Retirees need a substantial savings for healthcare costs, with an average of $172,500 expected to be spent on healthcare and medical expenses throughout retirement. This estimate includes traditional Medicare and Part D costs but not long-term care expenses, which can be significant for many individuals. Healthcare costs are rising, with a 4% increase from the previous year.

The need for long-term care is significant, with 80% of those over 65 requiring some form of care. Assisted-living facility costs are high, with rates reaching over $74,000 per year on average and increasing as residents age and require more care. Dementia care units can cost over $94,000 annually.

Planning for healthcare costs in retirement is crucial as monthly premiums for Medicare Part B are increasing. Many Americans have not considered healthcare needs during retirement, leading to unexpected expenses for retirees. Health savings accounts (HSAs) are a way to prepare for future healthcare costs, allowing tax-free contributions, growth, and withdrawals for qualified medical expenses.

However, most account holders use HSAs as checking accounts for current healthcare expenses, rather than investing for retirement. Contributing the maximum amount each year is unrealistic for many workers due to competing financial needs. Only a small percentage of HSAs have funds invested for future healthcare costs.

Richard Johnson, of the Urban Institute, notes that rising healthcare costs pose a significant threat to retirement security, with many older adults already facing healthcare debt. Consideration of future healthcare needs and investing in HSAs can help retirees prepare for these costs down the road.

Read more at Yahoo Finance: Retirees’ out-of-pocket healthcare cost are spiraling