Including healthcare costs in your financial plan

Choose the right plan 

Different insurance plans have different features. Some have low premiums and high deductibles. Other have higher premiums and lower deductibles. Some cover a broad range of services, and other have more narrow benefits. 

To manage your costs, you’ll need to think about what kind of plan makes sense for you and your family. For instance, if someone in your household has a chronic illness, you may want to choose a more expensive plan with a low deductible and a wide array of specialists in network. If you are young and healthy, you may be able to save by choosing a high deductible plan. Talk to your financial professional about your specific needs so that he or she can help you find a plan that works for you.

Consider an ACA plan

If you don’t have insurance coverage through work, you may be able to buy subsidized care through the Affordable Care Act (ACA). The government provides subsidies that ensure that premiums for a mid-level insurance plan cost no more than 8.5% of your income³, and low- and middle income buyers can find basic plans for less or even free. Go to healthcare.gov to find out more 

Think about an HSA

High deductible plans—which the IRS defines⁴ as plans with deductibles above $1,400 for individuals and more than $2,800 for a family—can be a good, relatively affordable way to obtain basic coverage. However, it’s important to be able to cover your pre-deductible costs. Fortunately, there’s a terrific, tax-deferred vehicle that can help you do that. It’s called a health savings account or HSA.

An HSA enables you to make a tax-deductible contribution⁵ of up to $3,650 per year for an individual plan or up to $7,300 for a family plan. That reduces your taxable income in the year you make your contribution. The money grows in your HSA account, tax-deferred. You won’t have to pay taxes on capital gains or dividends while it’s in the account. And finally, you won’t have to pay taxes at all on money you withdraw from your HSA for qualified medical expenses. As a result, you can pay for doctor’s visits, prescription drugs, even contact lenses and glasses, with pre-tax dollars, a significant savings. 

You can keep money in an HSA indefinitely, so if you don’t have a lot of medical expenses in one year, you can use your funds the next year or the year after. However, you can’t make contributions to an HSA if you’re not enrolled in an HSA-eligible insurance plan. Your financial professional can help you make sure that you choose a plan that qualifies. 

Your financial professional can provide guidance regarding your HSA, choosing a mix of liquid assets for current expenditures, as well as investment options for the longer term. That’s important because if you have money left in your HSA when you reach age 65, you can withdraw it for any purpose⁶, medical or not, without owing taxes.

Plan ahead for health costs

Medical expenses can be devastating if you don’t prepare for them, but with a good insurance plan, some savings for uncovered costs and perhaps even an HSA, you’ll be in a good position to meet them. Talk to your financial professional about how to get started.