Some of the major expenses you’ll need to anticipate in retirement are your healthcare costs. There are many choices to make when it comes to choosing a Medicare plan, using an HSA, and qualifying for Medicaid. One healthcare cost that is easy, but possibly detrimental to overlook is long-term care. It’s estimated that 52% of people turning 65 will need some type of long-term care during their lifetimes. On average, women will need 2.5 years of long-term care, and men will need 1.5 years. Also, 14% of people need long-term care for longer than five years. When you consider that the average rate for a private room in a nursing home is $100,375 a year, covering long-term care costs is a major feat.

Retirees may be confused about what services Medicare covers, but don’t fall for these long-term care myths. Medicare can cover medical services needed in nursing homes, assisted living facilities, and one’s own home, but not the cost of staying in these facilities or in-home care costs for long periods of time. Under most circumstances, it covers short-term stays in skilled nursing facilities if you were formally admitted to a hospital for three days. If qualifications are met, Medicare will pay the full cost for the first 20 days, and a portion of the cost for the following 80. After 100 days you are responsible for covering costs. Even if you purchase a Medicare supplemental insurance policy, you’ll need to find another way to cover long-term care costs.

Since Medicare won’t necessarily cover these costs, some people may look to Medicaid. And while Medicaid will cover a large portion of long-term care costs, there are strict functional and financial requirements to qualify for Medicaid. To start with, applicants must be 65 or older, and have a permanent disability or be blind. A medical specialist will assess applicants to see what type of care they require, and the criteria varies from state to state. The income limit to qualify for Medicaid also varies according to the state you’re in, and can be up to $2,313 per month as of 2019.

Covering long-term care costs is just one aspect of creating a retirement plan, but it is a big one. Whether you’re looking to pay for long-term care through Medicaid, insurance, your savings, or some combination, the professionals at Peak Financial Freedom Group can assess your unique financial situation and help make long-term care planning a part of your retirement plan. Click here to schedule your free financial review today.

If you have an HSA or are planning on opening one, you’re in luck: The IRS has announced higher contribution limits for 2020. Starting next year, you can contribute up to $3,550 for individual coverage, or $7,100 for family coverage. And, if you’re 55 or older, you can contribute an additional $1,000 per year. You can contribute to an HSA if you have a health plan with a minimum annual deductible of $1,400 for individual coverage or $2,800 for family coverage.

You can reduce your taxable income by contributing to an HSA even if you don’t itemize your taxes. Since it’s a tax advantaged account, the higher your tax bracket, the bigger your savings. It can be a powerful retirement savings tool because you can let the funds grow tax-free for as long as you want, and then withdraw money tax free for qualified medical expenses. After you turn 65 you can withdraw funds for nonmedical uses and pay the same tax you would on withdrawals from a traditional retirement account.

While it’s helpful to contribute enough to cover your out-of-pocket medical expenses for the year, it can be better to contribute the maximum amount in order to benefit from the investment. You can create an investment strategy for your HSA just like you would with a 401(k) or IRA, and use it to help cover the rising cost of healthcare in retirement. You can shift to lower-risk investments as you get older, and rely on the account once you’ve retired and no longer receive healthcare coverage from your employer.

You’ll want to avoid using the account to pay for nonqualified expenses, as you’ll pay both a tax and a 20% penalty on withdrawals before age 65. Also keep in mind that passing on an HSA to anyone except your spouse will also pass on a tax burden: non-spouse beneficiaries will have to pay taxes on the balance the year they inherit it. So, it can be better to draw down your account balance in retirement instead of saving it for your heirs. Once you turn 65 you can’t contribute to on HSA, but you can use it to cover Medicare premiums, out-of-pocket expenses, and a portion of long-term care policy premiums.

An HSA is just one way to plan ahead for your healthcare expenses in retirement. Here at Peak Financial Freedom Group, we can help you create a comprehensive retirement plan that takes your future healthcare costs into account. Click here to schedule your no cost, no obligation financial review.

Do you have a Health Savings Account (HSA)? If so, you should note that the rules regarding HSAs change when you turn 65. It’s important to prepare for the rising cost of healthcare in retirement, and an HSA can be a good way to cover future medical expenses, both for you and your spouse. However, once you sign up for Medicare, you can no longer contribute to an HSA. So, here is how you can make the most of what you’ve saved in your account.

