How to Save Money on and for Healthcare
Sound too good to be true? Maybe it should. You have read the headlines: healthcare costs continue to rise. More of the same each and every year, only it’s getting worse.
Let us show you how to structure your health plan to create short and long-term health savings options. The result is flexibility in an otherwise stringent and limiting healthcare market.
Save Money on Healthcare
Balancing your monthly health premium costs with health coverage needs to be at the forefront of your health insurance decisions. Traditional high-coverage plans like PPOs and HMOs offer the coverage you want, but often with overpriced premiums.
In contrast, HDHPs (High Deductible Health Plans) tend to have lower monthly premiums and as stated, higher deductibles. They are flexible and direct when it comes to their offering. Most don’t have additional costs once you reach your deductible.
HDHPs will save you money on your monthly premiums. How can you limit your financial exposure with their higher out-of-pocket deductibles? More on that below.
Save Money for Healthcare
The average American family pays $833/month in health care premium costs and $9,596 per year in out-of-pocket health care costs. Top that off with the expected $275,000 per couple in health costs in retirement. Those costs are on top of Medicare coverage. How can you prepare for these costs? What about an HSA?
An HSA or Health Savings Account is a personal savings account for health expenses. HSAs are owned by individuals (not employers) and can be transferred from job to job or institution to institution.
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.
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.
Bonus: Save Money for Retirement
After the age of 65, an HSA can be used just like a 401(k) or IRA. An HSA is the stealth retirement account you never knew about. HSAs don’t have mandatory distributions in retirement, so you can let any HSA investments grow into your 70s, 80s, and 90s.
HSAs weren’t designed for retirement savings, but their tax structure is almost identical to a 401(k) and IRA. This means you can save more tax-free funds for retirement.
The biggest challenge with rising health care costs is that you must renew your healthcare (and the additional costs) each year. An HSA helps break this cycle. Save this year, so you are one step ahead for next year. An HSA is the only health benefit that never expires. You can review your eligibility and open an HSA here.