Planning For Healthcare Costs in Retirement

Retirement should involve transitioning into a more relaxed lifestyle and enjoying the spoils of your hard work. That said, many people feel anxious about approaching the age of retirement and have concerns about how they are going to afford to live…

Want to retire today? Or 25 year from now? Either way, one major financial cost (and concern) in retirement is healthcare. Unexpected health costs could bankrupt your life of leisure or derail your retirement plans.

With healthcare costs rising each year, along with the increased care you might need as you age, you can’t depend on lady luck.

Let us show you how to plan for healthcare costs in retirement, 100% tax-free, and save money along the way for yearly health costs.

Retirement health

Health Costs in Retirement

Let’s get down to brass tax. Healthcare costs in retirement are expected to exceed $275,000 per couple. This is on top of Medicare coverage. Preparing for these costs, with dedicate health savings, ensures you won’t need to pull funds from other traditional retirement accounts like a 401(k) or IRA.

Added Health Savings Flexibility

How can you prepare for these costs? Open an HSA. An HSA or Health Savings Account is a personal savings account for health expenses. HSAs are owned by individuals and can be transferred from job to job or institution to institution. Once you open an HSA, those funds are yours for life.

HSAs allow for tax-deductible contributions, tax-free interest and tax-free withdrawals (if used for medical expenses). In 2019, individuals can contribute up to $3,500 in tax-free savings and families can contribute $7,000.

You get to decide to save, spend, or invest your HSA funds to balance your healthcare cost this year and prepare for health costs for next year and in retirement.

To top that off, after the age of 65, you can use your HSA funds, just like a 401(k) or IRA, for anything. An HSA just might be the new stealth IRA you have been looking for.

Decreased Healthcare Premiums

HSAs work with HSA-eligible health plans, like HDHPs to help you save tax-free money for all of your expected and unexpected health costs.

Traditional healthcare plans like PPOs and HMOs have exceptionally high coverage but are saddled with high set monthly premiums. HDHPs (High Deductible Health Plans) have lower monthly premiums. You get the safety net you need, but don’t pay for unnecessary coverage you don’t. Your HSA can help reduce the financial obligation that might arise until you reach your deductible.

Unlike traditional retirement savings like a 40(k) or IRA, you have the added flexibility to use your HSA funds today (for qualified medical expenses) or save for years to come. You get to choose the right balance for your lifestyle, and not have it dictated by stringent IRS guidelines.

HSAs provide the dedicated tax-free savings for health costs in retirement that you need. This means you can use your 401(k) and IRA for whatever you intended and not have those funds eaten away with trips to the doctor, hospital, or pharmacy.

Combine the savings power of a 401(k), IRA, and HSA to maximize your tax advantages for retirement. You save more of what you earn today and have more for tomorrow! You can check to see if you have an HSA-eligible health plan and open an HSA here.

Healthcare Costs in Retirement




About Us

DollarBreeders is a personal finance blog dedicated to people who want to take control of their finances and secure their future. Here you will find personal stories to inspire you to make better and more informed financial decisions. We aim to help people understand personal finances better and meet the challenge of living comfortably within the budget.