Your medical bills could soar during your senior years. Prepare accordingly.
Once you retire, you may find that some of your expenses aren’t as costly as they were while you were working. You may, for example, have more time to maintain your home rather than outsource every task like cutting the grass and washing the deck. That could save you thousands of dollars during the year.
Similarly, while you were working, you may have had an expensive commute. If you’re no longer commuting to a job, you may end up spending considerably less on transportation.
But if there’s one expense that tends to increase for seniors rather than decrease, it’s healthcare. And you may be shocked at just how much you might end up spending in that regard.
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Can you swing a $157,500 tab?
Last year, Fidelity estimated that the typical 65-year-old person retiring in 2023 would spend $157,500 on healthcare throughout retirement. That projection was based on Medicare enrollment in Parts A and B plus a Part D drug plan.
In reality, the amount of money healthcare will cost will hinge on several factors. Those could include:
- The state of your health
- How vigilant you are about keeping up with medical appointments
- The specific Medicare coverage you choose
But all told, you could be in for quite a whopping sum. So it’s important to prepare accordingly.
Fund an HSA during your career
If you’re worried about paying for healthcare as a retiree, you could always pad your general savings. But a better bet may be to fund an HSA, or health savings account, during your career and leave your balance untouched. That way, you can ideally bring a nice sum of money into retirement that’s earmarked for medical bills.
Unlike flexible spending accounts, HSAs don’t force you to spend down your balance every year. While you can tap an HSA for near-term medical bills, if you reserve that money for your senior years and pay for short-term bills out of pocket, you may end up in a stronger financial position once retirement rolls around.
That being said, you’ll need to check your HSA eligibility every year. Your health insurance plan will need to have a minimum deductible and a certain out-of-pocket maximum.
This year, you’ll qualify with a minimum deductible of $1,600 for self-only coverage, or $3,200 for family coverage. Your out-of-pocket maximum also can’t exceed $8,050 for self-only coverage, or $16,100 for family coverage. In 2025, all of these numbers could rise.
The idea of paying for healthcare in retirement can seem daunting. But if you’re able to bring a nice HSA balance into retirement, you may end up having one less major expense to worry about.
It’s also important to read up on healthcare costs in retirement so that you can plan accordingly. And while you’re at it, take a deep dive into what Medicare costs and covers so there are no unpleasant surprises there, either. The cost of Medicare can vary based on the decisions you make, so it’s a good thing to go in armed with information.
