Most of us understand that as we age, we’ll need more medical care. But despite that knowledge, so many of us are still underestimating health care costs. According to a Voya Financial survey, 66% of people think health care throughout their retirement will cost them less than $100,000, but according to the Employee Benefits Research Institute, in reality, in 2017 a 65-year-old woman will spend roughly $143,000 on healthcare alone after they retire.  

The good news is that there are things you can do now to help you save on those healthcare costs down the road. Here are three ways to reduce the medical costs in your retirement.

Get Long-Term Care Insurance Early

Long-term care insurance is a policy that covers prolonged medical care like assisted living facilities, memory care, nursing homes or home health aides. These are items that Medicare typically doesn’t cover and could run you thousands of dollars per month.

I recommend looking into a policy around age 50 because it’s unlikely your health improves dramatically after that point. By signing up early, you’re more likely to be accepted into a plan and you’ll likely be paying a lower premium. It’s also worth looking into a long-term care insurance policy that includes an inflation rider, which means the value of your plan is more likely to stay up to pace with the cost of living.

If Available, Open an HSA

A health savings account (HSA) is available to anyone who has a high deductible health plan (HDHP) and serves as a sort of a Roth IRA for healthcare needs. The added bonus to these accounts, however, is that if the distributions are taken to cover qualified medical costs, no tax is paid upon distribution. These plans are especially helpful because, unlike a Flexible Spending Account, the money you put into an HSA is yours forever.

And if you use an HSA and are healthy enough that you don’t need the money to cover medical expenses, after age 65 you’re able to withdraw funds for any reason without paying a penalty. At this point, the account works similarly to a Roth IRA, so you any non-medical distributions will be subject to ordinary income tax. 

Stay on Top of Your Health Now

The best advice I can give you when it comes to saving money on healthcare later in life is to continue or create healthy habits now. That may mean getting active, eating more vegetables or giving up smoking for good. It’s never too late to start working towards a healthier future, especially when you see how much being unhealthy can cost.

All of these options I’ve laid out today can help you save big over the long run, but each person’s lifestyle and circumstances are different. If you want more specialized advice on ways you can save on healthcare costs later in life, reach out to a financial advisor who has access to a team of healthcare specialists to help you have a healthier, more affordable retirement.

Jim Sandager

Jim Sandager

Senior Vice President, Financial Advisor

CFP®, MBA, Series 7 Securities Registration,1 Series 66 Advisory Registration, † Life & Health Insurance License As a CERTIFIED FINANCIAL PLANNER™ professional, Jim brings an extensive retirement income planning background to the team. He regularly writes a personal finance column for The Des Moines Register’s Business...Read More