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The New Coronavirus Stimulus Bill Passed - Here’s What it Means for Your Retirement Planning

If you’ve been waiting for an update on the coronavirus relief bill, you’re not alone. After months of negotiations, the long-awaited “Coronavirus Stimulus 2.0” finally passed on December 21, 2020. 

March 2020’s massive CARES Act included several provisions benefitting retirees and anyone with a retirement savings portfolio. Nine months later, this new agreement (essentially a huge attachment to the Consolidated Appropriations Act of 2021) extends some of those perks while modifying others. Here’s what the new $900 billion pandemic relief package has in store for Americans—and what it means for your retirement planning. 

What’s Included in the New Coronavirus Stimulus Package?

Naturally, the 5000+ page relief bill covers a lot, from extended unemployment assistance and another round of Paycheck Protection Program funding (with new conditions) to a slew of other personal and business tax benefits. There are even some longer-term changes affecting the student loan and health care industries. 

We couldn’t possibly cover everything, but here are some of the most important pandemic relief provisions that could impact you if you’re retired or planning for retirement. 

Stimulus Checks: Direct Payments to Individuals 

Stimulus checks were one of the most talked-about pieces—still, no one seems too thrilled with the outcome. Now that it’s official, though, many people have already gotten their second stimulus payout from the IRS:

  • Each individual receives $600 (plus $600 per qualifying child)
  • The payment amount is reduced if your adjusted gross income for 2019 is above $75,000 for individuals and $150,000 for married couples filing joint returns and surviving spouses.
  • Like last time, the payment is an advanced tax credit
  • Payments are automatic and you can check the status of yours online

Additional Tax Benefits for Charitable Contributions

The first coronavirus stimulus package initiated new tax benefits for individuals making charitable contributions. Namely, an above-the-line deduction of up to $300 for both single and joint filers for cash contributions to charitable organizations (if you do not itemize deductions on your Federal income tax returns). The newly passed stimulus bill extends this benefit to 2021 as well. Additionally, in 2021, joint filers can claim a deduction of up to $600.

Bans On Surprise Medical Expenses 

In a bold move, Congress has banned hospitals from charging for out-of-network services that often arise during emergency care. Although it doesn’t take effect until 2022, this change helps anyone who worries about unexpected or unfair health care costs

Carry Forward Relief For Flexible Spending Account Funds

Good news for anyone with a Flexible Spending Account (FSA)—employers can now allow their employees to carry over any unused 2020 balances to 2021. The same goes for remaining balances at the end of 2021, which can be rolled forward into 2022. Note that companies aren’t required to allow the carryover, but doing so won’t hinder the employer from receiving tax benefits. If you have eligible FSA funds, be sure to reach out to your HR department specifically. 

Funding for Vaccines and Nursing Homes

The pandemic relief bill allotted almost $70 billion for public health measures including the purchase and distribution of vaccines, as well as testing and tracing programs. And, it will provide emergency financial aid to eldercare centers that have been hard-hit. If you’re caring for an older relative or are in a risk group yourself, this measure may be a huge relief.

No New Help on RMD’s

The first stimulus bill allowed retirees to delay required minimum distributions (RMDs) for 2020. But the new package fails to include an extension of this waiver. So, unless something changes, retirees should be prepared to resume RMDs as normal in 2021.

Keeping Your Retirement Plan on Track 

We know that despite these new relief measures, many families are still struggling. We know it can be tough to feel confident about your retirement plans when the near term feels so uncertain. But if possible, take a deep breath and focus on the big picture. Remember that a solid financial plan is designed to withstand ups and downs, so you can retire stress-free, no matter what comes your way. 

As fiduciary financial advisors, we work for your best interests, not commissions. We’re here to help you protect your finances, now and in the future. If your income has been affected by the coronavirus crisis, or you have any questions about what these relief provisions mean for your retirement savings plan, just ask.

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