Opening a health savings account tied to a high-deductible plan
As you shop around, you could consider purchasing a high-deductible health plan that meets federal tax standards permitting you to open a health savings account (HSA). The high-deductible health plan will likely have lower premiums than others you’re considering, and the money you invest in an HSA, only available to those who purchase a high-deductible plan, can be used to pay for qualified medical expenses not covered by your insurance. Contributions are tax deductible for federal tax purposes, and any interest or other earnings are federal tax-free. Withdrawals are also federal tax-free as long as they’re used to pay for qualified medical expenses. Any unused balances remain in the account, potentially gaining in value. No other type of tax-advantaged savings account offers all of these features.
“Once you’re eligible for Medicare and enroll, you can no longer contribute to an HSA, although you can draw on your HSA funds to pay certain Medicare premiums and out-of-pocket medical expenses,” says Storey. There’s also no limit on when you can request HSA reimbursements, he adds. “You can tap your account any time you need the money.”
Planning ahead for future costs
After your immediate health coverage needs are sorted out, it’s a good idea to talk with your financial advisor about ways you might prepare for your long-term care needs, says Storey. The cost of regular healthcare is often dwarfed by the cost of long-term care, which can easily top six figures per year4 and isn’t, for the most part, covered by Medicare. An American who is 65 has nearly a 70% chance of needing some type of long-term care during the remainder of their lifetime5 and long-term care insurance premiums increase the older you are when you apply for coverage. If you haven’t already purchased it, your financial advisor can help you determine whether long-term care insurance makes sense for you or your spouse, factoring in age, medical history and other considerations.
In addition, if you know you’re about to leave the workforce — whether you’ve decided to take early retirement or you believe a layoff is imminent — it’s a good idea to ask your doctor and your dentist whether there are any procedures they would recommend you take care of while you’re still covered by your employer’s health plan.
And, of course, it can’t hurt to start exercising and eating right if you’re not already. As Storey notes, “The best health insurance is staying healthy.”