- Stay healthy. Obviously, you can neither prevent all illnesses nor suspend the natural aging process. However, by eating right, exercising regularly and reducing stress, you can improve your health and possibly reduce the odds of incurring high medical costs in retirement.
- Contribute to a Health Savings Account (HSA). If you have access to this type of plan at work, consider using it. Your money has the potential to grow tax deferred, and you can withdraw funds from your account tax free, provided withdrawals are used for qualified medical expenses. Keep in mind, however, that the contribution limits to HSAs are relatively low. So, your savings will probably not grow enough to cover all, or even most, of your medical costs. Yet, every dollar can help.
- Plan ahead for long-term care. If you are fortunate, you will never have to enter a nursing home or require the services of a home health care professional. Still, you never know. People who reach age 65 have a 40 percent chance of entering a nursing home, according to a study by the U.S. Department of Health and Human Services. In some areas, just one year's stay in a nursing home can easily cost $100,000. To avoid incurring these catastrophic expenses, consider putting a long-term care protection plan in place.
- Boost your savings. It's easier said than done, but try to put away as much as you can while you're working. Fully fund your IRA each year, and put as much as you can afford into your 401(k) or other employer-sponsored retirement plan. If you "max out" on your IRA and 401(k), you might want to invest in an annuity, which provides the potential for tax-deferred growth of earnings and can be structured to pay an income stream that you can't outlive.