Healthcare is one of the largest costs you'll have in retirement. The average 65-year-old couple retiring in 2021 will need approximately $300,000 to cover all their medical costs, according to Fidelity, and that doesn't include things such as dental or long-term care. Unfortunately, there's no way to entirely avoid retirement healthcare expenses, but you can reduce them by following these tips.

Stay healthy

It's obvious advice, but it bears repeating. If you make an effort to stay active and eat healthy, you'll likely spend less on healthcare than someone who ignores diet and exercise and has other unhealthy habits such as smoking.

Senior man lying in bed with oxygen tube

IMAGE SOURCE: GETTY IMAGES.

This is a great tip for reducing your healthcare expenses at any age, and, if you start now, you'll form good habits that will carry you through retirement. If you're not sure how to start improving your health, consider talking to your doctor about the best first steps.

Know what Medicare covers and what it costs

Most retirees rely on Medicare to cover their healthcare expenses in retirement. However, it's not free, and it doesn't cover everything.

Original Medicare consists of Part A and Part B. Part A covers hospital stays, and most people don't pay monthly premiums for this. However, there is a $1,484 deductible, and you'll face copays if you're hospitalized for more than 60 days.

Part B covers doctor visits. This does have a monthly premium, as well as a deductible and copays. It also has some gaps in coverage that may surprise you. Hearing aids, for example, aren't covered by original Medicare. Nor are dental care, vision care, or prescription drugs. These costs could ambush you in retirement if you don't start planning for them now.

Consider a Medicare supplement or a Medicare Advantage plan

Medicare supplement plans are additional insurance plans you purchase to fill in some of the gaps in original Medicare coverage. These plans are offered by private insurers, so there are many different options, and they all have different features and prices.

Medicare Advantage plans, also known as Medicare Part C, are plans that cover everything original Medicare does, as well as some of the things it doesn't. What's covered varies by plan, but most include prescription drug coverage (Medicare Part D).

If you sign up for one of these, you'll have a single premium, deductible, and copay rather than separate costs for original Medicare and a Medicare supplement plan. You typically can't have a Medicare Advantage and a Medicare supplement plan, so you must choose one over the other.

You don't have to buy any extra healthcare insurance in retirement if you don't want to, but doing so will give you a predictable monthly payment. That's easier to plan for than paying for your medical expenses out of pocket.

Save in a health savings account (HSA)

Health savings accounts (HSAs) allow you to set aside money for healthcare expenses at any age as long as you have a qualifying insurance plan. Money you put in an HSA reduces your taxable income, and, if you use its funds for medical expenses, you won't pay taxes on it at all. You can use your HSA for non-medical expenses, too, but you'll pay taxes on your withdrawals then, plus a 20% early withdrawal penalty if you're younger than 65.

You can only contribute to an HSA if you have a high-deductible health insurance plan. That's one that has a deductible of $1,400 or more for an individual or $2,800 or more for a family. If you qualify, you can contribute up to $3,600 as an individual or $7,200 as a family in 2021.

Some HSA providers let you invest your funds, which makes your HSA a great place to stash extra retirement money even if you don't think you'll use it all for healthcare. And, unlike most retirement accounts, the government doesn't force you to take money out of your HSA once you turn 72, so you can leave your savings in there to continue growing until you need it.

Take advantage of Medicare's free services

Medicare offers all enrollees free annual wellness visits, along with free screening for diseases such as diabetes, cancer, depression, and more. These free services can help you catch health issues before they become too serious.

Recognizing your health issues early is key, not only to recovering quicker but to keeping your costs down. If you can make health changes before you develop diabetes, for example, you can avoid paying for monthly medications to treat it.

Consider long-term care insurance

Long-term care insurance covers costs related to living in a nursing home or hiring a home health aide. It could be a lifesaver for those who develop a chronic health condition that leaves them unable to care for themselves. It's something you should consider, especially if you have a family history of debilitating health conditions.

The downside to long-term care insurance is that it's usually pretty expensive. However, you can reduce your costs by purchasing a policy while you're young and still relatively healthy. Insurers usually offer lower premiums to younger policyholders than they do to older ones. As you get closer to retirement, think about purchasing one if you believe there's a chance you could require long-term care in the future.

Build healthcare costs into your retirement plan

If you're still worried about not having enough money to cover your healthcare costs in retirement, you can always save some extra in your retirement account. You can use the $300,000 estimate for a retiring couple as your starting point, but you may have to save a little more if you're a long way off from retirement to account for inflation.

It's up to you to figure out how much you feel you need to save. Once you've decided on that number, use a retirement calculator to figure out how much you must save per month to hit your goal.

If your health situation changes as you age, you should revisit your healthcare plan for retirement. You may not think you need a long-term care insurance policy right now, for example, but if you develop a chronic condition as you get older, you may decide it's worth the investment. Like the rest of your retirement plan, your retirement healthcare plan should be adaptable because you never know exactly what the future holds.