Everyone has felt the impacts of the coronavirus pandemic in one way or another—economic, health, social, psychological, or a combination.
Retirees, especially, have been deeply afflicted by COVID-19, being most vulnerable to catch the various strains, experiencing deep financial commitments, and being isolated from family, friends, and loved ones.
Since March 2020, there have been two significant stimulus packages to help curb some of this loss—the $2.2 trillion CARES Act and the $900 billion Consolidated Appropriations Act. Now, there is another package, the American Rescue Plan.
The $1.9 trillion coronavirus relief package passed with a 220-211 vote in Congress and was signed into law by President Joe Biden on Friday, March 12.
What support does this bill provide? Here are the major components.
What’s the American Rescue Plan?
This package was designed to support individuals, families, businesses, and the economy at large, which has sustained negative impacts due to COVID-19. Below, we’ve outlined the top benefits you should put on your radar.
Direct stimulus payments
Eligible households will receive the biggest stimulus check yet, $1,400 per person plus an extra $1,400 for qualified dependents.
Phaseouts are much stricter this time around, beginning at $75,000 if filing single and $150,000 if married filing jointly. Those making over $80,000 and $160,000 respectively are ineligible for direct payments. The government will use your latest tax return to determine household income.
Extended unemployment benefits
Until September 6, 2021, unemployment benefits will increase by $300 per week. The first $10,200 in benefits will also be tax-free (for families making less than $150,000).
Unemployment programs that protect self-employed people and independent contractors, like the Pandemic Unemployment Assistance, have also been extended to September 6.
The plan also offers a 100% subsidy for COBRA health insurance premiums, allowing unemployed people to remain on their plans through September.
Relief for multi-employer pension plans
The plan took important steps to secure an $86 billion package for fledgling pension funds. The financial assistance is designed to help cover the costs of accrued pension benefits through 2051. Multiemployer plans that are in critical condition can apply for benefits and aren’t responsible for repaying any granted funds—a big step forward for pension security.
Improved three critical tax credits
The American Rescue plan restored life for some critical tax credits:
- Child tax credit
- Family and sick leave credits
- Employee retention credit
Americans will see a 12-month extension on a larger child tax credit—$3,600 for children under 6 and $3,000 for kids 6 to 17.
There are several ways this credit could impact families. It allows 17-year-old children to qualify, removes the earnings stipulation, and is fully refundable. The best part? Half the credit can be paid to families in advance. There are, of course, income thresholds to be cognizant of—$200,000 for single filers and $400,000 married filing jointly are ineligible.
It also expands the family and sick leave credits—safeguarding emergency time off for COVID-related measures. The employee retention credit helps employers keep staff on payroll. Both of these credits have been extended and expanded. Let’s talk more about how it could impact you together.
$25 billion in assistance grants will go to supporting a business sector hit so hard by the virus—restaurants, and bars.
This bill also allocated $7.25 billion to the Paycheck Protection Program.
School closures have put a significant strain on students, parents, teachers, and administrators. The plan allocates about $130 billion to K-12 schools. The funds will help schools reopen safely by reducing class sizes, purchase proper personal protective equipment, improve ventilation, among other improvements.
Deeply connected to K-12 closures is the lack of accessible and affordable childcare. The plan infuses $40 billion to childcare providers.
$40 billion is reserved for higher education to provide emergency financial aid to students.
Biden’s much-discussed student loan forgiveness plan was not included in this package. However, should any forgiveness law be passed before January 1, 2026, the forgiven balance will be tax-free. Under normal circumstances, loan forgiveness is considered taxable income—a law afflicting many borrowers.
Additional funds for vaccine manufacturing and distribution
Covid-19 vaccine manufacturing gets about a $20 billion windfall and about $50 billion will be funneled into testing and contact tracing.
How to make the most of these benefits
The American Rescue Plan will impact families in different ways. The most notable is the third round of stimulus checks.
Direct payments present many opportunities for individuals and families across the country. If you don’t have to use the funds to supplement daily living expenses, consider the following:
- Build up your emergency fund (3-6 months of living expenses)
- Pay off debt (put more toward your mortgage)
- Add to your brokerage account
- Fund short-term goals
- Donate to a charity or your local community
For retirees, the following could significantly impact you:
- Pension assistance
- Added tax credits
- Business funds
- Vaccine developments
It’s important to take advantage of every opportunity, financial and otherwise, available to you, especially in light of the trials and tribulations over the past year. As your trusted financial advisor, we are here to support you through all of life’s transitions.
While the pandemic has certainly extended its hardships, most people have experienced a deep change in the way they move about the world—hopefully with renewed grace, kindness, and compassion for themselves and others. We’d love to help you use your resources to live a fulfilling and meaningful life.
Schedule a call to learn more about how to take advantage of tax credits, grants, and loan opportunities available to you.