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Long Covid is a chronic illness with far-reaching impact, each by way of health and household finance.
As many as 23 million Americans have suffered long-haul symptoms of Covid-19, according to the U.S. Department of Health and Human Services. But there are steps individuals and their families can take to blunt the negative financial impact, within the realms of health, estate, tax and insurance planning.
“You’ll be able to accomplish that much to assist clients get monetary savings and time,” Carolyn McClanahan, an authorized financial planner and medical doctor, told financial advisors Tuesday at CNBC’s Financial Advisor Summit.
“We’re removed from being done with this,” McClanahan, founding father of Life Planning Partners in Jacksonville, Florida, said of long Covid.
1. Assess life and disability insurance needs
Some financial planning — like weighing whether you wish life and/or disability insurance — is precautionary and will happen before someone gets sick, McClanahan said.
Waiting until after developing long Covid might mean you pay higher premiums for all times insurance or private disability insurance — or that insurers will deny coverage, McClanahan said.
“Get [clients] insured before they really develop an illness,” said McClanahan, who’s a member of CNBC’s Advisor Council.
Life insurers, for instance, generally require a medical exam to find out the relative health of applicants, and might raise costs or deny an application depending on what shows up during that underwriting process.
Long Covid has been linked to lots of of potential symptoms, a few of that are debilitating and serious, like damage to vital organs. The symptoms can last for several months or years, in some cases.
Short- and long-term disability insurance replaces a portion of a employee’s pay if they need to miss work for an prolonged period as a consequence of disability. Life insurance policies replace lost income for beneficiaries (like a spouse and youngsters) within the event of death.
Employees may have the opportunity to get free or low-cost life or disability coverage through their employer during annual open enrollment.
(Many individuals with long-haul symptoms also apply for Social Security disability insurance. Nonetheless, claims are generally harder to get approved, since applicants must prove they cannot work for not less than one 12 months, McClanahan said.)
2. Complete estate-planning documents
3. Create a medical diary of symptoms, visits
Getting a diagnosis for long Covid will be difficult, partly since the illness is latest and never yet well understood by the medical community.
As an illustration, there’s not yet a test to find out if someone has long Covid, meaning some doctors are hesitant to diagnose or treat patients. The dynamic may end up in ample medical visits and accompanying costs.
“People must undergo a lot of doctors,” McClanahan said. “Doctors hate when they cannot fit something easily in a box.”
For people fearful they might need long Covid, McClanahan recommends making a medical diary with detailed logs of every symptom and doctor visit. This might ultimately help get a disability claim approved, should that prove mandatory, she said.
She also recommends looking for a latest doctor if yours doesn’t show a willingness to entertain long Covid as a reason for symptoms; good doctors show compassion from the start and can work with you to assist get approval for disability insurance, McClanahan said.
Further, patients who hit their annual deductible should frontload any mandatory health visits or procedures for themselves and/or any relations covered by the medical health insurance, she added.
4. Leverage health expenses for tax planning
Doctors hate when they cannot fit something easily in a box.
Carolyn McClanahan
certified financial planner and founding father of Life Planning Partners
For example your AGI is $50,000 this 12 months. You’ll be able to deduct any medical costs over $3,750 out of your federal income-tax bill. Those costs may include “payments for the diagnosis, cure, mitigation, treatment or prevention of disease, or payments for treatments affecting any structure or function of the body,” according to the IRS.
Long Covid patients with large, deductible medical expenses can consider financial-planning strategies that pull taxable income into the present 12 months but profit patients within the long-term.
For instance, they will consider a “Roth conversion,” McClanahan said. This is able to convert a pre-tax retirement account to a Roth account, a form of after-tax account.
Here’s the profit: Pulling funds from a Roth account in retirement means you would not owe income tax on the withdrawal like you’d with a pre-tax account. The caveat is, you’d owe income tax within the 12 months you complete the conversion.
Individuals with large annual medical costs can use the associated tax deductions to negate the income-tax payment for a Roth conversion, essentially doing it totally free. Depending on which tax bracket you are in, it could amount to a savings of over 20%.
