Financial Perspectives Q&A

How to manage your money

Timely answers to your investment, retirement and financial planning questions

Given ongoing market volatility and significant economic impacts stemming from the global pandemic, you may have questions about the effect on your financial life.

Everyone’s circumstances are unique, and answers will vary based on your financial situation and/or investing timeline. If you don’t see an answer here addressing your particular concern or need, remember our financial professionals continue to be available to help you navigate the uncertainty.

Impact to my investment portfolio

A. Tax-loss harvesting is a strategy that may allow you to cut your tax bill by selling investments at a loss and deducting the losses — up to $3,000 a year — against some or all of the capital gains taxes you owe on other investments that you sold for a profit.

  • This applies only to investments held in taxable accounts. Since growth on investments in tax-advantaged accounts — such as 401(k)s, 403(b)s, IRAs and 529s — isn’t taxed by the IRS, you don’t have to worry about minimizing gains.
  • You can claim up to $3,000 in losses on your taxes in a given year to offset taxable income. This amount is reduced to $1,500 per year if you’re married and filing separate tax returns.

However, don’t sell stocks just to qualify for a tax break. The point of investing is to achieve growth over the long term that beats the returns produced by more conservative assets like savings, CDs and money market accounts. In exchange, you agree to accept exposure to short-term volatility. Unless there is something fundamentally wrong with the investment that’s caused it to lose value, you may be better off holding on to it and allowing its growth over time to smooth out your returns.

If you decide to sell, put your proceeds to smart use. You can use them to rebalance your portfolio if your feelings toward risk have shifted. Or you might choose to buy more stock or buy into a mutual fund that provides you with exposure to an asset class your portfolio lacks.

Read more about when to consider rebalancing your portfolio

A. The U.S. dollar’s value is measured by its purchasing power compared to other countries’ currencies.

A weakening U.S. dollar means that the same dollar can buy fewer foreign goods. Or, said differently, it takes more dollars to buy the same amount of foreign goods. Consequences of this dynamic include:

  • A falling dollar is often associated with rising inflation due to the effect of making foreign goods more expensive to import.
  • Conversely, a weakening dollar means that U.S. goods appear cheaper to foreign buyers, which can make U.S.-manufactured products more price attractive and benefit U.S. exports.

The weakening U.S. dollar – due in part to government policies significantly expanding the money supply in an effort to address economic contraction resulting from the global pandemic – is a reversal of the stronger U.S. dollar trend that had been in place for the last two years. Should this new weaker dollar trend persist, it would likely coincide with higher commodity prices, higher inflation, higher U.S. Treasury interest rates and perhaps even stronger performance for foreign stocks compared to U.S. stocks.

Read more about the effects of inflation on investments

A. Bonds play two important roles in investment portfolios and financial plans:

  • They provide a steady source of cash flow into portfolios.
  • They can provide some defensive characteristics relative to global stocks, especially higher quality, longer maturity bonds.

When it comes to constructing your bond portfolio, it’s important to guard against falling into one of two “traps”:
  • Chasing higher incomes by owning lower-quality securities at the expense of longer maturity, higher-quality bonds. This will expose you to higher risk in difficult environments.
  • Owning too much cash, perhaps fearing interest rates will rise. This will lead to underperformance over time, given the value and moderate risk of owning bonds further out in maturity.

If bonds continue to be appropriate for your financial plan, we recommend adding high-quality bonds into your portfolio. Investment-grade corporate and high quality municipal bonds offer attractive yields compared to Treasuries. For some investors, reinsurance offers an opportunity to take advantage of a differentiated return stream.

Read more about high-quality bonds and reinsurance in managing downside risk

A. There are a few steps you can take when the market is volatile that may help you better weather the impact:

  • Review your financial plan, if you have one, or establish one if you don’t.
  • Revisit your risk tolerance to see if you’re still comfortable with your investment mix.
  • Review your fixed income, or bond, allocation. Government and high-quality bonds may help balance your portfolio
  • Remember it’s about time in the market, not timing the market.

Read more about how to handle market volatility

A. If you’re interested in timing the market, the answer is generally no.

In theory, some investors believe they should buy when prices are low but rising and sell when prices are high but falling. However, to time the market perfectly, you have to be successful twice: once when you buy and then again when you sell. Getting the timing right on both ends is doubly difficult.

