Though healthcare is a major burden for Americans of all ages, older adults are exceptionally concerned about it. In fact, in a new Allianz Life study, nearly one-third of baby boomers list rising healthcare costs as the greatest risk to their retirement in the coming year. But surprisingly, when asked about reducing that risk, only 7% were quick to identify health savings account (HSA) contributions as a means of mitigation.

If you're worried that an uptick in healthcare costs will wreck your retirement, and that milestone isn't so far off, it pays to take advantage of an HSA as long as you're still working. While having an HSA won't reduce your healthcare bills, it will give you a dedicated source of income to cover that whopping expense category.

Don't let healthcare costs trip up your retirement

The average healthy 65-year-old couple retiring this year is projected to spend an almost alarming $387,644 on healthcare costs throughout retirement (not including long-term care), reports software company HealthView Services. Reading between the lines, a couple that isn't particularly healthy can expect to lay out even more money for medical care. Even if you manage to enter your golden years with a decent amount of retirement savings, you may struggle to cover your costs during periods when healthcare issues eat up too much of your income for comfort.

Senior man with serious expression takes notes while senior women with serious expression looks on


That's why it's so important to fund an HSA while you can. HSA funds can be used for near-term healthcare expenses, but they also don't expire, so you can invest any unused money for added growth and carry it into retirement, when you'll probably need it the most. As is the case with traditional retirement savings plans like IRAs and 401(k)s, HSA contributions go in tax-free. Invested funds also get to grow tax-free, and withdrawals are tax-free, provided they're taken to cover qualified medical expenses.

Now one thing you should know is that not everyone is eligible to contribute to an HSA. To fund one, you must be on a high-deductible health plan (HDHP), and to be clear, that doesn't just mean having a deductible you feel is expensive. Rather, the IRS has rules that define what an HDHP is, and they can change from year to year.

For 2020, an HDHP must have a minimum deductible of $1,400 for individual participants, or $2,800 for families. It must also have an annual out-of-pocket maximum of $6,900 for individuals or $13,800 for families.

If your health insurance plan qualifies you for an HSA, you'll have the option to contribute up to $3,550 in 2020 as an individual, or up to $7,100 as a family. And there's better news if you're 50 or older -- you get a catch-up provision similar to that offered by IRAs and 401(k)s that lets you put in an extra $1,000 on top of whichever limit applies to you.

It's natural to worry about healthcare expenses, especially as retirement looms. But if you qualify to fund an HSA, doing so could spell the difference between covering your healthcare costs with minimal stress and struggling relentlessly because of them.