It’s no shock that the cost of living isn’t exactly cheap. That shock doesn’t end when retirement rolls around. Are you financially prepared to support your standard of living once you quit working?

Even though most people understand the importance of saving for retirement sooner rather than later, studies still show many baby boomers are way behind on their retirement savings.

In fact, the Blackstone Group found that 79% of middle-income baby boomers have nothing at all saved for the cost of healthcare in retirement.

This is by far the biggest mistake you could be making when you’re saving for retirement. If you think that healthcare costs are expensive now, they hit even harder when you are on a fixed income.

The Cost of Original Medicare

Many people believe when you enroll in Medicare at the age of 65, all of your medical expenses are covered without any cost to you.

Falling for this myth is the single biggest threat to your retirement savings. Medicare is not free and there are many out-of-pocket costs that really add up if you are seriously ill or injured.

The FICA taxes taken out of your paycheck only pays your premium for Medicare Part A. You’ll still pay a monthly premium for Part B and Part D, if you enroll. There are also annual deductibles, copayments, and coinsurance amounts to consider. These charges can really eat away at your retirement savings.

So, if Medicare only covers some of your medical expenses, how do you afford the out-of-pocket costs?

Medicare Supplement Plans

Medicare Supplement plans are private insurance plans you can buy to pick up where Medicare leaves off.

You do have an additional monthly premium, but for some people, the security of knowing you’ll never have catastrophic health expenses is more than worth the price.

If you have a serious or chronic health condition, a Medicare Supplement Plan may be the smartest decision you ever make for retirement.

Don’t Forget About Long-term Care Costs

Many people don’t think about the cost of long-term care or even look into what qualifies as long-term care until they are forced to.

Although the Centers for Medicare and Medicaid Services recently approved expanded benefits for long-term care services for some Medicare Advantage plans, the coverage isn’t comprehensive and you’ll still have a lot of out-of-pocket costs. Long-term care is very expensive.

Genworth Financial reported a Carescout survey on annual national median costs for the different areas of long-term care in 2018 and the results are somewhat shocking for a year of care:

• Homemaker Services: $48,048

• Assisted Living Facility: $48,000

• Private Room in a Nursing Home: $100,375

• Semi-Private Room in a Nursing Home: $89,297

• Home Health Aide: $50,336

• Adult Day Health Care: $18,720

The Benefits of HSAs

Looking for a way to put yourself ahead of healthcare costs in retirement? One of the best retirement savings tools is a health savings account.

A health savings account is a place where you can contribute money on a pre-tax basis to later be used for qualified medical expenses.

The money contributed to a health savings account is yours for life, earns interest over time and grows tax-free. Another great benefit of this kind of account is that you can even invest the money in stocks and mutual funds to increase earnings.

When it comes to saving for retirement, don’t assume that healthcare costs will be covered by Medicare. Also, don’t assume that you can get by without setting money aside for medical care. Medical emergencies happen and the best mentality to adopt for retirement is to prepare for the unexpected. If you really want to be certain that your finances are in order and that you are in a good spot financially in retirement, talk to an insurance professional to learn more about your health care options in retirement.

The above content is sponsored.