Saving for retirement and health care? An HSA helps do both at once

July 4, 2021

Retirement planning overlaps with health-care planning more than you might think. Fortunately, you might be able to prepare for both at the same time.

Sure, retirees will incur many expenses that have nothing to do with health care, such as housing, food, travel and recreation. And many of the health-related expenses retirees face will be covered by Medicare.

But there are still a lot of health costs in retirement that won't be paid by government programs. Fidelity Investments figures two spouses reaching age 65 should plan on budgeting for about $300,000 in combined out-of-pocket health expenses over their remaining lifespans. The Employee Benefit Research Institute estimates the combined costs could be closer to $325,000 on average.

“This is a huge chunk of change” in terms of out-of-pocket health costs that retirees will likely face, said Jake Spiegel, a research associate at EBRI. “Medicare doesn’t cover all expenses.”

So what can you do about meeting such a daunting obligation? Save, invest and make use of the best account choices out there.

Mainstream retirement accounts including 401(k) plans and Roth Individual Retirement Accounts are a big part of the equation. But you also might want to consider Health Savings Accounts, although these tax-favored vehicles aren't right for everyone.