You're going to need a quarter of a million dollars just for retirement health care costs. HSAs may help you save.
Living longer sounds great until you realize how much money you’ll need to survive.
Retirement is expensive, and long-term health care is a major part of that. As many older Americans gripe about how to afford retirement, they’re taking advantage of health savings accounts now more than ever, Fidelity says.
HSAs are still a relatively new type of savings account that give Americans the option to save money toward covering just health-related costs. A decade ago, 4.5 million people had HSAs. Today, more than 20 million people do.
Fidelity estimates that it will cost Americans $260,000 for health care costs during retirement. Oftentimes, Social Security and employee retirement accounts don’t cover all our basic needs, let alone a health emergency. To better prepare for one, health savings accounts were made for those with high-deductible health plans. They allow account holders to put money aside specifically for health costs and get a tax break while they’re at it. Those with low-deductible plans, which more reliably cover the costs of care, are not eligible for HSAs.
How to do more with a health savings account
Aside from helping you save money specifically for your health needs, HSAs let you pay for medical expenses with pre-tax dollars. Unlike flexible spending accounts where contributions expire at the end of the year, HSA money rolls the unused money over to the next year.
You don’t have to just stash your cash away into a health savings account, though. Fidelity recommends using your HSA in other ways. Try investing, where you can take a portion of your HSA and put it in a mutual fund. Around 15 percent of HSA account holders have assets invested outside of cash, Fidelity says. This year you can contribute $3,400 for an individual plan and $6,750 to a family plan.
Health care can hurt more than help
When we get sick, we should want to get better to be our most healthy selves, right? But what if the exorbitant cost of health care holds us back? Well, it already does.
Americans are worrying about health care more than ever before, more than any other concern our nation is facing right now. We’re earning less, saving less, and unable to cure illness quickly and inexpensively.
Because we don’t have as much money to save for either retirement or emergencies (or both), when hardships arise, we either go into debt to pay for them (and never get out) or we ignore our health issues because we simply cannot pay for them.
While most Americans face health care problems and say it’s their biggest worry, it’s older Americans that have some of the hardest times being able to afford it. Long-term costs are sky-high, upward of $200,000 a year, depending on where you live. Even in the cheapest state, Louisiana, you’ll still be paying $68,000 a year.
Unless drastic changes happen, you need to start caring about your retirement right now, no matter how old you are. HSAs are a start. You’ll thank yourself later.
Article last modified on June 26, 2017. Published by Debt.com, LLC .