How to Get Money Fast During the Coronavirus Pandemic

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The coronavirus pandemic continues its assault on the US economy, forcing businesses to close, lay off workers or cut hours.

Many Americans may need cash quickly, beyond what can be generated by strict budgeting.

But where to turn?

Here are some of the possibilities, according to financial advisors.

Unemployment insurance

“Apply for unemployment benefits immediately,” said David Haas, certified financial planner and owner of Cereus Financial Advisors in Franklin Lakes, New Jersey. “There is no stigma here.”

However, not everyone is entitled to unemployment insurance. Those who receive benefits only replace about a third of their previous weekly wages, on average, and for a limited period. This varies greatly by state.

Try to find another job

Some high-demand businesses like supermarkets and pharmacies are hiring workers. Quickly see if you can find another job, even if you hope or plan to return to your original job when the economy eventually rebounds, Haas said.

Some states, like New Jersey, have job websites to help you.

Taxable accounts

Taxable accounts – checking, savings, investment accounts and certificates of deposit – are probably the best place to withdraw money.

As for taxable investments, consider selling fixed income securities (like bonds) and cash equivalents (like money market funds) ahead of stocks, which are likely trading at a steep discount given the recent market sell-off.

The Dow Industrials chart of President Trump’s election through March 23, 2020.

CNBC

It would make your portfolio riskier, but give your stocks time to recover, said Stephen Rischall, CFP, co-founder of Navalign Wealth Partners in Los Angeles.

Those who sell investments with a net gain will have to pay capital gains tax. Those who sell at a loss could benefit from a tax-loss crop.

home equity

Homeowners can leverage a home equity line of credit or reverse mortgage, or consider a cash mortgage refinance, especially with interest rates so low, said Jeffrey Levine, CFP, director of advanced planning at Buckingham Wealth. Partners in Long Island, New York.

Cash-out refinancing allows a homeowner to swap an existing mortgage for a larger loan and pocket the difference tax-free. Lenders generally require homeowners to retain at least 20% of the equity in their home.

Let’s say an individual has a $300,000 home and still owes $100,000 on the mortgage. That person could potentially free up $140,000 by doing a cash refinance, according to Bankrate.

This, of course, could delay loan repayments for decades.

A reverse mortgage is only available to people age 62 and older. It is a non-recourse type of loan, which means that borrowers will never owe more than the value of their home. There are risks – for example, as with a traditional mortgage, lenders could foreclose on a home if borrowers don’t keep up to date with property taxes and maintenance.

Other loans

Investors can use margin loans to borrow against the value of their taxable investments. This allows them to avoid selling investments at a loss or incurring capital gains tax.

Investors can usually borrow up to half the amount of their account value. However, they should avoid borrowing the full amount, said Charlie Fitzgerald, CFP, manager of Moisand Fitzgerald Tamayo in Orlando, Florida.

This would help avoid a “margin call”, which could cause a brokerage to sell some of your investments if their value drops.

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Banks can also provide signature (unsecured) loans to long-time customers, Fitzgerald said. Some customers with good credit may also be able to get a bank loan with collateral like a car or other asset, he said.

Refinancing higher-interest debt — and subsequently reducing your expenses — is also a way to free up cash, said Nicholas Hofer, CFP, president of Boston Family Advisors in Boston.

Pattanaphong Khuankaew / EyeEm

Life insurance

People who have cash value life insurance (such as whole life insurance or universal life insurance) can get a tax-free loan by borrowing against the cash value of their policy. It could be risky, though – loans that get too big can eventually cause a policy to “lapse”, causing you to lose your insurance and potentially have a large income tax liability.

The cash value could also serve as collateral for a bank loan, Haas said.

Retirement accounts

Americans can withdraw money from individual retirement accounts or workplace savings plans like a 401(k).

There are many potential downsides to this strategy, including selling investments that are devalued, giving up tax-free investment growth, incurring tax penalties, and plundering a retirement account.

IRA and 401(k) investors would pay a 10% tax penalty (in addition to income tax) to make a withdrawal if they are not at least 59½ years old. Roth IRA investors can withdraw their contributions to the account without penalty or income tax.

401(k) investors have additional limitations. Some employers, for example, limit who can receive 401(k) distributions, meaning investors can only access their money through a loan or hardship distribution.

Both could have adverse tax consequences and are only available if the person is still employed.

Congress is weighing a bill that would allow 401(k) and IRA savers affected by the coronavirus to withdraw up to $100,000 without penalty.

ask the family

Applying for a loan from family members, while potentially uncomfortable, could be a last-ditch lifeline for some.

“When times get tough, that’s part of what family is all about,” Levine said. “I think everyone understands that this is a very unique moment in our history.”

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