Commentary & Opinion

How Americans Can Make The Stimulus Program Work For Them

An economic forecast

Ed Hutton from, an economist from Niagra University, offers options to bridge the financial gaps. (Originally posted 3/31/20)

It may be three weeks or more before Americans will receive the checks due those in certain income groups ($1200 for individuals, $2400 for couples and $3000 for families of four), per the stimulus package passed by Congress last week. The same is true on enhanced unemployment checks for those who have lost their jobs.

What can Americans do in the meantime? Ed Hutton, professor and director of the Financial Markets Lab at Niagara University, says there are options for those wishing to bridge the financial gap until assistance arrives.

While Hutton advises extreme caution when tapping into retirement funds, he said those under 59 ½ years old who withdraw from an IRA or 401 K, are now exempt from the 10% penalty that was in place before the crisis. He cautions, though, that regular taxes remain in place. There is also a higher cap on withdrawals; what used to be $50,000 is now $100,000.

Another option, for those who have employer-sponsored 401(k) accounts, is borrowing from those funds. Prior to the stimulus, the limit on withdrawals was 50% of the balance, limited to $50,000. That limit has now been raised to $100,000.

Individuals are also free to withdraw up to $100,000 from an IRA account without penalty, provided you have been impacted in some way (loss of job, gotten sick) by the Coronavirus.

Economy Seeing Signs Of Improvement

On the overall economy, despite bad news yesterday from major retailers, like Macy’s, Kohl’s, the Gap and others, that major furloughs and lay-offs will occur contributing to a dramatic increase in the unemployment rate, the stock market is beginning to react positively to signs that the crisis will end.

“About three weeks ago, the markets were down almost 37% from a high on February 19th,” said Hutton. “What’s encouraging is that if you look ahead and see what’s coming up after we get through this, there are encouraging signs and the markets have been reacting to that.”

“With what’s happening in Asia and Europe, it looks like the market will be up strongly again today. I think people are encouraged by some of the things that have happened, especially in China. China has restarted its economy. They’re manufacturing again. Their manufacturing output has doubled since the lows they were at a couple of weeks ago,” said Hutton.

here is certain to be aid for the larger companies like American Airlines, United Airlines, Boeing and the major retailers. The next one will be a massive stimulus program that will also contain relief for employees...

“I think people are starting to look ahead and say that we will get through this and the stock market is starting to react,” he said.

Finally, for small business, the stimulus will also begin to help. According to Hutton, companies with fewer than 500 employees will be able to borrow up to 250% of their monthly payroll. And, as long as they keep their workers on for at least eight weeks, those loans will be forgiven.

For larger businesses, the next stimulus package will likely contain major relief.

“There is certain to be aid for the larger companies like American Airlines, United Airlines, Boeing and the major retailers. The next one will be a massive stimulus program that will also contain relief for employees of the bigger enterprises who have lost their jobs,” said Hutton.

 

 

Niagara University
Founded by the Vincentian community in 1856, Niagara University is a comprehensive institution, blending the best of a liberal arts and professional education, grounded in our values-based Catholic tradition. Its colleges of Arts and Sciences, Business Administration, Education, and Hospitality and Tourism Management offer programs at the baccalaureate, master’s and doctoral level.