Helping clients emerge from the pandemic

By Tracy Stewart, CPA/PFS/CFF

Editor: Theodore J. Sarenski, CPA/PFS

The coronavirus pandemic has turned lives upside down. School, work, medical care, travel, birthday celebrations — everything has changed, including people's financial circumstances. Many Americans have seen their incomes drop and, at certain points, their investment account balances plummet.

These dramatic changes are reflected in household budgets and financial plans. Many younger families have delayed the purchase of a home or reduced saving for their child's college education because of the income interruption. For those close to retirement, the pandemic may have pushed back their timeline, keeping them at work for a few extra years. Finally, for those already in retirement, the economic impact of COVID-19 may have required a change in spending habits.

The good news is that CPA financial planners have an opportunity to step up and deliver client value on a different scale. Here are nine conversations to consider having with clients as the nation begins to emerge from the pandemic.

Encourage clients to revisit their goals

Remember how, in the pre-COVID days of travel, the helpful airline staff would remind you to open the overhead compartments slowly in case luggage had shifted during the flight? Your clients' financial lives have experienced similar turbulence, and some of the details may have to be reconsidered and rearranged.

Those clients who have previously been through a planning conversation will likely be grateful for an update. After all, whether the news is good or bad, there is psychological benefit to knowing where you stand.

For the clients who are new to financial planning, it may be helpful to begin by asking specific questions. Can they still retire on schedule — or has the pandemic set them back? If there is a setback, how significant is it? Do they still want to retire in place, or has a mandatory stay-at-home order pointed out that perhaps a different location may serve them better? What are their children's college plans now, and what resources are available to help cover the expenses?

Review savings (especially emergency savings)

The pandemic has demonstrated that a financial safety net is not a luxury. It is a real necessity. Moreover, the traditional advice to maintain three to six months' worth of household expenses in an emergency savings account may have fallen short. Some families have been facing unemployment and income cuts for more than six months, and there is no telling how much longer they must tread water.

For clients who have been fortunate enough to maintain a steady income, this is a good time to revisit the savings plan. One side effect of the pandemic has been a forced decrease in certain types of spending. Shifting those "extra" funds into savings can help clients face the uncertain future with a bit more confidence.

Some of your clients may feel that there is nothing they can do to improve their savings rate. This is a chance to remind them that small steps are always possible. Research has demonstrated that small-but-permanent spending cuts can be more effective in the long run than larger-but-temporary measures (see Tharp, "Dynamic Retirement Spending Adjustments: Small-But-Permanent vs. Large-But-Temporary," (June 7, 2017), available at So, encourage them to look for those less painful budget opportunities.

Reassess debt

With interest rates so low, now may be a good time for some clients to consider lowering their interest payments. Mortgage debt is the largest opportunity to potentially save money with a refinancing. For those with credit card balances, a transfer to a lower-interest credit card may offer some relief.

In both cases, encourage clients to read the fine print, and help them do the math.

With refinancing, the interest rate is the most obvious factor, but it should not be the only consideration. Clients may have a choice to refinance to a longer term or a shorter term, which will affect their monthly payments and the pace of building equity in their home. And then, there are application fees, appraisal fees, attorneys' fees, and the expense associated with a title search and insurance. Without adding it all up, it is hard to know whether refinancing is a financially smart idea for the client.

Evaluate investments

Former heavyweight boxing champ Mike Tyson once said, "Everyone has a plan until they get punched in the face." COVID-19 has certainly provided many punch-in-the-face moments, and market turbulence was one of them.

Explore what your clients learned about themselves during those days of double-digit market drops. Some may have discovered that their investment choices were too aggressive for them to sleep at night. Others may have experienced a strong urge to sell everything in an attempt to prevent further losses. You may also have clients who used their newfound free time at home to explore trading apps like Robinhood.

In times like these, the usually dry topics of risk tolerance and market timing take on living color and enjoy a moment of significance. Use this opportunity to educate clients, validate their sound choices, and review any mistakes that may have been made.

Double-check health insurance coverage

The COVID-19 crisis is unique in that it affects people medically as well as financially. Many families are worried about the health of their vulnerable loved ones, and a separate worry is how to pay the cost of health care treatment. The same concern will continue to exist even after the pandemic subsides.

Do your clients have the right health insurance plan? Do they know what their out-of-pocket maximum is? Does their insurance plan even have a stated maximum? Do they know how they would pay for emergency or extended medical care?

It is possible that, with your help, clients can discover that they do not have the right health insurance coverage for their needs. You can provide them with information to make better choices at their first opportunity to change coverage.

