Overspending is a common problem for seniors. In fact, a recent study from the Employee Benefit Research Institute found that while average spending among single retired individuals was $5,000 below household income, median spending exceeded median income by $3,000. 

Unfortunately, seniors generally aren't overspending on extravagant trips or spoiling grandkids. Instead, when they spend more than their income, it's often because of a medical issue.

As EBRI found, 85% of all seniors who spent at least 20% of their income on medical expenses experienced a budget deficit, compared with just 20% who spent 5% or less on care. 

Because medical expenses typically aren't optional, they're something you need to plan for to ensure your own expenditures don't exceed income available in your later years. 

Doctor talking with older male patient.

Image source: Getty Images.

How can you plan for medical expenses as a senior?

Healthcare spending inevitably rises with age. Preparing for this inevitability is something you should do throughout your working life. 

If you have a qualifying high deductible health insurance plan, investing money into a health savings account is typically the best way to prepare for medical spending in retirement.

Contributions to a HSA are tax deductible up to annual limits, and the money you put in can be invested and grow. It can be withdrawn tax-free at any time to pay for medical expenses, or withdrawn for any purpose after age 65 (but you'll be taxed at your ordinary rate). 

Not everyone is eligible to contribute to a HSA though. And HSA contributions alone may not be sufficient to fully fund your care as a senior. To make sure you have the money you need, consider healthcare costs when setting retirement savings goals.

Research has suggested a couple may need as much as $285,000 to $369,000 to fund out-of-pocket healthcare costs in retirement. So if you think you'll need $500,000 to maintain your standard of living, you may want to set a retirement goal of $785,000 or more, with some of that money specifically earmarked for medical care. 

You could up 401(k) contributions to make sure you have enough, or open a separate IRA that you save in just to fund future healthcare needs. 

How to handle medical expenses as a senior

If you're in retirement or close to it, the ship has probably sailed on saving hundreds of thousands of dollars just for healthcare. But there are still things you can do to try to keep costs down.

During Medicare open enrollment, make sure you choose a plan that meets your family's needs. If you or your spouse is sick, and you anticipate needing a lot of care, your most affordable option may be to pay high premiums for the most comprehensive Medigap or Medicare Advantage Plan available. 

You can also ask your doctor about money saving options, or see if you can qualify for government help, such as Medicaid benefits.

Don't let your medical needs mess up your retirement plans

Spending more than your income on medical care as a senior could cause big problems. You could end up spending your savings too quickly, and even going into debt. It's best to plan ahead to ensure you have enough money for even expensive medical care so this doesn't happen to you. 

If you're already retired and struggling, making sure you can get the care you need must always be a top priority. Cutting other things from your budget or even relocating to a cheaper area could become necessary.

Try to react quickly if you find yourself in this situation, to stave off a financial shortfall and avoid becoming one of the millions of Americans with a budget deficit due to healthcare expenses.