What else is good for you, physically and financially? A smart insurance strategy. This is the season to check your coverage: At the end of the calendar year, many companies offer open enrollment for healthcare—a chance to switch providers or opt into a savings plan. Even if you don't have employer coverage, review your family's past year of medical expenses and consider your needs going forward. With healthcare costs expected to rise 7.5 percent in 2013—which will likely translate into higher premiums, deductibles, and co-pays all around—it makes good sense to plan ahead.
Here are a few tips to help you find cost-effective coverage (plus some budget-saving strategies for your holiday spending, below). It's the best gift you can give or receive.
Do. Not. Go. Uncovered.
Because the Supreme Court upheld the individual mandate of the healthcare reform law, starting in 2014 there will be a penalty for those without health insurance. But that doesn't mean you should spend 2013 without coverage: It's lunacy to risk being struck by illness or injury and having to pay tens of thousands of dollars for medical bills out of pocket. If you're younger than 26, your parents can add you to their plan. If you're self-employed or your employer doesn't offer coverage, shop for it at Healthcare.gov or EHealthInsurance.com.
Next: Do you need a low or high-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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