A Tried & True Way To Protect Your Retirement Savings
Many of the Wealth Watch articles I pen focus on investment opportunities I uncover in today’s markets. Including the potential pitfalls to avoid for a worry-free retirement.
But another, vitally important part of the equation when it comes to building your wealth is to be careful about protecting the hard earned money that you’ve already set aside.
Case in point: Have you adequately planned ahead for skyrocketing healthcare costs during retirement?
Most folks I meet haven’t. They just assume that Medicare will be there to cover them when the time comes.
Just like Social Security, color me skeptical about what Medicare will look like 20 years from now.
You’ve got to take matters into your own hands. Not depend on Washington D.C. bureaucrats for adequate healthcare coverage.
For example, did you know that it’s estimated the average couple will need $280,000 in today’s dollars to cover medical expenses during retirement?
That’s according to a study by Fidelity Investments, and this figure doesn’t even include long-term care costs.
Most folks assume Medicare will kick in at age 65 and take care of everything. But the reality is the average retiree should expect to fork over about $5,000 per year on healthcare premiums and other out-of-pocket costs not fully covered by Medicare.
That’s why you must plan ahead and start saving now for your retirement healthcare expenses.
And at the current rate of inflation, the burden will only get bigger as time goes by.
The simplest, and for my money, most effective solution is to establish and start funding a health savings account (HSA) right away.
First, you may be familiar with HSAs as a convenient way to pay for or out-of-pocket costs, such as doctor visits or prescriptions, but that’s not all they’re good for.
An HSA can be used to pay for current qualified medical expenses, as well as future qualified medical expenses, even after you retire.
Second, and best of all, you’ll never pay federal taxes on that money!
That’s because you can fund your HSA with pre-tax dollars, contributions that grow tax free. And that money can be withdrawn tax free to pay for future qualified medical expenses too.
It’s triple-tax free money and it doesn’t get much better than that!
If your employer offers an HSA option, be sure to take full advantage of it. If you’re self-employed you can also set up an HSA yourself.
You can also contribute after tax dollars into an HSA, giving you a tax deduction on your personal return.
The contribution limit for HSAs in 2018 is $3,450 for individuals and $6,850 for family coverage. If you’re 55 or older you can contribute an additional $1,000 a year.
And unlike health flexible spending accounts (FSAs), HSAs are not subject to the “use-it-or-lose-it” rule.
All the money you sock away in an HSA will remain in your account to grow tax deferred year after year, until used to pay for future medical expenses.
And that’s how you score your triple tax savings advantage.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch