Q: Both last spring, and now again in December, I didn’t receive any “economic impact payments.” It doesn’t make any sense to me. My income in 2020 was way down compared to 2019. Do you have any idea how that could be?

A: Your confusion is completely understandable. You’re absolutely not alone! Let me explain how the stimulus payments actually work.

Congress structured those payments – the one last April/May and the most recent one in December/January – as an “advance” on a tax credit that’s officially applied to your 2020 tax return. But, they wanted to speed up payments to people during the lockdown last spring. And, since they didn’t know what your 2020 income was going to be, Congress simply used 2019 as their “guide.”

It looks like your 2019 tax return disqualified you from receiving the “advanced payments.” The government clearly got the wrong impression about the financial hit you took in 2020. As a result, they didn’t send you those payments in “advance” of your actual 2020 tax filing.

But, don’t worry, the 2020 tax season has now arrived. If your 2020 income was lower than it was in 2019, as you’ve said, you’ll now qualify for the two tax credits of $1,200 (spring) and $600 (winter). When it’s completed, take a close look at your 2020 taxes and see if your tax credits are in there. Better late than never, right?

Q: Is age 70 ½ still an important age when it comes to my annual required minimum distribution (RMD) from my IRA? I turned age 70 ½ last spring, but I didn’t have to take any distributions because of the pandemic. Do I have to take my first RMD in 2021?

A: You are correct that required minimum distributions, known as RMDs, were suspended in 2020. But, you’ve missed a recent change related to the RMD rules.

Back in December of 2019, Congress quietly passed the SECURE Act that changed a number of things to enhance overall retirement readiness. For some reason, this bipartisan bill officially pushed back the age that you are required to start taking distributions (and, therefore, finally paying some tax) from your IRA and other tax-deferred accounts.

Since you were born after June 30, 1949, you don’t actually have to take your first distribution from your IRA until you reach age 72. For those born prior to June 30, 1949, the important milestone remained age 70 ½.

You might wonder, why did they choose such an odd cut-off date of June 30, 1949? Well, that’s officially the last day you could have been born to reach age 70 ½ during the calendar year of 2019.

Side note: There appears to be a movement afoot in Congress to further push out the RMD starting age to 75. If that comes to fruition, it’ll no doubt create some tax and financial planning strategies to consider. Frequent tax law changes and arbitrary complexity certainly breeds job security for paper-pushers, like me!

Idle hands certainly are the Devil’s workshop. If the mob of Reddit day traders who drove GameStop to stupid heights last week are any indication, so too are idle thumbs!

For the uninitiated, here’s the lowdown. Over the span of three short weeks, GameStop inexplicably vaulted from about $20 per share to nearly $500 per share. The stock’s move had nothing to do with GameStop’s actual business, of course. It was driven by individuals who gathered online and supposedly shared the common goal of inflicting pain on evil Wall Street types.

GameStop is a struggling retailer operating in the video game industry that’s increasingly going digital; a trend that’s only been accelerated by Covid. It comes as no surprise that many hedge funds decided to bet against them. In fact, GameStop ultimately became the most heavily shorted stock on Wall Street.

Now, when an investor wants to bet against a stock, they find some shares to temporarily borrow and then immediately sell them into the market. Their plan is to return the borrowed shares by repurchasing them after the stock drops. Short sellers aim to sell high and buy low. Over the past couple years, short sellers literally borrowed every possible share of GameStop.

This massive, one-way bet caught the attention of some contrarian investors. Some wagered that GameStop might be able to pull off a turnaround. A few entertaining ones even went on YouTube to explain their rationale.

If things improved for GameStop, they dreamed of a colossal “short squeeze.” That is, they imagined a rising stock price that would literally crush the short sellers. Further, if only Gamestop investors could hold on tightly enough to their shares, the short sellers would be forced to bid higher and higher for shares to exit their terrible trade.

As the story goes, inspired by the prospects of destroying Wall Streeters, millions of idle, stuck-at-home and new investors – armed with easy-come, easy-go stimulus checks and Robinhood’s trading app – gathered on a social media platform, Reddit, to coordinate the ultimate short squeeze.

To help keep the game going, these new investors have even devised mantras to inspire others to hold tight. They speak of having “diamond hands” with the ability to ride through the volatility of the trade. They even post brokerage account screenshots showing their sometimes massive losses and add pithy reminders to their fellow gamers that you-only-live-once. I imagine it looked so fun!

Lately, though, it appears the Devil has been lurking in the shadows as these gamblers tapped away on their phones. Ironically, their end-game depended on their ability to suppress the deadly sin they most despise in others; personal greed.

Over the past few days, the mob has decided to sell out and is searching in vain for a willing sucker to buy their bloated shares. Naturally, no matter how game-like it all appeared, all that free money started to add up to some real dough. The mob does still view it as real money, right? Are you listening, Fed and Congress?

