Need a reason to kick start putting more money away for retirement? This statistic might do the trick. According to a retiree healthcare cost estimate from Fidelity Benefits Consulting, a 65-year old couple retiring in 2017 would need an average of $275,000 to cover healthcare expenses throughout retirement.
Healthcare is one of the largest expenses retirees come across as they get older, and it can significantly impact their savings. Because original Medicare doesn’t cover everything, retirees oftentimes purchase supplemental plans and/or supplement the gap with savings or retirement income, all of which require a bit of planning.
TIAA offers several steps you can take now to prepare, including considering a Health Savings Account (HSA). HSAs are personal savings accounts that allow you to save and pay for present and future healthcare expenses. If you participate in the GW Health Savings Plan, you may be eligible to participate in the HSA, administered through PayFlex. HSAs offer a triple tax advantage – contributions are made tax-free (via payroll deductions), any interest earned on the account is tax-free and account owners may make tax-free withdrawals for qualified medical expenses. GW will also match your HSA contributions, up to $600 for those with Employee Only medical coverage and up to $1,200 for those covering dependents under their medical plan. Unused HSA funds roll over from year-to-year (there is no “use it or lose it” rule), and the HSA remains with you even if you change insurance plans, switch employers or retire.
But should you prioritize obtaining the maximum GW match through your 401(a) retirement savings plan, or maxing out your HSA contributions? Time horizon, projected returns and tax brackets will determine the best strategy. Learn when an HSA-first strategy makes sense.
Healthcare will most likely be your biggest expense in retirement, but making small adjustments toward a healthier lifestyle today may help reduce your medical bills in the future. Make 2018 the year you get on the path to a happy and healthy lifestyle.
For a personalized estimate of your healthcare costs in retirement, try using this calculator from AARP.
