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Fidelity Investments now estimates that a 65-year-old retiring in 2026 will spend an average of $185,500 on healthcare and medical expenses during retirement. The figure, released in Fidelity’s 25th annual Retiree Health Care Cost Estimate, represents a 7.5% increase from last year’s projection, reflecting rising healthcare prices, greater use of medical services, and higher costs linked to chronic conditions. This jump surprised many retirees and highlights the mounting challenge of affording medical care later in life.
The estimate assumes retirees are enrolled in Original Medicare Parts A and B, which cover hospital and outpatient services, and Medicare Part D for prescription drugs. According to Fidelity’s report, about 48% of the projected costs come from Medicare cost-sharing like co-payments and deductibles, 45% from monthly premiums for Medicare Parts B and D, and 7% from out-of-pocket prescription drug costs not fully covered by Medicare.
Notably, the estimate does not include long-term care, such as nursing home or home health aide services. Data from the Department of Health and Human Services shows that nearly 70% of Americans turning 65 will need some kind of long-term care, and these expenses are rising even faster than general healthcare costs. In 2024, the annual cost for long-term services ranged from $26,000 for adult day care to nearly $128,000 for a private nursing home room.
Despite the hefty price tag, many Americans underestimate their future medical costs. Fidelity found that more than half of pre-retirees (54%) wrongly believe Medicare will cover all their healthcare expenses. Experts stress that understanding these costs is essential for retirement planning. “This is education for people who may not have thought about how they might need to pay for healthcare in retirement, that their Medicare isn’t automatically going to cover everything, and that Medicare isn’t entirely free,” said Helen Lloyd-Williams, vice president of workplace consulting at Fidelity.
To help cover these growing costs, financial advisors recommend starting to save early and considering options like health savings accounts (HSAs). HSAs offer a triple tax advantage—contributions are tax-deductible, investment growth is tax-free, and withdrawals for qualified medical expenses are also tax-free. However, savers must be enrolled in a high-deductible health plan to qualify for an HSA.
In summary, Fidelity’s latest estimate serves as a stark reminder that healthcare will likely remain one of the largest—and fastest-growing—expenses for retirees. Americans are encouraged to factor these costs into their savings and retirement plans as early as possible.