As much as healthcare can be a burdensome expense for workers, it can be an even greater expense in retirement. That's because health issues tend to pop up with age.
Last year, Fidelity estimated that the average healthy 65-year-old couple would need $315,000 in after-tax savings to cover their healthcare costs throughout retirement. And chances are, once Fidelity releases its 2023 estimate, that number will have increased.
If the idea of having to pay for healthcare as a retiree seems overwhelming, you're in good company. But if that's the case, you may want to strongly consider making these important moves ahead of that milestone.
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1. Research your Medicare plan choices
Many people assume that coverage under Medicare is universal. But actually, it isn't.
Some seniors save money on their healthcare costs by opting for a Medicare Advantage plan instead of sticking with original Medicare, which consists of Parts A (hospital care), B (outpatient care), and D (prescription coverage). Even if you decide to receive coverage under original Medicare, there are steps you can take to lower your costs, like understanding your benefits and taking advantage of the free preventive services you're entitled to.
2. Fund a health savings account
A health savings account allows you to set aside pre-tax dollars for healthcare spending. Unlike a flexible spending account (FSA), with an HSA, you're not required to deplete your plan balance year after year. In fact, HSA savers are encouraged not to use up their balances, but carry them forward, instead.
Any money you don't withdraw from an HSA can be invested. And investment gains in an HSA are tax-free, as are withdrawals, as long as that money is used for qualified medical spending.
Once you enroll in Medicare, you can no longer contribute money to an HSA. But if you're working and are on a high-deductible health insurance plan, it pays to see if it's HSA-compatible. If so, you may want to start funding that account and reserving that money for your senior years.
3. Do your part to stay in good health
The better your health is going into retirement, the less you might spend on medical care. So do your best to uphold healthy habits.
Don't smoke (or try to quit if you already do) and make a point to exercise regularly. Also, talk to your doctor about a healthy diet and weight, and make an effort to maintain both.
Your doctor may also, depending on your situation, encourage you to do certain things now to prevent brewing conditions from worsening. Make sure to go in for your annual physical and follow-up on any diagnostic testing your doctor recommends.
The idea of paying for healthcare in retirement can be scary. After all, you may be looking at higher medical bills than ever at the exact same time your income shrinks. But if you make the above moves, you can mitigate your concerns and set yourself up to cope well with the healthcare expenses that may be coming your way.
