The move will happen just after Labor Day. After several years of preparation behind the scenes, the merger of our custodian TD Ameritrade Institutional with Charles Schwab will complete its final steps at the end of this summer. We at Blue Spark Financial have been talking to clients about this since 2019, when Schwab first announced it would buy TD. Covid slowed the merge, as is easy to understand. TD is now sending letters to all clients letting them know what to do.

The bottom line is that your accounts’ custodian will change but little else. The Schwab website interface is similar enough that there should be little difference for you when looking at your accounts. Schwab says it will offer the same — or better — great service and low-cost transactions that we knew at TD.

When you get the letter, no action is needed. However, make sure you can access your accounts online at TD’s website, so you will be able to immediately access them after Labor Day at Schwab’s site. Kim can help you with this if you have trouble, reach out to her if you need assistance.

We have done much research over the last few years to ascertain whether Schwab will provide the best service over any other alternatives. We made the decision to remain with the new combined entity. As always, we will continue to do our due diligence to make sure all our third-party providers meet the needs of our clients.

The date for the final move is September 5, so when you log on to your site, you will go to the Schwab website instead of the TD website. We are hoping it will be seamless, as they say. Your account, its history, and its documents will automatically move to Schwab.

History of the Merger (Acquisition)

To be clear, it is not really a “merger,” as Schwab bought TDAI. The deal puts Schwab in league with Fidelity, Vanguard, and Blackrock. The acquisition of TD Ameritrade gives much greater scale to Schwab, which should help it grow and serve clients at lower costs. TDAI itself had earlier grown with the purchase of Scottrade in 2017.

The new combined total is approximately $6 trillion in client assets and 28 million brokerage accounts, Schwab says. The two companies had been operating independently since the 2019 deal. Schwab will work to complete the merger process Sept. 2 through Sept. 5. After the transition date, clients will log in to Charles Schwab going forward.

TD has long been a leader in technology, and Schwab is keeping several components that aid RIAs in their management and trading of client accounts. “Combining the strengths of Schwab and TD Ameritrade will enable the company to invest in enhanced client experience capabilities and further its financial success to the benefit of clients, employees and stockholders,” Schwab says.

Employment

A weekly report from the Department of Labor includes the number of new claims for unemployment benefits under state programs filed by workers who recently lost their jobs, as well as the number of continuing claims filed by those who remain unemployed. This provides an early look at whether the labor market is improving or worsening on a state-by-state and national basis. For example, the week ending March 20, 2021, first-time claims for unemployment benefits fell to 684,000, the lowest level since before lockdowns began in mid-March of 2020.

The ASA Staffing Index from the American Staffing Association tracks weekly changes in temporary and contract employment. Many employers rely on temporary help before hiring additional permanent employees, so staffing agency trends tend to lead non-farm employment by three to six months. As of March 8-14, 2021, there were 11.2% more staffing jobs than there were one year earlier.

Consumer Behavior

The proprietary Johnson Redbook Index captures consumer spending trends based on weekly data from a representative sample of thousands of large general merchandise and apparel retailers. In an encouraging sign, this key index improved 9.4% year-over-year on March 23, 2021.

The reservation app OpenTable – one of my favorites – has been monitoring the impact of COVID-19 on the hard-hit restaurant industry, providing data that provides an indicator of the “openness” of local economies around the world. Daily data shows changes in the number of people dining at restaurants compared with the same day of the same week in 2019. As of March 28, 2021, the weekly average number of U.S. seated diners was still down 29% from 2019, but had bounced back considerably from the last week in February, when the average was 40% below 2019.

Mobility and Travel

Other tech companies developed tools designed to help public health officials and policymakers around the world monitor day-to-day mobility trends with data collected from smartphone apps. Google’s Community Mobility Reports show changes in visits to places like grocery stores, retail shops, and parks. Apple’s Mobility Trends Reports show changes in routing requests (since January 2019) for walking, driving, and public transportation trips, the latter of which have been slower to recover.

The number of people who pass through U.S. airport checkpoints is posted daily by the Transportation Security Administration. On March 21, 2021, a spring-break surge caused the number of air travelers to rise above 1.5 million for the first time in about a year. Still, this total was far below the 2.2 million air travelers on the same Sunday in 2019.

