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May 28, 2008 9:07 am US/Pacific

Healthcare Costs In Retirement

QUESTION:   What do you think is the best way to cover healthcare costs in retirement?
ANSWER:  There is no one answer to this question. However, depending on your health, I would suggest looking at Health Savings Accounts(HSA) as a great way to fund health care needs in the future. This will depend on the type of plan you have now, however I believe we as a society are moving towards this type of funding option. The way Health Savings Accounts work, is that an individual(or couple) gets insurance for what is called a high deductible plan or sometimes referred to as catastrophic care. Typically, this means that you as the insured are responsible for a deductible each year of say $2,000. After you have spent $2,000, your insurance will pay the remaining amount, typically to some predetermined limit. The source for the first $2,000 could be a health savings account. The nice part of a health savings account, is that the individual
receives a tax deduction for all deposits, and the distributions used for health care costs are tax free. You might think of it like an IRA for health care purposes, except that the dollars are never taxed. Companies are increasingly moving in the direction of Health Savings Accounts.
If you don't have this option available to you, I would advise increasing your contributions to either your company savings plan, Roth IRA or both as additional funding options.

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Money Matters is provided by:

David Schauer, CFA, MSFA, CFP®
Financial Planner
Hanson McClain
E-mail questions to moneymatters@kovr.com

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