Personal Finance

Covid-19 has put older workers' retirement at risk. Here's how stimulus legislation would help

Key Points
  • Workers ages 55 and up could bear the brunt of financial challenges brought by Covid-19.
  • High unemployment rates coupled with high health risks come at a time when many don't have enough saved.
  • A report from the U.S. Congress Joint Economic Committee identifies what can be done.
Saul Loeb | AFP | Getty Images

Congress is at an impasse when it comes to how to help millions of Americans recover from the economic fallout of the coronavirus pandemic.

Now, a report from Democrats on the Joint Economic Committee of Congress shows that one group — workers age 55 and older — are among those most at risk for financial hardship.

As millions of workers have lost their jobs, the unemployment rate for those over 55 climbed to the highest rate on record, according to the report.

In April, the gap between the unemployment rate for workers 65 and up and those ages 25 to 54 grew by three percentage points, the biggest ever recorded. Unemployment for those 65 and up was 15.6%, while for prime age workers ages 25 to 54 it was 12.6%. Older workers most at risk for job insecurity include women and Blacks, according to the report.

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Unemployed older workers may face greater challenges finding new employment, while they also must contend with higher risks for health complications due to the pandemic.

What's more, many Americans do not have much in savings to fall back on. The typical worker has no retirement savings, the report found.

Meanwhile, just 40% of Americans have any retirement funds set aside, according to the report. The typical account balance is $40,000. Those ages 55 to 64 have a median of $88,000 saved.

"If you're in the 55 to 65 range, it's not just six months, a year or a year and a half, it's the rest of your life that is affected by this," said Rep. Don Beyer, D-Va., vice chair of the U.S. Congress Joint Economic Committee.

Rep. Don Beyer, D-Va.
Bill Clark | CQ-Roll Call, Inc. | Getty Images

The answer, according to Beyer, is to push for needed reforms in key areas including Social Security, health-care coverage and unemployment insurance.

"We have to do as much of the HEROES Act as we can," Beyer said of the legislation passed by the House in May.

Capitol Hill lawmakers are currently at odds over how much financial help to provide to Americans now. The HEROES Act, backed by Democrats, calls for $3 trillion in spending. Senate Republicans, meanwhile, proposed their own bill, the HEALS Act, which would cost about $1 trillion.

House Speaker Nancy Pelosi has said that Democrats would be willing to meet Republicans in the middle at $2 trillion. So far, Republicans have not said they are willing to do the same.

We should disconnect health care from employment. When you see all the people laid off, boom, the first thing that happens is they're losing their health care.
Rep. Don Beyer, D-Va.
vice chair of U.S. Congress Joint Economic Committee

"She really is open to a compromise," Beyer said of Pelosi. "But she doesn't believe that she can do a compromise that leaves the people who are hurting most out."

Those vulnerable Americans include children who rely on the government for their meals and health care, Beyer said. It also includes those who are unemployed.

Providing the extended federal unemployment benefits of $600 per week is crucial for many who are jobless, particularly because they often need to pay for health care either through COBRA or out of pocket, Beyer said.

Longer term, lowering the Medicare eligibility age from 65 to 60, 55 or even 50 could make sense, Beyer said. Employers would no longer have to pay the full health-care costs for older employees. It would also ease the burden on state-funded Medicaid programs, he said.

"We should disconnect health care from employment," Beyer said. "When you see all the people laid off, boom, the first thing that happens is they're losing their health care."

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Reinforcing Americans' financial security also requires short-term and long-term fixes to Social Security, he said.

Amid high unemployment, many workers may be tempted to claim Social Security retirement benefits at 62, the earliest possible age, rather than wait until 70, when they stand to get the biggest checks.

For many retirees, those benefits represent their main source of income. The report found that 20% of individuals 65 and up rely on Social Security for at least 90% of their income. Meanwhile, 23% said those benefits are between 50% to 90% of their money coming in.

Two bills proposed by Rep. John Larson, D-Conn., could provide short-term and long-term solutions, Beyer  said. The first would make it so that a temporary decline in income would not affect your Social Security benefits for the rest of your life, Beyer said.

The second, the Social Security 2100 Act, would gradually increase the Social Security payroll tax to 7.4% from 6.2%, increase checks by about 2% of the average benefit and restore the program's solvency through this century.

"If, at the end of the day, we're contributing a little more to Social Security and the employers are contributing a little more and it's solvent for the next 80 years, that's a pretty fair trade-off," Beyer said.

Admittedly, it may be tough to pass that kind of legislation in this political climate, when both sides of the aisle are finding it impossible to come together.

"If Joe Biden and Kamala [Harris] win, and if we're able to dislodge Mitch McConnell in the Senate, I don't see why there's any reason why we wouldn't do it in 2021," Beyer said of the Social Security 2100 Act.