Healthcare costs make up a large portion of most retirees’ living expenses. According to Fidelity’s latest estimate, someone retiring at 65 in the U.S. in 2023 will need to save about $157,500 to cover their out-of-pocket healthcare costs in retirement. Fidelity also estimates that the average retiree couple will need to save about $315,000 for healthcare.

Many people don’t have that much money in their budget set aside specifically for healthcare expenses. If you’re in that category, or simply want to make your healthcare more affordable and predictable in retirement, here are five strategies you might consider.

1. Use a health savings account (HSA)

The most obvious way to prepare for health care costs is to save more money, especially in tax-advantaged retirement accounts. But the preferably A good place to start saving for healthcare costs is a type of account known as a health savings account, or HSA. Far too few people take advantage of these excellent accounts.

To be eligible for an HSA, you must have a high-deductible health insurance plan, but if you qualify and pay contributions, there are some important benefits.

Most importantly, HSAs have a rare triple tax advantage. The money you contribute is tax deductible, your contributions can be invested like a 401(k) plan, and your investment gains are tax-free. And finally, you can withdraw any money you use for qualified healthcare expenses completely tax-free.

Unlike flexible spending accounts (FSAs), the money in an HSA doesn’t have to be spent by a certain date—you can roll it over and let it grow indefinitely. And if you don’t end up needing all of it to cover healthcare costs, you can use your HSA as a general retirement account after you turn 65.

2. Retire in a state with lower living costs

Not only does the general cost of living for retirees vary by state, but so do healthcare costs. According to the latest data from the Centers for Medicare and Medicaid Services (CMS), the average person (of any age) spends a total of $10,191 on healthcare costs. These range from $7,522 in Utah to $14,381 in Washington DC.

Of course, healthcare costs aren’t the only thing you should consider when deciding where to retire. But as you plan, keep in mind that where you live can make a big difference.

3. Postpone retirement until 65 (or longer)

The clear benefit of waiting until age 65 to retire is that you’ll be eligible for Medicare. Unless you have employer-provided health insurance that you can continue to use if you retire early (which isn’t common), this move can make a big difference.

In addition to Medicare eligibility, your Social Security benefit can be much higher if you wait until retirement. Americans can claim Social Security any time between ages 62 and 70, but the longer you wait, the more inflation-protected income you’ll have.

4. Medicare Supplemental Insurance

Medicare supplemental insurance plans (also known as Medigap plans) are not necessarily reduce Your healthcare costs, but can make them more predictable. There’s a lot to be said about Medicare supplemental plans, but the general idea is that they can cover out-of-pocket costs not covered by Medicare Parts A and B. The Medicare website has an excellent introduction to these plans and what the different options cover.

5. Stay active

It’s a fact that people who are active throughout their lives not only tend to live longer than those who aren’t, but they also have significantly lower healthcare costs on average. There are numerous studies to back this up, but one study published in BMJ Open Sport and Exercise Medicine found that healthcare costs for people who increased their physical activity levels in early adulthood were $1,874 lower per year after age 65.

All groups that maintained or increased their physical activity every phase had lower health care expenditures in retirement than those who were continuously inactive from adolescence to middle age.

The conclusion

Healthcare in retirement can be expensive, but smart planning ahead can make a big difference. By incorporating these strategies into your retirement planning, you can not only potentially reduce your healthcare costs, but also ensure you’re prepared for whatever might come your way.

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