6 factors affecting your retirement health care costs

1. Medicare choice

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

When you enroll, you’ll need to make numerous decisions about your coverage, such as choosing between traditional Medicare and Medicare Advantage. If you select traditional Medicare, you might need to add Medigap coverage—choosing from a list of policies. You’ll also have to decide if you want added prescription coverage, as well as dental and vision coverage if your plan doesn’t cover them.

Costs vary based on coverage, so you’ll want to be sure not to pay for more than you need. But you also don’t want to pick a plan based solely on cost and end up with inadequate coverage. When considering your options, think about whether you’d prefer to pay higher premiums (and/or additional premiums for extra policies) to increase the predictability of your out-of-pocket costs.

Choosing a Medicare plan can be complicated, but we can help. You can find out more in the Retirement section of our website:

Learn about Medicare Parts A to D

If you’d like help narrowing your choices based on your needs, you can use our Medicare Match tool, which is available to Vanguard Personal Advisor clients.

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 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. However, if you have no chronic conditions, have never smoked, don’t go to the doctor often, and have no major health issues in your family’s history, you can probably plan to spend less than the average person.

Keep in mind, however, that a higher health risk can also increase the likelihood you’ll need long-term care. Almost half of 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.

Learn about long-term care

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.† If that’s the case for you or your spouse, you might need to bridge that gap with other funding.

6. Income in retirement

If you plan on working after enrolling in Medicare or you 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—currently $91,000 for an individual and $182,000 for a married couple.