From an HSA to Healthy Habits: A Financial Consultant's Guide to Slashing Healthcare Costs in Retirement
Healthcare and long-term care costs have surged in the past decade. Have you set aside enough to prepare for this rising expense? Consider these four issues.
A 65-year-old retiring in 2026 can expect to spend $185,000 on healthcare costs. That's a 130% increase since 2002.
Those figures come from a new report from Fidelity, and they don't include long-term care, such as at-home caretakers or retirement homes.
You may have mapped out your retirement destination and legacy plans, but have you thought through the long-term care costs?
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
As a Registered Financial Consultant (RFC®) who specializes in tax-efficient planning for retirees, I'm sharing four considerations that every retiree should think about when it comes to planning for healthcare costs later in life.
1. Healthcare could become your largest retirement expense
Most Americans are ready to plan their housing, travel and everyday living expenses in retirement, but a portion could find that healthcare costs balloon beyond expectations, becoming the overall largest expense.
Consider the costs of Medicare premiums, prescription drugs and out-of-pocket costs that factor into your yearly budget.
You should also be honest with yourself about your mobility and health later in life. Americans are living longer, with more people making it to age 100 every year. Self-sufficiency at older ages can deteriorate quickly, and if you expect you'll need long-term care from professionals or a facility, monthly costs can range from $6,000 to $11,000, according to CareScout.
2. Medicare could fall short in retirement
Don't assume that Medicare will take care of your healthcare expenses in retirement. While it will certainly help with inpatient care, specialist visits and important screenings, there are multitudes of expenses that Medicare will not cover.
Beneficiaries will still pay for things like deductibles, coinsurance and insurance premiums. You can be hit with surprise expenses for out-of-market coverage or emergency care. It also won't cover routine dental, hearing and vision care appointments.
There are also significant time limits to the care that Medicare covers. If you find yourself at a long-term care facility, Medicare will cover only the first 20 days of your stay in full and only a portion of the care up to 100 days.
Medicare offers great support for paying for medical expenses, but if you're expecting it to take care of you on its own, you'll find a pile of unexpected bills in your mailbox.
3. Make your healthcare plans now
The earlier you begin planning for healthcare expenses, the more options you will have in retirement.
If you're still working, contributing to a health savings account (HSA) can offer one of the most tax-efficient ways to save for future healthcare costs.
Part of your plan should be what age you intend to enroll in Medicare. Most should enroll around the age of 65, but you may be able to delay Medicare Part B without penalty if you're still working and receive health insurance through your employer.
This will keep you from paying the premiums on your current insurance and Medicare at the same time.
You will be allowed to sign up for Medicare during a special enrollment period if you leave your position and lose your employer coverage.
The real issue to avoid is enrolling late without qualifying coverage. If you miss your window to apply, your premium can increase by 10% for each year you were eligible but chose not to enroll.
That is a devastating and unnecessary expense that will follow you throughout your retirement.
Be sure to speak with a financial adviser or retirement professional to understand the important windows of when you should enroll.
4. It's never too late to lower risk and costs
The best way to reduce your healthcare costs is by not needing healthcare in the first place.
Obviously, some unforeseen conditions and circumstances will impact our healthcare spending, but it's never too late to reduce the risk factors.
Eating well and exercising regularly will help keep risk factors for a wide range of illnesses and health conditions down. A lower risk of heart disease or broken bones means fewer medical bills throughout your retirement.
It will also greatly improve your mobility later in life, helping you enjoy your golden years to the fullest.
Just like saving for retirement, the sooner you invest in your health, the better. But it's never too late to start the journey to healthier living.
It's not a conventional consideration when making your financial plan, but it is a factor that could make a major impact on your healthcare spending in retirement.
Related Content
- Average Cost of Healthcare by Age and US State
- 5 Smart Retirement Healthcare Moves: Maximize Your HSA and Medigap Savings
- The 5 Biggest Stealth Costs in Retirement
- Retirement Location, Location, Location: Can Florida Be Beaten?
- Is That Really Your Grandkid Calling, or an AI Scam Trying to Rip You Off? 3 Tips to Protect Your Money
