69% of Americans worry about this expense – The Fool Motley

With regard to money, you can have a lot in mind. Are you saving enough for retirement? How will you pay for your children's tuition? Will you be able to afford the family's summer vacation this year?

Of all these concerns, there is a cost that most worries people: health care costs.

According to a recent report from a financial institution, 69% of middle-income Americans are afraid of not having the means to pay large medical bills. Primerica. That's more than the 43% who are worried about not saving enough for their retirement, according to the survey, and the 24% who are worried about losing their jobs.

This is also a legitimate concern – especially for retirees. The average 65-year-old retiring couple can expect to spend about $ 285,000 on health care during retirement, according to the latest Fidelity Investments study. If we consider that baby boomers (the next generation of retirement) have saved an average of $ 152,000, according to the Transamerica Retirement Research Center, this means that future retirees will not even more able to afford the costs of their health care – – and even less able to cover all their other financial needs.

Medicare can help you with some expenses related to retirement health care, but it does not cover everything. If you want to better prepare for medical bills, it's important to understand the role Medicare plays in retirement and how to increase your savings on your own.

What to expect from Medicare

Medicare is a great resource for retirees and can help cover many of your health care needs. But you are still responsible for premiums, deductibles and co-insurance; Original health insurance does not usually cover routine care, eye exams, and long-term care, which can cost hundreds or even thousands of dollars.

One potential solution is to join a Medicare Advantage plan. These plans are similar to the type of health insurance you probably receive through your employer, in the sense that they are offered by third-party insurance companies. Many plans include coverage for vision and dental care, as well as prescription drugs. The premiums vary greatly depending on your location and the plans offered in your area, but an Advantage plan is often more expensive from one month to the next than the initial health insurance.

Long-term care is one of the most expensive health care costs (about $ 7,000 per month, on average, for a semi-private room in a retirement home) and is generally not covered by the program. Health Insurance. This means that if you want to avoid getting blinded by massive medical bills, it's a good idea to prepare as much as possible before your retirement.

Take charge of the cost of health care

Although being slightly dependent on Medicare during retirement is not a bad thing, do not expect it to cover all your health care needs. If you budget health costs in your retirement savings, however, it can help cushion the shock when you incur high medical costs.

One way to do this is to open a health savings account (HSA). It is essentially a retirement fund reserved for health expenses. An HSA allows you to set aside pre-tax dollars, let them grow, and then withdraw them tax-free, as long as they are used to cover eligible medical expenses.

There are however limits to the amount you can contribute to an HSA, and not everyone is eligible to open one. To open an HSA, you must be enrolled in a high deductible health care plan, which means that you must have a deductible of at least $ 1,350 for individuals or $ 2,700 for families. The contribution ceiling is therefore $ 3,500 per year for individuals and $ 7,000 per year for families. And if you're 55 or older, you can pay an extra $ 1,000 a year.

With an HSA, you can set aside money specifically for health costs so that you do not need to tap into your main retirement fund to cover these expenses. In addition, since HSA contributions are tax-free at the time of withdrawal (assuming they are used to cover health care costs), you benefit from tax relief compared to that obtained if you use 401 (k) funds or a traditional IRA to cover your medical bills.

Another way to potentially save on health care expenses in retirement is to opt for long term care insurance. The key to buying a long term care insurance is to buy it sooner rather than later in order to qualify for the best rates. According to the American Association of Long Term Care Insurance, the average 55-year-old couple pays about $ 2,500 a year for long-term care insurance, while an average couple of 60 can expect to pay about $ 3,400 a year. And those who are already over 60 can have trouble finding insurance.

While spending thousands of dollars a year on insurance may seem too expensive, keep in mind that nearly 70% of Americans will need long-term care at some point in their lives. And with nearly $ 7,000 a month for nursing home care, it's not cheap.

Health costs may not be pleasant to think about, but ignoring them will not make them go away. Instead, take a proactive approach and start planning well ahead of retirement. This will not only be beneficial for your peace of mind, but also for your wallet.