Have you included your expected health care expenses in your retirement plan?

If your answer is no, you're not alone. Only 3 in 10 workers have tried to calculate how much they'll need to cover health care costs in retirement.*

A model we developed in partnership with Mercer Health shows your average health care costs, even with Medicare, could surpass $5,000 per year.** That said, it's important to note a couple of things: Costs vary substantially from person to person, but it's possible to estimate what they might be for you—and that lets you plan for them.

My clients nearing or in retirement find it invaluable to have this custom estimate built into their financial plans. Whether it's higher or lower than they expect, it gives them a sense of control to know what they might be spending on health care—and how those numbers might continue to change throughout retirement.

So what comprises the model that drives our personalized estimates? Our research shows many factors affect health care spending—these are the 6 most important.

1. Medicare choice

When it's time for you to enroll in Medicare (at age 65), it's important to review the available plans carefully and choose the one right for you based on your individual needs, not just the plan a friend or family member may have recommended. You'll reenroll each year around this time, so you'll be able to reevaluate your plan given any changes to your health or situation, and possibly choose a different option to address your evolving needs.

When you enroll, you'll need to make numerous decisions about your coverage, such as deciding between traditional Medicare and Medicare Advantage. If you choose traditional Medicare, you might need to add Medigap coverage—you can choose from many plans. Either way, you'll have to decide if you want added prescription coverage. And if your plan doesn't cover dental and vision, you'll need to determine whether you want to buy separate coverage.

Your costs will vary based on coverage, so you'll want to make sure not to pay for more coverage 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 our Retirement section.

Learn about Medicare from 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

The Medicare coverage you need and the costs you'll pay for it are largely determined by your health status. In fact, how healthy you are when you enter retirement (or your family's health history) largely determines how much you can expect to spend on health care.

3 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 one question, you should plan to spend more of your retirement income on health care. However, if you don't have chronic conditions (and have no family history), you've never smoked, and you don't go to the doctor often, you can probably plan to spend less than average.

Keep in mind 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

3. Retirement age

Some of my clients have a goal to retire early, so I work with them to make sure they're saving enough to cover their health care expenses during those gap years before they're eligible for Medicare at age 65. To know how much they should save, however, I need to know what their health care coverage plans are.

One possibility for coverage is to stay on your spouse's employer-sponsored plan, if your spouse is still working. You could also remain on your employer's plan through COBRA. Some employers may even offer continuing coverage as part of your retirement package.

If an employer-sponsored plan isn't a possibility, you can buy insurance through the federal marketplace, or purchase private insurance. All these options have their own requirements and their costs vary, so you'll want to do your research to see what makes sense for you.