It’s no secret that healthcare can be expensive. From insurance premiums to copays, the cost of caring for ourselves can be monumental. So it’s not surprising that 22% of respondents in a recent survey by the National Endowment for Financial Education said they’re worried about covering their medical costs. If you have similar concerns, here are three accounts to consider saving in for healthcare.
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1. A traditional savings account
It’s a good idea to have money in a savings account for emergencies. But you may also want to open a separate savings account for medical bills.
While healthcare costs can sometimes be an emergency, they should also be budgeted and saved for accordingly. And socking money away in the bank will give you the freedom to easily take withdrawals for medical bills as needed.
How much should you save for healthcare? A good bet is to go through your medical bills from the previous year and put in enough money to cover an equivalent set of bills. Also, if your health insurance plan charges a deductible — the amount of money you need to pay out of pocket before your insurer pays for your services — then aim to save at least that much money. In fact, socking away your deductible is a good goal for your emergency medical expense fund.
2. A flexible spending account
With a flexible spending account, or FSA, you allocate pre-tax dollars for healthcare bills. If you contribute $1,500 to an FSA, that’s $1,500 of income you won’t pay taxes on. But an FSA also requires you to accurately estimate your healthcare expenses for the year. If you allocate too much money to your FSA and don’t use it up within your plan year, you risk forfeiting the balance.
For the current year, FSAs max out at $2,750, and as of this writing, we don’t know what the maximum allowable contribution will be for 2022. You
