Plan for healthcare costs in retirement
Some expenses go down in retirement — after all, you won't be commuting to the office, buying work-related attire, or paying Social Security and Medicare taxes. Unfortunately, health care costs tend to increase, becoming one of your largest budget items in retirement.7
Fortunately, it's possible to set aside money for retirement health care spending with a Health Savings Account (HSA).
- Contributions are made on a pre-tax basis, meaning they reduce
your taxable income today.
- Investments can grow tax-free.
- Withdrawals are also tax-exempt as long as they're used to pay for qualified health care expenses.
In 2022, you can contribute $3,650 to a self-only HSA or $7,300 for a family plan.9
There are a few things worth noting about this strategy. First, you have to have a high-deductible health care plan (HDHCP) to open an HSA. Second, you cannot contribute to an HSA once you enroll in Medicare.10
Finally, if you currently have a lot of out-of-pocket medical costs, you could spend all of your HSA funds on medical expenses that aren't covered by insurance.
But if you already have an HDHCP at work, have several years until retirement, and don't have a lot of out-of-pocket medical expenses, an HSA can be another way to save for retirement. Just look for a low or nofee HSA that allows you to invest your balance rather than just paying a paltry rate of interest. To maximize the amount you have available when you retire, contribute the maximum each year and invest whatever you don't spend.
Inflation is a real cause for concern for anyone looking forward to retirement. Fortunately, like market fluctuations, it's something you can plan for. The first step is to discuss your plans with your Synovus financial advisor. They can help ensure you're responding to inflation in a way that makes the most sense for your unique circumstances.