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What the Coronavirus Means for Your Retirement Finances

US News & World Report -  Money logo US News & World Report - Money 3/24/2020 Emily Brandon
Annabel Norwell Davis et al. sitting at a table: Senior couple looking concerned with bills and laptop © (Image Source/Getty Images) Senior couple looking concerned with bills and laptop

The economic impact of the coronavirus may fall especially hard on retirees who are living on a fixed income. Retirement accounts have lost value, and savings accounts are likely to generate even less interest than they did in the recent past. However, the Social Security and Medicare programs have recently been tweaked in an effort to support retirees.

Here is how the coronavirus pandemic could financially impact retirees:

  • Social Security offices are closed.
  • Medicare will now pay for telehealth services.
  • Retirement accounts have lost value.
  • Savings accounts will pay lower interest rates.
  • Recreation spending has dropped.
  • The urge to panic is strong, but stay rational.

Social Security Offices Are Closed

All local Social Security offices were closed to the public beginning on March 17, 2020, in an effort to prevent the spread of the virus among the older population. Scheduled appointments will now be handled over the phone. Social Security payments will continue as scheduled via direct deposit or the postal service. Seniors will still be able to access many services online via a my Social Security account or by calling 1-800-772-1213. Those who wish to enroll in retirement, disability or Medicare benefits can still do so online.

"If you want to sign up for the first time, I would advise doing so through the Social Security Administration website, since the volume of phone traffic will be excessively high," says John Palmer, a Syracuse University professor and former public trustee for the Medicare and Social Security programs.

Medicare Will Now Pay for Telehealth Services

Medicare beneficiaries will be able to speak with their doctors from home without traveling to a doctor's office or hospital for the duration of the COVID-19 public health emergency. Medicare will pay for telehealth visits with doctors, nurse practitioners, clinical psychologists and licensed clinical social workers starting on March 6, 2020.

"Based on the data that we have gathered from Medicare beneficiaries, those in the older age group are more prone to adverse outcomes if and when they get the COVID-19, and therefore I urge all Medicare beneficiaries to take advantage of this if made available by their provider," says Zaldy S. Tan, a medical doctor and associate chief of the UCLA division of geriatric medicine.

Medicare beneficiaries will be able to receive many services remotely, including evaluation and management visits, common office visits, mental health counseling and preventive health screenings. Telehealth visits will be paid at the same rate as typical office visits, and Medicare patients may face out-of-pocket costs including coinsurance and a deductible.

Retirement Accounts Have Lost Value

Watching your retirement account balance plummet is especially horrifying for those who are already retired. "Minimizing and/or delaying withdrawals from retirement accounts while we are in the midst of the crisis allows your accounts time to recover," says Adrienne Ross, a certified financial planner for Clear Insight Financial Planning in Spokane, Washington. "It allows you to delay or avoid selling assets when they are down in value." Think about ways to delay purchases and reduce spending to give your investments time to recover in value before you lock in the loss by selling your assets.

If you have other options, consider tapping into a savings account or emergency fund rather than taking a withdrawal from a depleted retirement or investment account. "Hopefully you've got an emergency fund that allows you to keep the money invested," says Marie Thomasson, a certified financial planner and owner of Modern Assets in Culver City, California. "If you need to withdraw money for required minimum distributions or living expenses, take out only the minimum necessary."

Savings Accounts Will Pay Lower Interest Rates

The Federal Reserve's interest rate cut is likely to lead to lower interest rates on savings accounts. However, you can still look for a savings account that has a better interest rate than you are earning on your current savings.

"Online savings accounts are a fantastic alternative to the traditional savings account, and are still FDIC-insured," Thomasson says. "They offer a much higher interest rate overall and I recommend them to all my clients."

If you won't need your savings in the near future, you can also park your money in a certificate of deposit. "CDs are a good option if you are comfortable locking in that money for a certain amount of time," Thomasson says. "Make sure you have enough cash or other income through Social Security or your pension that you won't need to tap the CD early."

Recreation Spending Has Dropped

Staying at home allows you to save money on meals, transportation and entertainment. "During today's environment, surely there are some expenses that are less, like going out to the movies, sporting events, going out to dinner or even travel for now," says Alan Rhode, a certified financial planner and CEO of Modern Wealth in Huntingdon Valley, Pennsylvania. The drop in recreation spending as you practice social distancing can provide a cushion to your retirement budget.

Don't Make Major Financial Decisions in a Panic

Your retirement investment strategy requires rational thought and perhaps a consultation with a financial advisor. "The best thing a person can do is stick to their plan, keep fear, anxiety and bias out of it, and really understand their budgets to see if there are some aspects of expenses that can be forgone in bad times," Rhode says. You don't want to make any significant changes to your financial plan in a moment of panic.

Copyright 2020 U.S. News & World Report

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