Step 5: Plan for medical expenses
It's easy to underestimate the cost of health care or caring for a spouse with Alzheimer's disease or cancer.
"It's the one thing that people almost always underestimate when they plan for retirement," says John Rother, president and CEO of the nonprofit National Coalition on Health Care.
Retirees can take steps to protect against high costs before Medicare kicks in. One option is to stay on your employer's insurance under the Consolidated Omnibus Budget Reconciliation Act, or COBRA, or elect a high-deductible individual plan to save premium dollars.
Starting in January 2014, health insurance through the Affordable Care Act will give people more flexibility about when to retire because insurance companies can't deny people coverage based on pre-existing conditions.
The law limits how much insurance companies can charge consumers on the basis of age and provides subsidies for those with lower incomes.
"For people who are older and (have) lower income, this could be a major help with their expenses," says Rother.
As you get older, you're more at risk for expensive health problems. Long-term care insurance can be an expensive option, and many insurance companies are cutting back on this coverage.
In some cases, people can minimize those risks by eating healthy foods, exercising daily, and getting regular screenings, vaccinations and checkups.
"What most people don't realize is that their own behavior is the most important way to stay healthy," says Rother.