Individuals need to be proactive and plan for medical expenses in retirement. After housing, healthcare is the most significant expense for retirees. Health spending accounts and long-term health insurance are two options for people looking for ways to cover their health care costs in retirement.
As of 2022, people can contribute up to $3,650 for an individual or $7,300 for a family per year into a health savings account. After age 55, an additional $1,000 per year is allowed. Money in an HSA grows tax-free and it can be spent tax-free on qualified medical expenses. Once a person has Medicare, he or she no longer is eligible to contribute to the HSA, but can use money already in the account to pay for qualified medical expenses that are not covered by Medicare.