Many people might hear about the staggering health-care costs that come with retirement and think there's no way it will apply to them.
But financial advisors say that those high costs are real. And those medical expenses should be a key line item in any retirement plan.
On top of paying Medicare premiums, "a lot of people don't realize how much the out-of-pocket expense will be, because they haven't had to use their health insurance a lot or for the types of common [ailments] that come with age," said Greg Hammer, CEO and president of the Hammer Financial Group. "The expenses can become a huge burden."
Indeed, data from Fidelity Investments show that a 65-year-old couple retiring this year will need roughly $260,000 to cover health-care costs during retirement. That's 6 percent higher than its 2015 estimate and the highest since Fidelity began tracking such costs in 2002.
The estimate includes only costs related to traditional Medicare coverage (its premiums, co-pays and deductibles) and prescription drug out-of-pocket expenses.
In other words, it excludes other health-related expenses, such as dental and vision services, over-the-counter medications and — the biggie — long-term care. Except in very limited circumstances, Medicare does not cover long-term care needs, which can range from help with daily living to around-the-clock nursing care.
But before you even try wrapping your head around the possibility that you might one day require an aide to bathe and feed you, it's important to fully evaluate the options available for your primary insurance: Medicare. Because different options and combinations of those options can result in different overall costs.
"A lot of people have uncertainty because it's the first time they've really had to choose their health-care insurance," Hammer said. "They've had coverage through work, but it was just kind of there and didn't involve choosing a plan."
First, it's important to know that in most situations, you must sign up for Medicare. You can do it when you're three months from turning 65 and up to three months after that milestone. (If you don't — and you don't meet one of the exclusions — you likely will face higher premiums for Part B that never go away.)
In simple terms, Medicare Part A covers hospital stays. And as long as you've paid into the system through working the equivalent of about 10 years, you won't pay premiums. If you don't qualify, you can purchase it and pay premiums.
Part B generally covers doctor visits, and everyone pays premiums. Higher incomes generate higher premiums: If you're single and earn more than $85,000 or are married with a joint income of at least $170,000, you will pay more.
Part C, or the Medicare Advantage program, lets people choose from a Medicare-approved private insurance plan instead of parts A and B. Each plan comes with differing variables, ranging from coverage to deductibles and co-pays.
Part D, meanwhile, is for prescription drug coverage. A voluntary option, it often ends up being included with an Advantage plan.
Certified financial planner Hans "John" Scheil, president and owner of Cardinal Retirement Planning, said that when you combine premiums with Part D and supplemental insurance — not to mention the co-pays — the monthly outlay can come as a surprise to many of Scheil's new clients.
"It's not a financial threat to them, because they have the income," Scheil said. "But here they are, coming up on age 65, signing up for Medicare, and they find out there's suddenly an extra $400 or $500 a month they have to pay that seems to come out of nowhere."
To determine how much clients should budget for health care, some financial advisors, such as Scheil, use health-care assessments and software that considers a range of data points — including age, where you live, your income, blood pressure and cholesterol level — to help predict future health-care costs.
Advisors say that one of the challenges for people in their 60s is accepting that there is a good likelihood they will need long-term care at some point, which can end up tearing through a person's assets if not planned for.
"They have to really be able to acknowledge their own morbidity," Scheil said.
According to government data, someone turning age 65 today has nearly a 70 percent chance of needing some type of long-term care in their lifetime. The monthly cost for, say, a semiprivate room in a nursing-care facility averages more than $6,000.
"You may be lucky enough to live your whole life and never need long-term care," Scheil said. "But if you end up needing it, you're going to be darned glad you planned for it."
One option is long-term care insurance. But some policies can come with pricey premiums of several hundred or more a month. That alone can turn people off.
"A lot of people don't want to spend the money, because it doesn't have a guaranteed return," said Hammer of the Hammer Financial Group.
For some clients, he said, an asset-based care protection program (as it's known in the industry) is appropriate. Essentially, this assigns a part of your portfolio to long-term care if the need arises. This could include life insurance or an annuity, or newer approaches that combine the two so that if the policy is unused, there is still a payout.
"That can help people to not feel like they're spending money and getting no return," Hammer said.
Also, if you are not yet retired and have a high-deductible health plan that comes with a health savings account, keep in mind that what you save in that HSA is tax-deductible and grows tax-free. In addition, its distributions are tax-free if used for qualified medical expenses.
Roughly 16.7 million HSA accounts were in use in 2015, an increase of 22 percent from 2014, according to Fidelity. While the annual contribution is fairly low in comparison to anticipated health-care costs in retirement — $3,350 for individual coverage and $6,750 for family coverage — every bit can help.
Advisors also recommend looking at your projected health-care costs within the context of your entire financial picture because, with thoughtful planning, there are ways to maximize your medical benefits while minimizing how much you spend on health care.
"Make sure you talk with someone who can speak intelligently about these things or who has resources available to you if they don't know the answers," Hammer said.
— By Sarah O'Brien, special to CNBC.com