The hotel occupancy rate (released weekly by a group called STR) is another good indicator of the willingness of consumers and businesses to spend money on travel. U.S. hotel occupancy hit 58.9% in the week ending March 20, 2021, the highest level in a year. More importantly, the industry had recovered nearly 85% of comparable 2019 occupancy.

Real-Time Tracker

In May 2020, the Harvard-based nonprofit Opportunity Insights, in partnership with several private-sector providers of high-frequency data, launched Economic Tracker as a free public service. Interactive charts show day-to-day changes in U.S. debit- and credit-card spending, small-business revenue, employment, online job postings, and time spent outside the home. In addition to nationwide statistics, disparities in progress can be broken down by income and industry, as well as by state or metro area.

Fed Indexes

The Weekly Economic Index (WEI), which is published by the Federal Reserve Bank of New York, signals the state of the U.S. economy based on 10 different indicators of consumer behavior, the labor market, and production — they are available daily or weekly. The WEI is scaled to the 4Q GDP growth rate, which means the weekly result is the economic growth that could be expected if current activity continued for a year. For the week ending March 20, 2021, the WEI jumped to 4.14% from -0.33% the previous week.

These estimates are based on current conditions, are subject to change, and may not actually happen. Neither is an official forecast of the Federal Reserve. When investing, as we always say, it’s wise to maintain a long-term approach based on your personal goals, time frame, and risk tolerance, rather than react too quickly to shifting economic dynamics.

Consumer Behavior

The proprietary Johnson Redbook Index captures consumer spending trends based on weekly data from a representative sample of thousands of large general merchandise and apparel retailers. In an encouraging sign, this key index improved 9.4% year-over-year on March 23, 2021.

The reservation app OpenTable – one of my favorites – has been monitoring the impact of COVID-19 on the hard-hit restaurant industry, providing data that provides an indicator of the “openness” of local economies around the world. Daily data shows changes in the number of people dining at restaurants compared with the same day of the same week in 2019. As of March 28, 2021, the weekly average number of U.S. seated diners was still down 29% from 2019, but had bounced back considerably from the last week in February, when the average was 40% below 2019.

Mobility and Travel

Other tech companies developed tools designed to help public health officials and policymakers around the world monitor day-to-day mobility trends with data collected from smartphone apps. Google’s Community Mobility Reports show changes in visits to places like grocery stores, retail shops, and parks. Apple’s Mobility Trends Reports show changes in routing requests (since January 2019) for walking, driving, and public transportation trips, the latter of which have been slower to recover.

The number of people who pass through U.S. airport checkpoints is posted daily by the Transportation Security Administration. On March 21, 2021, a spring-break surge caused the number of air travelers to rise above 1.5 million for the first time in about a year. Still, this total was far below the 2.2 million air travelers on the same Sunday in 2019.

The hotel occupancy rate (released weekly by a group called STR) is another good indicator of the willingness of consumers and businesses to spend money on travel. U.S. hotel occupancy hit 58.9% in the week ending March 20, 2021, the highest level in a year. More importantly, the industry had recovered nearly 85% of comparable 2019 occupancy.

Real-Time Tracker

In May 2020, the Harvard-based nonprofit Opportunity Insights, in partnership with several private-sector providers of high-frequency data, launched Economic Tracker as a free public service. Interactive charts show day-to-day changes in U.S. debit- and credit-card spending, small-business revenue, employment, online job postings, and time spent outside the home. In addition to nationwide statistics, disparities in progress can be broken down by income and industry, as well as by state or metro area.

Fed Indexes

The Weekly Economic Index (WEI), which is published by the Federal Reserve Bank of New York, signals the state of the U.S. economy based on 10 different indicators of consumer behavior, the labor market, and production — they are available daily or weekly. The WEI is scaled to the 4Q GDP growth rate, which means the weekly result is the economic growth that could be expected if current activity continued for a year. For the week ending March 20, 2021, the WEI jumped to 4.14% from -0.33% the previous week.

These estimates are based on current conditions, are subject to change, and may not actually happen. Neither is an official forecast of the Federal Reserve. When investing, as we always say, it’s wise to maintain a long-term approach based on your personal goals, time frame, and risk tolerance, rather than react too quickly to shifting economic dynamics.

