4 Ways to Lower Your Healthcare Costs in Retirement So They Don't Upend Your Budget

Healthcare is one of the biggest expenses many retirees face. And unfortunately, it's a cost that tends to increase from year to year.

A 65-year-old retiring in 2026 can expect to spend an average of $185,500 on healthcare expenses throughout retirement, says Fidelity. But that figure is up 7.5% from just one year ago. And it's likely to keep rising.

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The bad news is that healthcare might end up monopolizing a large chunk of your retirement income. The good news is that there are steps you can take to lower your healthcare spending during your senior years. Here are four to focus on.

1. Sign up for Medicare on time

One of the easiest ways to avoid unnecessary healthcare costs is to enroll in Medicare when you're first eligible. Your initial enrollment window spans seven months, kicking off three months before the month of your 65th birthday and ending three months after that month.

If you don't have qualifying employer coverage that entitles you to a special enrollment period, signing up for Medicare late could subject you to surcharges on your premiums for the rest of your life. So it's important to pay attention to Medicare enrollment dates. And don't assume enrollment is automatic.

If you're receiving benefits from Social Security ahead of your 65th birthday, you'll generally be enrolled in Medicare automatically. Otherwise, you'll have to actively sign up.

2. Compare your Medicare plan choices every year

Many retirees enroll in a Medicare plan and stick with it for life. That could be an expensive mistake.

Every year during Medicare's open enrollment period, which runs from Oct. 15 through Dec. 7, beneficiaries have the opportunity to switch Medicare Advantage plans or Part D prescription drug plans. Comparing your options could help you find a lower-cost plan without having to sacrifice coverage.

Remember, not only can Medicare plan rules change from year to year, but so can your health-related needs and your list of prescriptions. Spending a little time shopping around each fall could result in meaningful savings if you find a plan that better fits your needs.

3. Buy Medigap early on

Original Medicare generally requires beneficiaries to pay deductibles, coinsurance, and other out-of-pocket costs. Those expenses can quickly add up, and there's no annual cap on how much you might spend. That's where Medigap comes in.

Medigap, or supplemental insurance, can pay for expenses such as deductibles and copays. While Medigap policies do require an additional premium, they may save you money over time.

The best time to buy a Medigap plan is during your initial enrollment period, which begins the month you are both 65 (or older) and enrolled in Medicare Part B. That enrollment window lasts six months.

During that period, insurance companies generally cannot deny you coverage or charge you higher premiums because of preexisting health conditions. Once that six-month window closes, buying a Medigap policy may become more difficult or expensive.

4. Take advantage of preventive care

Preventing health problems is often less expensive than treating them. Medicare offers many preventive services at low or no cost, so it pays to stay on top of your health to prevent issues from escalating. At a minimum, schedule an annual wellness exam with your doctor and undergo all screenings they recommend.

Some Medicare Advantage plans offer supplemental benefits like gym memberships and meal delivery that can help manage certain chronic conditions. It pays to explore your plan's benefits if you're enrolled in Medicare Advantage and have one or more conditions that can be better controlled through diet and exercise.

Healthcare costs are an unavoidable part of retirement, but they don't have to be a source of financial stress. Taking the steps above could lower your costs, and allow you to allocate more of your retirement income to the things you enjoy.

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