Retirement Planning

• Health care in retirement can cost nearly $200,000 — but many Americans underestimate or overlook this major expense.

• Saving in a Health Savings Account (HSA) and choosing the right Medicare plan can help reduce out-of-pocket costs.

• No matter your age, it’s never too early (or too late) to plan — every generation can take steps now to protect their future finances.

When most people think about retirement, they imagine travel, hobbies, and finally having time to relax. But there’s one major expense that often catches retirees off guard: health care. From doctor visits and prescriptions to Medicare premiums and long-term care, the costs can add up quickly — and many Americans aren't prepared.

To help break down what future retirees need to know, Whitney Stidom, vice president of Medicare Enablement at eHealth, spoke with ConsumerAffairs about how different generations can start planning now, practical steps you can take to protect your future finances, and more. 

Set realistic expectations

When it comes to planning for retirement costs, Stidom recommends having realistic expectations about health care costs.  

“In retirement, everyone eventually needs health care, and health care is expensive,” she said. “Our recent survey found that 76% of Americans underestimate or don’t know the average cost of health care in retirement, which amounts to nearly $200,000 for the average retiree.” 

Money-saving tips

Stidom shared her top three tips for saving money for health care costs in retirement: 

1. Pursue healthy habits. Get exercise, avoid unhealthy food, don’t smoke. Ask your doctor for advice based on your health and family history. The healthier your lifestyle, the better chance you have of avoiding the need for medical intervention.

2. Save money specifically for your retirement health care costs. If you’re still in the workforce, consider a Health Savings Account (HSA). In 2025 alone, you can save $4,300 (or $8,550 for a family) on a tax-free basis in an HSA. The money is yours to keep and can be invested to potentially grow in value over time. You can build up a health care expense nest egg in an HSA and use it in retirement to help cover deductibles, copayments, dental and vision care, or even massage therapy if medically necessary.  

3. Make sure you’re in the right Medicare plan for your needs and budget. Whether you’re enrolling in Medicare for the first time or reviewing your plan choices during the fall Annual Enrollment Period (AEP), it’s important to understand your options. Medicare Advantage plans may provide coverage for many services not included in Original Medicare, such as prescriptions, dental, vision, hearing, and more. It can pay to shop around. Americans have access to an average of over 40 Medicare Advantage plans in their local area, and beneficiaries who comparison shop can potentially save an average of over $1,100 per year on medical costs. 

The generational breakdown

Regardless of what generation you’re in, it’s important to start preparing for retirement. Stidom broke down her best advice for consumers trying to make the most of their money. 

• Retired: If you’re already retired, the best Medicare plan for you last year isn’t necessarily going to be the best plan for you in the new year. Your personal health and medical needs can change from one year to another, and so can your personal finances. If you’re enrolled in a Medicare Advantage plan or a Part D drug plan, your benefits and costs under that plan can also change from one year to another. 

• Boomers: For Boomers who are not yet retired, if you’re healthy and rarely visit the doctor, consider a plan with a Health Savings Account (HSA). If you’re enrolled in an HSA-eligible plan and age 55 or older, you can make an additional $1,000 contribution to your account each year to help you stockpile tax-advantaged funds for future health care costs. 

• Gen X: This group needs to think beyond their 401(k)s. Health care costs in retirement typically aren’t on the radar for most Gen Xers yet. They should consider HSAs as well, and start educating themselves about what Medicare is, how it works, what it covers, and what it doesn’t. Some Gen Xers have helped their parents through these questions, but it may soon be time to start applying those lessons to yourself. Gen Xers might also take stock of their personal health and lifestyle and think about where they’re headed 10 or 20 years from now, as now is the time to make healthier lifestyle decisions. 

• Millennials and Gen Zers: They may not be thinking much about retirement yet, or about health care costs. Since they’re younger and typically healthier, HSAs can be an especially good option for them. If you’re 30 years old today and have an employer that contributes to your HSA, you could potentially save tens of thousands of dollars – in part through the power of compound interest – for health care costs by the time you are retirement age.

Millions of Americans started 2025 with rising credit card debt, living paycheck-to-paycheck and falling further behind their financial goals.

Charlotte, N.C., financial advisor Marcus Sturdivant Sr., says the start of a new year is a good time to improve your financial literacy, suggesting that improved money skills affect not just your bank account but your entire life.

“I’m a financial advisor by trade so I’ve seen the results in other people’s lives,” Sturdivant told ConsumerAffairs. “When we sit down and have a conversation we see that many people don’t understand the value of owning a home, of credit, and how to use credit and debt.”

So what does he mean? Sturdivant says much of the stress in family life is caused by the lack of proper money management and is one of the biggest causes of divorce.

“People can be married 20 or 30 years and not really understand each other’s views of money, or where they want to get to by retirement,” he said. 

For young people, having a good financial literacy education is important when dating. For example, if you have a good credit score you probably want to avoid getting involved with someone who has a poor score.

Happier, more stable life

Sturdivant says someone with a strong financial literacy grasp will likely have a happier, more stable life. They will have fewer worries about debt because they will pay their credit card balance in full each month. Someone without this knowledge may be quickly burdened with unsustainable debt.

“Einstein stated that compounding interest is the strongest force in nature,” Sturdivant said. “That blade cuts both ways, if people are saving and compounding those gains, it is beautiful. On the flip side, paying minimum balances or not paying at all will have detrimental consequences on the growing balance.”

