An American couple retiring this year should expect to spend $275,000 in health care costs throughout retirement a number that has risen 6% since last year, and will continue to rise indefinitely.

The number assumes the individuals are enrolled in Medicare, but does not include expenses associated with a nursing home or long-term care, according to Fidelity Investments, the Boston-based financial services firm that analyzed these health care costs. Instead, the $275,000 includes monthly expenses that come with health coverage premiums, copayments and deductibles and out-of-pocket expenses for prescription drugs. The expected cost of health care has grown 70% since Fidelity first started tracking health care costs in 2002, and will continue to rise in the future, Adam Stavisky, senior vice president of Fidelity Benefits Consulting. Medicare is wonderful, but by design it doesnt cover everything, Stavisky said.

See: Whats the matter with health care?

Americans are anxious as it is for retirement the image of those golden years has shifted considerably in recent decades, where people are relying on their own savings instead of a pension plan, and many are choosing to work part or full time in their older years. Almost half of Americans are not confident about reaching their retirement goals, partially because of how expensive health care is: 71% of the more than 1,000 adults in a survey by the American Institute of Certified Public Accountants said they were anxious about health care costs, and another 68% said their concern was over the uncertainty around health care costs.

On top of how expensive health care is, and the pressure to save for it, many Americans dont understand the details of various plans and insurances. Health care is unfortunately complex and most people will shut down before they try to unravel the complexity, Stavisky said. Health care legislation is also in limbo Senate Republicans failed to agree on a reformed health care bill, which would have reduced Medicaid spending (the health care plan for low-income families and those with disabilities or few resources), and both parties are fighting over the fate of the Affordable Care Act, also known as Obamacare. For now, however, the ACA is still in tact.

See also: Heres how Republicans and Democrats can come together to fix health care

In the meantime, its on Americans to ensure their security in retirement, and that means funding health care costs. We may not want to talk about it, but the obligation exists nonetheless, Stavisky said. One increasingly popular way to do that is by funding a health savings account (HSA), where assets are deposited, invested and withdrawn tax-free and help Americans pay for qualified medical expenses. HSAs accounted for about $37 billion in assets at the end of 2016, and to more than $41 billion in January, according to Devenir, a Minneapolis-based HSA adviser and consultancy firm. The average investment account holder has a balance of almost $15,000, and overall the number of HSA accounts has grown 20% between December 31, 2015 and December 31, 2016.

HSAs are attached to a high-deductible health insurance plan, and have a contribution limit in 2017 of $3,400 for individuals and $6,750 for families. In 2018, those limits will increase to $3,450 and $6,900, respectively. There is an additional catch-up contribution of $1,000 allowed per year for individuals 55 and older. Alternatively, Americans can use a Flex Spending Account to accompany their health care coverage, but must spend it all or lose any remaining money in the account at the end of the year. Though they can be beneficial, and many experts recommend them, individuals interested in opening an HSA should consider fees and initial costs associated with the plans, and understand their nuances for example, once someone signs up for Medicare, contributing to an HSA is no longer an option. Alternatives to an HSA would be a traditional employer-sponsored retirement plan, such as a 401(k) plan, or a traditional or Roth Individual Retirement Account.

The money contributed each year into an HSA doesnt have to be used in that year, and unspent money will roll over year after year to become another nest-egg in retirement, if the individual chooses, said Chad Wilkins, president of HSA Bank, a Milwaukee-based health savings account administrator.

Some experts suggest paying all health care expenses out of pocket and saving HSA funds for health care costs in retirement (or, for whatever purpose after turning 65, when those assets are no longer only for medical expenses and the account is treated like a 401(k) plan nonmedical expenses will incur income taxes, though). Individuals can also use the money to reimburse themselves for a medical expense (with a receipt) from years prior, Wilkins added.

Original post:
Health care costs in retirement will only grow here's how to save - MarketWatch