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Planning for retirement

Retirement health care costs

Chances are you already know about the kinds of health care costs you'll face in retirement—they're not too different from your preretirement costs. So how much really changes when you hit age 65? We took a look at your health care cost breakdown.
7 minute read

Your ongoing expenses

3 different types of expenses for several different types of plans

Premiums

The amount you pay for coverage

Deductibles

What you cover before insurance kicks in

Coinsurance and copays

The part of the payment on each claim that you're responsible for

Traditional Medicare

Part A premiums are usually free, but there will be a brand-new deductible with each hospital stay. After the deductible, Part A will cover the first 60 days of a hospitalization; then coinsurance kicks in.

You'll also pay premiums for Part B, which covers office visits. And coinsurance is 20% once you meet your annual deductible.

Medicare Advantage

If you want Part C (instead of A+B), you'll pay premiums that may be more expensive but get coverage that's more extensive—possibly lowering your out-of-pocket costs.

Can be added to both types of Medicare

You'll also pay premiums, deductibles, and coinsurance for Part D (prescription coverage) if you elect it.

Coverage you can add to Medicare:

Supplemental insurance

If you choose Traditional Medicare (Parts A+B), you might buy an additional policy for extra coverage (also called "Medigap"). If so, you'll pay a separate premium for that.

Some Medigap plans have deductibles (but keep in mind that these plans offset other Medicare costs).

Costs vary widely depending on the plan you choose as well as your current health status, your location, and other factors.

Dental, vision, and hearing

Most of the time, Medicare doesn't cover these costs, so if you want insurance, you'll buy it separately. (Some Medicare Advantage plans do include coverage for these costs).

How it adds up

Medium risk: Individuals who generally have higher costs than nonsmokers free of chronic conditions but lower costs than high-risk individuals.

Example price tags (per year)*

High risk: Individuals who generally smoke, visit the doctor frequently, and/or have at least 2 serious chronic conditions.

Example price tags (per year)*

Source: Mercer-Vanguard health care cost model, 2018.


See more about what retirement health care will cost

Your unpredictable expenses

Only 52% of retirees ever need to pay for long-term care.†

But for those who do, it can get expensive, fast. Temporary care (for example, to recover from a surgery or an accident) falls under Medicare Part A, so it would be at least partially covered. But Medicare doesn't cover ongoing long-term care.

How it works

Long-term care includes anything from adult day care to residence at an assisted living facility to nursing care. Unless you have long-term care insurance, you'll likely pay these costs out of pocket. And even insurance will typically start paying only after a predetermined period of time—and then only pay up to certain limits.

If you exhaust all your financial resources, Medicaid may pay these types of costs.

How much does long-term care cost?†

Paid long-term care costs:

of retirees can expect to incur no long-term care costs

of retirees can expect up to $100,000

of retirees can expect $100,000–$250,000

of retirees can expect $250,000 or more

FIND OUT WHAT YOU MIGHT SPEND ON HEALTH CARE

When it comes to retirement planning, knowing the "average" only gets you so far. We can help! As part of our advice service, you'll receive a retirement plan that includes a personalized health care estimate for every year you're in retirement, taking into account your health status, coverage choices, retirement location, and more.

See how we can help

Where does retirement fit into your priorities?

See how to juggle multiple financial goals

 

Vanguard research

Get more from Vanguard. Call 1-800-962-5028 to speak with an investment professional.

Get more from Vanguard. Call 1-800-962-5028 to speak with an investment professional.

*Median cost in 2018 for a 65-year-old woman.

**Based on Supplemental Plan F.

†For people turning age 65 between 2015 and 2019. Source: Assistant Secretary for Planning and Evaluation (ASPE) Issue Brief, Long-Term Services and Supports for Older Americans: Risks and Financing, ASPE Research Brief, revised February 2016, Table 5.

For more information on the research behind Vanguard's health care cost estimator as well as the figures cited in this article, see