Instead of trying to time the market, consider spending time in the market by buying stocks and holding on to them regardless of market fluctuations. This is a long-term buy-and-hold investment strategy.

Read more about the buy and hold investment strategy

A. It’s fair to take a closer look at how you feel about the amount of risk you have in your portfolio, especially since you’re experiencing it real time.

If you’re willing to hold your portfolio through the current period of market volatility, then you appear to have made a correct assessment of your risk tolerance. However, if you find yourself “losing sleep at night” over the market’s recent ups and downs, it may be time to re-assess your risk tolerance and consider adjusting your portfolio as necessary.

Learn more about assessing your risk tolerance

Impact to my retirement

A. Even though you’re not required to withdraw money, you still have the option to do so.

As part of the CARES Act, RMDs are waived in 2020. This means if you’re over age 72*, you don’t have to withdraw money from your retirement accounts (401(k)s, 403(b)s and IRAs). RMDs are also waived for beneficiaries of inherited retirement accounts.

If you’re not sure if you should take the RMD, ask yourself two questions:

  • Do you rely on your RMD as income?
  • Will not taking your RMD move you into a higher tax bracket next year?

If you answered no to both questions, you likely don’t need to take it. Keeping your money in your account(s) gives it the potential to keep growing into next year.

If you answered yes to either category, you may want to consider taking at least part of your RMD. Talking with your financial professional can help you determine the right move for you.

*NOTE: The SECURE Act of 2019 raised the age to begin RMDs from 70½ to 72. This change went into effect on January 1, 2020 for individuals who had not turned 70½ by December 31, 2019.


Read more about taxes and your retirement income

A. Yes, if you took out a loan from your 401(k), you’ll have to pay that amount back plus interest within 5 years, in most cases.

Note that the CARES Act increased the maximum amount you could borrow from your 401(k), from $50,000 to $100,000. However, not all employers have adopted the new CARES Act provisions, so be sure to check with your employer to see what options are available to you.

Read more about CARES Act provisions related to IRAs and workplace savings plans

A. The answer depends on what’s important to you.

  • If you leave your money in your old 401(k) account, you can take penalty-free withdrawals if you leave your job at age 55 or older.
  • If you’re interested in lower-cost investment options, leave your money in your old account or roll it over into your new employer’s plan, if the option is available; not all plans allow this.
  • If you rollover your 401(k) into an IRA, you’ll have a broad range of investment options available to you, which are typically limited in a 401(k). You can withdraw money from an IRA without penalty for a qualifying first-time home purchase or higher education expenses. Rolling over 401(k)s may also make it easier to manage your overall finances if accounts are consolidated in one place.

You may want to compare fees, investment options, and plan rules before making a decision. If you do roll your 401(k) to a new account, have the administrator of your old 401(k) do a direct transfer to your new account. Indirect transfers may be subject to a 20 percent federal income tax.

Read more about rolling over your 401(k)

A. Along with the tax filing deadline, the deadline for contributing to an Individual Retirement Account (IRA) has also been extended to July 15.

If you have not filed and meet the income requirements, you may want to max out your contributions for 2019, which is $6,000 ($7,000 if you’re 50 or older).

There’s also an opportunity to add money to your Health Savings Account (HSA), if you have one, up to $3,500 for individuals and $7,000 for families, plus a $1,000 catch-up if you’re 55 or older. Contributions to IRAs and HSAs may help to offset tax liabilities you have.

Read more about how the CARES Act has modified contribution rules for IRAs and HSAs

A. The answer depends on your financial situation.

  • If you’re employed, financially secure and not worried about losing your job, you should continue to contribute to your retirement and savings accounts as you normally would. If you’re able to, consider boosting your contributions, especially to your savings account if you have less than 3-6 months’ worth saved.
  • If you’re worried about losing your job, you may want to prioritize funding your savings account. Continue funding your retirement account as well, but perhaps just enough to take advantage of any employer match that’s offered.
  • If you’ve lost your job, you’ll want to cut back as much as possible. If you have more than $5,000 in your 401(k), you can leave your money in that account. If you have less than $5,000, you can cash out the account or roll it over into an IRA. Keep in mind that unless you roll it over, you’ll have to pay taxes, and possibly penalties, on it.