Here comes yet another $2 trillion in economic relief directly on the heels of last month’s nearly $1 trillion package. For those keeping score, that’ll bring the official tally to roughly $5 trillion spent to combat Covid.

President-elect Biden unveiled an outline of his economic recovery plan last week. With majority control of both the House and the Senate, we should expect semi-swift passage. Here’s a rundown of the major things we can expect to see.

To begin, with $600 payments now just landing in the bank accounts of about 250 million adults and children, it looks like this will be topped off to $2,000 per person. Given the very broad reach of these payments – which will be received by approximately 75% of adults and children – it is probably safe to say the main goal is to encourage consumer spending, rather than helping those most in need.

To address those most in need, Biden’s plan also aims to further enhance unemployment benefits for the current 19 million people who continue to struggle to find ample safe or steady work. Just before Christmas and after many months of intense negotiation, Congress recently agreed to add $1,200 per month to regular state-based unemployment benefits. If Biden’s plan becomes law, we should expect this to increase again to $1,600 per month and push the benefit period out another six months to September.

Biden’s plan also seeks to help those with children. Currently, almost all families receive a $2,000 tax credit for each child under the age of 17. The proposed plan is to increase this to $3,000 per child. Biden has also proposed making these child tax credits fully, rather than partially, “refundable.” That’s just a fancy word that means eligible families would get a check for the full $3,000 per child, even if they actually owed zero federal tax.

Biden also wants to expand the tax credit designed to help defray the high cost of childcare. Families currently receive a tax credit between 20% and 35% of childcare expenses. The current credit can reach as high as $3,000 per child with a family maximum of $6,000. The proposal is to expand the credit to $4,000 per child, subject to a maximum of $8,000 per family. And, unlike the current tax law, he also wants to make these childcare tax credits “refundable”, as well.

Among other proposals, Biden’s goal is to establish a multi-year transition to a national minimum wage of $15 per hour. This proposal would affect workers and businesses in some states more than in others. Additionally, Biden hopes to provide bigger health care premium subsidies for those who use the Affordable Care Act to gain coverage.

Oh, I almost forgot to mention the growing talk of student loan debt relief up to $10,000 per borrower. So, the next time your kids or grandchildren question the impact of their vote, just remind them of the two Georgia run-off elections!

Mark Twain once said, “History doesn’t repeat itself, but it does often rhyme.”

Investor speculation is once again running rampant. Trading activity and the number of new brokerage accounts has spiked in 2020. Options trading among individual investors has jumped and eye-popping IPOs have arrived. Tesla and Bitcoin are signs of something concerning, not to mention the surging market valuations of all things tech-related. This type of investor frenzy doesn’t usually end well.

Under most measures, both the stock and bond markets appear to be significantly overvalued. Fundamental metrics, such as sales, earnings and cash flow almost uniformly point to frothy financial markets. Coldly weighing fundamentals and finances, as opposed to simply chasing market momentum, is what separates investment from speculation. The line is blurry, for sure.

A common explanation of the market’s stunning rebound since March centers on the Federal Reserve and the US Treasury. Since the virus struck, the financial support by these two government bodies totals about $7 trillion and growing. The Fed is buying bonds at an annual pace of about $1.5 trillion and President-Elect Biden describes the latest $1 trillion aid package as just a “down payment.”

About half of the $7 trillion is meant to prop up consumer spending through direct payments to people and businesses. The goal is to fill the income holes left behind by Covid. The other half of that $7 trillion has been used to prop up stocks and bonds by mercilessly driving down interest rates and prodding investors to take on risk. Think of this part as filling asset holes created by Covid. Arguably, it’s not hard to view this part as market manipulation.

The documentary, The Flaw, convincingly argued the underlying cause of the financial and housing crisis of 2008 was a combination of anemic income growth and growing wealth inequality in America. Not surprisingly, the central villain in that story was the Federal Reserve.

As the story was told, for the poor and middle-class who don’t tend to own a lot of investments, the equity in their homes represented their primary path to wealth creation. For the rich who have lots of financial assets, the Fed’s super-low interest rate policy in response to the tech-stock bust drove them to provide toxic mortgages to everyone with a pulse.

The story described a symbiotic relationship where the rich chased after some yield and the poor gained easy access to rising home equity to keep spending beyond their income. It worked beautifully, until the merry-go-round stopped. As if trapped with no other way out, what came next was a doubling down on zero interest rates by the Fed along with deficit spending by Congress.

As I eagerly turn the page of my calendar to 2021, today’s pumping of trillions into the economy has me contemplating the impact on the tomorrows yet to come. I’m hearing history’s rhyme. I sincerely hope this time the Federal Reserve has finally devised a way out of the trap they’ve created for conservative, income-starved investors. In the meantime, I’d suggest you prudently rebalance.

Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com