NEW YORK (MainStreet) — Your house is paid off. The kids are done with college. You’re looking at retirement. But you just have one nagging question on your mind: how are you going to pay for your health care once it’s no longer provided by your employer? Sure, Medicare will be there, but will it be enough? Whether your retirement is around the corner or 25 years down the road, you need to know how to plan to pay for your health care when you retire starting now.

Knowing How Much You Need

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“We’re in a sort of demographic crisis,” says Randy Padawer, a consumer advocate with LexingtonLaw, referencing the fact that there will soon be more senior citizens than young working people.

He urges consumers not to ignore their AARP notices, but to leverage them as a resource. “AARP is a great non-profit source to help you figure out how much you’re going to need as a health-care cushion,” he says, adding that the average couple is going to need between $200,000 and $250,000 just for health care expenses.

Don’t Count on Insurance

Even if you have private insurance, Padawer urges consumers to have a war chest of savings set aside to pay for their health care as they get older.

“Insurance is notorious for not covering things,” he says. “You don’t want to lose your house in your senior years or have to decide between food or medicine.”

He also notes that while seniors have the greatest access to public care available, many still struggle with these kinds of tough decisions. Take time out to figure out the four parts of Medicare and what they cover -- and what they’ll cover for you and your family.

Saving for Your Health in Retirement

Steve Auerbach, CEO of Alegeus Technology, touts Health Savings Accounts (HSAs) as one of the best-kept secrets when it comes to saving for retirement.

“When we asked customers if they understood how HSAs worked, we found that only about 30% did,” Auerbach said.

Often conflated with a flex account, HSAs are actually a lot more like a 401(k) plan for your health: you can save year over year, with your savings accruing over time in much the same way as a 401(k).

What makes them even better than retirement accounts is that when you spend the money on qualified medical and other expenses, you don’t pay taxes either putting the money in or taking it out. What’s more, the money in an HSA also grows tax-free. Much like a 401(k), there are maximums on what you can contribute, and you will pay penalties if you take the money out and spend it on non-qualified expenses. You can also take the money with you from one employer to another, unlike a flex account and there’s no “use it or lose it” rule.

More than just for the retirement-minded consumer, HSAs can be for healthy young people as well as a complement to a more bare-bones insurance program. Rather than paying a high premium for a low-deductible plan, the healthy can spend less on a high-deductible plan and pocket the difference tax-free into an HSA.

The money will accrue over the years and can be spent on anything from bandages to major surgeries.

“If you have a plan with a deductible of $10,000, these plans will really be paying for your medical care,” he says. And, unlike premiums, which just get paid every month regardless of whether or not you actually use your health insurance, money in an HSA sits around, gaining value -- value that you can use when you need it.

“One of the biggest challenges to retirement savings for health care is education,” says Auerbach. “Start by finding a trusted company that provides a range of products.”

--Written by Nicholas Pell for MainStreet

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