More protections for older people and flexibility with investment accounts

The government’s $2 trillion stimulus package is expected to provide financial relief to small businesses and unemployed workers — but it will also help many people in or on the way to retirement.

The package, known as the CARES Act (short for “Coronavirus Aid, Relief and Economic Security”), is intended to combat the negative economic impacts Americans are suffering as a result of the spreading coronavirus, known as COVID-19. Companies across the country are furloughing or laying off employees, and many other businesses are shut down as part of state and local quarantines. A record 3.28 million people filed for unemployment benefits recently, and numerous others have faced a reduction in income.

Older Americans, who have been urged to stay home because they are at a high risk of complications from contracting the virus, will also benefit from the stimulus bill. There are numerous provisions that affect this demographic specifically, according to the National Committee to Preserve Social Security and Medicare. Other pieces of the law assist Americans who are planning to retire in the future, though there are caveats.

Here are a few ways in which the CARES Act will affect older Americans, and what they should know:

More attention, and funding, for nursing homes

The stimulus package will provide extra funding to the Centers for Medicare and Medicaid Services in an attempt to assist nursing homes in keeping their facilities safe and preventing the spread of the coronavirus. Nursing homes, assisted living facilities and other senior-focused centers house some of the most vulnerable members of society, as seen after an outbreak in a Washington state nursing home killed at least 26 people. Individuals age 60 and up are more at risk of complications from the coronavirus than their younger counterparts. The death rate is also much higher for people who are 80 or older than other age groups.

A focus on Medicare and Medicaid services

Seeking medical attention will be easier for some older Americans, such as by offering telehealth coverage for individuals who cannot go to the doctor’s office. The law mentions other examples where telehealth could help, including a temporary waiver of face-to-face visits between home dialysis patients and physicians and using telehealth for recertification of hospice care eligibility.

The package also allows Medicare beneficiaries to receive a three-month supply of medications through Part D, unless refills of the drug are prohibited. The intention for 90-day refills is to reduce the number of pharmacy visits patients may need to take during the “COVID-19 emergency period,” the law states.

Programs have been extended as part of the law, such as the community-based long-term care spousal impoverishment protections and the “Money Follows the Person” program under Medicaid, which helps patients transition from institutional care to community-based care, according to NCPSSM. One provision earmarks money for older Americans and disability programs, such as those that support nutrition and family caregiving services. Another provision focuses on home energy assistance programs that help low-income individuals affected by the virus.

The CARES Act also extends mental health services under Medicaid, which assists patients with mental health and substance use disorders, until Nov. 30, according to the National Law Review’s analysis of the legislation.

Rebate checks for many Americans

The government will give rebate checks to taxpayers with a Social Security number who meet income requirements. Individuals who earned $75,000 or less in 2019 (or 2018 if last year’s return has not yet been filed) will receive $1,200. Married couples who file jointly will receive $2,400 if they earned $150,000 or less. Check amounts are phased out until the limits at $99,000 and $198,000, respectively.

Americans who claim Social Security benefits, including retirement and disability, are also eligible.

The checks are meant to help cash-strapped Americans stay afloat during this crisis, but individuals who don’t need the money to pay for rent, utilities, food or other necessary expenses may want to consider putting some of that money toward an emergency savings account, credit card debt or retirement account, experts said.

Extra time to fund individual retirement accounts

The Treasury Department delayed the deadline for contributing to an IRA on behalf of the prior year when it extended the deadline for filing tax returns to July 15 this year. People with extra cash can use this time to max out their IRA for last year, which is capped at $6,000, before beginning to fund an IRA for this year, advisers said.

Waive required minimum distribution rules

Retirees must begin withdrawing from most retirement accounts by the time they turn 72 years old, but that rule has been waived this year as a result of the coronavirus. This enables retirees who do not need that money to keep it in their investment accounts, especially at a time when major stock benchmarks are extremely volatile. Withdrawing assets now could result in taking a loss as well as losing potential interest and returns in the future.

What to look out for

The CARES Act allows individuals to withdraw up to $100,000 from retirement accounts, such as a 401(k) or IRA, for issues related to the coronavirus, such as being infected by the virus or losing a job because of a quarantine, without incurring any penalty fees. The money would still be taxed, although the amount in taxes could be spread out over three years. Individuals have three years to repay the distribution they took, in which case they would also have no tax consequences. This is separate from the provision that increased the amount one can take in a loan from their 401(k) (up to $100,000).

In some cases, taking a hardship withdrawal is unavoidable, especially when faced with a health and economic crisis, but Americans should be wary, said Ed Slott, founder of IRAhelp.com. “You’re draining your savings for retirement,” he said. “This should be a Hail Mary if you are in dire straits.”

 

Gregory Ricks breaks the bill down in his Coronavirus Stimulus Bill webinar. Register below