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4 Ways to Prevent Medical Costs From Derailing Your Retirement


If you’re young, your retirement healthcare needs are probably the last thing on your mind. But even if your golden years are decades away, it might be a good idea to start thinking about how you’re going to pay for your medical bills and medications. According to Fidelity, the average 65-year-old couple who retired in 2022 can expect to spend a total of $315,000 in retirement. Consider working with a financial advisor as you plan for retirement healthcare needs.

Find out now: How much life insurance do I need?

Before you retire, it’s a good idea to take certain steps to ensure that you can cover the cost of healthcare once you stop working. Check out four things you can do now to prevent your medical expenses from derailing your retirement plan.

1. Save for Future Healthcare Needs Now

You may not be planning to retire for another 30 or 40 years. But it doesn’t hurt to start funneling money into a health savings account (HSA) now so that you can pay for medical care later.

In order to contribute to an HSA, you have to be enrolled in a high deductible health insurance plan. For 2022, you can save up to $3,650 in an HSA if you have individual coverage or up to $7,300 if you have family coverage. For 2023, you can save up to $3,850 in an HSA if you have individual coverage or up to $7,750 if you have family coverage.

If you have an HSA, you can withdraw your savings tax-free at any time if you’re using them to pay for qualified medical expenses. Once you turn 65, you can withdraw the money penalty-free for any reason. But you’ll have to pay ordinary income tax on your distributions.

2. Take Advantage of Your Employer’s Wellness Program

4 Ways to Prevent Medical Costs From Derailing Your Retirement

If your employer offers a wellness program, it’s a good idea to sign up for it. Taking care of yourself when you’re young can reduce the cost of your medical care in the future.

Depending on how the plan is structured, you may be able to enjoy things like fitness classes, discounts on gym memberships, preventative care screenings and other perks. By keeping your weight, blood pressure and stress levels in check, you can increase your chances of avoiding serious health issues later on.

3. Understand How Medicare Works

Even if you plan to rely on Medicare to cover the cost of your healthcare expenses, you shouldn’t assume that your insurance will pay for everything. You may need to supplement your Medicare plan with additional coverage. For example, if you have Medicare Part A and Part B but you need a plan that pays for all of your prescription drugs, you may need to get Medicare Part D coverage.

You can enroll in Medicare within three months of your 65th birthday. Before you sign up, you’ll need to understand what your Medicare plan will include. If you’re still working, you could use your employer’s plan to fill any gaps in coverage. But if you’re retired, you may have to look into getting a supplemental Medigap policy.

4. Consider the Benefits of Long-Term Care Insurance

4 Ways to Prevent Medical Costs From Derailing Your Retirement

If you’re worried that your healthcare costs will eventually eat up your retirement savings, you can look into getting long-term care insurance. This type of coverage is designed to pay for expenses associated with living in a nursing home. That’s something that Medicare doesn’t cover.

One downside of long-term care insurance is its cost. If you want this kind of insurance, you’ll have to pay for all of it upfront. And if you don’t end up needing it, you might not be able to get any of your money back.

Not sure whether you’ll need a long-term care insurance policy? You could consider getting a hybrid policy that combines long-term care insurance with permanent life insurance coverage. If you don’t need the long-term care benefits, they’ll be paid out to your beneficiaries when you pass away.

Related Article: Do Wealthy Investors Need Long-Term Care Insurance?

The Bottom Line

You probably don’t want to get stuck with hefty medical bills after you retire. That’s why it’s important to have a plan that addresses your future healthcare needs.

Tips on Healthcare During Retirement

  • A financial advisor can give you valuable insight and guidance on how to ensure you have access to and can pay for healthcare in retirement. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • It’s important to keep tabs on how well your investments are doing so you have an adequate nest egg. Use our no-cost retirement calculator to get a quick estimate of how your financial preparations for retirement are going.

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