Unemployment Provisions

The legislation extends unemployment benefit assistance:

• An additional $300 weekly benefit to those collecting unemployment benefits, through September 6, 2021
• An additional 29-week extension of federally funded unemployment benefits for individuals who exhaust their state unemployment benefits
• Targeted federal reimbursement of state unemployment compensation designed to eliminate state one-week delays in providing benefits (allowing individuals to receive a maximum 79 weeks of benefits)
• Unemployment benefits through September 6, 2021, for many who would not otherwise qualify, including independent contractors and part-time workers
• For 2020, the legislation also makes the first $10,200 (per person for joint returns) of unemployment benefits nontaxable if modified adjusted gross income is less than $150,000.

Business Relief

• The employee retention tax credit was extended through December 31, 2021. It is available to employers that were significantly impacted by the crisis and is applied to offset Social Security payroll taxes. As in the previous extension, the credit is increased to 70% of qualified wages, up to a certain maximum per quarter.
• The employer tax credits for providing emergency sick and family leave were extended through September 30, 2021.
• Eligible small businesses can receive targeted economic injury disaster loan advances from the Small Business Administration. The advances are not included in taxable income. Furthermore, no deduction or basis increase is denied, and no tax attribute is reduced by reason of the exclusion from income.
• Eligible restaurants can receive restaurant revitalization grants from the Small Business Administration. The grants are not included in taxable income. Furthermore, no deduction or basis increase is denied, and no tax attribute is reduced by reason of the exclusion from income.

Housing Relief

• The legislation allocates additional funds to state and local governments to provide emergency rental and utility assistance through December 31, 2021.
• It allocates funds to help homeowners with mortgage payments and utility bills.
• It also targets funds to help the homeless.

Health Insurance

• For those who lost a job and qualify for health insurance under the federal COBRA continuation coverage program, the federal government will generally pay the entire COBRA premium for health insurance from April 1, 2021, through September 30, 2021.
• For 2021, if a person gets unemployment compensation, the taxpayer is treated as an applicable taxpayer for purposes of the premium tax credit, and the household income of the taxpayer is favorably treated for purposes of determining the amount of the credit.
• Persons who bought their own health insurance through a government exchange may qualify for a lower cost through December 31, 2022.

Student Loan

• For student loans forgiven or cancelled between January 1, 2021, and December 31, 2025, the forgiven amounts are not included in taxable income. They would ordinarily be considered income.

Tax Credits

• For 2021, the child credit amount increases from $2,000 to $3,000 per qualifying child ($3,600 for qualifying children under age 6), subject to phaseout based on modified adjusted gross income. The legislation also makes 17-year-olds eligible as qualifying children in 2021.
• For most individuals, the credit is fully refundable for 2021 if it exceeds tax liability.
• The Treasury Department is expected to send out periodic advance payments (to be worked out by the Treasury) for up to one-half of the credit during 2021.
• For 2021, the legislation increases the maximum credit up to $4,000 for one qualifying individual and up to $8,000 for two or more (based on an increased applicable percentage of 50% of costs paid and increased dollar limits).
• Most taxpayers will not have the applicable percentage reduced (can be reduced from 50% to 20% if AGI exceeds a substantially increased $125,000) in 2021. However, the applicable percentage can now also be reduced from 20% down to 0% if the taxpayer’s AGI exceeds $400,000 in 2021.
• For most individuals, the credit is fully refundable for 2021 if it exceeds tax liability.
• For individuals with no qualifying children, the minimum age at which the earned income tax credit can be claimed is generally lowered from 25 to 19 (24 for certain full-time students) and the maximum age limit of 64 is eliminated (there are no similar age limits for individuals with qualifying children).
• For 2021 only, earned income tax credit: increase of credit available for individuals with no qualifying children (bringing it closer to the amounts for individuals with one, two, or three or more children which were already much higher).
• To determine the credit amount, taxpayers can elect to use their 2019 earned income if it is more than their 2021 earned income.

We are continuing our series of online free webinars for anyone who needs help during this pandemic and beyond. The next one is March 25 at 5:30pm, and all you need to do is send in a question in advance. We’ll then send the link to the Zoom webinar.

We heard that some people are shy or simply embarrassed to ask financial questions publicly on Zoom. So to include more people, Maura will answer questions that people send in ahead of time.
The audience will not have to show themselves. You don’t even have to dress up!

We want to be able to take down the barriers – whatever they are – that prevent greater financial literacy.

All Are Welcome

Everyone is invited: clients, friends, students, anyone you know who might have a question. Just send in the question ahead of time to postoffice@bluesparkfinancial.com.

Sample Questions

Here are some questions that have been sent in so far:

• How do I improve my credit score?
• What is a stock split?
• If I took money out of my IRA while I was laid off, can I put it back in?
• Are stimulus payments taxable?

Our quarantines and shelter-in-place this year have been difficult for many, but it would be a shame not to use the current situation to learn more about ourselves, says Shlomo Benartzi, PhD, an expert in behavioral finance and a professor at the UCLA Anderson business school. He suggests three questions for us to ponder that could lead to a greater sense of happiness. Money means different things to different people, and he encourages people to use this opportunity to think about what it means for them specifically.

Question 1 – Am I Spending Money On the Right Things?
If the goal is to maximize happiness, am I spending in line with that goal? Many behavioral scientists believe that spending on experiences rather than things leads to a richer emotional life. We can be thrilled by a pair of new shoes or a new set of dishes, but we habituate quickly to the new purchase – it does not continue to thrill us. But experiences, Benartzi says, give lasting pleasure in a few ways. Experiences such as vacations are fun to plan, and then they are fun while they are happening, and they are fun in the re-living of them through shared memories and photos. Experiences can make us happier for a longer period time, these scientists say. The pandemic gives us a unique opportunity for us to find out what kinds of spending makes us happiest. Going to eat at a restaurant gives pleasure to many, and how much do we miss it? What about going to a gym? Once things are open, do we run to the clothing store or to a yoga class with others?

Question 2 – Is This What Retirement Will Feel Like?
Behavioral economists have always suggested that people take a “test drive” for retirement, by taking a break from work to explore what retirement feels like. The Coronavirus quarantine has felt to many like a kind of forced mini-retirement. Several of our clients who are furloughed say they feel this strongly. What does it feel like to stop working? What fills your day? What gives you a sense of fulfillment and contentment? Benartzi says that most of us might never actually take a test drive of retirement in real life because we are too busy to put our lives on hold, just to find our answers to these questions. So with the current situation, he says it’s a good thing to fully explore our situations. Do you have trouble with isolation and miss the office? You might want to plan to work longer. Do you find interests to fill your days and feel fine without colleagues and meetings? Are you anxious to go back to work, or do you never want to go back? Do you dream of a different kind of work? Thinking about these questions will help you create a plan for your real retirement that could make you happier. It’s not the same for everyone, but we can learn from each other’s responses.

Question 3 – Can I Spend Less?
The pandemic has certainly curtailed most of our spending nationwide, whether we wanted to do that or not! Spending dropped more than 23% in the quarter from the year previous, and that’s not surprising, considering that most everything had to be purchased online. This offers an opportunity to analyze ourselves and our spending – are we more happy or less happy with the reduced spending? Academic research gives conflicting results about whether money can buy happiness, and much of it depends on Question 1, how you choose to spend. But Benartzi encourages people to think whether the cut-back in consumption has made them feel better or worse. If you have remained fairly content despite buying considerably less, maybe there is room for more savings in your future.

Behavioral finance is the application of a specific field of psychology—cognitive psychology—to finance. Cognitive psychology focuses on “the study of higher mental processes such as attention, language use, memory, perception, problem solving, and thinking.” What we have learned from behavioral finance has emerged from laboratory research and large group data sets, often conducted by economists.

Another Set of Three Questions

This shelter-in-place is definitely a time to think about values. Many people want to sort that out,  but how to even begin? George Kinder, author of The Seven Stages of Money Maturity, has developed his own “three questions” to try to elicit what people want from their lives.

