My goal is to rely on my future Social Security checks as little as possible. Hopefully, I can use the income to pad my travel budget, pursue hobbies, or give to causes I care about. Realistically, though, I’ll probably depend on Social Security for at least some of my income. And so, I plan to set aside my future benefits for a big expense that devours a growing share of retiree budgets year after year.

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Why I plan to spend my Social Security checks on healthcare

I’m in reasonably good health, but I’m also probably about 25 years away from retirement — and a lot can go wrong during that time. As you get older, you can generally expect to spend more on healthcare. For example, people ages 55 and older accounted for just 31% of the U.S. population in 2021, but were responsible for more than half of healthcare spending.

Medical expenses account for a huge share of senior budgets. Fidelity estimates that a 65-year-old retiring in 2024 will spend at least $165,000 in out-of-pocket healthcare costs during retirement. Because medical expenses typically rise faster than overall inflation, I expect these costs to be even more burdensome for my generation.

What about Medicare?

Like the vast majority of Americans, I’ll eventually qualify for Medicare, the federal government’s insurance program for people 65 and older and those with disabilities.

But Medicare can also come with substantial out-of-pocket costs. Part A coverage comes with a deductible — currently $1,632 — if you’re hospitalized. Part B, which covers routine medical care, has premiums ($174.70 each month in 2024, but higher for some high-income recipients) that most seniors have deducted from their Social Security checks

I’ll also need to plan for Part D prescription drug coverage, as well as the many things that Medicare doesn’t cover, like dental care, eyeglasses, hearing aids, and (most frighteningly) long-term care.

One factor that many Americans need to prepare for is the possibility of early retirement, whether it’s by choice or due to a job loss, illness, or caregiving responsibility. The average American retires at age 62, three years before the typical age of Medicare eligibility.

Since I’m self-employed, so I already shoulder the full cost of health insurance. But if you have job-based coverage and you retire early, you may need to pay this cost out of pocket for several years.

How I’m preparing for healthcare costs in retirement

Though there’s a lot of talk about the shaky future of Social Security. But if everything continues as-is and Social Security burns through reserves, the Social Security Administration could continue to pay about 83% of scheduled benefits come 2035, according to the latest trustee’s report. So I’m still counting on getting a benefit in my retirement planning calculations, even if I may need to plan for a slightly lower amount.

In the meantime, I know there’s a lot I can do in the next couple of decades to prepare for retirement. Come open enrollment for next year, I’m planning to go with a plan that allows me to put money aside in a health savings account (HSA), knowing I can use any money I don’t spend toward medical expenses in retirement. I’m also save as much as I can in retirement accounts, like my Roth IRA and SEP IRA.

Healthcare can be an exorbitant expense for retirees, so it’s best to over-prepare if you can.

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