The average total cost of healthcare in retirement for individuals age 70 and over is about $122,000 per person.1 As healthcare costs continue to rise, those in or nearing retirement are increasingly concerned about how they will manage healthcare expenses over a period of 20 or more years in retirement. This can be particularly concerning for women who, on average, live longer than men and may need to fund their healthcare needs for a longer period of time.
A comprehensive approach to planning is critical for evaluating how key retirement risk factors, such as longevity, rising healthcare costs, or the need for long-term care, may impact your income and lifestyle in retirement. Below, we look at three ways to help you plan for your healthcare needs in retirement.
1. Start saving with a Health Savings Account
A Health Savings Account (HSA) allows you to set aside money on a pretax basis every year (similar to an IRA, 401(k), or 403(b) retirement savings plan), and that money can then be used for qualified healthcare expenses. You must be enrolled in a high-deductible health plan to participate. Your available balance rolls over year after year, and you can use it at any time, provided it’s to cover an eligible healthcare expense. Depending on which institution manages your HSA, you may also be able to invest a portion of your HSA balance, giving it the potential for growth. There is a limit on the amount of money you can put into an HSA each year—for 2021, that’s $3,600 for individuals and $7,200 for families. Similar to retirement accounts, there is a catch-up contribution allowed for those age 55 and over of an additional $1,000 annually.
To learn more about Health Savings Accounts, please visit the TIAA Health Savings Account Resource Center