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What have we learned from the Pandemic of 2020?

By Steve Gaito

McDowell County


In three months, from January 1st to April 1st, the S&P 500 went down almost 25 percent. In the same period, the Federal Funds rate dropped from 1.55% to .05% and our National Debt is expected to expand to over 30 trillion dollars. This information looks alarming for our nation but what does it mean for you and your retirement?  First and foremost, this event has significantly impacted your ability to produce income if you are expecting to live off either your investments or interest earnings. A second concern is a likely rise in taxes that will be implemented to pay for this additional national debt.  As a CERTIFIED FINANCIAL PLANNERTM practitioner, I am trained to look at the impact on both personal and professional lives. This pandemic has caused the largest disruption to both jobs and businesses in my lifetime. The drop in the stock market and fixed interest accounts are only rivaled by what took place during the Great Depression. It is a reality that the future will look different, but what we learn from this event could shape our future into a better place.

On a positive note, during this pandemic, I have learned that people are generally good and caring. I have seen that nurses, doctors, schoolteachers, law enforcement officers, and public health officials are critical to our society. I have also realized that what many of us deem as essential is very different from what our government deems essential. And most importantly I have learned to appreciate faith, family, and friends more than ever before.

Looking back on my experiences in financial planning I recognize that in the 90’s I was very involved in helping people save for retirement. I primarily worked with nonprofit organizations to implement their retirement plans. At that time, it was all about the efficient frontier (asset allocation) and how diversification could minimize the impact of market fluctuations. It was an interesting theory, but as I have seen several times since the 90’s it is not perfect. If you can wait asset allocation works out in the long run. That is the key statement having the ability to wait. Today as people rely on their investments for income that may not be an option. As I moved into the early 2000’s and more Baby Boomers were retiring, it was clear that there needed to be an alternative for pensions plans that were replaced by 401(k), 403(b), 457 and IRA plans. With the loss of pensions, there was a great need for guaranteed income that you could not outlive. This was the dawn of the Annuity era. This type of planning met the need for guaranteed income and was quickly adopted by most financial planning professionals. For the next 15 years, comprehensive retirement planning consisted of balancing your managed portfolio for growth and an annuity for guaranteed income. I have found that most advisors do a pretty good job of these two elements, but over the last 5 years, I have realized this is incomplete retirement planning. Complete planning involves tax-efficient planning. With so much money in these qualified plans (401(k)), there is a tax risk that few consider. If you look at your statement and you see that you have $500,000 in your IRA, most think they have a half of a million dollars. If you try to access this money you will quickly see that you do not have $500,000 but more like $375,000 if you consider a total tax of 25% for state and federal taxes. By being strategic about how you access these funds can reduce the tax you will pay.

As I study the current situation I see that the United States started 2020 with 23 trillion in debt. With the implementation of the stimulus packages and the reduction of tax collection from closed businesses and unemployed workers, it is estimated that our debt will balloon to 30 trillion by the end of the year. Just look at the unemployment numbers and you can see this in real-time. The impact that 0% interest has on savings and fixed income investments complicates conservative investments. There is no place to get a safe return like we used to get from CDs and bank accounts. The market drop changed the 20-year average of the stock market from just over 6% return to about 4.5% return. This would give a 60/40 portfolio a blended average of 2.7% before taxes and fees. Consider fees in a portfolio of 1% and taxes of 25% and your after-tax net of fees return is 1.275%. Can you live off of this return? I am not providing this information in an attempt to frighten you but rather to make you look clearly at the situation and decide if this is what you want or expect from your retirement plan. You cannot control the market, but you can minimize your taxes.

There is also another very real concern and that is with a debt of 30 trillion dollars do you think taxes will rise or fall? I believe that they will rise, and they will not be limited to your tax brackets. We may see taxes rise in hidden ways. For those on Social Security, we could see all benefits taxed at 100% instead of 85%. We could see the elimination of deductions for our taxes. Finally, we could see our retirement savings taxed at a different rate than income tax rates. These are all risks associated with taxes that we can minimize through planning.

So, my takeaway from this is that these are challenging times. Finding ways to minimize taxes and future taxes can offset some of the limited returns on portfolios. Now is the time to act as we can pay taxes on lower amounts and let them grow tax-free.

I wish everyone great health and invite you to schedule a time to talk with me about how I can help you with a complete retirement plan. Give me a call at 828-559-0299 or email me at

Just let me know that you read this article in the Blue Ridge Christian News and I will run a tax analysis of your retirement plan at no cost.


Steve is owner of Faith Based Health Care and Retirement Resource Management. He is a National Speaker on the topic of Social Security optimization, quoted in national publications like Money Magazine, US News and World Reports and Fox Business. Steve loves to educate and teach on financial topics like taxation of retirement accounts, long term care, healthcare, and efficient savings plans for small businesses. He has provided financial planning for missionaries through the International Mission Board. You can find Steve at 68 South Main St. in Marion, NC by calling 828-559-0299, email or visit his website at