4 financial moves if you have — or are worried about — long Covid

Long Covid is a chronic illness with far-reaching impact, both in terms 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, in the realms of health, estate, tax and insurance planning.

“You can do so much to help clients save money and time,” Carolyn McClanahan, a certified financial planner and medical doctor, told financial advisors Tuesday at CNBC’s Financial Advisor Summit.

“We’re far from being done with this,” McClanahan, founder of Life Planning Partners in Jacksonville, Florida, said of long Covid.

Some financial planning — like weighing whether you need life and/or disability insurance — is precautionary and should take place before someone gets sick, McClanahan said.

Waiting until after developing long Covid might mean you pay higher premiums for life insurance or private disability insurance — or that insurers will deny coverage, McClanahan said.

“Get [clients] insured before they actually develop an illness,” said McClanahan, who’s a member of CNBC’s Advisor Council.

Life insurers, for example, generally require a medical exam to determine 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 hundreds of potential symptoms, some of which 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 worker’s pay if they must miss work for an extended period due to disability. Life insurance policies replace lost income for beneficiaries (like a spouse and children) in the event of death.

Workers may be able to get free or low-cost life or disability coverage through their employer during annual open enrollment.

(Many people with long-haul symptoms also apply for Social Security disability insurance. However, claims are generally more difficult to get approved, since applicants must prove they can’t work for at least one year, McClanahan said.)

Individuals would also be well-served by doing some estate planning ahead of time, McClanahan said. That would include completing documents like a will, financial power of attorney and health-care power of attorney, as well as ensuring beneficiaries are named on important financial accounts, she said.

Those respective powers of attorney outline individuals who’ll step in to make financial or medical decisions on your behalf if you’re incapacitated.

A will details how you wish your assets to be distributed after you die. About two-thirds of Americans don’t have a will. Dying without one in place can create big problems for surviving family members, who are left to unentangle the legal hurdles.

Getting a diagnosis for long Covid can be challenging, partly because the illness is new and not yet well understood by the medical community.

For instance, there’s not yet a test to determine if someone has long Covid, meaning some doctors are hesitant to diagnose or treat patients. The dynamic can result in ample medical visits and accompanying costs.

“People have to go through a number of doctors,” McClanahan said. “Doctors hate when they can’t fit something easily in a box.”

For individuals worried they might have long Covid, McClanahan recommends creating a medical diary with detailed logs of each symptom and doctor visit. This might ultimately help get a disability claim approved, should that prove necessary, she said.

She also recommends seeking a new doctor if yours doesn’t show a willingness to entertain long Covid as a reason for symptoms; good doctors show compassion from the beginning and will work with you to help get approval for disability insurance, McClanahan said.

Further, patients who hit their annual deductible should frontload any necessary health visits or procedures for themselves and/or any family members covered by the health insurance, she added.

Medical costs associated with long Covid — such as testing, office visits and medical procedures — can easily extend into the thousands of dollars.

Even if you have health insurance, some costs may be “out of network” for your insurer, McClanahan said. Those costs are often much higher than in-network coverage, and may not have an annual dollar cap.

But there’s a silver lining if you have exorbitant health costs: You may be able to leverage them for substantial tax savings.

Here’s the principle: You can deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income from your taxes.

Let’s say your AGI is $50,000 this year. You can deduct any medical costs over $3,750 from 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 current year but benefit patients in the long-term.

For example, they can consider a “Roth conversion,” McClanahan said. This would convert a pre-tax retirement account to a Roth account, a type of after-tax account.

Here’s the benefit: Pulling funds from a Roth account in retirement means you wouldn’t owe income tax on the withdrawal like you would with a pre-tax account. The caveat is, you’d owe income tax in the year you complete the conversion.

People with large annual medical costs can use the associated tax deductions to negate the income-tax payment for a Roth conversion, essentially doing it for free. Depending on which tax bracket you’re in, it could amount to a savings of over 20%.