How much money do you have saved in case you get sick and need expensive care? If you're like most Americans, probably not very much.
Continue Reading Below
According to the "2017 Alegeus Healthcare Consumerism Index," just 36% of American healthcare consumers make monthly contributions to savings for healthcare, and just 32% have made it a goal to save for long-term care costs.
If you're not one of them, you could be setting yourself up for financial disaster.
Why you need dedicated savings for healthcare
If you don't have dedicated savings for healthcare, then cost concerns could prevent you from getting help. In a 2017 Gallup poll, 37% of women and 22% of men reported having delayed medical care due to cost. Among people who delayed care, 63% indicated their condition was at least somewhat serious.
Concern about affording care aren't unfounded, as 18% of Americans have past-due medical debt in collections, and medical debt is the No. 1 cause of bankruptcy in the United States.
Continue Reading Below
Health insurance caps the costs you're responsible for, so paying for a policy -- which Obamacare can make more affordable -- should be a priority. But having insurance isn't a substitute for savings: You need both coverage and cash set aside, because even with insurance, you'll likely incur thousands in medical expenses if a serious health issue arises.
For Obamacare plans, the maximum allowable out-of-pocket costs in 2017 were $7,150 for individual plans and $14,300 for family plans -- enough to cause serious financial hardship. And even among workers with employer coverage, around 30% now have high-deductible plans.
Saving enough money to at least cover your deductible could protect you from financial calamity when you're sick and can least afford to stress about your finances.
How can you save for healthcare?
The best way to save for healthcare is to open a health savings account (HSA), which allows you to invest with pre-tax money and withdraw money tax-free to pay for qualifying healthcare expenses.
You're eligible to open an HSA if you have a deductible of at least $1,350 for an individual plan or $2,700 for a family plan as of 2018. You can contribute up to $3,450 to your HSA for self-only coverage or $6,900 for family coverage.
Money contributed to an HSA can be invested and left to grow if it's not spent each year. If you begin investing before you need costly care, you could accrue a balance high enough to cover your costs without enduring hardship when an emergency arises.
If you're lucky enough to avoid serious illness, the money in your health savings account can provide a major source of protection during your senior years, when you may need substantial savings to cover long-term care or other expensive care late in life.
If you can't qualify for an HSA, consider opening a dedicated savings account just for healthcare savings. Ideally, this should be separate from your emergency fund; if you develop a serious illness and your condition prevents you from working, your emergency fund may be needed to cover living costs.
Make saving for healthcare a line item in your budget
While you probably have a lot of priorities for your money, make it a point to set at least some cash aside for healthcare. If you automate the process and set aside $66 a week, you could make the maximum contribution possible for a health savings account for self-only coverage.
If you can't save quite that much, remember that if you get very sick, you don't want to worry about paying for the care you need. Any amount you put aside could literally save your life someday.
The $16,122 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,122 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.