Question No. 1. Imagine you have enough money to satisfy all of your needs, now and in the future. Would you change your life and, if so, how would you change it?
We can think about what we would do if we didn’t need to worry about money. What would you change about your life? Would your values remain but your goals change? “It’s the winning-the-lottery question,” Kinder says. “What we’re trying to get at is, what do you care about the most?” He says people often mention hobbies they wish they had more time for, things they want to buy, and trips they would like to take. “The people who say they’d quit their job is less than 10%, but the people who say they’d work less might be 40%,” he says.

Question No. 2. This time, assume you are in your current financial situation. Your doctor tells you that you only have 10 years to live, but that you will feel fine up until the end. Would you change your life and, if so, how would you change it?
By narrowing the focus to 10 years or less, Kinder says, he challenges people to consider what is most important to them right now. “You get a sense of mission,” he says. What are you going to deliver? It might be a greater orientation to family, or to travel, or to doing something creative. This is where people might say they want to write a book. This is the question where virtues come out, “People say they want to be better.”

Question No. 3. This time, your doctor tells you that you have one day to live. Look back at your life. What did you miss out on? Who did you not get to be? What did you fail to do?
“The point is to reflect on your life,” Kinder says. It’s about what would you regret not being able to do, if that diagnosis were true, and what would you change given the chance. “With this final question, you get down to bedrock, what’s absolutely critical.” Sometimes it’s something creative, like ‘I never got to play jazz in a club.’ Or it could be something that’s blocked a person for years, like ‘I never resolved my relationship with my father.’ Kinder likes this question because it goes to the inner core of what is important in people’s lives. “It’s not about paying the mortgage. It’s not about putting in the new kitchen.” He says that many people find satisfaction from using that framework for thinking about their lives and then making small changes – whether it is spending a little less time watching television and focusing on something they always wanted to learn to do. “If you can figure out what you are passionate about, that can provide a road map. But it can also spur you to consider how you can find extra time for the things you really care about.

It’s the season. Nobody likes it, but we can help you get organized. Let us know if you need help with your CPA’s questionnaire. 2020 was a tough year for many, with different challenges in getting ready to file your taxes.

Your custodian has mailed out your tax documents, and we also put them in the Vault of your online Dashboard. There are still a few updates, or corrected 1099s, for some of you.
Remember that because RMDs were not required in 2020, you may not receive the 1099-R form you are used to getting.

Tax Filing Deadlines

Here are some important deadlines:

• March 15 for S Corps and Partnerships
• April 15 for personal tax returns
• April 15 for C Corps
• April 15 for trusts, estates, and gift returns
• May 15 for exempt organizations
• Sept 15 is extended deadline for S Corps and Partnerships
• October 15 for individuals who extended

How do we make sure our beloved animals are taken care? In reviewing clients’ wills, I’ve seen many that are so well thought out that they include their current pets and any pets they might have in the future. Several famous cases, including Leona Helmsley, Michael Jackson, Doris Duke, and Alexander McQueen, provided fabulously for their pets. Karl Lagerfeld left $300 million to his cat.

Pets are actually considered property like furniture, jewelry, and cars – so if you don’t include your pet in your estate planning, they may not end up where you want them. Here’s what to do:

Identify your heir for your pet.

Figure out who would be best to care for your pet, and ask them if they would be willing to do so. It’s important to name someone who really would want to take care of them. Describe your pet and what they need.

Add that person to your will.

It can be a codicil to your existing documents that names the person, or you can include it as a statement in your will when you update your estate documents.

Create a trust for your pet.

You probably want to make sure there is enough money set aside to pay for your pet’s expenses like food, toys, veterinary fees, and medicines. You can name not only the new caregiver but the person who will manage the funds for your pet’s care. It’s also important to name a contingent caregiver and contingent trustee, in case they are unable to accept the inheritance and role of owner of your pet.

Add your desires for their medical and end-of-life care.

You may have specific ideas of what your pet needs at that time.

Set reasonable expectations.

In the famous Leona Helmsley will, she left $12 million when she died in 2007 to her dog named Trouble. This was more than she left to two of her grandchildren, who had been intentionally left out of the will. A judge later determined that Trouble could get by on less, and gave $6 million to the grandchildren, $2 million to Trouble, and the rest to charity.

