For Mark Roberts’ Use: When you think about your health insurance policy, you probably don’t consider how it could help you retire more comfortably. Other than staying healthy and productive, what does health insurance have to do with your financial future?
As it turns out, you can actually leverage some health insurance options to save for retirement. At the very least, you can prevent small disasters that set you back years in your savings plan.
If you have a high deductible health insurance policy, how do you plan to cover out-of-pocket expenses in the event of huge medical bills? Just one accident or serious illness could cost you thousands of dollars in an instant. Many people who find themselves in this situation are tempted to borrow money from their retirement accounts, but that’s almost always a mistake. What if there was another way?
Actually, there is. A health savings account (HSA) allows you to stash pre-tax money in a special account, to be used for qualified medical expenses. This money rolls over from one year to the next, so it will be there if you ever incur large medical bills.
Meanwhile, you are reaping an income tax benefit in the form of a valuable deduction. And the money that accumulates in the account won’t be taxed if you use it for qualified expenses.
Now here’s the best part: Remember what we said about that money rolling over from year to year? If you don’t use the cash in your HSA, you take the account with you when you retire. Then you can use the money for out-of-pocket medical expenses, like co-payments, deductibles, medications, and even certain equipment.
So, you can protect your current retirement funds, and you can even carry your HSA into retirement. The money isn’t taxed as long as you use it for qualified health expenses, and it is likely you will incur some medical bills (even long-term nursing care) at some point during your later years. Therefore, an HSA offers you a terrific benefit now, but could become another source of retirement funds as well.
This is just one of the many creative retirement planning solutions you will learn by working closely with a qualified financial professional. Call us with any other questions you might have. For every retirement funding dilemma, there is a possible solution!