Tips for Saving this Year and Years to Come
Balancing rising healthcare costs is difficult enough. Planning for healthcare costs 20 years into the future might seem impossible. In fact, you can create healthcare savings strategies today that offset the impact that those rising costs can have on your income and retirement savings. It’s actually easier than you think.
Review Your Costs
Before we can consider how to save for these costs, we need to understand the costs. While the average American family pays $833/month in premium costs and $9,596 per year in out-of-pocket health care costs. This might be drastically different from your personal experience. Take the time to understand your costs – pencil and paper or spreadsheets are mandatory!
Health Cost Review Tips
- Look at your annual real dollar costs.
- Do your best to forecast expected costs in the future based on lifestyle changes and health requirements
- Add a buffer for any unexpected healthcare expense that might arise
You should be left with a well-rounded forecast of your current and future health costs. This model is far from perfect but is a good jumping off point.
Compare Services and Plans
The level of healthcare services required might surprise you. While healthcare plans like PPOs have dominated the healthcare space, newer options like high deductible health plans (HDHPs) are becoming more commonplace.
While PPO health insurance plans offer incredible coverage they are saddled with high-cost monthly premiums. On the other hand, HDHPs offer relief from the high-cost premiums. They are a lower cost alternative. This can save you money on your health costs this year. What if something comes up, and your HDHP insurance leaves you with higher out-of-pocket medical costs?
Don’t you wish there was a way to balance those lower premiums and the higher out-of-pocket deductibles? More on that below.
Consider an HSA
If you could save tax-free dollars for healthcare costs, that would help limit the real dollar cost increase health expenses (and insurance) would have on your income. HSAs provide that exact opportunity.
HSAs allow for tax-deductible contributions, tax-free interest and tax-free withdrawals (for medical expenses). They are the only dedicated long-term health savings on the market. Use that tax-free money for health expenses this year or in years to come. Your HSA account, and any money you save, is for life!
On top of these health savings benefits, after the age of 65, HSA can be used just like a 401(k) or IRA. They are effectively an additional retirement account. HSAs also don’t require mandatory distributions, so any HSA investments can grow in retirement well into your 70s, 80s, and 90s. You can review your health plan eligibility today and open an HSA (if eligible). You don’t have to wait for next year’s open enrollment.
Even in a confusing and convoluted health experience, making healthcare more affordable is possible. It takes time and foresight. Understand your health expenses and health service options so you can get ahead of the curve. With some work, you should be left with the best (and most tax-advantageous) health insurance and savings options on the market. Your future self will thank you.
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.