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The federal government is doing right by seniors in paying them as much as $500 to help with expenses incurred as a result of physical distancing.

The bulk of government financial help in the pandemic has been designed to replace the income of laid-off workers and help their employers survive the economic shutdown. Seniors don’t fit this model.

There has also been a “we’re-all-in-this-together” theme to the government response to the pandemic. Helping everyone but seniors would be callous.

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But there’s an important distinction to be made between helping seniors with their costs, as the feds are doing, and helping them with the investment losses they’ve had in the stock-market plunge of late February and March. So far, and rightly so, the government hasn’t addressed investment losses by seniors.

Many seniors were shocked by how quickly and sharply stocks fell. They feel vulnerable as a result and have been waiting to see what financial support the federal government might offer. The cash payments announced Tuesday may disappoint some, but it’s not the job of government to backstop individual investing losses. If anyone loses money in the stock market, that’s on them.

The financial support for seniors announced Tuesday consists of a one-time, tax-free payment of $300 to people eligible to receive Old Age Security. An extra $200 will be paid to low-income seniors eligible for the Guaranteed Income Supplement.

With seniors facing added costs and hits to their savings from the COVID-19 pandemic, Prime Minister Justin Trudeau said the government will bump payments under old-age security and the guaranteed income supplement by up to $500 for those who qualify. The Canadian Press

The maximum $500 in payments will offset the added costs of living with physical distancing. For example, it costs more to have groceries delivered than it does to shop in person and take advantage of what’s on sale. What this federal money likely won’t do is calm the nerves of seniors whose investment portfolios were exposed to the recent stock-market crash.

The S&P/TSX Composite Index fell about 37 per cent in a little more than a month, which is an exceedingly rough ride. The index has since halved its loss, but the trauma of the decline remains.

Ottawa hasn’t ignored investment losses incurred by retirees. For 2020, the minimum mandatory withdrawal from registered retirement income funds has been reduced by 25 per cent. If a senior has to sell hard-hit stocks or equity funds to pay for a RRIF withdrawal, this move reduces the sting a little bit.

The feds should have waived this year’s RRIF withdrawal requirement entirely. They could still do that, but they’d have to take an additional step of allowing people who already made a RRIF withdrawal to put the money back in without penalty. This would be a huge hassle for all concerned, seniors and their advisers and investment companies, but also a morale booster for retirees who feel they were mugged by the stock market.

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It’s a flaw of our retirement system that seniors feel the pain of stock-market declines as intensely as they do. We’d all be better off if more people retired with defined-benefit pension plans, where cash is paid monthly as long as you live and professional money managers handle stock-market ups and downs.

Without a defined benefit pension, you have to rely on your own investing skills or those of an investment adviser. You need to pay close attention to your retirement investments, notably the mix of stocks, bonds and cash. At all times, you need to be prepared for the kind of stock-market decline we saw recently.

The extent of the stress felt by seniors about their investments recently suggests that they may not have been as conscious of risk as they should have been. They may need to work harder, either themselves or by questioning their adviser, to prepare their retirement investments for big stock-market downturns.

Helping seniors cover extra living costs in the pandemic is compassionate. But helping them with investment losses sends a message that there’s a safety net for people who don’t manage their investments well.

Unfortunately, that’s not true in our retirement system for many people. They have to look after themselves.

Stay informed about your money. We have a newsletter from personal finance columnist Rob Carrick. Sign up today.

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