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If you’re saving for retirement, you’re likely building up a nest egg that will cover the food, housing, transportation and medical expenses you’ll have in your golden years. You’re probably also stashing away at least 15% of your paycheck and anticipating a savings withdrawal rate of no more than 4%. While you may be doing all the right things when it comes to saving for retirement, it might be that you simply haven’t stowed away enough money. A recent report by the Center for Retirement Research at Boston College found that a significant portion of retirees’ savings and Social Security benefits went towards covering their medical expenses.Below, Select takes a closer look at what percentage of retirees’ income is spent on medical expenses and how you can better prepare to handle these costs in retirement.Subscribe to the Select Newsletter!Our best selections in your inbox. Shopping recommendations that help upgrade your life, delivered weekly. Sign-up here.The cost of medical expenses in retirementIn the brief, researchers used data from the 2018 Health and Retirement Study to see how much of retirees’ Social Security benefits and total retirement income was going toward medical-related expenses such as Medicare premiums, prescription drugs, surgeries and doctor visits. And while it may seem like having Medicare means paying lower medical costs, this was not the case.The study found that, in 2018, 12% of the median retiree’s total retirement income went toward medical expenses. For the median retiree, 25% of their Social Security benefits went towards medical costs. In total, the median retiree spent $4,311 on medical expenses, with most of that money going toward Medicare premiums.In 2022, the monthly premium for Medicare Part B, which is medical insurance, was $170.10.”With out-of-pocket health expenditures eating away at retirement income and Part B premiums on the rise, it is understandable why many retirees likely feel that making ends meet is difficult,” the researchers noted.It also turns out that people preparing for retirement aren’t great at forecasting how much they’ll spend on medical expenses later in life, as another recent study by the Center for Retirement Research at Boston College found.According to the 2022 Fidelity Retiree Health Care Cost Estimate, the average retired couple at age 65 can expect to spend around $315,000 on health care expenses in retirement.How to prepare for medical expenses in retirementSo, if you’re planning for retirement, how can you best prepare for these medical costs ahead of time? There are a number of ways to use tax-advantaged accounts and insurance products to help cover healthcare costs.401(k)s and IRAsFirst off, you should focus on maximizing tax-advantaged investment accounts such as your employer-sponsored 401(k) or a traditional or Roth IRA. With a 401(k) and traditional IRA, the money will not be taxed until you withdraw it in retirement. With a Roth IRA, money is taxed upfront which allows your investments to grow tax-free over time.If your employer offers a 401(k) match, take advantage of that since it’s essentially free money. If you’re eligible for a traditional or Roth IRA, consider opening one with Charles Schwab, Fidelity Investments, Vanguard or Betterment. Select ranked these companies as offering the best IRAs based on factors such as the variety of investment options, low fees and ease of use.Fidelity Investments

• Minimum deposit and balanceMinimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go account, but minimum $10 balance for robo-advisor to start investing. Minimum $25,000 balance for Fidelity Personalized Planning & Advice
• FeesFees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go is free for balances under $10,000 (after, $3 per month for balances between $10,000 and $49,999; 0.35% for balances over $50,000). Fidelity Personalized Planning & Advice has a 0.50% advisory fee
• Bonus
• Investment vehiclesRobo-advisor: Fidelity Go® and Fidelity^® Personalized Planning & Advice IRA: Fidelity Investments Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA^®
• Investment optionsStocks, bonds, ETFs, mutual funds, CDs, options and fractional shares
• Educational resourcesExtensive tools and industry-leading, in-depth research from 20-plus independent providers

BettermentOn Betterment’s secure site

• Minimum deposit and balanceMinimum deposit and balance requirements may vary depending on the investment vehicle selected. For Betterment Digital Investing, $0 minimum balance; Premium Investing requires a $100,000 minimum balance
• FeesFees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has a 0.40% annual fee
• BonusUp to one year of free management service with a qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC
• Investment vehicles
• Investment optionsStocks, bonds, ETFs and cash
• Educational resourcesBetterment RetireGuide™ helps users plan for retirement

Health Saving AccountsAdditionally, if you’re enrolled in a high-deductible healthcare plan, you should think about contributing to a Health Savings Account, a tax-advantaged investment account that can be used to pay for medical expenses. For 2022, the yearly contribution limit is $3,650 for single-earners and $7,300 for families. Those who are age 55 and older are eligible for catch-up contributions of an additional $1,000 per year. Note that if you don’t use the money you saved in a given year, the funds will be rolled over to the next year.Generally, Health Savings Accounts offer three major tax advantages. Contributions are tax-deductible which means they will reduce your overall taxable income. You also won’t pay taxes on your contributions.You can then withdraw HSA funds for qualified medical expenses such as co-pays, co-insurance, prescription drugs and menstrual products. Once you hit age 65, you can use the funds from your HSA to take care of any expenses, not just out-of-pocket medical costs.Additionally, if you choose to invest your funds, you won’t have to pay taxes on your earnings.Similar to a traditional or Roth IRA, you can invest the funds in your HSA into exchange-traded funds, mutual funds and stocks. You’ll want to look into the rules of your Health Savings Account first, as some of them have a minimum amount requirement that must be reached before you can start investing your funds.Long-term care insurance and MedigapIf the out-of-pocket costs of healthcare in retirement are still high even after Medicare coverage, you might opt for supplemental Medicare insurance which is known as Medigap.Medigap is provided through private insurance companies and can be used to fund Medicare co-pays, deductibles and coinsurance. Individuals must be age 65 or older and need to be enrolled in Medicare Part A (hospital services) and Part B (medical insurance). With Medigap, individuals pay a premium for the supplemental insurance in addition to any premiums they must pay for Medicare Part A and B.Another type of insurance you may look into is long-term care insurance which is used to fund nursing home stays, assisted living and adult daycare expenses. Since Medicare and Medigap do not generally cover these expenses, it may be wise to start shopping for a long-term care insurance policy starting in your 40s or 50s. Assisted livings and nursing homes can be incredibly costly — according to a 2021 Cost of Care Survey by Genworth, the average cost for a semi-private room in a nursing home was $7,908 per month while a private room costs $9,034 per monthWith a long-term care insurance policy, you pay a premium each month to a private insurance company. If you ever need the covered services offered through the plan, you then submit claims to the company. Bottom lineWhen saving for retirement, you should be prepared for a significant amount of your retirement income to be allocated toward medical bills —12% of the median retiree’s retirement income had gone toward covering medical expenses. You can save for retirement by taking advantage of the variety of different tax-advantaged investment accounts that exist such as 401(k)s, traditional and Roth IRAs and Health Savings Accounts. Additionally, you should consider taking out Medigap or long-term care insurance if you anticipate substantial healthcare expenses in retirement.Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party. .