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Is There a Better Way to Plan for Health Care Expenditures?


Health care is most people's largest expense in retirement. Is there a better way to plan for it? Of course! Find out how in this week's Arista Advice. 

Full Transcript:

Hello and welcome to Arista Advice. Question of the week is: "Paul, is there a better way to plan for health care expenditures now and in retirement?" The answer is of course! There's a really cool vehicle out there called a Health Savings Account.

The largest expense in retirement is your health care. It's rising at almost double digit inflation and costs on a three-year average. Health savings plans provide a hedge against some of that uncertainty by providing a tax-sheltered, tax-deductible, and a tax-exempt withdrawal vehicle. A triple tax play.

HSAs are designed to help with health care costs. Their flexibility makes them a versatile and powerful tool for building wealth. What are they? HSAs, as discussed, are tax-sheltered savings accounts available only to those that are enrolled in a high deductible health plan.

You'll see on this chart here the different types of savings accounts. HSA, Roth IRA, 401(k), traditional IRA, 529, and a taxable investment account and how the contributions is either taxable, pre-tax, or the investment growth is tax-deferred or taxable and the withdrawals are tax-exempt  or taxable. And the one category that benefits you the most is the top one - the Health Savings Account. You'll see here also a graph that discusses the untapped  opportunity for clients to grow their wealth.

Did you know that only 50%  of those with an HSA contribute to it? It's like having a TV at the house  and not using the TV. If you have an HSA, and it's available to you at work, use it!
The second - only 14% of HSA owners contribute the maximum amount. This year is $7,100 that you can contribute if you are married. So $7,100, folks, you can put into these accounts and get a tax deduction.
This is the shocker. I hope you're all sitting down! Only 5% of those that are contributing to an HSA, have put money into it. Only 5% are using that money to grow in the equity markets. So 95% of the people, they're leaving it in cash, and this year in 2021 cash is earning .1 and inflation is 3, you're going backwards. So remember, look into your employer's benefits, see if they have a HSA, if they do, use it, understand it, and maximize it to your full extent.

Thanks for listening. Go to AristaWealth.com to get other videos, tools, tips and resources to help you live a life of significance.