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It's key to factor in health costs when saving for retirement

As if retirement planning weren't difficult enough, things get even more complicated when you factor in the cost of health care.

"Health care is one of the most underemphasized things in retirement," said certified financial planner Brian Fenstermaker, founder of Envision Financial Consulting.

Even Fenstermaker's high-net-worth clients worry. "A lot of my clients have millions of dollars in savings, but they are still concerned about health care," he said.

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There's good reason. According to Fidelity Investments, the average 65-year-old couple retiring this year are likely to spend $245,000 on medical care not covered by Medicare — 29 percent more than they did 10 years ago. That figure doesn't include long-term care, which can run as high as $200,000 a year for a private room in a nursing home.

The data from the Employee Benefits Research Institute are even grimmer. A 65-year-old couple who would like a 90 percent chance of having enough money for lifetime health care should set aside $392,000.

Health-related costs are rising by twice the rate of overall inflation. The Centers for Medicare and Medicaid project that health spending will grow almost 6 percent a year through 2024.

Making sense of the numbers

Of course, not everyone is "average," said Carolyn McClanahan, a financial advisor who was once a physician.

"If you don't [show] the propensity to want to go to the doctor every time you have a cold, your numbers aren't going to be that high," she said.

To understand how much you'll be paying for health, you need to factor in your own health history, family history and how you use the health-care system, McClanahan said.

A healthy lifestyle, or lack of one, counts for a lot, said McClanahan, founder of Life Planning Partners. People who don't smoke, keep their weight down, exercise and eat well have fewer health issues and, therefore, fewer health-related expenses. On the other hand, people with diabetes have twice the medical expenses that people who don't, according to a research study featured in the journal Diabetes Care.

"What happens in our health system is that doctors offer you all these options, but they don't tell you which of the options are useful." -Carolyn McClanahan, founder of Life Planning Partners

But Paul Fronstin, director of health research with EBRI, notes that healthy people may incur higher lifetime costs simply because they have more years in which to visit doctors and get treatments.

"[Longevity] is good, but it comes with a price tag," he said.

How you use health care also matters. "What happens in our health system is that doctors offer you all these options, but they don't tell you which of the options are useful," McClanahan of Life Planning Partners said. "It's really the doctor's responsibility to tell you which ones are useful, but they don't, so the patient has to [find out]."

Insurance company Nationwide offers a health-assessment tool for advisors to use with their clients to help put a more personalized number on health-care expenses. The firm estimates that seven in 10 people can't correctly estimate retirement health-care costs.

Medicare doesn’t cover everything

While Medicare forms the backbone of almost every retiree's health plan, it is by no means comprehensive. Medicare covers hospital stays through Part A. But it only picks up 80 percent of the tab for doctor's visits with Part B, without a maximum out-of-pocket per year.

You must pay for Part B coverage, and the higher your income is, the more expensive it is, topping out at $389.80 a month for individuals with $214,000 or more in adjusted gross income and couples with an AGI above $428,000.

In addition, Medicare doesn't pay for dental or vision, either. Medications aren't covered unless you buy a standalone drug-benefit plan. And long-term care isn't covered, either.

That's why it's important to have supplemental insurance to fill in some of the gaps, said Katy Votava, a registered nurse and health economist whose company, GoodCare, provides training to financial advisors on health-care issues.

Plan F, the most comprehensive plan and the most popular, pays for parts A and B deductibles and co-pays. It's also the most expensive option, running about $300 to $500 a month, depending on the state. Lower-priced Medicare Advantage plans often provide less coverage, though that varies by location.

"If people have high health-care costs, they're almost always going to make out better in Plan F than Advantage because they are going to pay less over time," Votava said.

Make a plan for health-care spending

While some aspects of medical care are out of your control, there are a number of steps you can take to make the costs more manageable.

First, put health care on your retirement radar. True, the costs are big, but they're spread out over many years. "It's part of your retirement cash flow, just like housing is part of your retirement cash flow," Votava said.

Next, consider a health savings account, known as an HSA. Many employers now offer these accounts, which must be paired with a high-deductible health insurance plan. The money you put into the accounts is tax-free. It grows tax-free and is tax-free when used for health-related expenses.

"The earlier you start, the better, because you can give your money more time to grow tax-free," said Sunit Patel, vice president of benefits consulting with Fidelity.

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HSAs can be linked to investment accounts. If your goal is to use the money for retirement health-care expenses, make sure to invest it in stocks that can outpace inflation.

Finally, monitor your own health-care usage. Long before the need arises, think carefully about how you and your family will approach the end of life. Patients spend about six times the amount in their last year as do patients not facing a terminal diagnosis.

Doctors may be willing to provide treatments that have little chance of working — and, in the process, increase your expenses and suffering, said McClanahan of Life Planning Partners. Be willing to explore palliative care. "Medicare covers it, and it improves patients' quality of life greatly," McClanahan said.

— By Ilana Polyak, special to CNBC.com