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Long Covid is a chronic disease with far-reaching implications, both in terms of health and household finances.
According to the US Department of Health and Human Services, as many as 23 million Americans have suffered from long-range symptoms of Covid-19. But there are steps individuals and their families can take to mitigate the negative financial impact in the areas of health, estate, tax, and insurance planning.
“There’s so much you can do to help clients save money and time,” Carolyn McClanahan, a board-certified financial planner and physician, told financial advisors Tuesday at CNBC’s Financial Advisor Summit.
“We’re far from done with this,” McClanahan, founder of Life Planning Partners in Jacksonville, Fla., said of Long Covid.
1. Assess life and disability insurance needs
Some financial planning — like weighing whether you need life and/or disability insurance — is precautionary and should take place before anyone gets sick, McClanahan said.
Waiting until Covid has long developed could mean you pay higher premiums for life insurance or personal disability insurance — or insurers refuse coverage, McClanahan said.
“Receive [clients] insured before they actually develop a disease,” said McClanahan, who is a member of CNBC’s Advisory Board.
For example, life insurers generally require a medical examination to determine the relative health of applicants and may increase costs or deny an application depending on what is revealed during this underwriting process.
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Here’s a look at more stories about the complexity and impact of Long Covid:
Long Covid has been linked to hundreds of potential symptoms, some of which are debilitating and serious, such as damage to vital organs. Symptoms can last for several months or years in some cases.
Short-term and long-term disability insurance replaces part of an employee’s wages if they are unable to work for an extended period of time. Life insurance policies replace lost income for beneficiaries (such as a spouse and children) in the event of death.
Employees may be able to obtain free or low-cost life or disability insurance through their employer during annual open enrollment.
(Many people with long-distance symptoms also apply for Social Security disability coverage, but applications are generally more difficult to approve because applicants must show they can’t work for at least a year, McClanahan said.)
2. Complete the estate planning paperwork
3. Keep a medical journal of symptoms and visits
Getting a diagnosis for long Covid can be difficult, in part because the disease is new and not yet well understood by the medical community.
For example, there is still no test to determine if someone has had Covid for a long time, meaning some doctors are reluctant to diagnose or treat patients. The dynamics can lead to extensive doctor visits and associated costs.
“People have to go through a series of doctors,” McClanahan said. “Doctors hate it when they can’t just put something in a box.”
For people concerned they may have been ill with Covid for a long time, McClanahan recommends keeping a medical journal with detailed logs of each symptom and doctor visit. This could ultimately help approve a disability claim should it prove necessary, she said.
She also recommends seeing a new doctor if yours is unwilling to long consider Covid as a reason for symptoms; Good doctors show compassion from the start and will work with you to get disability insurance approval, McClanahan said.
Additionally, patients who meet their annual deductible should prioritize any necessary health visits or procedures for themselves and/or family members who are covered by health insurance, she added.
4. Use healthcare spending for tax planning
Doctors hate it when they can’t just put something in a box.
certified financial planner and founder of Life Planning Partners
Let’s say your AGI is $50,000 this year. You can deduct any medical expenses over $3,750 from your federal income tax bill. These costs, according to the IRS, may include “payments to diagnose, cure, mitigate, treat, or prevent any disease, or payments for treatments affecting any structure or function of the body.”
Long Covid patients with high, deductible medical expenses can consider financial planning strategies that draw taxable income into the current year but benefit patients over the long term.
For example, you might consider a “Roth conversion,” McClanahan said. This would convert a pre-tax retirement account into a Roth account, a type of post-tax account.
Here’s the benefit: Withdrawing funds from a Roth account in retirement means you don’t owe income tax on the withdrawal like you would with a pre-tax account. The caveat is that you owe income tax in the year you complete the conversion.
People with high annual medical expenses can use the associated tax deductions to negate the income tax payment on a Roth remodel, essentially for free. Depending on which tax bracket you are in, this can result in savings of over 20%.