In this episode of Money Rehab, host Nicole Lapin addresses the financial aspects of healthcare and aging. She breaks down the key components of disability insurance and health coverage, including what most policies do and don't cover, and explains strategies for building a healthcare fund using various savings vehicles like high-yield accounts, bond ETFs, and CD ladders.
The episode explores tax-advantaged healthcare accounts, including HSAs and FSAs, and their contribution limits and benefits. Lapin also covers practical approaches to budgeting for private care services and outlines resources available through government programs and non-profit organizations. The information provided helps listeners understand their options for managing both current medical expenses and future healthcare costs.
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Understanding disability insurance is crucial for financial planning. Short-term disability typically replaces 60-70% of your salary for a few months, while long-term disability covers 50-60% for several years or until retirement. Key policy elements include the elimination period, payout duration, and tax implications of benefits.
When reviewing health insurance, it's important to note that while most employer-sponsored plans and Medicare cover hospice care, they often don't include full-time home care, extended private nursing, or custodial care. This gap in coverage makes long-term care planning essential.
Creating a healthcare fund requires a focus on accessibility and stability. High-yield or money market accounts are recommended for healthcare savings, providing both liquidity and reliability. For those with taxable brokerage accounts, conservative options like short-term bond ETFs or CD ladders can help minimize volatility while maintaining accessibility.
Health Savings Accounts (HSAs) offer triple tax advantages: pre-tax contributions, tax-free growth, and tax-free withdrawals for medical expenses. For 2025, HSA contribution limits are set at $4,150 for individuals and $8,300 for families, with an additional $1,000 allowed for those over 55. FSAs provide an alternative for those ineligible for HSAs, though funds must be used within the plan year.
Medical expenses exceeding 7.5% of adjusted gross income may be tax-deductible, and retirement account withdrawals for qualified medical expenses can avoid the usual 10% early withdrawal penalty.
Creating a comprehensive care budget is essential for managing future healthcare costs. This includes considering various levels of support, from part-time to overnight care. When working with home care agencies, negotiating rates and seeking discounts for scheduled hours can lead to significant savings.
Various support programs are available through Medicaid Waiver Programs and state Area Agencies on Aging. For those facing serious illnesses, organizations like Criage Cancer and CancerCare.org offer free legal, financial, and case management assistance, along with home care and transportation grants. United Policyholders can help ensure insurance policies cover necessary services.
1-Page Summary
Understanding the intricacies of insurance and coverage is essential for managing healthcare and end-of-life costs effectively.
Disability insurance is designed to replace a portion of your income if you are unable to work due to a disability. Short-term disability generally replaces around 60 to 70 percent of your salary for a duration that can range from a few weeks to a few months. In contrast, long-term disability may cover 50 to 60 percent of your salary for a much longer period, which could extend for several years or sometimes until retirement.
It is important to understand the specifics of your policy, such as the elimination period (the time before your benefits begin), payout duration (how long the benefits last), and whether the benefits are taxable or non-taxable. This knowledge is crucial for accurate budget planning and for understanding how to maintain financial stability in the face of an unexpected illness or injury.
Reviewing your health insurance policy can be enlightening, particularly with respect to hospice care coverage. Hospice care, which is generally covered by most employer-sponsored health plans including Medicare, focuses on comfort over curative treatment for individuals with terminal illnesses. However, these plans often do not encompass full-time home care services, private nursing beyond limited hours, or extended custodial care, which can include assistance with daily activiti ...
Insurance and Coverage For Healthcare and End-of-life Costs
Creating a healthcare fund requires strategies focusing on liquidity, stability, and accessibility to ensure you can handle future care needs without major financial disruption.
When planning for future healthcare needs, it's critical to prioritize liquidity and stability. Funds needed for healthcare should be readily accessible and not subject to the uncertainties of the broader market. Considering high-yield or money market accounts for your healthcare savings can provide the needed stability and easy access.
Minimizing volatility is key when it comes to investing in a healthcare fund. For savings held within taxable brokerage accounts, it's suggested to shift to more conservative investment options such as short-term bond ETFs or CD ladders. These tools provide a buffer against market fluctuations, ensuring funds remain stable and accessible, even when the broader market faces volatility.
The aim of a healthcare fund is to create a financial reserve that is easily accessible and not subject to the vo ...
Saving and Investing Strategies for a Healthcare Fund
Understanding health savings accounts (HSAs) and flexible spending accounts (FSAs) can provide significant tax advantages for managing healthcare costs.
For those with high-deductible health plans, HSAs offer a triple tax advantage. These accounts feature pre-tax contributions, tax-free growth of funds, and tax-free withdrawals for qualified medical expenses. In 2025, the contribution limits for HSAs are set at $4,150 for individuals and $8,300 for families, while those over 55 can contribute an extra $1,000.
If you are ineligible for an HSA but can access an FSA, you can still use pre-tax dollars for medical expenses. However, FSAs operate on a 'use it or lose it' principle, meaning funds must be spent within the plan year or they're forfeited.
Should your out-of-pocket medical expenses exceed 7.5% of your adjusted gross income (AGI), these costs can be itemized as deductions on your taxes. Deductible medical expenses include payments toward home nursing care, long-term care services, hospice, and transportation for medical appointments not covered by insurance.
Tax-advantaged Accounts Like HSAs and FSAs
Planning for healthcare costs as one ages or as family members require increased support is essential. Creating a budget and negotiating rates are important steps to manage these potentially substantial expenses.
Creating a detailed care budget is a crucial task. When establishing this budget, one should consider the varying costs associated with different levels of care such as part-time assistance or overnight supervision. This budget should encompass a range of services based on the individual's needs and provide a clear estimate of potential future healthcare costs. Having a well-thought-out care budget is an implied part of the planning process for managing healthcare expenses.
Moreover, negotiating with home care agencies is key to finding the best possible rates. While it may not be always explicitly discussed, securing discounts for scheduling specific numbers of service hours can lead to substantial savings. It is beneficial to establish open communication with agencies to negotiate terms that suit both the client's financial capabilities and the caregiver's offerings.
The cost of caregivers—whether they're private nurses, home health aides, or for long-term support—can be considerable. Planning for these expenses by exploring different cost-savi ...
Budgeting and Negotiating For Private Care Services
Finding the right resources and support programs can be a crucial step for individuals needing assistance due to health, financial, or other personal challenges. There are several avenues available for additional help, ranging from Medicaid Waiver Programs to specific nonprofit organizations dedicated to providing aid.
Those in need of in-home care subsidies or respite care grants can explore Medicaid Waiver programs. These programs may be affected by legislative changes, such as proposed bills, which can alter eligibility and access. It's important to stay informed about these developments to adequately plan for the future.
Your state's Area Agency on Aging is a valuable resource for identifying available support programs. They can provide guidance and direction to help you navigate through the various assistance options tailored to meet the needs of the aging population.
For individuals battling serious illnesses like cancer, nonprofits like Criage Cancer and CancerCare.org offer complimentary services that can make a bi ...
Resources and Support Programs for Additional Assistance
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