Paying for Health Care After Retirement

With the current state of health care, the prospect of not being able to afford it after retirement is a concern for most adults, even doctors. The Employee Benefit Research Institute estimates that a 55-year-old couple planning to retire in 2016 will need $560,000 to cover employment-based health insurance premiums, Medicare Part B premiums, and out-of-pocket health care costs. Registered Rep. magazine suggests the number is closer to $1 million.

The Tax Relief and Health Care Act of 2006 provides a highdeductible health care plan paired with a Healthcare Savings Account (HSA). This kind of account can provide lower premiums, pretax contributions, and no taxes on withdrawals. Unused balances in HSAs can be rolled over for future use or can be converted into a traditional IRA. Although only 1% of employees are currently contributing to a HSA, 40% of employers either have such an account or plan on having one in the future.

A home equity line of credit (HELOC) can pay for uncovered health costs by tapping into the equity of the retiree's home. The loan can be paid off over a specified time period and the interest may be tax deductible. HELOCs are best set up before retirement in order to best be prepared for emergencies.