Financial Resources for Gig Performers (And Others!) During the Pandemic

Gig Economy

By Thomas Donnelly

Fun Fact: decades ago, my spouse was a professional magician and entertainer for several Fortune 500 companies, and we are proud members of The Academy of Magical Arts and its clubhouse, The World Famous Magic Castle, in Hollywood. So it’s no surprise that many of our closest and oldest friends are magicians, jugglers, comedians, and other variety entertainers. I’ve seen first-hand what happens to folks with irregular performers’ incomes when their gigs suddenly dry up, as they have because of the pandemic and the resulting financial crisis. Planning for times like this is essential. In this series of articles, I’ll lay out details about government resources that are available to you right now, as well as simple steps that you can take immediately to manage your budget and cash flow during financial crises like this. Lastly, I’ll explain some concrete ways that you, as a gig performer, can build wealth for your future financial security, even beginning during this financial crisis.

Whether you’re an event planner, an actor, a gig entertainer, or anyone else caught off-guard by a sudden loss of income due to the pandemic, the first thing you should do is review what financial resources are available for you from the government.

State and Federal Aid During the Pandemic

If your income from gigs has been eliminated, there is financial help available.

The Coronavirus Aid, Relief, & Economic Security (CARES) Act provides an additional $600 per week from the federal government on top of state-provided unemployment benefits. The federally paid increased amount applies from March 29, 2020, through July 25, 2020, for all states except New York. (New York’s end date is July 26, 2020.)

State-provided unemployment insurance benefits have also been extended to a maximum of 39 weeks of benefits from February 2, 2020, through December 26, 2020. This means that eligible workers who file an unemployment claim starting February 2, 2020, will receive state benefits through November 1, 2020. Eligible workers who file an unemployment claim starting March 29, 2020, will receive state benefits until December 26, 2020.

The CARES Act also created a new, temporary Pandemic Unemployment Assistance program to extend these benefits to self-employed individuals, freelancers, and contractors like gig performers who lose employment due to the pandemic and economic crisis.

If you’re eligible and haven’t yet filed a claim, you should do so now. Many states will allow you to backdate your claim to the date when your income was disrupted.

Finally, be mindful that any self-employment income information you report in an unemployment claim may be subject to verification, and states may cross-reference with your tax filings. Large discrepancies could cause state or federal tax agencies to suspect unreported income, which may result in an audit. Meanwhile, an important reminder: collecting unemployment benefits based on false or inaccurate information is considered insurance fraud and may result in serious penalties.

Your Emergency Fund

Hopefully, you have enough savings to cover at least six months of living expenses, especially if you have received the CARES Act benefits. If you do, congratulations! Consider this your emergency fund, and right now, you’re living through the very emergency that you saved it for. But the crisis persists. It could be many months until we have a vaccine or reach herd immunity to the coronavirus and the economy gets back to normal. The sad truth is that large events and live entertainment and performance venues will be among the last parts of our economy to go back to “normal.” Six months is probably an optimistic timeframe.

If you don’t have emergency funds to cover you throughout this period, then you may need to fund your monetary shortfall strategically.

Tapping into your retirement accounts for emergency cash should only ever be done as a last resort. Still, if you have money in a Roth IRA, you can withdraw the previous contributions that you’ve made (but not the growth on them) both tax- and penalty-free. And if you have other retirement accounts like a 401(k) or a Traditional IRA, the CARES Act provides a new Coronavirus-Related Distribution of up to $100,000, which is exempt from the normal 10% penalty and mandatory withholding requirements. The income from the withdrawal from your 401(k) or Traditional IRA can be reported over three years, beginning in 2020. And these distributions can be “rolled back,” in whole or in part, back into the account within three years of the distribution, which means your retirement accounts can get back to almost where they would have been without the emergency withdrawals.

The CARES Act also increased the maximum loan amount allowed to be made against retirement plans, from $50,000 to $100,000 for individuals impacted by coronavirus. Such loans may equal, but not exceed, the vested balance of your retirement plans. Payments on such loans that should be made during 2020 can also be delayed for up to one year. (Note: 401(k) loans should only be considered an option for you when you would otherwise be spending on credit cards that would have a higher interest rate than the loan against your 401(k) would have.)

There’s More To Do

We have just reviewed how you can receive much-needed funds from the state and federal governments as a gig performer whose irregular performance income has been reduced or eliminated during this pandemic and the resulting economic crisis. We’ve also detailed ways you can access savings and retirement accounts penalty-free because of the CARES Act. Next time, we will get into budget and cash flow issues for the gig performer, and some simple steps that you can take to reduce monthly expenses without reducing the quality of life, so you can make the resources you have last.

In the meantime, if you are in need and haven’t done so yet, please be sure to take advantage of the federal and state resources detailed above. If you’d like to talk one-on-one about your financial situation and how to improve it, such as ways to begin building wealth and saving for retirement, even during this pandemic, I’m here to help.

Thomas Donnelly is a Financial Advisor of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately $1billion in assets under management as of 02/10/20. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results.”
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  • Financial Education for Gig Performers (And Others!) During the Pandemic (Part Two of a Series)