Financial Planning During the COVID-19 Pandemic

A&I Wealth Management > Periscope Newsletter > Financial Planning During the COVID-19 Pandemic

The COVID-19 pandemic is unprecedented and the impacts may be felt for years to come. As of the time of writing, we have three vaccines that promise to change things for the better. How does the current situation change our planning?

Taxes May Go Up

With a new President and different Congress in 2021, we may have higher taxes. Some of the taxes that are being discussed include the income tax, recently reduced in the 2017 Tax Cuts and Jobs Act. Many prognosticators believe that they tax rates may go back up to the amounts they were before 2017.

Another tax that is on the table is the estate tax. Currently, only estates worth approximately $11 million or more faced the “death tax.” This is the highest limit in history. Rumor has it that that limit may be reduced in the near future, which means more people will be subject to the estate tax.

The long-term capital gains tax is being discussed as another tax that could be increased. This one affects almost all of our clients. If this tax is increased, then the taxes we pay on investment accounts will go up dramatically. Any investment held outside of an IRA, 401k, Roth IRA, or other “qualified” plan may be taxed at a person’s income tax rate. The highest long-term capital gains tax is 20% (high earners must also pay another 3.8% net investment tax). Today, the highest income tax rate is 37%–which would be a big increase for taxable investments. Unless Congress raises the income tax rate back to the pre-2017 numbers, then it will go all the way up to 39.8%–effectively doubling the tax bills!

Maybe a Roth Conversion Soon

If you are thinking about a Roth conversion, 2020 may be the year to do it. A Roth IRA is never taxed again money. The Roth is different from a traditional 401k or traditional IRA, which gives you either a pre-tax contribution  or income-tax-deductible contribution, an tax deferral on the growth. If taxes go up in the future, then the Roth IRA provides more spendable money than a traditional IRA or 401k, all else being equal.

Regardless of your income, you may perform a Roth conversion. You may change your traditional IRA or 401k into a Roth if you are willing to pay income taxes on the conversion. You may convert any amount of money-regardless of your income tax bracket. To find out what your income tax bracket is this year, visit

You want to talk with your financial advisor right away if you are considering a Roth IRA conversion in 2020. You must do it in a calendar year, which doesn’t give you much time!

The value of a good conversation
COVID-19 is worsening as we enter the time of year when days are darkest, and emotions can run both high and low. We are being told we have to stay home and cannot visit with the people we love the most. We have many reasons to feel worse than usual. If you are beginning to feel more down than usual, know that it is normal and there is help.
Listen to our upcoming lunch and learn to gain helpful insights into the emotions we are all feeling. Gather a handful of tips and tricks to help you manage this difficult time.







About the author

Karl Frank, Certified Financial Planner ®, MSF, MBA, MA, is the President of A&I Financial Services LLC, a local business that specializes in wealth management, insurance planning, and retirement planning. Karl cares for business owners and the businesses that care for them. Learn More about Karl.