Consider a Higher-Deductible Plan
If you and your family are in good health and have eight months' worth of emergency savings, you can lower your monthly premium costs by switching to a plan with a higher deductible. Your employer may offer what's known as a high-deductible health plan (HDHP), which sweetens the deal by also allowing you to contribute to a health savings account (HSA). HSA money is deducted from your pretax salary—so it reduces your taxable income for the year (for a family in the 25 percent tax bracket that contributes the maximum $6,450, the savings is more than $1,600)—and can be used at any time to pay medical costs. Money taken out for nonqualified medical use is taxed, kind of like what happens with withdrawals from traditional IRAs.
To be clear, you should not switch to any high-deductible plan before ensuring that you have ample savings to cover the full deductible. (In the case of an HDHP, the maximum out-of-pocket charge is $6,250 for individuals and $12,500 for families.)
Get a Flexible Spending Account
If your employer offers a flexible spending account (FSA) for healthcare, you're nuts not to take advantage of it. The money, which comes out of your pretax salary, can be used for all sorts of medical expenses: co-pays, prescriptions, and any other cost not covered by your insurance. In 2013 you can contribute up to $2,500 to an FSA; for those in the 25 percent federal tax bracket, that's a $625 coupon to spend on medical care. (Some employers also offer an FSA for child and dependent care, and the 2013 maximum contribution for that program is $5,000.)
I was blessed to be able to afford medical treatment for my mother, who lived to be 97, whenever she needed it, but I sure wish we'd bought her long-term-care (LTC) insurance decades ago. For many of you the prospect of a $1,000 to $2,000 (or higher) annual premium for an LTC policy is a big commitment. But what you spend on that premium today can potentially save you tens of thousands of dollars a year if you're eventually unable to fully care for yourself. (Learn more at the American Association for Long-Term Care Insurance website). Adult children should consider helping with the premium—it's a small price to pay to reap huge benefits for the people you love.
Suze Orman's latest book is The Money Class: How to Stand in Your Truth and Create the Future You Deserve (Spiegel & Grau).
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