Sturdivant has worked with a Charlotte-area non-profit, offering a free financial literacy course to help people get a grasp of their finances, sometimes turning their lives around. He says it just takes that initial step.

“People fear what they do not understand and finances can seem daunting and only for the affluent,” he said. “The first step in mindset is realizing everyone can grow in their financial literacy and start to grow their returns.”

If you’ve ever asked yourself why the money game has to be so darn complicated, you’re not alone.

In addition to recent revelations that millennials aren’t in sync with estate planning and questions about the pluses and minuses of bond yields and CD rates, a new survey of 2,000 Americans reveals that 43% of us have no clue what a 401(k) is and 70% saying they had no shot of winning a game of personal finance trivia.

The study, commissioned by Beyond Finance for Financial Practice Week and conducted by OnePoll, found that four in 10 Americans (39%) are guilty of procrastinating when implementing healthy financial habits. Gen Z are most likely to procrastinate (49%) while baby boomers are least likely to procrastinate (22%).

The top reasons respondents cited for postponing personal finance tasks include stress (25%), feeling their financial health is already poor and can’t get any worse (16%) and forgetfulness (13%).

“Unfortunately, avoiding looking at your finances and making healthy changes is incredibly common,” said Dr. Erika Rasure, chief financial wellness advisor of Beyond Finance.

"Some people tend to neglect taking stock of their financial situation, and others can become nervously consumed by it. There’s a middle ground to take when improving your financial health — learn healthy money habits, pay attention and make small, achievable adjustments to your spending and habits.”

So what is a 401(k)?

An employer-sponsored 401(k) is a retirement savings plan that offers significant tax benefits. As a result of these tax benefits, you are limited in how much you can contribute. The annual contribution limit for 2024 is $23,000 for those under 50. The limit is $30,500 for those over 50.

In her breakdown of how 401(k)’s work, ConsumerAffairs financial writer Cassidy Horton explains that the best place to start a 401(k) is when you start working at a new company.

“You typically decide what portion of your income you want to put into your 401(k)," she said. "These contributions are taken directly from your paycheck and invested on your behalf, so you don’t need to do it yourself. Depending on the type of 401(k) you choose, you’ll either receive tax benefits when you deposit the money or when you withdraw it.”

That last part – tax benefits – probably got your attention. But, as Horton explains, the type of 401(k) you choose – a traditional or Roth – needs to be considered and not just drawing a name out of a hat.

The traditional 401(k) works by deducting a percentage of your salary before taxes and depositing it into the account before taxes. The upside with that option is that your taxable income will be lower and you'll be able to save for retirement.

“Say you make $50,000 a year and you contribute 3% of your income to a traditional 401(k). Since $1,500 is taken out of your salary and put into a 401(k), you’ll be taxed only on $48,500, which can help lower your tax bill,” Horton said.

“The money in your traditional 401(k) grows tax-deferred. This means the IRS won’t tax your contributions or growth until you begin payouts in retirement. Even then, you’ll pay taxes only on the money you withdraw.”

And the Roth 401(k)s? They’re similar to traditional 401(k)s but with a couple of caveats.

“Similar to a traditional 401(k), as long as the money remains in your account, you don’t pay taxes on the investment growth. When you begin taking distributions after retirement, they’re tax-free since you’ve already paid the tax upfront,” Horton advises, but cautions consumers to pay attention to what type of “Roth” you sign up for.

“Unlike Roth IRAs (which are different from Roth 401(k)s), there are no income limits on a Roth 401(k). So, you can contribute even if you’re a high earner. But the downside is that not all employers offer this kind of account.

“If you’re young and know you’ll likely be in a higher tax bracket come retirement, it may be smart to use a Roth 401(k) and pay those taxes upfront. But if your employer offers a great matching program, it may make more sense to invest your money in a traditional 401(k) so you defer taxes on that money until retirement.”

401(k): Scam-prone or scam-free?

At the moment, ConsumerAffairs isn’t aware of any current 401(k) scams, but the possibilities always exist as scammers try to milk every possible investment fraud angle they can. And a 401(k) scam is likely in the works already.

Over the past year, investment fraud was again the costliest type of crime tracked by the FBI’s Internet Complaint Center (IC3). Losses to investment scams rose nearly 40% – from $3.31 billion in 2022 to $4.57 billion. The most vulnerable of those are consumers 30-49 years old.

Just so you know what to expect if a 401(k) scam is unleashed, some common 401(k) scams and risks you need to be aware of include:

Phishing attacks: Scammers will pose as a 401(k) provider or the HR department where you work (or did work). Their usual tactic is sending emails or texts designed to trick you into giving up your login credentials. If they gain your confidence, then they’ll try and steal funds or personal data.

Unauthorized distributions: In this trickery, fraudsters hack into your account and initiate unauthorized withdrawals or transfers of funds. This often goes unnoticed for a while, but if you have account alerts set up with your investment company, you might be able to monitor those changes more closely.

Beware of doubtful investment schemes: When it comes down to how much you’ll gain from a 401(k), many retirement advisers say that it’s typical for a 401(k) portfolio to produce an average annual return of 5% to 8%. If someone comes knocking, pitching you on an investment within your 401(k) that will produce more than that, it could be a scam, so be careful.