Colin Overweg, CFP® Featured in Investopedia 👨🏼💻
By Meagan Drew
Updated March 24, 2025
Fact checked by Suzanne Kvilhaug Full Bio
Strategies to better plan for rising medical costs
While most retirees assume Medicare will cover the majority of their medical expenses, out-of-pocket costs for premiums, copayments, prescriptions, and long-term care can quickly add up. In fact, healthcare expenses can be among the most costly expenditures retirees face. Failing to plan for them can eat away at hard-earned retirement savings over time.
Health Savings Account (HSA)
Health savings accounts (HSAs) are tax-advantaged vehicles that help workers with high-deductible health plans (HDHPs) save for qualified medical expenses. Not only do HSAs provide short-term savings options, but they can also serve as powerful retirement savings tools with triple tax advantages. As Colin Overweg of Advize Wealth Management explains, "The HSA combines the best parts of a Roth and a traditional IRA. If eligible, contributions to an HSA are tax-deductible today, grow tax-deferred, and can even be withdrawn tax-free for qualified medical expenses, including Medicare premiums.”
Unlike other employer-sponsored savings accounts, there is no "use it or lose it rule," and HSAs never expire. Your HSA is yours to take even if you leave your employer. HSAs are only available to employees with high-deductible health plans, but those who have HDHPs while working can use their HSAs to come out ahead in retirement.
In 2025, the annual HSA tax-deduction contribution limit (for employees and employers combined) is $4,300 for individual coverage and $8,550 for family coverage.10 If you are age 55 or older, you can contribute $1,000 annually, in addition to the maximum HSA limit for the year, as a catch-up contribution.11
While opening an HSA earlier in your work life will give you more time to save, individuals closing in on retirement in their 50s should still consider opening an HSA and maxing out the contribution limits.
Preventive Care
Preventative healthcare, such as routine checkups, vaccinations, and health screening, reduces overall health costs in the long run by catching diseases early and helping to prevent chronic conditions.
Staying active and health conscious throughout your life and into retirement can help keep healthcare costs low as you age. Overweg has seen firsthand with his clients how "joining a gym for $50 per month might actually save thousands in the long term." Studies show that retirees who stay active stave off cognitive decline longer, reducing the need for long-term care in their lifetimes.18
Resources for Healthcare Cost Planning
Many resources are available today to help estimate and plan for future healthcare expenses.
Overweg recommends Fidelity's free health cost estimator and, for comparing plans based on your coverage needs and medication costs, Medicare.gov Plan Finder.2021
Anyone planning for retirement should also visit the AARP Health Care Cost Calculator to estimate healthcare costs in retirement.22
Finally, one of the best resources for retirement planning is consulting a financial advisor. "Nobody knows the future, so a good financial planner will build a personalized plan with multiple scenarios to project your retirement plan success and give you peace of mind,” Overweg says. “And, of course, this plan will continue to be updated as the world evolves."
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