3 Ways to Limit Healthcare Costs in Retirement

According to a recent study from Fidelity, the average 65-year-old couple can expect to spend $245,000 on out-of-pocket healthcare expenses in retirement.1 Those expenses include things like premiums, deductibles, copays and more. They do not include costs for long-term care.

What do you dream of when you think about retirement? Traveling the world? Spending time with family? Taking up a new hobby? Dreaming about retirement is an important part of the planning process, as it helps you identify your goals and even build out your budget.

One thing you probably don’t dream about is spending time at the doctor’s office or even the hospital. Unfortunately, the possibility of needing medical treatment is a very real and costly prospect for many retirees. While it may not be pleasant to think about, it’s also too important to ignore.

The good news is there are steps you can take to limit those costs and boost your ability to pay for them. Below are three tips to help you manage your healthcare costs in retirement. Incorporate these into your retirement income plan so healthcare expenses don’t sink your retirement.


Be proactive about your health.

Arguably the best way to manage health care expenses in retirement is to limit your need for treatment. By investing some time into caring for your body, you may be able to avoid some costly trips to the doctor.

Think about ways you can gradually improve your health. Consider incorporating exercise into your schedule. If hitting the gym isn’t for you, perhaps you can find a local class or walking group. That may be a great way to get some exercise and meet new friends. Also, look for ways to improve your diet and possibly lose a few pounds.

If you have a lingering injury or issue, consider getting it treated before you retire and while you still have your employer’s health insurance. Maybe you need physical therapy for an old injury or need to have a procedure you’ve been putting off. Now may be the time to go through with those efforts.


Max out your HSA.

A healthcare savings account, also known as an HSA, may be one of your most effective tools when it comes to managing your health care costs in retirement. An HSA is a vehicle that allows you to save money in a tax-efficient manner specifically for health care expenses. You can open an HSA through your health insurance company or your bank.

When you contribute to an HSA, you get to take a deduction for a portion of your contribution. You can then invest your funds, and taxes on the growth are deferred. All withdrawals are tax-free as long as the money will be used for qualified medical expenses.

Perhaps the most attractive part of an HSA is that it’s portable. You can take it with you from job to job and even into retirement. That means that you can save money today on a tax-efficient basis to pay for medical bills you’ll face in retirement.

In 2016, individuals can contribute up to $3,350 per year to their HSA. Married couples and families can contribute up to $6,750. Also, anyone over the age of 50 can make an additional $1,000 catch-up contribution per year.2

If you’re not currently contributing to an HSA, now may be the time to do so. The tax-efficiency of the HSA might help you better cover your health care costs in retirement.


Consider long-term care insurance.

According to the U.S. Department of Health and Human Services, 70 percent of those over the age of 65 will need long-term care at some point in their lifetime.3 Long-term care is care or support needed over an extended period to help an individual perform basic life functions, such as bathing, eating and getting out of the house.

Long-term care is often provided in a nursing facility but can also be provided by an in-home nurse or caretaker. There are a few important points to remember about long-term care. One is long-term care costs are not included in the $245,000 health care cost calculated by Fidelity. You can expect to pay long-term care costs on top of your deductibles and copays.

Another important consideration is long-term care often isn’t covered by Medicare. You may get some Medicare assistance in the days immediately after a hospitalization; however, Medicare payment for long-term care is very temporary. After Medicare support ends, you’re on your own when it comes to paying long-term care costs.

A potential strategy is long-term care insurance. This is a policy you pay for today, while you’re still healthy and before you need long-term care. Then, in the future, should you ever need extended care, the insurance policy will pay some or all of the cost. Many policies will even support in-home care, which could help you stay in your home.

Take care of your body, put money away into your HSA and examine your long-term care insurance options. If you address those three points, you should be better positioned to manage your health care expenses in retirement. Contact us at TB Financial Group today for more information.







This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

15534 – 2016/3/31

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