Retirees, like most Americans, have been hit hard by the coronavirus crisis. Not only are seniors more at risk when it comes to getting sick, but many have also faced serious financial consequences, as their stock portfolios tumbled due to COVID-19 and may not have fully recovered despite the market rebound.
Despite this sad reality, several proposals to provide additional stimulus funds leave seniors on Social Security out entirely, while others offer them the same amount of COVID-19 money as they got in the first stimulus check, even while increasing the size of the coronavirus payout for millions of other families.
Here are those proposals, along with some details on how they might affect retirees.
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1. The Reopening America by Supporting Workers and Businesses Act of 2020
U.S. Rep. Kevin Brady (R-Texas) introduced this legislation to encourage people to return to work even when many are receiving more money on unemployment.
The CARES Act authorized an extra $600 in weekly benefits for unemployed workers, which is to be paid through the end of July. Thanks to this extra bump in benefits, as many as 67% of laid-off employees got more in benefits for staying home than they earned on the job.
Brady's Act would allow those laid-off workers to keep some of this extra cash. Under his proposal, anyone who goes back to work before the extended benefits run out would get to keep up to two weeks of benefits -- amounting to a $1,200 stimulus payment.
Unfortunately, most Social Security retirees wouldn't get even a dime from this proposal, as less than one-third of retirees earn any money from work at all. The only retirees who'd benefit from Brady's proposal are those who were working before the pandemic, who got laid off, and who can get back to work before July -- a difficult prospect with unemployment rates so much higher for older workers. The number of senior retirees who meet all these criteria is vanishingly small.
2. A payroll tax holiday
One of President Trump's favorite stimulus plans is a payroll tax cut. In fact, the Trump Administration has repeatedly urged lawmakers to reduce or even eliminate payroll taxes as a form of coronavirus relief, with Vice President Mike Pence even going so far as to say, "We've got to have a payroll tax cut" in the next coronavirus bill.
Sadly, most Social Security retirees won't benefit if this is the form the next COVID-19 stimulus money takes. That's because a payroll tax holiday only affects those who work and earn income thta is subject to these taxes. And, as mentioned above, most retired Social Security recipients don't work.
Not only would payroll tax cuts leave seniors out of the next COVID-19 payment, but this move could actually cause retirees long-term financial pain. That's because these payroll taxes are Social Security's primary funding source. Cutting them could lead to the program's trust fund running out of money sooner than expected, which could necessitate as much as a 24% reduction in retirement benefits.
3. Proposals that provide increased stimulus funds for dependents
Although there are more than a half dozen stimulus plan proposals out there, only one -- the HEROES Act -- has passed either chamber of Congress (in this case, the House of Representatives).
The HEROES Act makes some key changes to what would effectively be the second COVID-19 stimulus payment, including expanding who counts as a dependent and providing extra money for dependents above what the CARES Act offered.
Sadly, most people on Social Security don't actually have dependents so they wouldn't get the benefit of a larger second check. In fact, recent research from the Society of Actuaries found just 9% of retirees support someone other than themselves or their spouse. Since providing substantial financial support to someone is key to claiming them as a dependent, the vast majority of Social Security retirees wouldn't get any extra money in their second COVID-19 payment.
To be clear, seniors still would get the same amount of money under the HEROES Act as they got under the CARES Act. But they'd be left out of the plan to raise the payment for millions of American families.
Prepare to weather the storm even without stimulus funds
With the country officially in a recession and coronavirus cases again rising alarmingly, it's more important now than ever for seniors to shore up their finances, especially as they could very well end up getting too little stimulus money or none at all in the final coronavirus relief legislation.
For those who haven't already spent their first COVID-19 payment, saving it for emergencies is most likely the best solution if you don't have a hefty emergency fund yet. If you've already got liquid cash saved for unexpected costs or economic chaos, investing the money could help you offset any losses resulting from COVID-19 market volatility or prepare for any benefit cuts that could come because of the impact of the novel coronavirus on your Social Security benefits.
You can also look into SSI benefits if your Social Security is too low to support you, consider taking steps to reduce taxes on your benefits, or work on creating a crisis budget to see you through the recession. Since you can't count on lawmakers to take your needs into account, it's up to you to prepare for whatever the future holds.
