The ability to handle lifetime medical expenses is the key to a financially sustainable retirement, according to new studies such as one by the Employee Benefits Research Institute. Yet, medical expenses also are the wild card in retirement finance, because they are the hardest expenses to estimate.

To handle the issue successfully, don’t fudge the numbers, guess, or ignore the issue. Have a systematic approach to planning for retirement medical expenses.

Start with the baseline expenses. If, like most retirees, you have no employer retirement medical benefits, you will sign up for Medicare and use that as your basic retirement medical expense coverage.

Start with the Part B premium, because for most people Part A (hospitalization) carries no premium. The standard Part B premium is $104.90 per month in 2014, or $1,258.80 annually. Higher income retirees pay higher premiums through the Medicare surtax. You can find details about the surtax at the Medicare web site.

Next are prescription drug costs. In most studies, prescriptions are the highest portion of retirement medical expenses. The best way to control these costs is through a Part D Prescription Drug policy. The average Part D policy carries around $650 in annual premiums in 2014. You can start with a lower-cost policy and upgrade to one with broader coverage later if you need it.

In addition to prescriptions, a lot of medical expenses aren’t covered by Part B. To control the uncertainty and risk of these expenses, take out a Medicare Supplement, or Medigap, policy. There are a range of policies available, with different types of coverages. We can’t cover the details here, but Plan F covers most of the Part B gaps, and the average annual premium for Plan F policies is about $2,000.

Add the premiums and your basic package of coverage in 2014 comes to about $4,000. Now, consider making some adjustments.

Higher-income taxpayers have to factor in higher premiums for both Medicare Part B and Part D coverage, due to the surtax.

Also, premiums for Part D and Medicare Supplement policies vary by insurer and also by region around the country. Don’t use the average national premium in your planning. Use premiums in the area in which you plan to live in retirement. You can find policy details and premiums on the Medicare web site at www.medicare.gov.

All the premiums cited above are for 2014. They are likely to increase each year, including the Medicare Part B premium. Most estimates for medical expense growth are 6% to 9% annually, though some people believe the recent changes in government policy will reduce that growth rate.

Of course, you can use a Medicare Advantage plan instead of the combination of Part B, Part D, and Medigap coverage. About 30% of Medicare beneficiaries now use these plans, and the percentage has been increasing the last few years. Check the cost of and coverage gaps in Medicare Advantage plans in the area in which you plan to retire and incorporate that in your planning.

Remember, most people have to sign up for Medicare and related policies at age 65, regardless of when they plan to retire, or they’ll pay higher premiums for life.

There still are medical expenses that aren’t covered by any of the above. Dental and vision care are the most frequently incurred noncovered expenses. Also, Part D drug coverage has copayments and deductibles that aren’t covered by anything else. Probably the best way to estimate these in your spending plan is to add a percentage of your total premiums. I think 20% to 30% is reasonable, because Medicare Part B has a 20% copayment requirement on many expenses.

The estimates above also are for an individual. Medicare doesn’t have family or joint coverage, so if you’re married these premium estimates have to be doubled to ensure both of you are covered.

That’s my recommendation for a baseline estimate of retirement medical expenses. Start with the premiums that will ensure you have as many retirement medical expenses as possible covered. Next, consider further adjustments.

Inflation is a major reason medical expenses are a wild card. For example, Fidelity’s annual estimate of retirement medical expenses used an inflation rate of 6% annually for years. But it after 2010 it started using lower rates.

Let’s say the average premiums of $4,000 annually apply to you and you’re married. You’ll pay $8,000 in premiums as a couple in 2014. If you expect retirement to last 30 years, that’s a total of $240,000 in premiums for the two of you.

That’s in 2014 dollars. At 5% annual premium inflation, the premiums will be almost $33,000 in year 30. But while medical expenses overall likely will increase at 5% or higher, insurance premiums aren’t likely to increase at that rate. A 3% annual inflation rate decreases the year 30 premiums to less than $19,000.

Some estimates of retirement medical expense spending differ from this baseline. Some use a lower inflation rate. Others assume less insurance coverage and lower lifetime premiums. Then, they use an estimate of total lifetime medical expenses for the average person that aren’t covered by Medicare Parts A and B.

Yet, almost no one will incur the average expenses. Some will be substantially higher and others substantially lower. So, if you use the average estimate in your planning but don’t have the insurance coverage, you take the risk that you’ll be in the half of people with above-average expenses and will have to pay them out of pocket.

Many people approach retirement with misunderstandings about retirement medical expenses. They assume Medicare pays for almost everything or that inflation is low. A recent study for Fidelity found that 48% of those aged 55-64 believed retirement medical expenses are likely to total only around $50,000.

I presented a process for you to develop a reasonable estimate of retirement medical spending so that it can be incorporated in your plan. Use it, and adapt it as you think appropriate for your situation. But remember it’s only an estimate. There’s more uncertainty about retirement medical spending than about any other retirement expense. Also, there are a lot of gray areas, so above all have flexibility in your plan.