HealthCare will cost you $260,000 in Retirement

[Docbeans]

On CNN today. This, they estimate, is without including the expense of long-term care-whether with LTCI or self-insured. And it is predicted to go up 4-6% annually. So, for those of us retiring in 20-25 yrs, that estimate is in the range of $550-650k.

[jfoxcpacfp]

Docbeans wrote:

On CNN today. This, they estimate, is without including the expense of long-term care-whether with LTCI or self-insured. And it is predicted to go up 4-6% annually. So, for those of us retiring in 20-25 yrs, that estimate is in the range of $550-650k.

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Guess what? Investing your HSA in a properly diversified equity mutual fund ETF portolio at $562.5/mo ($6,750/family, BOM) will grow to $538k and change in 25 years. Of course, I get to use 8% because my financial plan stipulates that the HSA portfolio wouldn't have any bonds in it and would be rebalanced annually  

Of course, this assumes that HSA contribution limits won't grow - which they will. Also that HSAs will remain in effect for HIPs, which is debatable.

[Hatton]

Ok docbeans $250000in todays dollars for me will mean approx $595 per month for a 35 year retirement (living to 95). This $7100/year.  Your money will grow with inflation if it is in stocks.  I may retire next year which would mean a 35 year retirement. This is not that bad when you break it down.  I worry more about medicare part b and d premiums due to someones arbitrary definition of those who can afford to pay a little more.

[conniebird]

What about us folks with no HSA? Just up the contributions into retirements? Also it doesn't seem like an Hsa is great when you need medical resources like having a baby....

[Hatton]

Yes just save enough to cover the costs in a retirement plan or a taxable account.  I don't have a HSA either.

[jfoxcpacfp]

conniebird wrote:

What about us folks with no HSA? Just up the contributions into retirements? Also it doesn’t seem like an Hsa is great when you need medical resources like having a baby….

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Yes. An HSA is just a tax-advantaged way of doing what you'll need to do (save for health care in retirement), regardless. Just as you wouldn't take money out of your IRA to pay for medical bills, it's better in many cases to invest the HSA funds and let them grow tax-free for future costs while paying medical bills with after tax money. Just look at the HSA as an extra IRA for healthcare.

Of course, if you're not already maxing out retirement, this should be a goal of your financial plan. And I realize that you guys are all over the place in your career, so this may not be an option in residency/fellowship.

[conniebird]

I don't have access to an HSA with my current job.

[Josh0731]

conniebird wrote:

I don’t have access to an HSA with my current job.

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That may be true, but you might want to double check.  I've never had a job where the employer offered a sponsored HSA, like many people I opened then managed the account myself.  And in my current job the HDHP is called 'Catastrophic' coverage as if they are strangely trying to scare people away from using it, but read all the dollar figures and its just an ordinary HDHP.  Many employers may either not be that savvy about HDHP/HSA options or they just don't care to be, but that doesn't necessarily mean its not an option.

[conniebird]

I checked. I work for one the largest health systems in my region and the max deductible is pretty small, actually it's non existent. So does not qualify. I get my healthcare through my system so it's basically free. Not a bad thing!

[GXA]

Congratulations on basically having free healthcare!  Ours used to be like that, however over the last 10 years we have become increasingly responsible for the costs.

I believe the HSA may be the only vehicle allowing you to put away pretax money and withdraw after decades of growth taxfree - so long as it is used for healthcare.  If not used for healthcare after retirement, the withdrawals are taxed like an IRA.

https://www.whitecoatinvestor.com/the-best-ways-to-use-an-hsa/

I have my HSA funds invested in index finds and pay for my current healthcare expenses with my credit card (which I pay off at the end of the month). 

[DMFA]

Yeah, the HSA is basically a double-tax-advantaged account.  If you can choose a high-deductible plan ($1300/self or $2600/family required for eligibility), then it's great account to have.

If you can't, then I guess you'll just have to suffer with your excellent healthcare coverage and with another taxed-advantage account or LTCG. ;-)

[chrisCD]

As others have noted, you have to have a high-deductible plan that is HSA qualified.  Your plan administrator should be able to tell you whether or not your particular plan is.  Investing all of the HSA into equities or some other split (some bonds maybe --  :twisted:  ) may be a tad risky if you actually do have a medical event that you need to tap it for.  With medical costs being what they are, it doesn't actually take much for such an event to occur (appendicitis, broken arm, etc.)

Most high deductible plans have the qualifying deductible and then a higher out-of-pocket maximum.  We are responsible up to our deductible and then have an 80/20 split up to the OOPM.  So if you don't have access to the OOPM, I would suggest at least keeping that amount in a liquid form within the HSA.

I have a number of dependents and this is the first year that my HSA may end up in the black.  It does save me $ on Fed Taxes but for some crazy reason, CA doesn't recognize HSAs and I do pay state taxes on that income.

cd :O)