Posts Tagged "coronavirus"

The Profound Financial Pain of COVID-19

It was hard to miss the news last year that four out of 10 people couldn’t come up with $400 if they had an emergency. The coronavirus is that emergency – on steroids.

A wave of new surveys asking Americans about their personal finances reveal the depth of a crisis that has suddenly befallen untold numbers of people. And the worst, economists say, is probably still ahead of us.
Financial Stress chart
As of last week, 36.5 million people had filed for unemployment benefits, and that doesn’t include some workers who were furloughed or have not yet been able to file their applications for benefits. The Federal Reserve said nearly 40 percent of people living in households earning less than $40,000 have lost their jobs.

As the virus tore through the country in April, most adults cited a lack of savings as the reason for their financial stress in a survey by the National Endowment for Financial Education.

What many people have, instead, is debt. In recent years, consumers loaded up on credit card and other debt – for bigger houses, new cars, vacations. This is what people do when the job market is strong and confidence is riding high. …Learn More

Estimate Your Unemployment Check Here

People standing in line for a grocery store during the pandemic

Florida’s unemployment office, after denying benefits to some 260,000 residents, said that it made a mistake. From Maine to California, laid-off workers scheme to outfox crashing websites or wait for hours on the phone to apply for benefits at state unemployment offices.

Thirty million people have filed for unemployment benefits so far, and countless others are trying. Frustration is a way of life for millions of people desperately in need of money for essentials.

If you’re curious about how much your benefit will be – when you eventually get through – or if you fear a layoff is in your future, Zippia has something for you.

Highest and Lowest UI benefitsThe job listing and career advice website has created a calculator that will provide a ballpark estimate of your weekly benefit. Just enter your income and the state you live in, and Zippia’s estimate will be calculated using your state’s unique benefit formula.

The estimate is the total of your benefit from the state, which is based on your pay, plus the $600 additional payment Congress recently threw in. These new federal payments are scheduled to expire at the end of July.

The size of the unemployment check roughly corresponds with each state’s cost of living. Nevertheless, the weekly maximum benefits in some states are disproportionately higher, including in Massachusetts, where the maximum is $823 per week, followed by Washington ($790). The lowest maximum benefits are in Arizona ($240) and Mississippi ($235).

“Our goal is to give as much useful information for people who are in a really tough situation,” said Zippia’s Kathy Morris, who was involved in collecting the state data and designing the calculator.

Whatever your state provides to the unemployed, if you’re entitled to a benefit, you should get it. …Learn More

Photo of mother and daughter

Parents Cut Back Aid to Kids in Downturn

When the economy tips into a recession, as it is doing in reaction to the COVID-19 pandemic, the question of whether parents will give financial help to their adult children could conceivably go either way.

Parents looking for some peace of mind might throw a financial lifeline to their struggling or unemployed offspring. Or parents who’ve been providing some support might pull back.

One study of how parents in the United States and Germany handled this dilemma found that they retrenched in both countries during the Great Recession.

Parents are often an important source of support for their adult children. But between 2005 and the peak of the recession in 2009, the share of U.S. parents providing financial or in-kind support fell from 38 percent to 35 percent.

Germans are less likely to help their children in the first place, and they pulled back even more over the four-year period, from 24 percent to 10 percent of the parents, according to the 2017 study, which was funded by the U.S. Social Security Administration.

By 2011, the two countries had started to diverge: the Germans were stepping up their support again, while Americans continued to pull back. One obvious reason German parents snapped back earlier was that their economy recovered more quickly. …Learn More

Wire being frayed

Layoffs Fray Health Insurance Network

The majority of Americans who have health insurance – some 150 million workers – get their coverage through their employers. But this network has suddenly developed a big hole in the midst of a pandemic.

The economic shutdown that is suppressing the coronavirus has thrown nearly 30 million people out of work – and taken away their health insurance. Millions more are expected to be laid off.

About 10 percent of the U.S. population did not have health insurance in 2018, Kaiser’s most recent estimate. This share will certainly increase sharply, but how high it goes and how quickly the situation will improve is hard to predict, given all the uncertainties, said Jennifer Tolbert, director of state health reform for the Kaiser Family Foundation.

The Affordable Care Act (ACA) does provide options that were unavailable to people who lost their jobs during the 2008-2009 recession. Even so, “there are still so many ways that people can lose insurance,” Tolbert said.

The coronavirus “highlights the still-existing gaps in our healthcare system and coverage,” she said.

Under the ACA, the newly unemployed potentially have two options: purchasing private policies on the state insurance exchanges or enrolling in the Medicaid program for poor and very low-income people.

Medicaid MapMedicaid enrollment is available year-round for the newly unemployed and for low-paid workers whose hours have been cut, causing them to lose the insurance they had when they were full-time. But this program is not an option for thousands of laid-off workers in 14 states, including Florida and Texas. They will slip through the cracks, because their states have declined the ACA option to extend their programs to cover more residents.

Medicaid historically has provided health insurance for low-income parents with dependent children. Under the ACA, most states did expand their programs and now include adults who do not have children. The ACA also expanded coverage by increasing the income ceiling for Medicaid eligibility to 138 percent of the federal poverty level. …Learn More

Self-Employment More Prevalent Over 65

Workers of all ages are being affected by the damage COVID-19 is doing to the economy, but people who are loosely attached to the labor force may be more vulnerable.

That’s the situation for a small but growing segment of the U.S. labor market: self-employed people who are 65 and older.

When workers are in their prime, most of them are directly on an employer’s payroll. But a new study finds that self-employment begins to dominate as people work past traditional retirement ages and work as independent contractors, consultants, freelancers, or gig workers.

Self-employment graphyThe detailed Gallup survey designed by the researchers shows that self-employment is more pervasive at older ages than previous data had indicated. Nearly half of all workers in their late 60s are self-employed, and that rises to more than two-thirds of workers in their late 70s. In contrast, only one-fourth of people in their late 50s are self-employed.

The Gallup survey was designed to capture self-employment more fully than the Bureau of Labor Statistics (BLS) does. That’s because the researchers asked detailed questions designed to get a more complete count of the independent contractors who may mistakenly have failed to report themselves as self-employed to the BLS.

In the study, independent contractor is the most common form of self-employment at older ages. This is mainly the province of an elite group who are able and willing to continue working several years after most people have retired. They are often professionals or former managers who said their primary motivations for being self-employed are remaining active or pursuing an interest.

But even at the oldest ages, a significant minority of independent contractors are working mainly for the money. …Learn More

Golden eggs

More Cuts to 401k Matches are Coming

To conserve cash, some employers are suspending contributions to their workers’ 401(k)s. And if this downturn plays out like previous recessions, more will follow.

The handful of employers announcing suspensions in recent weeks include travel companies and retailers hit first and hardest by shrinking consumer demand, including Amtrak, Marriott Vacations Worldwide, the travel company Sabre, Macy’s, Bassett Furniture Industries, Haverty Furniture Companies, and La-Z-Boy.

Tenet Healthcare and a physician practice in Boston on the front lines of providing expensive coronavirus care have also suspended their matches. Employees, not surprisingly, are unhappy with these moves. An emergency room doctor told The Boston Globe that his organization’s decision comes as he is “working huge extra hours trying to scrape together [personal protective equipment] and otherwise brace for COVID-19.”

Employers are required to give their workers a 30-day notice and cannot stop the match prior to the 30-day period.

Suspending matching contributions has become somewhat of a recession tradition. In the months following the September 2008 market crash, more than 200 major companies rushed to do so, according to the Center for Retirement Research. The firms’ primary financial motivation was easing an immediate cash-flow constraint – not a concern about profits – the researchers found.

But cutting 401(k) contributions may be a small price to pay for mitigating layoffs, said Megan Gorman, a managing partner with Chequers Financial Management in San Francisco. “It might be a stop gap to help save the business in the long run,” she said. A typical employer matches 50 percent of employee contributions up to 6 percent of their salaries.

Amy Reynolds, a partner at Mercer Consulting, said the bigger danger for workers’ future retirement security is tapping their 401(k)s to pay their routine expenses in a tough economy. As part of the rescue package Congress passed in March, workers can withdraw up to $100,000 without paying the 10 percent penalty usually imposed on 401(k) withdrawals by people under 59½. “We want them to be thoughtful and consider other sources before they get to that,” Reynolds said. …Learn More

Art saying Now what?

Boomers Facing Tough Financial Decisions

For baby boomers who thought they were on the path to retirement, the road is shifting beneath their feet.

Danielle Harrison, a financial planner in Columbia, Missouri, sees a raft of problems stemming from the COVID-19-induced economic slowdown.

Many older workers getting close to retirement age are taking big hits to nest eggs that were already too small. Some boomers who lacked pensions and were behind on saving tried in recent years to make up for lost time with a riskier portfolio in the rising stock market – now they’re experiencing the downside of that risk. Others are scrambling to pay expenses or maintain debt payments as their income drops, altering their financial security now and changing their calculations for the future.

“It’s really going to hurt people,” said Harris, who believes that some baby boomers who had planned to retire in the near-term may be rethinking those plans.

And she’s talking about the boomers who still have jobs. The layoffs have already begun and will continue. Economists estimate GDP will contract in the second quarter at an unprecedented 10 percent to 24 percent annual rate.

Evan Beach, a financial planner in Alexandria, Virginia, predicted that “People are going to get fired, and the people who get fired are not the 25-year-olds making $60,000. They’re going to be the 50- and 60-year-olds making $120,000.”

The economic stimulus package Congress passed last week could help, because it was designed to mitigate some job losses by extending loans to businesses that preserve their payrolls. It will do nothing to repair investment portfolios, however.

Beach and other financial advisers worry that panic decisions in this tumultuous time will only make things worse for boomers who, now more than ever, need to preserve their retirement resources.

Just as they did in the years after the 2008 financial market crash, some unemployed boomers will pound the pavement for a job and will scrape by – through odd jobs, short-term contracts, and unemployment benefits – rather than be forced into a premature retirement.

But Beach anticipates that many of them may have no other option than to claim their Social Security – the program’s earliest claiming age is 62. The problem with starting Social Security now is that it would permanently lock in a smaller monthly check. This goes against a central tenet of retirement planning, which is that many people would be better off delaying the date they sign up to increase a retirement benefit they will need for the rest of their lives.

Beach conceded, however, that claiming the smaller benefit now is not irrational for a couple with one laid-off spouse, only $2,000 in income, and $3,000 in expenses. If the laid-off spouse can start getting $1,000 from Social Security, he said, “that’s not irrational. That’s desperate.” …Learn More