Take advantage of savings
High-deductible plans are often paired with health savings accounts (HSAs), which let you and your employer contribute up to $3,600 for singles and $7,200 for families, pre-tax. Withdrawals for medical care are tax-free, and there’s an investment option for the money as well.
If you are relatively healthy, using the investing option can help you save for health care in retirement. Any money you don’t use on health care now can continue to grow. It can grow even more if you have other funds you can use to pay for your health care expenses now.
To help pay for health-related expenses, many employers offer flexible spending accounts (FSAs), which let you put aside up to $2,750 a year in a separate account, pretax. The only catch is that most of the money must be used by year-end. Otherwise, you’ll forfeit the balance.
Employers can let their workers carry over $500 into the next year. Or employers may allow a two-and-a-half-month grace period for using up the funds at the beginning of the next year. Be sure to find out your company’s policy.
A large number of expenses can be paid for with an FSA, including doctors’ co-pays, deductibles (but not premiums), out-of-network costs and prescriptions. The Internal Revenue Service Opens in new window site has a full list of permitted medical expenses.
Also note that, except for "limited-purpose" FSAs that cover only dental and vision care costs, you can't use an FSA if you have a high-deductible plan with an HSA, and vice versa.
Consider disability insurance
Disability is more common than you may realize. A 20-year-old has a one in four chance Opens in new window of suffering an illness or injury that keeps him or her away from work before retirement age, according to the Social Security Administration.
You may be healthy now, or not want to think about the possibility of having a debilitating condition in the future, but the fact is, the time to think about it is exactly when you are still healthy and functioning. Life is unpredictable, and preparing now should make things a lot easier to manage if the worst happens.
Disability insurance can replace a portion of your income if you are unable to work. Your employer is a good place to start looking for this coverage. Work-based disability insurance can be more affordable than plans purchased on your own, and there is no medical exam.
Aim to replace 60% to 70% of your income with a policy. (Some work-related expenses will no longer be in your budget.) If you can’t get enough coverage at work, consider supplementing the policy with an individual plan.