It’s about time. No one could have predicted the insanity that was 2020 in hindsight. So here we stand with a future filled with challenges and opportunities. Covid is an ever-present reality, but we have a real vision of a life made safer by a vaccine that will now be distributed nationally. If we can make it through another few months, the sigh of relief will be heard round the globe. And the pent up demand for just about everything will cause a resurgent economy. Fear is the biggest deterrent to growth, and optimism will unleash economic activity.

But first, we have to get through the next few months. For some of my readers that is simply the task of spending more time working at home, staying within a safe bubble. But for far too many, the next three months will be critical. They are just one government regulation away from being evicted from their rental apartments or foreclosed from their homes. The need for food and healthcare has become a high priority for too many American families who have lost jobs that won’t return for a long time — restaurant and hospitality workers, for example.

So while we start this year with a stock market trading at all-time highs, thanks to the Fed’s money creation, those who are surviving well have a special opportunity, even a duty, to reach out and help someone else make it through. Living in a safe bubble, you might not see them. But your community food bank certainly does. Reach out through charities or just by asking your church or school which families need help. Your generosity could make all the difference. We need those people to be part of the next upswing, instead of falling farther behind.

Because there will be an upswing in 2021. Count on it and plan for it. There is plenty of money sitting on the sidelines, earning no interest. The Fed planned it that way! And since there is no reward for saving, then spending will be the big alternative once Covid worries subside.

Yes, our economy will be forever changed by the new technologies that have been created and used widely in the past year. Instead of playing the “reopening trade” so much discussed in the financial media, count on overall economic growth. Just start with the premise that the American economy will come back stronger, as it always has, after every crisis.

In 2020, the Dow Jones Industrial average rose 7.1% even after the sickening drop in Spring. The S&P 500 gained 16%. And the Nasdaq, home of many tech stocks, rose 43.4%.

The median home price increased 15% year over year to $320,625 — the highest on record, according to Redfin. And those who swore off homeownership during the 2008-09 financial crisis missed out on a major surge.

It has never paid to be cynical about America’s future. Or as Warren Buffett has often said: “No one ever got rich betting against America!”

I’m avoiding politics here. It’s too painful to watch, too bitter to discuss. I’m sticking with the mantra that history has taught me and that I have observed in my own lifetime of investing: “America will survive and prosper, and so will you if you plan, save and invest.”

So here are a few personal finance tips based on that optimism, as we enter 2021.

ReFi Your Mortgage Now!
The Fed has promised to keep interest rates low, almost forever. But can they truly control long-term interest rates which are set by the free market? With the growing U.S. debt, and the ongoing need to borrow and refinance, it is entirely possible that rates could rise amidst fears for the future value of the dollar.
Locking in a fixed-rate mortgage under 3% could become a lifetime opportunity. And if you want to own your home free and clear by retirement, rates for 15 year mortgages are even lower.

Consider Inflation
Even the Fed can’t seem to make inflation happen, despite all their money creation. But don’t rule out the possibilities. Gold ended the year above $1900 an ounce (a gain of $373 an ounce for the year) after earlier reaching an all-time high of $2067 in August. Meanwhile, the dollar dropped in value as foreign investors questioned the value of buying U.S debt. Eventually, a declining dollar and more debt could lead to rising consumer prices — inflation. Along with gold, over the long run stocks have beaten inflation.

“Chicken Money”
It’s painful to leave some money in bank CDs or money markets when you’re earning miniscule interest. But, as we’ve all learned, cash on the sidelines buys peace of mind, as well as bargains. And it gives you courage to remain disciplined in your other investments. Always remember that temptingly higher yields come with significant risks, and many traps for the unwary.
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RMDs Come Back
In 2020 no mandatory distributions were required from IRAs and retirement accounts. But they will be back in 2021. So keep all your year end statements to document the value of your accounts, on which 2021 RMDs will be based. Set up a plan to take them automatically every month — or in a lump sum at year end. But don’t forget about them!

Student Loans
With more than $1.7 trillion in student loans outstanding, much of it at rates as high as 8% or even higher, you can count on this issue to be a hot topic in the next administration. Forgiveness of at least some part of this balance will be considered.
Yes, many people worked hard to repay their loans, and expect others to do the same. But here is a reality check: The government borrows for 10 years at less than 1% interest, while student loans keep their original high rates, piling onto the debt. Couldn’t the interest portion of student loans be waived or reduced if we really wanted to support an educated population?

Stimulus Checks
The second round of stimulus checks is on the way. But there is still a chance to get the first check for $1200 if you know someone who was passed over. That includes your college-age children who were declared as dependents on your 2018 return, which the IRS used to first determine eligibility.

If your child is 17 or older this year, and had some earned income, do not declare him or her as a dependent on your 2020 return. Instead, they can file their own 2020 return, and claim a REFUNDABLE TAX CREDIT for the first $1200 stimulus — and the second $600 stimulus if they haven’t received it, but qualify based on income for 2020. That line will appear on 2020 tax forms, which will be available soon.

That goes for your elderly parent whom you claimed as a dependent in earlier years. Even if they don’t have enough income to be required to file a return, they should do so in 2020 in order to claim the original stimulus if they did not receive it, as well as the new $600 check.

Beware of Identity Theft
The dramatic increase in unemployment benefits earlier this year as well as the new benefits for the self-employed (PUA) which were difficult to verify, created a fertile ground for identity theft. Those massive breaches at Equifax and major retailers several years ago yielded a trove of personal information. Much of it was used to apply for benefits from strained state unemployment offices, with money sent to newly-opened online bank accounts using stolen Social Security numbers and birthdates.

Seniors were especially targeted in this scam, which the FBI estimates could have misdirected huge sums of money when you consider that additional $600 per week in benefits sent out until the end of July.

Many will become aware their identity was used only when they receive a 1099-G form from the government in January, asking for taxes to be paid on the unemployment benefits they allegedly received! I expect this identity theft chaos to be the headline personal finance story of 2021.

Read this article on the home page of TerrySavage.com to find out how to protect yourself and how to report suspected identity theft to multiple authorities. Useful links are included in the article.

Finally, let’s give America a chance to breathe this year. Let’s take a step back from confrontation and a step forward toward a more peaceful co-existence. There will still be some rough patches ahead, but if we give our country the opportunity, it will take us to renewed prosperity for all.
And that’s The Savage Truth.