With all the advances in medicine and technology, it’s no surprise that people are living much longer than before. The rapid rise of health care costs could have a large impact on quality of life now and in retirement.
Save and save again
Unfortunately, health insurance doesn’t cover all of your medical expenses. As a result, some workers are tempted to tap into their 401(k) savings account before they should. The best way to prepare for future healthcare costs as well as any other financial situation is to save as much as you can today.
Consider a Health Savings Account
If your employer offers a high-deductible health plan, then you can save for current and future medical expenses in a health savings account(HSA). Withdrawals from an HSA can be made to pay for qualified medical expenses, including dental and vision expenses. They also have several tax advantages:
- Contributions to HSAs are tax-deductible
- Any interest or earnings grow tax-free
- Distributions are tax-free when taken for qualifying medical costs
Cut costs on prescriptions
You can save big by choosing generic medications. They have the same active ingredients, but cost less than brand name drugs. Ask your health care provider if there are less expensive options or other offers and see if it’s possible for you to use them instead. Even small savings can add up over time.
Choose in-network providers
Going outside of your health plan provider’s network to a non-participating doctor could result in an expensive – and avoidable – medical bill. When you visit in-network providers, you get access to the lower rates that they’ve negotiated with your health plan.
Use medical expense deductions
Medical expenses can take a bite out of your budget, especially if you have unforeseen emergencies that are not fully covered by your insurance. The IRS allows taxpayers some relief, making some of these expenses partly tax-deductible. If you incur extraordinary medical expenses in 2020 or a later year, you may be able to deduct from your taxable income on your income tax return the medical costs that exceed 10% of your adjusted gross income (AGI). This can include out-of-pocket insurance premiums and a host of other expenses.
Healthcare costs are likely to be a significant part of your retirement budget. If you haven’t already factored these costs into your retirement, you may want to consider planning for it. The sooner you prepare, the better off you will be.
To plan for healthcare costs in retirement, consider using the Be Ready! Service which provides you with access to a Financial Advisor2 to discuss your overall financial wellness including managing school debt, budgeting, retirement planning, etc. At no additional cost, you will receive a personalized Financial Snapshot that will provide you with steps you can take to help you write your Financial Wellness story. Call Voya Financial Advisors at 844.253.8692 to get started!
1 Neither Voya nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax advisor or attorney before making a tax-related investment/insurance decision.
2Financial Advisors are Investment Advisor Representatives and Registered Representatives of, and offer securities and investment advisory services through Voya Financial Advisors, Inc. (Member SIPC).