A plan to save for rising healthcare costs
Healthcare costs are rising, making it increasingly difficult for individuals and families to afford necessary medical care. Therefore, when coming close to retirement, the earlier you start planning for healthcare costs, the better.
Why is healthcare so expensive?
Healthcare can be expensive due to various factors, including the high cost of medical equipment and technology, research and development, administrative expenses, and the high cost of pharmaceuticals. Additionally, an aging population and increased chronic diseases have escalated the demand for healthcare services, contributing to rising costs.
Healthcare planning options
Estimate your healthcare costs: Look at your past healthcare expenses and estimate how much you'll need to pay for healthcare in the future. This can include insurance premiums, deductibles, copays, and out-of-pocket costs.
Revisit your plan regularly: Healthcare costs can change over time, so it's essential to revisit your savings plan periodically and adjust as needed. Review your healthcare expenses at least once a year and adjust your savings plan accordingly.
Make regular contributions to a Health Savings Account (HSA): An HSA is a tax-advantaged savings account that can be used to pay for eligible medical expenses tax-free. If you have a high-deductible health plan, you may be eligible to contribute to an HSA. Unused HSA funds can roll over to the next year, allowing you to build your savings. Making regular contributions to your HSA can help cover your healthcare expenses in retirement. Learn how much you can contribute to your HSA
Consider a healthcare Flexible Spending Account (HCFSA): If your employee benefits included a HCFSA, you may contribute to an HCFSA. This benefit plan is a tax-advantaged reimbursement account that can be used to pay for eligible medical expenses. However, you usually must use the funds in your HCFSA by the end of the plan year, or you'll lose them. Learn more about HCFSAs
Look for ways to reduce healthcare costs: While saving for healthcare expenses is important, you should also look for ways to reduce your healthcare costs. This can include shopping around for the best prices on prescription drugs, using generic medications when possible, and taking advantage of preventive care services that are fully covered by your insurance.
Following these steps helps ensure you’re prepared to cover your healthcare costs and avoid financial stress.
This blog is up to date as of June 2023 and has not been updated for changes in the law, administration or current events.