6 factors affecting your retirement health care costs

How much money you'll need for health care may be the biggest unknown expense you'll have in retirement—and how you prepare could determine how long your savings last.

So what comprises the model that drives our personalized estimates? Many factors affect health care expenses, but according to our research, these are the 6 most important.

1. Medicare choice

When it's time for you to enroll in Medicare (at age 65), carefully review the available plans and choose one that's right for you based on your individual needs.

Costs vary based on coverage. When considering your options, think about whether you'd prefer to pay higher premiums (and additional premiums for extra policies) to increase the predictability of your out-of-pocket costs. You'll reenroll each year around the same time, so you'll be able to reevaluate your plan and choose a different option to address your evolving needs.

If you need guidance around your Medicare decision, getting in touch with our advisors is a great start. They have several resources that can help you narrow your plan selection based on your priorities.

2. Health status

How healthy you are when you enter retirement and your family health history largely determine the Medicare coverage you'll need and how much you can expect to spend on health care.

A few questions to consider:

• Do you smoke?
• Do you have an unhealthy diet?
• Do you refrain from exercise? 
• Do you visit the doctor often (at least 10 times a year)?
• Do you have 2 or more chronic health conditions?

If you answered "yes" to at least 1 question, you should plan to spend more of your retirement income on health care. Keep in mind, however, that a higher health risk can also increase the likelihood you'll need long-term care. Fortunately, many retirees don't end up needing it, but if you do, it can be expensive. You may want to build long-term care into your plan as a separate cost.

An advisor can help you determine when to start planning for long-term care. There are risks to planning too late—but also too early. We can help you set an ideal time frame based on your personal circumstances. My goal for my clients is for them to feel confident and in control of their financial destiny. For some, this may include a long-term care insurance plan. For others, a separate investment account may make sense.

4. Employer subsidy

If you've had coverage through an employer-sponsored plan—either yours or your spouse's—your health care costs in retirement can seem even higher. Research shows that when a worker retires, they lose an average of $6,440 in employer subsidies.³ If that's the case for you or your spouse, you might need to bridge that gap with other funding.

A Health Savings Account (HSA) may help. If you have an HSA, you can use the money you withdraw for medical expenses—or pay out of pocket from your retirement savings. The decision is yours.

5. Location

Where you live in retirement also affects your health care costs. Although traditional Medicare coverage costs the same everywhere, other expenses such as prescription coverage, supplemental plans, and private insurance can vary from state to state and even region to region within the same state.

6. Income in retirement

If you plan on working after enrolling in Medicare or earn substantial income from your retirement savings, the government may not subsidize as much of your health care costs—it depends on your total income. The income levels you'll need to exceed to trigger surcharges are high, however—$103,000 for individuals and $206,000 for married couples in 2024.⁴