Build Up an HSA for Health Care Expenses in Retirement
According to Fidelity Investments, the average 65-year-old couple retiring in 2017 will have $275,000 in health care costs in retirement, including premiums for Medicare, insurance coverage to fill in the gaps and out-of-pocket costs. “That’s a lot of money, and HSAs are the most effective way you can save for that given their tax benefits,” says Leo Acheson, an analyst with Morningstar, which analyzes HSAs based on fees and investing options. You can’t make new contributions to an HSA after you sign up for Medicare, but you’ll be able to use your HSA money for additional medical expenses. After age 65, you can withdraw HSA money tax-free to pay premiums for Medicare Part B, Part D prescription-drug coverage and Medicare Advantage plans (but not medigap premiums), in addition to other eligible medical expenses.