1. General partners in partnerships
2. S corporation shareholder-employees
3. C corporation shareholder-employees
4. Form 1040, Schedule C filers (e.g., the self-employed, sole proprietors, 1099 recipients, single-member LLCs, and husband and wife LLCs treated as single-member LLCs) See our separate story for No. 4.

If you own all or part of your business and work in the business, you fall into one of the four categories. The maximum loan attributable to and forgiveness available for the “compensation paid” to any owner-employee across all businesses is

• $15,385 for borrowers who received a PPP loan before June 5, 2020, and elected to use an eight-week covered period, or
• $20,833 for borrowers under the 24-week covered period.

Partnerships

The PPP loan forgiveness begins for general partners at the amount of their 2019 net earnings from self-employment (reduced by claimed Section 179 expense deductions, unreimbursed partnership expenses, and depletion from oil and gas properties) multiplied by 0.9235. You then take the lesser of the amount determined above or $100,000, divide by 12, and multiply by 2.5 to find the loan amount. With this calculation, the maximum loan is $20,833. The maximum forgiveness attributable due to the partner’s self-employment income is

• $15,385 if the partnership obtained its loan before June 5, 2020, and elected the eight-week regime, or
• $20,833 if the partnership is under the 24-week program.

Note: Under the 24-week program, the partnership with no employees does not need to spend any amounts on interest, rent, or utilities to obtain full forgiveness. It can obtain full forgiveness in 11 weeks using the calculated self-employment income of up to $20,833 for each partner.

S Corporations

As with any owner-employee, the PPP loan and its forgiveness for “compensation” is capped at $15,385 under the eight-week covered period and $20,833 under the 24-week covered period.

Reminder: The $20,833 cap is based on the maximum defined compensation of $100,000 divided by 12 and then multiplied by 2.5.

Under the 24-week program, the S corporation whose only employee is an owner-employee obtains full loan forgiveness after 11 weeks when using the 24-week covered period without spending anything for interest, rent, or utilities. If the S corporation with no employees other than the owner-employee elects the eight-week covered period, the corporation has to spend money on interest, rent, and utilities to rise above the compensation cap and create full forgiveness.

The Paycheck Protection Program Flexibility Act of 2020 created a new statutory 60% payroll rule that can make it easier to qualify for full forgiveness with payments for interest, rent, and utilities when electing the eight-week covered period. S corporation owner-employees are capped by the amount of their 2019 employee cash compensation and employer retirement contributions made on their behalf, but employer health insurance contributions made on their behalf cannot be separately added because those payments are already included in their employee cash compensation.

Example. You operate your solo business as an S corporation. Your 2019 W-2 compensation of $68,000 included $18,000 for medical insurance. Your payroll cost for the PPP loan and its forgiveness includes the full $68,000 plus what the S corporation paid into your retirement plan and to the state for unemployment insurance. The total of these amounts is capped at $100,000, which creates the $20,833 maximum loan amount as explained.

C Corporations

C corporation owner-employees are capped by the amount of their 2019 employee cash compensation and employer retirement and health insurance contributions made on their behalf.

Example. You operate your business as a C corporation where you are the only employee. In 2019, the corporation paid you a salary of $60,000, contributed $12,000 to your retirement plan, paid $20,000 for your family’s medical insurance, and paid $350 to the state for unemployment insurance.
Your corporation has $92,350 in qualifying payroll costs. Your loan and forgiveness are capped at $19,240 ($92,350 ÷ 12 x 2.5).

Owners of Multiple Businesses – Caution

If you have ownership interests in more than one business, you need to consider that the owner-employee loan maximums apply to all your businesses. The new interim final rule puts the $15,385 or $20,833 deemed compensation cap on the loan forgiveness for the defined owner-employee, but contains no guidance on how to allocate or otherwise deal with the caps when you have ownership interests in multiple businesses.

Example. You operate an S corporation and a proprietorship. You receive your PPP loan on June 17. The cap on your combined S corporation and proprietorship loan forgiveness attributable to (a) your employment in the S corporation and (b) your profits from the proprietorship is $20,833.

We know you can obtain loan forgiveness for up to $20,833, but there is no guidance on how you would allocate the forgiveness between the S corporation and proprietorship. Perhaps by the time you apply for PPP loan forgiveness, we will have some direction.