woman sitting outside doing yoga enjoying retirement

Preparing Medical Expenses for Retirement

It’s hard to predict how your retired years will look. But one thing you can be almost certain about is an increase in medical expenses. It’s an accepted part of life — the need for increased health care as you age. 

The average 65-year-old couple can expect to pay $11,400 on health care in their first year of retirement.1 That couple can also expect to have average medical expenses in retirement of about $295,000.2 Medicare premiums, deductibles, copayments, and other health care coverage add up. It’s no doubt that medical bills are one of the largest expenses for retirees, and that’s why it’s important to prepare today for health care costs in retirement. 

Choose a healthy lifestyle now to reduce medical costs in the future

We’ll let you in on a little secret. Individuals who take care of their bodies in their younger years are much less likely to experience major health issues such as diabetes, heart disease, lung disease, or cancer later in life. OK, so that’s not much of a secret, but it is a fact many of us forget. Eating right, exercising often, getting enough sleep, and avoiding harmful substances or risky behaviors may have a direct impact on your bank account. 

According to the Centers of Disease Control in a 1999 research study, if an overweight individual lost just 10% of their weight, their expected lifetime medical costs for obesity-related diseases could drop by $2,200 to $5,300,3 and their life expectancy could increase by two to seven months.4 Delaying or avoiding costly chronic health conditions, such as diabetes, would save you thousands of dollars every year. If you make the choice to have a healthy lifestyle now, it will likely pay off later. 

Put as much money as possible into a Health Savings Account

Your Health Savings Account (HSA) is a savings account that can only be used for health-related expenses. You have control over how and when to use the funds, and the money does not have an expiration date. These accounts can be a gamechanger to afford healthcare in retirement. 

Opening an HSA and paying into it before you reach retirement is a simple, quick way to build up a reserve of money to use for regular medical check-ups or emergency doctor visits. 

HSAs are only available to those with a qualifying High Deductible Health Plan (HDHP) who are not covered by other non-qualifying health coverage and meet other requirements. You unfortunately will not be able to open up an HSA or put money into it without a HDHP. The requirements for a HDHP in 2020 are: 

  • Minimum deductible of $1,400 for an individual or $2,800 for a family
  • Maximum out-of-pocket expenses of $6,900 for an individual and $13,800 for a family

Importance of an HSA

When saving for retirement healthcare costs, a Health Savings Account makes a big difference. The funds from your account can be used to pay medical premiums, such as premiums for Medicare or some premiums for qualifying long-term care insurance. Other benefits of an HSA include: 

  • You can withdraw contributions and gain tax-free for eligible medical expenses
  • Funds can be used to pay out-of-pocket medical expenses not covered by Medicare (i.e., dental expenses, hearing aids, vision care, and over-the-counter medications)
  • After you reach 55 years of age, you can contribute an additional $1,000 every year over the maximum limits of $3,600 for individual coverage and $7,200 for family coverage (in 2021)

Remember that you will not be able to contribute to your HSA account after you enroll in Medicare, so make your contributions prior to that time in order to maximize your benefits. 

Invest in a life insurance policy

There are some life insurance policies that let the policy holder receive death benefits to pay for certain healthcare costs in retirement. For life insurance policies that permit this option, death benefits can be used for home healthcare, assisted living, adult day care, or a nursing home. 

The individual may be able to qualify for these death benefits if they are unable to do some “activities of daily living,” such as dressing, eating, and bathing, or if they have a terminal illness with a life expectancy of 12 to 24 months. Not all life insurance policies permit withdrawing the death benefit before death, so it’s best to check with your life insurance policy before you reach retirement. 

home nurse giving water to 65 year old lady

Medicare at 65 Option

Most people plan on enrolling for Medicare at age 65. Those who are retired or working for a small business (or their own business) with less than 20 employees sometimes consider Medicare. Medicare is a national health insurance program that can lead to a lower average monthly cost of health insurance for a retired couple. 

Factor in the expenses

In order to best prepare for medical expenses after retirement, you need to know approximately what you will be paying. There’s no way to know exactly what healthcare costs in retirement will be, but there are ways to get a close approximation. 

This Health Care Calculator from AARP can help you estimate your average retirement healthcare costs.5 It is an estimation, but it can help you get a good idea of what you’ll need to plan for. 

Always plan ahead

It’s a little bit easier to plan for retirement when you can break it down into smaller, more manageable goals. Here are some tips to help plan for retirement and keep your retirement health care costs low. 

  • Plan for how your spending habits may change in later years. You may choose to downsize into a smaller home or sell one of your cars, or you may be spending less on travel expenses while more on other bills
  • Plan for the possibility of long-term care and how you will pay for it (it can be costly)
  • Focus on preventative care instead of reactive care. Stay up to date on doctor visits
  • Have a good understanding of your health plans and the limitations of them. 


  1. https://communications.fidelity.com/wi/tools/retirement-health-care/
  2. https://institutional.fidelity.com/app/item/RD_13569_42402/retirement-planning-health-care-costs.html
  3. https://njaes.rutgers.edu/health-finance/health-behaviors.php
  4. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1508787/
  5. https://www.aarp.org/work/retirement-planning/the-aarp-healthcare-costs-calculator/