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Beyond the pursuit of leisure, a primary concern for many Americans in retirement is securing a financial strategy to cover healthcare expenses that may last 20 to 30 years. After age 65, health care becomes one of the biggest line items in your household budget, often surpassing even housing and food. According to the Health View Services Retirement Health Care Cost Estimate Report, a typical 65-year-old couple retiring in 2026 could expect to spend hundreds of thousands of dollars on health care in retirement.

With that much at stake, making shrewd, research-informed moves around Health Savings Accounts (HSAs) and Medigap plans can meaningfully stretch your retirement dollars. 

 

1. Understand How HSAs Work (and Why They’re Unique)

Health Savings Accounts (HSAs) are one of the most under-utilized retirement planning tools largely because the rules are different from most savings vehicles. Unlike traditional retirement accounts like 401(k)s and IRAs, HSAs let you avoid taxes across three stages: 

• Contributions are tax-deductible, reducing taxable income today.

• Money grows tax-free while invested.

• Withdrawals for eligible medical expenses are tax-free.

This triple tax benefit makes HSAs uniquely powerful. Even after age 65, you can use HSA funds tax-free for qualified medical costs including Medicare premiums which most retirement accounts do not allow. 

To contribute to an HSA in 2026, you must be enrolled in a High-Deductible Health Plan (HDHP). Annual maximum contribution limits are raised over time for inflation and in 2025 the limit is $4,150 for individuals and $8,300 for families. (Those figures can give you a sense of scale as 2026 limits are finalized historically, limits increase year to year).  

Because HSAs roll over year after year (unlike FSAs), and unused balances stay invested, they can grow into significant health care war chests by retirement. Many financial planners view them as “stealth retirement accounts” precisely because of their tax efficiency and flexibility. 

 

2. Max Out Your HSA Contributions as Early as Possible

Let’s say you delay contributing because you think you’ll need the money for expenses right now. That habit is one of the most common pitfalls advisors see. The longer you delay contributing to an HSA, the more you miss out on compounding growth. 

Here’s a smarter strategy: 

• Treat your HSA like a retirement account first, spending account second.

In practical terms, that means: 

• Contribute the maximum HSA amount each year you’re eligible.

• Pay current year medical expenses out-of-pocket if possible.

• Let the HSA funds you’ve contributed grow and compound tax-free, invested for the long term. 

In retirement, you can reimburse yourself for past qualified medical expenses (as long as you saved the receipts). By deferring distributions and letting the account grow, you effectively turn current out-of-pocket spending into future tax-free income. 

This strategy is supported by research showing that investors who treat HSAs as long-term investment vehicles, rather than cash-out accounts, accrue substantially higher balances in retirement. 

 

3. Invest Your HSA Don’t Let It Sit in Cash

Many HSA administrators default to holding your contributions in a low-yield cash account meaning your money barely moves while inflation slowly sap purchasing power. 

Instead: 

Invest your HSA funds in diversified portfolios (stocks, bonds, or a target-date mix) once you’ve built a modest cash buffer for near-term expenses. 

Most major HSA providers including Fidelity, Lively, and HealthEquity offer investment options similar to traditional retirement accounts. Historically, equities have dramatically outpaced savings returns over long time horizons, meaning your HSA balance can grow far more than if it sits in cash. 

For example, if you invested consistently over decades, your HSA could grow from a few thousand dollars to a six-figure balance by retirement, giving you tax-free funds to cover Medicare premiums, long-term care costs not covered by insurance, or out-of-pocket expenses. 

This investing mindset turns your HSA into a long-term growth engine, not just a short-term expenditure bucket. 

 

4. Understand Medicare Premiums and How HSAs Can Help

In retirement, one of the largest ongoing health expenses is Medicare premiums. Many retirees underestimate how much these costs add up especially when brackets shift upward due to income levels. 

Medicare’s Income-Related Monthly Adjustment Amount (IRMAA) increases premiums for higher-income beneficiaries. According to the Social Security Administration and Centers for Medicare & Medicaid Services, higher tax-filers can pay substantially more for Part B and Part D premiums. 

HSA withdrawals used for qualified medical expenses including Medicare premiums are tax-free after age 65. Being strategic about how you generate taxable income in retirement (for instance, withdrawing from a Roth IRA before tapping HSA funds) can lower your modified adjusted gross income, potentially keeping you out of higher Medicare premium brackets. 

