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Health savings accounts and estate planning

No matter what phase of life you are in, unexpected medical expenses can throw a giant wrench in the financial works. As you approach retirement and end-of-life, you should consider a number of money-related matters.

First, you'll want to consider how much you need to live a healthy, stable life in the years after you retire. You might also want to consider what you want to pass on to children or other heirs.

Even if you take time to consider these issues and to make arrangements for both yourself and your heirs through estate planning, your plans could be derailed by a sudden medical issue after you retire. Even with insurance, a hospital stay or medical treatment can take a deep chunk of your savings.

There are several ways that you can plan for such a circumstance, though, to avoid losing out on retirement funds that are earmarked for late-life travel or paying bills throughout later years. One way to avoid excessive medical bills is to purchase supplementary insurance policies. These policies are usually paired with Medicare coverage, and they pick up most if not all of the out-of-pocket costs after Medicare pays on claims.

Another way to cover medical expenses without delving into retirement savings accounts or using money or assets that you intend to leave to heirs is to have a health savings account. These accounts, which often come with tax benefits, let you save money ahead of time to be used for medical expenses. Individuals who are approaching retirement can even save extra money in an HSA to catch up on medical savings while benefiting from tax breaks.

Understanding the financial and legal aspects of retirement and estate planning can be difficult. Working with an experienced professional helps you consider all the options and make decisions that are best for you now and in the future and are also good for your heirs and loved ones.

Source: AARP, "Health Savings Account and Retirement Security," Lynnette Khalfani-Cox, accessed Oct. 16, 2015

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