High Deductible Health Plan + Health Savings Account Plan

One of the biggest concerns for retirees is medical costs. As we live longer, the need for health insurance grows and the cost of that insurance will also increase. It’s simple math, older people are simply more expensive to insure. Since you’ll be living on a fixed income, the increasing costs of your insurance will introduce longevity risk, the risk that you’ll outlive what your assets can fund.

Suze Orman proposes a plan that might work to mitigate this risk – combining a high deductible health plan and a health savings account. A High Deductible Health Plan (HDHP) is one in which you are willing to accept a higher deductible in return for lower recurring premiums. In 2009, the minimum deductible is $1,150 for individuals and $2,300 for family coverage. HDHP will also have higher annual out of pocket limits too. You couple this with a health savings account, which is a tax free investment account, to maximize your savings. You pay the deductibles of the HDHP with the earnings from the HSA.

It’s not a perfect solution but certainly one to investigate.

The Health Scare Lurking in Your Retirement Plan [Yahoo! Finance]