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Retirement Planning Part 4 of 4: Consider Health Care Costs

Retirement Planning Part 4 of 4: Consider Health Care Costs

August 24, 2016

The cost of health care today is something that simply cannot be ignored when making plans for your retirement. Health care will likely be one of your biggest household expenses during your golden years. The real costs of health care vary from person to person depending on your age and overall current health of course, but creating an estimate of your future needs is essential to make sure all your bases are covered.

According to Medicare, a person retiring today could expect to incur roughly $4,123.08 in annual costs for their health coverage in retirement. For just health coverage premiums alone, a couple retiring today should expect to incur about $8,246.16. The figure does not include other out-of-pocket costs, such as expenses for dental services, eye exams or glasses, or even deductibles for prescription drugs.

Over the entire course of your retirement years, these costs have the potential to erode your retirement nest egg.

Fortunately, there are ways to help combat the rising costs through strategic investment vehicles. One of the best options today is a Health Savings Account, or HSA. Health Savings Accounts allow you to save for current and future health care expenses on a tax-free basis. Money saved within these accounts can be deposited, grow and be withdrawn tax free if used for qualified medical expenses.

In 2016, HSA holders can opt to save up to $3,350 for an individual and $6,750 for a family. 1 HSA holders age 55 and older are permitted to save an extra $1,000. So a husband and wife who are each 55 and above, and each with their own HSA accounts, could collectively put away up to $8,700. These HSA contributions generally are completely tax deductible from your gross income, which will lower your federal income taxes.

Your health is your greatest asset. Your FAS Financial Advisor can help you determine what your needs for health care during your retirement years might be and how to create a strong plan to navigate those waters effectively.