Worried About Sky-High Healthcare Costs in Retirement? Here Are 3 Ways to Manage Them

Many seniors end up struggling in retirement because they underestimate how much healthcare will cost them. An average retired couple aged 65 today could need as much as $315,000 in after-tax dollars to pay for medical care in retirement, according to Fidelity. Clearly, that’s not a small amount of money.

If the idea of having to cover senior healthcare costs is daunting to you, you’re in good company. But here are some steps you can take to make your healthcare expenses more manageable.

A person at a laptop holding a pill bottle.

Image source: Getty Images.

1. Pad your retirement savings plan

The more money you sock away in your IRA or 401(k) plan, the more options you’ll have to spend money on any expense that comes in higher than expected in retirement — including healthcare. And one good way to ramp up your retirement plan contributions is to save your raise every year.

Granted, some years may be more difficult than others due to inflation. But if you generally pledge to save your raise in its entirety, you may find that you end up with a nice savings balance at the end of your career.

2. Aggressively fund your HSA

If you’re eligible to participate in an HSA, or health savings account, it pays to pump as much money as you can into that plan during your working years. But one thing you don’t want to do is constantly dip into your HSA to cover near-term healthcare costs if you can help it.

See, one of the best things about HSAs is that they allow you to invest funds you aren’t using and grow your money into a larger sum. And since HSA funds never expire, you can save and invest your contributions when you’re younger, and then carry a nice balance into retirement, when you’re likely to need extra money for healthcare costs.

3. Choose the right Medicare plan

If you’re still working, it may be premature to start looking at Medicare plan options. But once you get closer to retiring and moving over to Medicare, it’s important to review your plan choices carefully.

While coverage under Part A (hospital care) and Part B (outpatient services) is the same for all enrollees, Part D drug plans offer varying levels of coverage from one plan to the next. Alternatively, you might decide not to enroll in original Medicare but rather sign up for Medicare Advantage. There, too, you’ll see different levels of coverage based on your plan choice.

The good thing about Medicare is that you get the option to piece together healthcare coverage that works for you. In fact, you can even delay your enrollment without penalty if you’re covered by a qualifying group health plan. So it’s wise to read up on Medicare and develop a strategy for it.

Don’t get thrown for a loop

Your health is something you shouldn’t neglect at any age — especially not in retirement. But it will most likely take a lot of money to ensure you’re able to get the care you need as a senior. If you make a point to pad your savings and be savvy about your Medicare enrollment, you can make an otherwise daunting expense a bit less burdensome.