What Will Healthcare Cost You in Retirement? Prepare to Be Shocked | Personal Finance | #healthcare | #elderly | #seniors
A good way to pay for healthcare in retirement
If you’re floored by the idea of you and your spouse having to spend $300,000 on your medical needs in retirement, there’s one savings product you should look at — a health savings account, or HSA. With an HSA, you get to contribute pre-tax dollars to an account that’s earmarked for medical expenses. Those HSA funds don’t expire, and you can invest any money in them that you don’t need to use for near-term medical bills. As such, if you fund an HSA consistently during your career but don’t take withdrawals from it, and instead invest that money, you can wind up with a nice sum to help cover your healthcare expenses during your senior years.
The other great thing about HSAs is that their investment gains are not taxable, nor are withdrawals from them, provided you use the money for qualified medical expenses. As such, if you were to put $5,000 a year into an HSA for 30 years to cover you and your spouse, avoid taking withdrawals, and invest that money in a way that generates a fairly conservative 5% average annual return, you’d wind up with close to $332,000.
The only catch with HSAs is that not everyone qualifies to use them. To be eligible, you must be enrolled in a health insurance plan with a deductible of $1,400 or more if you’re saving on your own behalf, or a deductible of $2,800 or more if you’re saving at the family level (meaning, for at least yourself and a spouse).