While you can’t always plan to avoid illness, you certainly can save for it. Health spending per person in the U.S. was $10,348 in 2016 – 31 percent higher than in Switzerland, the next highest per capita spender.The average American consistently spends more on healthcare-related costs than citizens elsewhere. Accidents, sickness and old age are things that you cannot predict, but with a little help, you can work toward being more financially secure for the years ahead.
We sat down with Rachel Barzilay, CAP®, CFP®, CRPC®, Managing Director, Wealth Management Advisor and Senior Portfolio Manager with Merrill Lynch Wealth Management in Boca Raton, to discuss tips that can help you prepare for future health costs.
How can I plan for future health care costs?
The first step in planning for your future healthcare costs is having a conversation with your family and loved ones. Financial burdens of healthcare come not only from your own personal health journey, but from your family’s journey as well. It is important to discuss how future caregiving responsibilities may impact your finances. Initiate a discussion now with both your partner and your older relatives. Some questions to consider include: Where will the money for healthcare expenses come from? Will our parents have the care they need as they grow older? Who will play the caregiver role? Can you afford to take a leave from work if you need to care for others?
What is an HSA and what does it cover?
An HSA, or health savings account, allows a person who is enrolled in a quantified high-deductible health plan (HDHP) to pay for routine medical costs until the high deductible has been met. The benefit is that the money put into your HSA account is tax-deductible, or pre-tax; a “triple-tax advantage” ensures that you won’t pay taxes when you contribute, earn interest or withdraw from the account.
HSAs can cover a wide range of routine medical costs, including: qualified out-of-pocket medical expenses you incur before you’ve met your HDHP; medical, dental or vision coinsurance and co-payments; prescription drugs; some kinds of medical equipment, like eyeglasses; and some medical treatments not covered by your insurance, such as visits to a chiropractor.
How can I plan for health care in retirement?
In retirement, your medical bills will likely increase. Simply acknowledging this fact is a great first step. Often when we think about retirement, we envision only the good things – spending more time with family, traveling or perhaps checking items off your bucket list. These are important goals, but you should also be mindful of the biggest unknown – your health.
Having a plan in place for the future is key to financial preparedness, which is why now is the time to open a retirement account if you haven’t done so already. This plan can reflect your aspirations and your vision for the future, but it should also account for potential healthcare costs. As you plan to make your finances mindful of your health, consider taking proactive measures to mitigate your risk for diseases and health complications in the long run.
January is always a time to reflect on your health – this year, think about it in terms of your finances, too.