Nine out of 10 seniors age 65 and older rely on Social Security benefits to provide at least some of their income. These benefits aren't very substantial for most, though, with an average benefit of just $1,503 per month or $18,036 annually in 2020.
But for retirees who rely on money from Uncle Sam, there's some good news -- their take-home income from the government could be more than 13% higher this year. That is, if there's a second stimulus check that's the same size as the first one.
COVID-19 stimulus money provides a big boost to the average retiree's income
Most Social Security beneficiaries throughout the country already got one COVID-19 stimulus check. The Coronavirus Aid, Relief and Economic Security (CARES) Act authorized payments of $1,200 per adult and $500 per dependent to people with household incomes under $75,000 for singles or $150,000 for married couples filing jointly. Payments are phased out at a rate of $5 per $100 in income above these thresholds.
Since most retirees don't have dependents who qualify them for the extra $500, that meant the typical senior got a $1,200 check. With an average Social Security benefit of $1,503 per month, this extra $1,200 in annual income amounted to around a 6.65% increase in their annual take-home from government benefits.
Now, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act has passed the House of Representatives and authorizes a second stimulus payment. Under the HEROES Act, the second COVID-19 check would be the same $1,200 for most seniors (although it increases the money available for dependents to $1,200). That means seniors who receive it would get a total of $2,400 in stimulus money between the first and second checks. Since this second payment would bring total income from the government to $20,436, seniors receiving the average Social Security benefit would get a 13.3% boost to their annual income from Uncle Sam.
Of course, the HEROES Act hasn't been signed into law, and it probably won't be as the Republican majority in the Senate objects to many provisions of it. But even most Republicans are on board with a second stimulus payment, so there's a good chance seniors will get at least some money again -- and since the first payment was for $1,200, it would make sense to assume the second payment would be for the same amount.
For seniors who get this extra money, there's some more good news -- while their household income will go up thanks to the two COVID-19 payments, their taxable income won't. That's because the stimulus money is considered an advance on a tax credit. It's not subject to income taxes, nor does it count as income when determining if Social Security benefits are taxable.
Make the most of your COVID-19 stimulus money
If you haven't already spent your first stimulus check or if you receive a second one, you should make the most of the extra money you'll get this year. If you don't have anything saved for emergencies, the extra $2,400 gives you a good chance to put some cash into a savings account, where it's accessible if you need it.
But if you've got liquid assets already, investing that extra $2,400 could help you make up for any losses you may have incurred during March's COVID-19-driven market crash. Or the money could be used to take advantage of buying opportunities that exist during the 2020 recession, so you can pad your investment account and get a little more financial security to help you cope with an uncertain future.