Read more about how to save for retirement at every age

Impact to my financial plan

A. While there’s never a bad time to take another look at your life insurance policy, now can be a particularly good time.

As both health and economic uncertainty continue due to the pandemic, life insurance can be one way to make sure you and your loved ones are protected if your situation changes unexpectedly.

You’ll want to review and consider revising your coverage if anything in your life has changed, such as:

  • Your income, either through a job loss or promotion
  • A birth or death in your family
  • You get married or divorced
  • Your health or lifestyle

It can be hard to know how much life insurance you need or which type of policy to purchase, so be sure and work with your financial professional to determine your coverage needs.

Read more about your life insurance options

A. The answer depends on a couple of factors.

  • First, are the interest rates on your loans fixed or variable? If you took out federal loans before 2013, there’s a chance it could have a variable rate. A variable rate rises if federal interest rates rise and falls if interest rates fall. All federal student loans after 2013 are fixed rate loans, with the interest rate staying the same for the life of the loan.

    If you have variable interest rate loans, consolidating would allow you to switch to a fixed interest rate, which may be helpful to you if you anticipate repaying your loans off over a long period of time.
  • Second, how much time and money do you have left? If your monthly payments are manageable, you have a few thousand dollars left to pay or 1-2 years left to go, consolidation may not be the best option for you. If you’re struggling to manage your monthly payments, however, consolidation could be a helpful option.

Read more about student loan terms

A. Yes, if you feel financially secure and not at risk of losing your job, now can be a good time to purchase a house.

Mortgage rates are historically low, and many open houses and showings have gone virtual, helping to lessen concerns about health and safety risks.

Keep in mind that not all mortgage rates are the same. The interest rate for an adjustable rate mortgage (ARM) follows the federal interest rate, rising and falling accordingly. So, while an ARM may be affordable now, your rate will likely increase once the economy stabilizes.

Fixed-rate mortgages are based on the Treasury rate rather than the federal interest rate; however, the federal interest rate has an indirect effect on the Treasury rate, which has resulted in a lower interest rate.

It’s also worth noting that lower mortgage and interest rates don’t impact other home ownership costs like property taxes, homeowner’s insurance or closing costs.

Read more about the financial decisions when buying a home

A. It’s a good question, given today’s historically low interest rates.

However, deciding whether refinancing is right for you depends on your specific circumstances. As you consider your options, a good place to start is to ask yourself these questions:

  • Am I going to stay in the home for a period of time?
  • Can I lower the interest rate on my mortgage?
  • Will my monthly payments be reduced, or can I maintain monthly payments similar to my current mortgage but reduce the term of the mortgage?
  • Are refinancing costs manageable for me?
  • Will the interest expenses I save by refinancing more than cover the cost of doing so?

If you can answer yes to all of these questions, refinancing may be worth a closer look. If so, your savings could free up cash to put toward your other financials goals such as investing for retirement or saving toward a college education. Or if you shorten the term of your loan, you may significantly reduce interest costs and pay off the mortgage sooner.

Read more about refinancing a mortgage with U.S. Bank

A. With interest rates dropping and retailers offering deep discounts to entice consumers, it’s hard not to be tempted.

The decision regarding to buy or not to buy comes down to a few simple things:

  • Do you have the cash to cover normal and emergency expenses? If your job is secure and you have enough cash reserves, then it might make sense to make a purchase now.
  • Do you really need this item? Regardless if you can afford it, you need to consider if you really need it. A good deal isn’t a great deal if it leads you to needlessly throw away money.

If your answer is yes to both these questions, now might be the right time to move forward with a major purchase.

Read about good vs. bad debt

A. Due to the CARES Act, tax filers who choose the standard deduction for their 2020 taxes will be able to claim a maximum deduction of $300 for qualifying charitable contributions.

Tax filers who choose to itemize deductions on their 2020 return will be able to deduct charitable contributions equal to as much as 100 percent of their adjusted gross income (or AGI).

Read more about how the CARES Act impacts charitable contributions

A. There has been a lot of attention given to the Federal Reserve dropping the interest rates to near 0%.

The Federal Reserve has taken this action to stimulate the economy. When interest rates go down, purchases made with mortgages, loans or credit cards become more affordable. This can have a positive impact to your personal finances when managed responsibly.

Read more about how recent interest rate cuts may affect you