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Social Security, Medicare and health care in retirement

When you're planning your retirement budget, don't overlook health care expenses. Medicare doesn't cover everything.
5 minute read

Points to know

  • Think of health care expenses as part of your budget, just like housing or food.
  • Choose the Medicare options that reflect your needs.
  • If you choose Medicare Part B, premiums will be deducted from your Social Security payments if you're receiving them.

Medicare & you: Know your options

Medicare is the federal government's health insurance plan for anyone age 65 and older, certain younger people with disabilities, and people who qualify under the Special Needs Plan.

There's a common belief that Medicare covers all health care expenses. It doesn't. And the additional expenses can add up to a big number.

These expenses range from co-pays and deductibles to premiums for supplemental private insurance. Your cost depends on factors such as the Medicare choices you sign up for, your age, gender, health status, and income.

Social Security & Medicare

If you're planning to retire before age 65, remember that Social Security and Medicare are independent of each other.

You can claim your Social Security benefits at age 62, but you aren't eligible for Medicare until you're 65. If you have no insurance through an employer plan before then, you'll have to pay for private health insurance.

You're automatically enrolled in Medicare if you're 65 or older and you're receiving Social Security benefits.

If you're not receiving Social Security benefits and you're 65 or older, you have a 7-month window to sign up—3 months before you turn 65, your birthday month, and 3 months after your birthday.

When it starts

You're covered on the first day of the month you turn 65, unless your birthday is on the first day of the month. In that case, your coverage starts the first day of the previous month.

Did you know?

If you're working at age 65 (or older), have health insurance through your employer, and aren't taking Social Security benefits, you may still want to sign up for Medicare Part A. Most people don't pay premiums for Part A, and it may help pay for costs your group plan doesn't cover.

How Medicare works

You have 2 basic options:

Traditional Medicare. Parts A and B comprise the original program. You can supplement the traditional plan by adding Part D and a Medigap policy. You must have Parts A and B to get Part D.

Medicare Advantage. This private plan provides coverage from an insurance company contracted with Medicare. It includes Parts A and B, and most plans include prescription drugs.

Did you know?

Each year, you can review your Medicare plan options and make changes during open enrollment. This period usually starts in early October and ends in early December.

Be flexible about your health care coverage

Once you make a decision on Medicare, keep in mind that it's not set in stone.

Your health care needs will likely change over the years, so it's wise to review your coverage annually and adjust it when necessary.

While it's tempting to focus only on premium costs, that approach may not give you the coverage you need. Consider the quality of your coverage and care, and whether your doctor is in the network, if that's required.


The Social Security Administration (SSA) website provides estimates for how much you'll collect if you start receiving benefits at age 62, your full retirement age (FRA) (between 66 and 67), and age 70.

A Vanguard advisor can help

If you're struggling with making your best Social Security decision, we can help. You'll also get a custom financial plan, ongoing portfolio management, investment coaching, and real-time goal tracking—all at a low cost.

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