With great urgency, the coronavirus pandemic has required us to reevaluate the way we live and take extra measures to protect our physical health. It presses us to do the same with our financial health. As the economy reacts to the COVID-19 health crisis, we face myriad concerns related to paying for retirement as well as the day-to-day.
When the stock market crashed in March, many Americans saw their retirement plans take a blow. In the first quarter of 2020, the average 401(k) balance fell $91,000 and the average IRA balance fell $98,900 — 19% and 14% decreases, respectively. Some workers may delay retirement with the hope it will give their investments enough time to bounce back. One recent survey found that 40% of Americans now fear they won’t be able to retire at all because of the coronavirus.
Others may be pressed into early retirement amid widespread job loss resulting in the highest unemployment rate since the Great Depression. Older workers, as well as disabled workers, have been disproportionally affected.
Labor economist Teresa Ghildarducci estimates the coronavirus pandemic will force another 3.1 million older workers into poverty in their retirement, including those considered high income. In an interview with CNBC, she explained that the rising unemployment rate among older workers may mean the workers will not go back into the labor force or it will take them a while to find another job. Consequently, cash-strapped Americans draw on their retirement savings, go into debt, or apply for Social Security early and forgo increased benefits.
Needless to say, given present financial circumstances due to the coronavirus, you may be tightening your spending. Whether you are nearing retirement or took early retirement and planned ahead for healthcare expenses, here are a few ways to stretch your healthcare dollars during the coronavirus pandemic and into the future.
1. Take advantage of telemedicine for coronavirus symptoms
Telemedicine offers many advantages in ordinary times. During a pandemic, those advantages become all the more valuable. Virtual appointments make it possible to stay home and consult with a healthcare provider when we want to reduce our risk of exposure to COVID-19. Many conditions can be diagnosed and treated through telemedicine — sinus infections, rashes, allergies, eye infections and allergies, and anxiety, to name a few.
As for cost-savings, telemedicine charges tend to be less than those from in-person care. One study, which used an acute respiratory infection as an example, found the average cost for evaluation and management on the day of the visit compared as follows:
- $41 for a telehealth visit.
- $84 for a physician office visit.
- $674 for an emergency room visit.
Of course, your telehealth consultation may determine a need for followup care, diagnostic testing, prescription medications and other services for which you would be charged. You may still come out ahead.
The same study compared average totals for evaluation and management on the day of the visit, follow-up, pharmacy, imaging, testing and other charges, which were as follows:
- $79 for telehealth visits.
- $146 for physician office visits.
- $1,734 for emergency department visits.
You can access telemedicine a couple of different ways, through benefits included with your job-based health insurance plan or as part of a standalone telemedicine platform. If you are uninsured because of the coronavirus, short-term medical insurance and individual major medical insurance (i.e., ACA plans) are typically the most economical and include telemedicine benefits. Medicare Part B covers some telehealth services, and the CARES Act includes provisions that expand access during the COVID-19 pandemic.
2. Maximize your health savings account
If at all possible, fully fund your health savings account each year. HSAs offer tax advantages that can make a real difference:
- Your contributions aren’t subject to federal income taxes.
- Whatever your HSA earns from interest and investments is tax-free.
- Distributions used to pay for qualified medical expenses are also tax-free.
HSA contribution limits are subject to change each year; they are as follows for 2020:
- $3,550 for self-only plans.
- $7,100 for family plans.
If you who 55 years old or older, you can deposit up to an extra $1,000 each year through what is known as a catch-up contribution. HSA funds roll over each year, which means there’s no rush to use them. Whatever you accrue will be available for immediate use or for future expenses.
What if you don’t have an HSA? Contact your health insurer to see if your existing policy is HSA compatible. If not, at the next opportunity you have to enroll in coverage, look for an HSA-compatible high-deductible health insurance plan.
The IRS definition of a high-deductible health insurance plan for the year 2020 as follows, but keep in mind that the plan you select must also be marketed as HSA-compatible:
- An annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage.
- Annual out-of-pocket expenses that do not exceed $9,600 for self-only coverage or $13,800 for family coverage.