The benefits of an HSA are that contributions are not taxed, funds grow tax deferred, and can be withdrawn tax free for qualified medical expenses. You can also learn the benefits of pairing your IRA with a Health Savings Account. You can still contribute to your HSA for 2018 until April 15^th of this year if you have not signed up for Medicare yet. Before age 65, you can’t use funds from an HSA to pay for non-medical expenses without incurring a 20% penalty. But, when you turn 65, you only have to pay taxes on withdrawals for non-medical expenses, and do not have to pay taxes on withdrawals for qualifying medical expenses. Qualifying medical expenses include Medicare Part B and Medicare Advantage plans, prescription drugs, a portion of long-term care insurance premiums, dental and vision care.

Unlike a flexible spending account, the use-it-or-lose-it rule does not apply to HSAs. One strategy you can use is to avoid withdrawing from your HSA before you turn 65, by paying in cash for medical expenses. If you keep the receipts, you can withdraw from your HSA to reimburse yourself years later. This way, the funds have more time to grow tax free, and you can delay withdrawing until after you are 65 and the funds used for qualifying medical expenses are no longer subject to tax.

If you are still working past the age of 65 and delay signing up for Medicare, you can continue to contribute to an HSA. People who have an employer match may choose to do this. You must also delay Social Security benefits in order to delay Medicare and must work for an employer with more than 20 employees.

Make sure you know the rules regarding using an HSA after the age of 65 before you turn 65. If you’re like most Americans, you will start receiving Medicare benefits when you are 65, and will no longer be able to contribute to an HSA. However, this doesn’t mean that your HSA can’t be a useful tool in retirement if you know how to make the most of what you’ve saved in your account.

Knowing ahead of time how to use your HSA when you turn 65 can help you create a retirement plan that take rising healthcare costs into account. Here at Peak Financial Freedom Group, we can help you prepare for retirement by arming you with knowledge and a comprehensive plan based on your individual needs. Click here to schedule your no cost, no obligation review today.

We know life is like a box of chocolates – but what about retirement? Do you really know what it holds, or how much it will cost? It’s easy to budget based on your current lifestyle, but what about anticipating major unexpected costs? The truth is that as you get older, it’s likely you’ll have to spend more on healthcare. But the truth is also that there are things you can do to plan ahead for this. We always hear that healthcare costs are rising and Americans are living longer, so why not take these facts into account when planning for retirement?

According to the Employee Benefit Research Institute, a couple retiring at 65 will need to pay around $399,000 for healthcare costs in retirement. That could be a significant chunk of your retirement savings, and you never know when you might need serious medical attention. 23% of families over 75 experience a $400 or greater medical expense once a year. This can pose a major problem, as Americans between 65 and 74 spend about 77% of their income on housing, healthcare, food, transportation, and clothing. This doesn’t leave much wiggle room for major healthcare expenses, and transitioning into retirement is no small task.

Working longer can be a solution, but you might want to enjoy the benefits of an early retirement. Saving more is also an option, and specially saving in a Health Savings Account (HSA) account can be a good strategy. If you have a high-deductible health insurance plan, defined as one with an out-of-pocket maximum of $6,750 and a minimum deductible of $1,350, you can contribute up to $7,000 a year to an HSA for your family. There are also benefits to pairing your IRA with a Health Savings Account.

If you’re exceptionally healthy, you might not be as worried about high healthcare costs, but you might need to worry about outliving your retirement savings. Deferred annuities, or “longevity annuities” pay out a defined amount at a specific date in the future. Deferred annuities cost less than immediate annuities, because the money has more time to grow before payouts start. A deferred annuity can pay you for the rest of your life, and then continue paying your spouse if you are to pass away before him or her. This can be a good strategy to protect both you and your spouse from outliving your retirement savings.

Although it’s difficult, thinking about unexpected costs during retirement now can help you avoid bigger problems in the future. It’s not enough to create a budget based on your current lifestyle: As healthcare costs rise and Americans are blessed with longer lives, retirement planning becomes more complicated.

If you want help creating a comprehensive retirement plan, contact the professionals at Peak Financial Freedom Group. Click here to schedule your no cost, no obligation financial review so we can start helping you plan for the unexpected.