This doesn’t mean you should avoid income, it means sequencing it thoughtfully to optimize tax and health care outcomes simultaneously. 

 

5. Don’t Overlook Medigap (Medicare Supplement) Savings Opportunities

Once you enroll in Medicare (typically at age 65), Original Medicare (Part A and Part B) becomes your base coverage. But Original Medicare has deductibles and cost-sharing provisions that can add up quickly after passing your deductible threshold. That’s where Medigap  Medicare Supplement Insurance enters the picture. 

Medigap policies help pay: 

• Part A and Part B deductibles

• Coinsurance and copayments

• Excess charges (in some states)

According to research from the Kaiser Family Foundation, out-of-pocket spending under Original Medicare alone can be significant, which is why many retirees purchase Medigap to protect against volatility in medical costs. Choosing the right Medigap plan (plans are standardized by letter, like Plan G or Plan N) can mean thousands saved in unexpected medical bills. 

Key considerations: 

• Plan G is often highly ranked for broad coverage (including Part B deductible).

• Plan N is usually less expensive overall but requires some copays.

Medigap premiums vary by age, location, and smoking status but because they protect against unpredictable medical costs, they should be evaluated as part of a comprehensive retirement plan. 

 

6. Plan for Long-Term Care Before You Need It

Long-term care (LTC) assistance with daily living activities like bathing, dressing, or meal prep is one of the largest risks to retirement finances. According to the U.S. Department of Health and Human Services, nearly 70% of people turning 65 today will require some form of long-term care during their lives. 

Traditional Medicare doesn’t cover most long-term care costs, and paying out of pocket can rapidly exhaust savings. 

There are three broad strategies to manage this risk: 

1. Traditional Long-Term Care Insurance

You purchase a policy that pays a daily benefit if you need care in a facility or at home. Premiums vary significantly based on age, health, and benefit levels. 

 

2. Hybrid Policies (Life Insurance + LTC)

These policies provide a combination of death benefits and long-term care coverage. If you don’t use LTC benefits in life, a death benefit goes to beneficiaries making this a more attractive option for some. 

3. Self-Funding Using HSA and Retirement Assets

Some people allocate a portion of retirement savings, including HSAs, toward expected long-term care costs. Because HSA withdrawals for qualified medical expenses (including LTC costs in some cases) are tax-free, this can be a flexible addition to your strategy. 

Evaluating these options before retirement gives you time to find competitive pricing, avoid underwriting challenges related to age or health, and integrate LTC planning with overall retirement needs. 

 

7. Coordinate Tax Strategies Between HSA, IRA/401(k), and Social Security

A powerful retirement health care plan isn’t just about picking good accounts, it’s about sequencing withdrawals and managing taxable income across multiple buckets so you minimize tax and maximize flexibility. 

Here’s an example of smart sequencing: 

• Use HSA funds first for qualified medical expenses because they’re tax-free.

• Use Roth IRA funds next (also tax-free if conditions are met) to keep your taxable income low.

• Use traditional 401(k)/IRA funds after you’ve tapped HSA and Roth, especially if doing so keeps you in a lower Medicare IRMAA bracket.

• Delay Social Security until your full retirement age or later to increase monthly benefits if your plan supports it. 

This sequencing isn’t universal, but it’s grounded in research on tax efficiency and retirement income strategies. Lower taxable income often translates into lower Medicare premiums and lower taxes on Social Security benefits, which compounds savings over time. 

 

Key Takeaway  

The biggest differentiators between retirees who run short on savings and those who build resilient retirement finances are: 

• Starting early

• Integrating health care planning with broader retirement strategy

• Using tax-advantaged accounts effectively

• Anticipating future costs rather than reacting to them 

As health care continues to be one of the largest expenses in retirement, these seven smart moves are less about crisis avoidance and more about operating with clarity and control. When health care costs are strategic, predictable, and planned they become manageable, even in the face of inflation and uncertainty. 

 

 

 

 

 

 

 

 

 

 

 

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We believe the information in this material is reliable, but we cannot guarantee its accuracy or completeness. The opinions, estimates, and strategies shared reflect the author’s judgment based on current market conditions and may change without notice.

The views and strategies shared in this material represent the author’s personal judgment and may differ from those of other contributors at IntriguePages. This content does not constitute official IntriguePages research and should not be interpreted as such. Before making any financial decisions, carefully consider your personal goals and circumstances. For personalized guidance, please consult a qualified financial advisor.

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