If you no longer have an HSA-compatible health insurance plan or enroll in Medicare, you will no longer be able to contribute to your HSA; however, you can still use its funds for qualified medical expenses. You can even withdraw funds for non-healthcare expenses after age 65, but they may be subject to income tax.
3. Add supplemental insurance coverage
It may seem counterintuitive to buy more coverage when we’re talking about saving money, but a supplemental health insurance policy can help you pay for out-of-pocket medical expenses.
Supplemental plans include benefits for healthcare-related to accidents and critical illnesses. You can use these benefits toward your health insurance deductible, medical bills, transportation, childcare and everyday living expenses.
Another way supplemental coverage can help you save on healthcare is through extra non-insurance benefits included in your plan. For example, the supplemental insurance sold through Pivot Health includes non-insurance discount vision services, a discount prescription drug card and video consultations with board-certified doctors.
Supplemental insurance is something you can buy right now; plans are available year-round and not subject to ACA open enrollment periods. You can gather and compare quotes online, then enroll within a few minutes.
If you are enrolled in Medicare, you buy Medicare supplement insurance to help pay for costs not covered by Part A and B, including copayments, coinsurance and deductibles. Medigap policies, as they are called, are available through private health insurance companies.
Take Care of Your Health During The Coronavirus
Now, as much as ever, it’s important to make good health a priority. Coronavirus-related stressors can take their toll on physical and emotional well-being, and measures taken to safely navigate daily life can create additional challenges.
Stay-at home restrictions, social distancing and business closures can lead to social isolation and lack of exercise. As such, it’s important to find other ways to keep moving and maintain social contact with friends and family.
Try to stay on schedule for recommended preventive care, and maintain treatment for your ongoing health conditions. Continue with mental health therapy online if possible. Keep your prescriptions filled; if need be, look into having them delivered or sending a friend or family member pick them up.
Don’t delay care if something about your physical or mental health changes or doesn’t seem right. Depending on the severity of the concern, a telemedicine visit may suffice. Otherwise, you might need to be seen in-person at the doctor’s office, urgent care or the emergency room. Call 911 if you’re having a medical emergency.
Fear of being exposed to the coronavirus has become a barrier to getting healthcare. Hospitals have seen fewer people showing up with heart attacks and strokes throughout the pandemic; emergency visits in some parts of the U.S. are down as much as 50%. Medical professionals warn that not getting medical attention can lead to a worsening condition or even death.
You can be assured that healthcare facilities are taking extra precautions to keep you safe right now — limiting visitors, checking temperatures upon entry, wearing masks and goggles, and separating patients with COVID-19 symptoms, for example.
Retirement Savings and the CARES Act
Even if you practice frugality and take extra cost-savings measures, it may not feel like enough right now, especially if you face unexpected medical bills or a reduced income. Your retirement account may be recovering, but it may also be a resource.
The CARES Act, which the federal government passed in March, includes provisions that make it easier to withdraw funds from certain retirement accounts during the coronavirus. However, before we get into what some of them are, know that experts caution that not everyone who can take advantage of these provisions should. You’ll want to consider the long-term implications of your retirement along with your current financial situation.
Under the CARES Act, you are allowed to withdraw up to $100,000 from your retirement account in 2020 without facing an early withdrawal penalty. Another provision raised the limit on borrowing from 401(k) accounts from $50,000 to $100,000 and extended loan repayments due in 2020 for a year.
Eligibility isn’t across the board, however. You must have experienced financial hardship as a result of the pandemic (e.g., diagnosed with COVID-19, business closure or reduction of hours, inability to work due to childcare). You also need to check with your employer to see if they adopted these CARES Act loan and distribution provisions.
If you’re already retired, the CARES Act suspended your required minimum distribution in 2020. This is designed to help those whose retirement portfolios took a hit potentially gain back some losses as the market rebounds.
Talk to a financial advisor for guidance and also reach out with any other concerns you have about your retirement plan right now. It’s probably a good time to revisit your savings as well as your goals.
As for healthcare, your medical needs and financial situation may change in the months and years ahead. Talk with a health insurance advisor to assess your coverage and look at additional options.