child tax credit for one year to $3,600 for kids under 6, and $3,000 for kids between 6 and 17 (the current credit is a flat $2,000 per child under 17). 50% of the credit would be available as advance monthly payments that the IRS will start sending to families in July 2021.4
Unfortunately, not all families will qualify. Phaseouts begin at $75,000 for single filers, $112,500 for heads of households, and $150,000 for joint filers. However, families who earn less than $200,000 ($400,000 for joint filers) could still claim the regular $2,000 credit.4
Health insurance costs could drop on health exchanges/marketplaces: The bill removes the income cap on insurance premium tax credits for folks who purchase insurance on the federal health exchange or state marketplace (for two years). That means the amount you would pay for health insurance would be limited to 8.5% of your income as calculated by the exchange.5
A lot of rules have changed in the last year, throwing an already complex tax season into a bit of confusion.
Could there be more stimulus passed this year? It seems unlikely if the U.S. economy continues to expand.
According to a fresh estimate, our economy will expand nearly twice as fast as originally expected, growing at an estimated 6.5% in 2021 versus the 3.2% projected in December.6
Obviously, these projections rest on a lot of assumptions about vaccination rates, reopening, and consumer spending.
Let’s hope we stay on track.
That was a lot of information to absorb. Have questions?
P.S. Markets have hit new highs as fears of out-of-control inflation faded and hopes about the recovery surged. The usual caveats apply: we’re in a roaring bull market and any time stocks reach new highs, pullbacks and corrections are possible. Keep calm, cool, and focused. I’m here for questions.7
P.S.S. The last day to contribute to an IRA for 2020 is April 15, 2021.
For the past year, it has seemed (to me, anyway) that the stream of bad news has mainly been interrupted by worse news.
Every week it seems we’re confronted by death tolls, natural disasters, political shenanigans, business closures, viral variants, and more.
It’s so easy to become fixated on doom scrolling and negative headlines. The media makes that easy.
But what if things are getting better?
How would your life change if things were getting back to normal?
Are you ready for that?
Because I think we’re on the upswing.
Here’s why I think things are going to get better rapidly in 2021.
Vaccines are proving to be effective against COVID-19 and we’ve got several of them.1
At least one (the newly approved Johnson & Johnson vaccine) is effective against the vicious new variants that have popped up.2
Vaccine rollouts are going (kinda) well and are accelerating. Once a large proportion of Charlotte and cities across America are vaccinated, we can expect to see community transmission rates plummet and normal life resume.
Imagine what that will feel like.
Economists think a tidal wave of growth is coming and the economy will roar back this year.3
That’s good news for businesses, workers, and markets.
The next round of stimulus looks like it’s going to get passed in the next couple of weeks, getting money into the pockets of the folks struggling to pay bills and keep their businesses open.
That’s a lot of good news.
What do you think, are you ready to start planning life after the pandemic?
What’s the first thing you will do when it’s safe?
Me? I’m going to give everyone I love a big hug.
I can’t wait.
Does that mean that everything’s going to be just peachy?
I wish it would, but I don’t think it will. We’ve lost too much and still have too much to do.
The 500,000+ folks we lost to the pandemic. Each one a vibrant member of our society and a loved one.
The millions of jobs that probably aren’t coming back.4
The medical staff, essential workers, and teachers who are burning out under the strain of a pandemic.
The divisions in our society that still remain.
Markets are frothy and volatile and will likely remain so. A temporary sell-off is quite possible.
But, I’m hopeful for 2021.
Chris Mullis, Ph.D.,CDFA® Founding Partner Reduce Taxes. Invest Smarter. Optimize Income