3 Ways to Fund Health Care Expenses in Retirement

health care expenses

By Joe Globensky, RFC®

health care expenses

About this time last year, I wrote a blog post about the estimated health care expenses for a couple in retirement.  You can find that blog post here. Well, the bad news – the estimate is no longer $280,000.  It has risen to $285,0001.  The good news – these expenses can be less of a worry if you plan correctly and start saving early.

So how do you go about saving to fund your health care expenses in retirement?  It takes time.  It takes discipline.  And, you don’t have to have it all saved by the time you turn 65.  But, you do want to start the savings process as early as possible.  That way, any return you might receive on your money can help towards this goal.  So, let’s look at your options for alleviating the rising cost of health care when you retire.

Option #1 – Health Savings Accounts (HSAs)

My business partner, Bridget Schneider, wrote a great blog post about Health Savings Accounts in December.  I encourage you to check it out here.  Then find out if you have access to an HSA and, if so, start contributing, even if it’s a small amount.  This is a great way to fund health care expenses.

According to Devenir, a national leader in providing investment solutions for health savings accounts, the number of HSA accounts grew to 25 million in 2018.  This was a 13% increase over 2017.  And contributions to HSAs grew 22% in 2018 over 2017.  As proof these accounts are growing in popularity, Devenir projects that by the end of 2020, the HSA market will approach $75 billion in HSA assets covering roughly 30 million accounts.

Option #2 – Retirement Accounts

As the name implies, a retirement account is designed to help you save for retirement.  Expenses you will encounter during retirement include your necessary items like food, housing, transportation, and health care.  It can also include your wants like more travel, a second home, or possibly picking up a new hobby.

Most of us have access to a retirement account, like a 401(k), 403(b) or SEP/SIMPLE IRA, through our employer.  You may also be able to contribute to a Traditional or Roth IRA.  These accounts will allow you to save money that will grow tax-deferred.  Ideally, until you need to access the funds in retirement.  These are great vehicles to save, not only for your needs like health care costs but also your wants.  Like that new pontoon boat for the lake.

Option #3 – Focus on Your Health

While this is #3 on the list, it should be #1 on your mind.  One of the best ways to keep your future health care costs manageable is by having a healthy mindset.  I’m not talking about joining the fake meat craze or buying a goat for your next yoga session.  I’m talking about making good choices and striving to lead a healthy lifestyle, one step at a time.

If you have a dog, extend your daily walk a ½ mile twice a week.  When you are eating at home, or away, control your portion sizes.  Once or twice a week have a glass of water instead of a soda.  As you strive to improve, you will start to build healthy, repeatable habits.

These habits can lead to thousands of dollars in savings later in life.  Maybe through reduced prescription costs, fewer doctor co-pays, and lower premiums for your health insurance.  It may not seem like much now, but with retirements lasting sometimes 30 or more years, every health-conscious decision you make today can mean more money to use on the fun stuff of retirement.

How We Can Help

At Connections Financial Advisors, we are here to help you as you encounter all of life’s stages.  Whether you have a newborn, a new house, or are new to retirement.  And we do it in a way that is comfortable.  That helps you build confidence.  That educates you and helps you understand the importance of it all.

Let’s sit down and talk about how we may be able to help you on your financial journey.  Our introductory meeting comes at no cost, with no obligation.  Give us a call at (217) 605-8130, schedule an appointment online, or check out our website for more information.  We look forward to speaking with you.

1 Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2019 may need approximately $285,000 saved (after tax) to cover health care expenses in retirement.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  Companies mentioned, and their respective services, are not affiliated with LPL Financial.

Follow us on social media for more tips on financial planning.

 Facebook Connections Financial Advisors     Twitter Connections Financial Advisors     LinkedIn Connections Financial Advisors    YouTube Connections Financial Advisors

Recent Posts

The Pros and Cons of Deferred Compensation

By Joe Globensky, RFC®At some point in your career, you may be offered participation in a nonqualified deferred compensation (NQDC) plan. Currently more than 90% of public companies offer some sort of NQDC plan and nearly half (44%) of eligible employees...

Financial Fraud and How To Prevent It

By K. Bridget Schneider, CFP®, CRPC®If you think you're immune to financial fraud, think again.  Financial fraud is an ever-present threat to all ages.  It comes in many forms from an attempt to access your money and financial accounts with your personal...

What is Indexed Universal Life Insurance?

By Joe Globensky, RFC® As part of our initiative to educate our clients and prospective clients, we often check out what is trending on social media.  What products or solutions are people searching for?  What industry terms do people want to know more...

What is an Annuity and Why Would I Buy One?

By K. Bridget Schneider, CFP®, CRPC®Have you heard that June is Annuity Awareness Month?  I can imagine some of you saying, “No, but I hear that annuities are expensive and lock up your money with little to nothing paid out as you get older.”  Well, that...

5 Steps to an A+ College Plan

By K. Bridget Schneider, CFP®, CRPC®Imagine your son or daughter receiving an acceptance letter from the trade school or college of their choice.  It is rewarding to witness them start on the path for their adult life.  The only thing that could make you...


Office: 217.605.8130
Toll-Free: 844.305.7670
Fax: 217.666.4188

604 N Union St Ste 1
Lincoln, IL 62656

Email Us


Sign up to receive the latest news, tips, outlooks and more: