Asked by wonderloaf  |  Submitted June 23, 2016

How does one plan for retirement health expenses on a tax-free or deferred basis while still an employee with 10 years until retirement?

I am currently covered by my employer health plan and contribute to an FSA for annual expenses. My income is $150k. I seek to stash away money (and deduct it from my income, if possible) now to support higher anticipated health care expenses in retirement. My goal is to have separate retirement and health accounts. In other words, I don't want to rely on 401(k) or annuity payouts to pay for healthcare.

My employer does not offer health care benefits to retirees. My etirement age goal is 60 years old. I am currently 50 years old. I do not think I am eligible to contribute to a HSA but would like confirmation on that please. Thank you. Norm Davis

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  Answers  |  2

June 23, 2016

One of the best ways is to get yourself a Universal Life Insurance policy with a Long-Term Care (LTC) rider that essentially can use your life insurance face amount to pay for LTC needs after retirement. This way you get a benefit either way - if you die your beneficiary gets the face value of the life insurance or you use the face value for your long-term care needs.

wonderloaf | 06.25.16 @ 00:29

Thanks for the insight, Edward. I am probably too old to dive into a Universal Life policy that will be both beneficial and cost effective. But I am willing to listen to options if you have a few to relay. Thanks again!

$commenter.renderDisplayableName() | 09.28.20 @ 03:29


June 24, 2016

Hi Norm,

You indicated that your are currently covered by your employer's health care plan. Is this correct?
Check with your employer on eligibility for an HSA. Here is a link to IRS PUB 969 to give you more insight.

Most of our folks are also unwilling to rely on tax-deferred savings to offset their health care needs. There are lots of options with this. We prefer to incorporate this into your estate plan and we love the cash-flow component from the investment options. We can work with your MARR (Minimum Acceptable Rate of Return) or we can just set up a certain $ amount to transfer funds into. These $$ can also grow at your MARR until you need them. You also indicated that you anticipate certain future health care needs. If you have not already done so, get with your advisors, and put together some realistic bottom line numbers. Then, dive into any shortfall or cash flow needs. We can easily set up a conference call to discuss. Always do what is in your best interest.

Edward has given you info on the UL option with an LTC rider. My concern with this is that the LTC rider is not long-term care insurance (LTCI). The rider may not cover enough of the costs associated with your indicated future health care needs. Also, it may reduce the death benefit from the life insurance as well as limit access to your funds due to various regulatory hurdles.

Feel free to contact us directly to discuss in greater detail. No obligation.
It's not what you make; it's what you keep that determines your lifestyle.

wonderloaf | 06.25.16 @ 00:28

Thanks Dave. I am headed out on a trip and will be in touch upon my return.

$commenter.renderDisplayableName() | 09.28.20 @ 03:29