The Cost of Healthcare Continues to Soar: How to Prepare for Retirement

Asset Protection Group | Sep 11, 2022

You’ve no doubt noticed that the cost of healthcare continues to rise, even outpacing overall inflation in many years. In just twenty years, between 2000 and 2020, the cost of healthcare had tripled to $4.1 trillion annually. As we know, retirees tend to incur more healthcare expenses than other groups, simply because age tends to bring more health problems.

In fact, the average retired couple can expect to spend about $315,000 on their healthcare, according to an analysis by Fidelity Investments. Your individual expenditure could vary significantly from that figure, depending upon your health and some factors that you can’t control (like genetics).

And you might even know that Medicare won’t pay for all of your healthcare expenses. Like other types of health insurance, Medicare beneficiaries are responsible for a portion of their costs, such as deductibles, co-payments, and the cost of some medications and medical supplies.

What can you do to prepare for the cost of healthcare in retirement? If you’re eligible for a health savings account (HSA) during your working years, consider using one now!

An HSA allows you to save pre-tax money now, that can be used for qualified healthcare expenses. But if you don’t use the money each year, the account balance will roll over to the following year. You can take the account with you into retirement and use the funds to pay for things like Medicare premiums and your uncovered medical expenses.

Additionally, the fact that you’re stashing pre-tax money means that you can lower your current income tax liability now – potentially saving you a bit on your taxes.

Currently the annual contribution limit for an HSA is $3,650 for an individual, or $7,300 for couples or families. And if you’re over age 50, you can save an additional $1,000.

If you’re enrolled in a high deductible health insurance plan, chances are good that you’re eligible for a health savings account. Talk to your human resources department at work. And remember to call us with all of your retirement planning questions. We can help you determine a strategy that works for your situation.

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