How To Save On Future Healthcare Costs Starting Today

Why It Matters:
  • Budgeting for future healthcare costs can keep retirement finances on track.
  • Living a healthy lifestyle is an investment in your financial future.
  • Aging can bring bigger healthcare costs, possibly including chronic conditions or long-term care.

American Heart Association tkc.profilePicture Written by: American Heart Association | Transamerica
Dec. 23, 2020

5 Min readClock Icon

One of the biggest expenses during retirement is healthcare. Knowing what contributes to medical costs later in life can help in financial planning.

You also may be able to reduce future expenses by following a healthy lifestyle today. Safeguarding your health can safeguard your money.

Older Americans’ out-of-pocket healthcare costs fall into two main categories: health insurance premiums and services. “Among potential service expenses are medical visit co-pays, prescriptions, home healthcare and long-term care,” explained Kristi Fuller, MSW, assistant project director for the Georgia Health Policy Center at Georgia State University.

“Healthcare costs are rising,” Fuller noted. “These costs are outpacing growth in wages, inflation, and gross national product.”

What’s causing healthcare costs to go up? “Prescription drugs, new medical technology, increased use of services, an aging population and the prevalence of chronic conditions are the leading contributors,” said Fuller, who is affiliated with Georgia State’s Gerontology Institute.

Calculating costs

Though Medicare is available at age 65, that doesn’t mean it covers every healthcare expense. There are still Medicare premiums and out-of-pocket healthcare costs. About 66% of older Americans on Medicare — or 64 million people — were covered by traditional Medicare as of 2019, while 34% were enrolled in Medicare Advantage plans through private insurers that provide additional services, such as dental and vision care.1

Average out-of-pocket annual spending for traditional Medicare was $5,460 in 2016, the latest statistic available as reported in 2019 by the Kaiser Family Foundation.2

To choose the right Medicare plan, Fuller suggests considering whether supplemental insurance coverage is offered by an employer; which prescription drugs are routinely filled on the Medicare plan; your income level; and possible Medicaid eligibility if you have a low income. The State Health Insurance Assistance Programs can help with navigating the different plans and in reassessing the situation each year.

Establishing a Health Savings Account (HSA) before retirement is a way to save money for future out-of-pocket medical expenses. An HSA has a triple tax advantage because contributions are tax-free, the money in the account grows tax-free, and withdrawals for qualified expenses are tax-free. 3

Planning for possible long-term care is another part of budgeting for retirement, as long-term care plans can be costly.

Consider these stats. The median cost for a home health aide in 2020 is $23 per hour and $1,012 per week, and the median cost for adult day services is $75 per day. Assisted living facility median cost is $48,612 per year; a semi-private room in a nursing home is $90,155 per year; and a private room in a nursing home is $102,200 per year.4

Long-term care insurance may be more reasonably priced if it’s bought before you need it. “Consider purchasing it during your 50s or 60s,” Fuller said, “and carefully compare plans while taking into account projected income and assets.”

Healthy living

About 80% of older adults have at least one chronic disease; 68% have at least two, according to the National Council on Aging. Chronic diseases such as diabetes and lung disease place a significant financial burden on individuals and the healthcare system. The good news is those who manage their symptoms can reduce their medical costs and improve their quality of life.5

Nearly half of American adults have some type of cardiovascular disease, which includes heart disease, the nation’s leading cause of death. 6 Total cardiovascular disease costs are expected to reach $1.1 trillion in 2035, and sharp increases are projected during that time for people over age 65.7

To reduce your risk, focus on Life’s Simple 7, seven changes the American Heart Association has identified to help achieve optimum cardiovascular health. The seven factors are managing blood pressure, controlling cholesterol, reducing blood sugar, getting physically active, eating better, losing weight, and quitting smoking.

“Making healthy choices can start at any point and lead to positive health benefits,” Fuller noted.

Research has shown that boosting physical activity in middle age can even help reverse heart damage and protect heart health in older years. 8 Also, Life’s Simple 7 can keep the brain healthy and reduce the risk of developing dementia.9 It’s worth noting that financial mistakes resulting from cognitive decline are one of the main financial risks for retirees late in life, according to the Center for Retirement Research at Boston College.10

Caregiving for loved ones

It’s not only your own health that affects your pocketbook in older age. Caregiving for an aging, ill, or disabled loved one also may unexpectedly become part of the financial picture.

Those who are employed while being a caregiver may need to adjust their work schedule, take time off, or change jobs. “All of these can lead to loss of income or lost opportunities for advancement,” Fuller explained, adding that women take on the largest share of caregiving duties and endure the most detrimental economic impact.11

An unpaid family caregiver spends an average of nearly $7,000 on out-of-pocket costs caring for a loved one, an AARP study found. The amount was even higher for caregivers living an hour or more away.12 Caregiving can also take an emotional toll on the person providing care.13

Whether helping someone else or managing your own health in older age, or both, don’t neglect your personal needs. Boost brain health and reduce stress by maintaining social ties in the community and spending time with friends and family.14

Things to Consider:

  • Take into account factors like income and employer health insurance coverage to pick the right Medicare plan.
  • Life’s Simple 7 can reduce risk for cardiovascular disease and dementia.
  • Setting up a Health Savings Account before retirement can help set aside money for future out-of-pocket expenses.

This article was prepared by the American Heart Association (AHA). Transamerica is not affiliated with the AHA and does not control, guarantee, or endorse the information. This information does not constitute the practice of medical advice, diagnosis or treatment .

Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.

1 “Medicare ,” KFF, June 2019

2 “How Much Do Medicare Beneficiaries Spend Out of Pocket on Health Care? ” KFF, November 2019

3 “Health Care Costs in Retirement Might Make You Reconsider an HSA ,” American Society of Pension Professionals and Actuaries, August 2020

4 “Planning for Care Costs ,” Alzheimer’s Association, 2020

5 “Chronic Disease Management ,” National Council on Aging, 2020

6 “Steps to Prepare Your Body — and Pocketbook — for Retirement ,” American Heart Association, April 2019

7 “Heart Disease and Stroke Statistics — 2020 Update: A Report from the American Heart Association ,” Circulation, January 2020

8 “Out of Shape And Middle-Aged? It’s Not Too Late To Turn It Around ,” American Heart Association, October 2018

9 “Seven Habits Make For A Healthy Heart — And Brain, Too ,” American Heart Association, August 2018

10 “What Financial Risks Do Retirees Face in Late Life? ” Center for Retirement Research at Boston College, January 2019

11 “Still Shortchanged: An Update on Women’s Retirement Preparedness ,” National Institute on Retirement Security, May 2020

12 “Surprising Out-of-Pocket Costs for Caregivers,” AARP, October 2019

13 “Caregiving Costs Expected To More Than Double, Analysis Finds,” American Heart Association, April 2018

14 “Healthy Brains, Social Interaction,” Cleveland Clinic, 2020


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