The HSA STRATEGY

Getting a health savings account is part of a greater strategy for financing health care for the rest of your life. That’s why I call it “the HSA Strategy.”

Step 1: Get an HDHP

Replace your current low deductible PPO or HMO plan with an affordable high deductible health plan (HDHP) to protect against large unexpected medical bills. Protection from large medical bills is the single most important reason for having insurance. When you make this change you will reap a substantial savings on your premiums.

Benefit: Save 20-60% on premiums
Individuals: Save $1,000 to $2,000 per year
Families: Save $3,000 to $4,000 per year

Key understanding: Only buy insurance for the big stuff; self insure the small bills.

Step 2: Open an HSA

Put those premiums savings into a tax-advantaged health savings account (HSA) to pay for routine expected medical bills and to save for future deductibles.

Key statistic: 73% of Americans spend less than $500 per year on health care and will have unused dollars roll over to next year. At end of year, unused dollars roll over for future use.

Step 3: Save for lifetime of benefits

Set a goal to “save and invest” those unused dollars over the next 10, 20, or 30 years. Use those accumulated tax-free dollars to pay “future” deductibles, long term care insurance premiums, and health care expenses not covered by Medicare.

At retirement you could have $100,000 or more for future health care expenses If you save and invest $100 per month at 6%

5 years: $7,011
10 years: $16,469
20 years: $46,435
30 years: $100,953

If you save and invest $200/month or $300/month, you would have $200,000 or $300,000.

Key point:The #1 reason to get an HSA: you get a lifetime of benefits instead of just benefits during the current policy year. With a traditional health plan, you pay monthly premiums, but at age 65, you have nothing to show for it.

You do need to save for the future

Bob Hopper Insurance Most people believe that Medicare will pay most of their health care costs during retirement. According to Fidelity Investments, a couple will spend $295,000 in expenses between age 65 and final years. By self insuring the routine and expected health care cost, and investing those saved premiums over long periods of time, you can go a long way towards financing healthcare expenses not covered by Medicare.

A bottle of champagne for your agent

I often tell people that when they reach age 65, they will have a tremendous urge to buy me a bottle of very expensive champagne. Why? If you follow my advice, you will have a nice sized balance in your health savings accounts to help pay the costs not covered my Medicare.