WEST PALM BEACH, Fla. — With companies cutting back and many Floridians out of work due to the coronavirus pandemic, a lot of us are looking for extra sources of income during this very difficult time.
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"We're all going through the same thing," said Dave Wentley, a financial advisor with Wentley Investments, LLC in Atlantis. "We don't have a playbook."
When it comes to finding additional sources of money, where should you start?
INTERVIEW WITH FINANCIAL ADVISOR:
BORROWING FROM YOUR 401(K)
Your first thought may be to tap into your 401(k) or other retirement plan. But Wentley warns that should be a last resort.
"The 401(k) has really become the nest egg, the savings place for the majority of people that can do it," said Wentley. "So that's really where their money is."
If you do have to dip into your 401(k), Wentley said the IRS has relaxed rules when it comes to withdrawing money from your retirement accounts.
You can make a penalty-free withdrawal of up to $100,000 from your IRA. You'll then have up to three years to pay the taxes on your withdrawal, or return the full withdrawal amount without suffering a tax penalty.
In addition, the government has eased the rules for withdrawing money from your 401(k) before age 59-and-a-half.
"Normally, they'll hit you with a 10 percent penalty on any money that you take out of your retirement plan prior to age 59-and-a-half. That's gone. You don't have to worry about the penalty," said Wentley.
Wentley added that if you do need to pull money out of a retirement account, don't take any more than you need.
"Just try to be judicious about it," Wentley said. "Take out what you need to meet your immediate needs."
BORROWING FROM FAMIILY MEMBERS
Wentley said another place you can start looking for additional money is from loved ones.
"These aren't normal times," said Wentley. "I've come across families that are making loans to one another."
The financial advisor admitted that sometimes loaning money to a family member can cause problems, but it's an option that may available to you.
"You may have a mom or a dad who may be retired and have some money put away that they can help you get you through it," said Wentley.
ASKING LENDERS FOR A BREAK
The first of the month can be a stressful time with mortgage, rent, and utility payments due.
But Wentley advises people to contact their lenders to see if you can get a forbearance on your monthly payments.
"Credit cards, mortgages, those are things that you can possibly, hopefully delay if you talk to the credit card company or the bank that has your mortgage," said Wentley.
Many banks are willing to work with customers, Wentley added, and they'd rather see you make your payments than go into foreclosure.
"They will say, listen, we're gonna suspend payments. You're still gonna have to pay them in full, but we're gonna give you 90 days. And you don't have to make any payments for the next three months," said Wentley.
MEET YOUR IMMEDIATE NEEDS FIRST
Whatever route you choose to take, Wentley advises everyone to focus on taking care of their immediate needs, bills, and expenses first.
"I tell people to start with what I call expenses of daily life. And that is the most immediate things facing you," Wentley said. "For some, that's food. And for others, that's shelter. For others, maybe it's helping children. Whatever is really most, that you need most right now, that's where the money should first be applied."
