4 tips to help you plan for health care needs in retirement

Key Points

  • Your health and your finances may be more dependent on each other than you think – especially when it comes to planning for retirement.
  • Medical costs are still daunting and fewer employers are offering health care coverage for retirees, so it’s important to plan for health care costs in retirement.
  • Decisions you make now will affect your future health care options.


The decisions you make about health care now can have a dramatic effect on your financial future. Although most people are worried about high health care costs in retirement, few have taken action to address those costs, according to the results of the Ameriprise Health, Wealth and Retirement Study℠.1

That’s despite the fact that a married couple with median drug expenses will need $259,000 to have a 90 percent chance of paying for their retirement health care costs, according to a 2015 study from the Employee Benefit Research Institute. That number increased from the previous year, and continues to be a daunting sum.

Here are four strategies that can help you plan for health care costs in retirement.

1. Choose a healthy lifestyle now for good health later

Making good choices today can help you stay healthy when you’re older. You’ll prevent or control costly chronic illnesses such as heart disease and diabetes. Eating well and exercising regularly are two of the most important ways you can stay healthy now and in the future. In addition, be sure to get your physical each year. A routine exam can spot small health problems before they become full-blown conditions.

2. Estimate your costs

Understanding what you’ll need for health care costs later in life is an important first step toward making sure you have what you need for the future. You’ll want to account for the cost of any health conditions you may already be treating as well as determine how much cushion you’ll need for unexpected costs. Keep in mind that Medicare won’t take care of all your routine health care costs in retirement. For the most part, long-term care, dental and vision are not covered by traditional Medicare. Plus, you’ll pay for premiums, co-pays and deductibles out-of-pocket. Many health insurance companies offer online tools to help policyholders estimate retirement health care costs.

3. Boost your savings

Contributing the maximum to your 401(k) or other employer-sponsored retirement savings plan is one of the best ways to boost your savings for health care in retirement. Consider supplementing those accounts with contributions to a traditional or Roth IRA or an after-tax investment account.

A health savings account (HSA) can also help. Earnings on the account are tax-free, and no taxes are paid on withdrawals used for qualified medical expenses. Any money you don’t use for health care rolls over year to year, providing a possible savings tool for health care costs in retirement. The majority of large companies offer some type of high-deductible health insurance option, and many companies contribute to employees’ accompanying HSA.

4. Plan for your long-term care needs

In many cases, long-term care is the largest percentage of health care expenses for retirees. The median cost of a private room in a nursing home is $91,250 per year, according to the 2015 Genworth Cost of Care Survey. Long-term care insurance can help cover nursing home, assisted living and home health care costs as well as protect your retirement assets. Purchasing long-term care insurance while you are still relatively young and in good health can help keep premium costs low. Plus, new hybrid policies offer life insurance benefits and long-term care coverage.

An Ameriprise financial advisor can help determine which type of long-term care insurance is right for you and create a plan that can protect your retirement from the potential impact of rising and unexpected health care costs.