There's a reason we're constantly being told to save steadily for our senior years. Once we retire, we'll be largely or entirely without income from wages, facing a world of expenses from housing to transportation to healthcare. And that last expense may end up being a lot steeper than many of us are anticipating.

The average 65-year-old opposite-gender couple retiring this year can expect to spend $300,000 on medical expenses throughout the course of their retirements, according to Fidelity's latest estimates. The average male retiree is looking at spending $143,000, while the average female retiree is looking at spending $157,000. (Since women tend to live longer than men, their healthcare costs wind up higher.)

Older man and woman on couch looking at documents with worried expressions

Image source: Getty Images.

Not only are these numbers substantial, but they represent a 30% increase from 10 years ago, when the average healthcare spending projection was just $230,000 for the typical 65-year-old couple. And if healthcare inflation in the U.S. continues to generally outpace core inflation, future retirees could be in line for even greater sticker shocks when it comes to their medical bills.

A good way to pay for healthcare in retirement

If you're floored by the idea of you and your spouse having to spend $300,000 on your medical needs in retirement, there's one savings product you should look at -- a health savings account, or HSA. With an HSA, you get to contribute pre-tax dollars to an account that's earmarked for medical expenses. Those HSA funds don't expire, and you can invest any money in them that you don't need to use for near-term medical bills. As such, if you fund an HSA consistently during your career but don't take withdrawals from it, and instead invest that money, you can wind up with a nice sum to help cover your healthcare expenses during your senior years.

The other great thing about HSAs is that their investment gains are not taxable, nor are withdrawals from them, provided you use the money for qualified medical expenses. As such, if you were to put $5,000 a year into an HSA for 30 years to cover you and your spouse, avoid taking withdrawals, and invest that money in a way that generates a fairly conservative 5% average annual return, you'd wind up with close to $332,000.

The only catch with HSAs is that not everyone qualifies to use them. To be eligible, you must be enrolled in a health insurance plan with a deductible of $1,400 or more if you're saving on your own behalf, or a deductible of $2,800 or more if you're saving at the family level (meaning, for at least yourself and a spouse).

There are also contribution limits. In 2021, they are:

  • $3,600 if you're saving just for yourself and are under 55;
  • $4,600 if you're saving just for yourself and are 55 or over;
  • $7,200 if you're saving at the family level and are under; 55
  • $8,200 if you're saving at the family level and are 55 or over.

HSA contribution limits change from year to year, in the same way that the government regularly raises the maximum levels for IRA and 401(k) plan contributions.

Set yourself up to avoid stress

Healthcare costs can cause major financial anxiety for seniors -- don't let that happen to you. If you qualify for an HSA, you have a prime opportunity to sock money away for medical care in the future -- and give yourself one less thing to worry about later in life.