Review property and casualty insurance coverage

The big disruptor that most people associate with the past year or so has been the COVID-19 pandemic. However, the year has also been marked by devastating wildfires in the western United States, a record-setting number of North Atlantic hurricanes (enough to have caused the National Hurricane Center to run out of names), and other natural disasters.

Even if your clients have been fortunate to escape direct damage from these events, now is a good time to sit down with them to review property and casualty insurance policies. Include homeowner's insurance, auto insurance, and umbrella coverage. Ask about earthquake coverage, especially for clients whose residences are not subject to a mortgage. Some individuals may find that their coverage is insufficient or missing.

Explore alternative sources of cash flow

The idea of diversifying sources of cash flow may have looked quaint to most people before the pandemic. Now that there is a better understanding of the reality of shutdowns, furloughs, and early retirement packages, it is a good idea to brainstorm with clients on how, if they encounter hard times, they could potentially cover their bills after their emergency cash reserve runs out.

One possible source of cash could be taxable brokerage accounts. Clients should be prepared to pay taxes on the withdrawals and to realize losses if they cash out when the markets are in a dip. For those who want to avoid liquidating investments, a securities-based loan may be an option to consider.

For other clients, their home could become a source of cash through a reverse mortgage or a home-equity line of credit. This could allow the family to remain in the home and keep their traditional investments in the market.

Tapping retirement savings is rarely the ideal option, but in certain situations it can offer another lifeline. Help your clients understand the financial consequences of an early withdrawal and the conditions for potentially avoiding the penalties.

Identify planning opportunities

Along the lines of never letting a good crisis go to waste, some planners are guiding their clients through the possibility of using this unprecedented time to lock in tax savings through Roth conversions. There is some uncertainty about what will happen to tax rates in the future. Many families have experienced a temporary drop in their incomes, and there have been periods of market downturn. Those conditions can add up to good timing for Roth conversions.

The bottom line of the Roth conversion decision is straightforward. If your client would rather pay income tax at today's tax rates, then a Roth conversion may be the right tool to accomplish that goal. Clients who would rather take a chance on future income tax rates are probably not good candidates for a Roth conversion.

However, additional factors should be considered before offering guidance.

Would the conversion be for the benefit of the original account owner — or for his or her surviving children? Keep in mind that there is a requirement for the account to be funded for five years before taking tax-free distributions. Remember also that nonspousal heirs may be subject to required minimum distributions that force them to withdraw the funds within 10 years of inheriting the account.

Is the client using the conversion as an opportunity to "max out" his or her current income tax bracket without pushing into a higher rate bracket? If that is the case, then you may recommend converting smaller amounts (from a traditional IRA to a Roth IRA, for example) until the client reaches the top of his or her current income tax bracket. This strategy requires careful planning.

The pace of Roth conversions is another issue to think about. Would the client rather do one larger conversion (for example, $100,000) — or engage in cost averaging by converting $20,000 per month over the course of five months? The former option would lock in the market values at the time of the single-instance conversion. The latter choice could potentially take advantage of a continued market decline — if that is what happens.

Finally, the client will need available funds to pay income taxes on the conversion, and also must consider possible side effects, such as causing some Social Security benefits to become taxable or Medicare premiums to increase.

Review estate planning documents

Now is a good time to ask clients about the status of their estate planning documents and especially their health care proxies, living wills, and advance directives.

Before the pandemic, it was reasonable for an aging parent to list an adult child as a health care proxy, even if that child lived in a different state. If a parent were to get sick or injured, his or her health care proxy could jump on a plane and get virtually anywhere in the country within 24 hours. However, with air travel restrictions and quarantines in place, it might make sense to switch the health care proxy to someone who is nearby — at least until the world returns to some version of normal.

Another example is the use of ventilators for patients whose lungs are damaged by the coronavirus. Those who have previously indicated that they do not wish to be placed on life support need to update their documents if they want access to this type of potentially lifesaving measure.

Guiding clients through change and uncertainty

With perseverance, vaccines, and treatment protocols in place, the end of this pandemic may be in sight. However, many unknowns still lie ahead.

For now, CPA financial planners can continue to do their best to support clients through this uncomfortable time of transition. And remember, every situation that combines change and uncertainty is potentially an opportunity for tax and financial planning. Practitioners should raise these questions with clients and proactively look for ways to help them improve their financial situation through professional advice.



Tracy Stewart, CPA/PFS/CFF, is the owner of Tracy Stewart CPA PLLC in College Station, Texas. Theodore J. Sarenski, CPA/PFS, is a wealth manager at Capital One/United Income in Syracuse, N.Y. Mr. Sarenski is chairman of the AICPA Advanced Personal Financial Planning Conference. He is also a past chairman of the AICPA Personal Financial Planning Executive Committee and a former member of the Tax Literacy Commission. For more information about this column, contact


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