What are Your Income Guardrails?

April 26, 2021

Fresno Financial Consultant News

By August of this year, the unemployment rate was more than 10%. As many as 5.2 million Americans remained jobless as far back as the beginning of May.1 That’s a lot of time to go without earning income. Have you thought about the “guardrails” you have in place should your income or net worth drop precipitously?

As an immediate band-aid, every state provides unemployment insurance for workers who recently lost income under qualifying conditions. Thanks to the CARES Act passed in March of this year, there is even temporarily relief for self-employed individuals. The federal government also provided 100% reimbursement funding for state-administered Short-Term Compensation programs, also known as work-sharing. This pre-existing program is designed to provide compensation to employees whose work hours have been reduced.2

People out of work who are eligible for Social Security can go ahead and file for benefits. Be aware that beneficiaries who have not reached full retirement age can start then stop benefits within a year if and when they resume employment. Note that in this scenario, all benefits paid out will need to be repaid. However, those who have reached full retirement age can start drawing benefits and then suspend them when they go back to work — without having to repay those benefits. In both cases, once Social Security benefits are halted, they then continue accruing to a higher benefit level up to age 70.3

Beyond what the government provides, it’s important that individuals shore up their own finances to weather difficult times. If you weren’t exactly prepared for an economic decline precipitated by a global pandemic — and not many people saw that one coming — then you probably now appreciate the wisdom of guardrail strategies.

The ability to tap alternate assets can help your retirement income plan stay on track while you weather an economic storm. One way to do that is to leverage assets to serve multiple purposes. For example, real estate may be used for rental income or be sold as proceeds for additional income.

Many of today’s life insurance policies offer flexible features that allow the owner to withdraw from a cash value account or tap the policy for a loan. Be aware that loans not repaid in full may affect the face value of the death benefit. Many annuity contracts also allow for withdrawals up to a certain percentage of the accumulation value without surrender charges.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM), AEWM and Soutas Financial & Insurance Solutions, Inc. are not affiliated companies. California Insurance License #OK48173 860314 – 03/21

1 Caleb Silver. Investopedia. Aug. 7, 2020. “1.76 Million Jobs Added in July as Unemployment Rate Falls to 10.2%.” https://www.investopedia.com/1-76-million-jobs-added-in-july-5074135. Accessed Aug. 10, 2020.

2 The U.S. Department of Labor. May 4, 2020. “US Department of Labor issues additional guidance about short-time compensation program provisions.” https://www.dol.gov/newsroom/releases/eta/eta20200504. Accessed Aug. 10, 2020.

3 Barbara A. Friedberg. Investopedia. Nov. 17, 2019. “Social Security ‛Start, Stop, Start’ Strategy Explained.” https://www.investopedia.com/articles/financial-advisors/011216/social-security-start-stop-start-strategy-explained.asp. Accessed Aug. 10, 2020.