Don’t Miss These End of Year Healthcare Deadlines
An average 65-year-old couple retiring today will need an estimated $285,000 to cover their healthcare costs. This doesn’t even include long-term care costs, which can run as high as $253 per day on average for a private room in a nursing home or $119 per day on average for care in an assisted living facility one-bedroom unit. Today’s retirees should anticipate these potential costs when creating their overall retirement plan. There may be ways to help save on costs by minimizing your tax burden and with thoughtful planning, such as deducting the cost of qualified medical expenses. So, don’t miss these end of year healthcare deadlines.
There are several tax deductions you can potentially take advantage of by the end of the year if you itemize your taxes. For example, you can potentially deduct qualified medical and dental treatments costing at least 7.5% of 2019 gross adjusted income for the 2020 tax year. You may also be able to claim a home office deduction, health insurance if you are self-employed, and a certain portion of long-term care insurance premiums. There are also several other things you can potentially do by the end of the year to help lower your 2020 tax bill, such as bunching itemized deductions.
If you retired earlier than expected this year or plan to retire before age 65, you might consider these tax strategies if you’re navigating the private health insurance marketplace. If you don’t yet qualify for Medicare, you may be considering coverage through COBRA or the Affordable Care Act, and you should factor these costs into your overall retirement plan.
Review Your FSA or HSA
A Flexible Spending Account (FSA) allows workers to put away pre-tax dollars to spend on eligible healthcare products and services. For many FSA users, money must be spent by December 31st of each year because it does not roll over to the next year. Some of the goods and services typically covered include co-pays and deductibles, dental care, vision care, vitamins, thermometers, and many over the counter drugs.
If you have a Health Savings Account (HSA), your money will roll over to next year. However, you may want to review your contributions or distributions now and consider how your HSA savings will factor into your retirement plan. HSA contributions are generally made with pre-tax dollars. Funds can grow tax-free in the account and then can be withdrawn tax-free if they’re used on qualified medical expenses, making it a potentially powerful retirement planning tool.
Consider Your Medicare Options
Medicare Advantage Open Enrollment season starts January 1st and ends March 31st. During that time, you can switch to a different Medicare Advantage Plan and join a Medicare Prescription Drug Plan. This is a good time to review your healthcare needs to see if your current plan still suits them. For example, if your prescription drug needs have changed in the last year, a different Part D prescription drug plan might work better for you. The same drug cost can vary widely between plans, and plans can change the list of drugs they cover each year.
Create a Healthcare Plan for Retirement
With healthcare costs on the rise, it’s important to make sure your retirement plan takes those potential costs into account. We can look at your unique situation and see if you can take advantage of tax deductions, Medicare options, and savings accounts, so your healthcare plan is integrated into your overall retirement plan. Give yourself the gift of a truly comprehensive retirement plan this year by giving us a call. We wish you a happy and healthy holiday season!
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