Americans retiring in 2026 may need significantly more savings to cover healthcare, as a 65-year-old is expected to spend an average of $185,500 on medical expenses throughout retirement, according to Fidelity Investments’ 25th annual Retiree Health Care Cost Estimate released this week.

The estimate, up 7.5% from a year earlier, reflects rising healthcare prices, increased utilization of medical services and growing costs associated with chronic conditions.

The estimate is designed as a long-term planning benchmark for retirees enrolled in Original Medicare Parts A and B and Medicare Part D. It includes Medicare premiums, copayments, coinsurance, deductibles and out-of-pocket prescription drug costs, but does not include long-term care expenses.

Cost Breakdown

Fidelity said Medicare Parts B and D premiums account for about 45% of the projected healthcare costs, while other medical expenses, including deductibles, copayments, coinsurance and services not fully covered by Medicare, account for 48%. Out-of-pocket prescription drug expenses make up the remaining 7%.

The company also found that 54% of pre-retirees incorrectly believe Medicare will cover all of their healthcare expenses.

“Financial planning for retirement is about more than reaching a savings target, especially as retirement itself continues to evolve,” said Shams Talib, head of Fidelity Workplace Consulting.

“Whether Americans fully stop working, phase into their retirement, or pursue new ways to stay engaged, health care consistently remains one of the largest expenses they will face. Providing a benchmark to consider can help them plan with purpose and more confidence.”

Planning Ahead

“Medicare is a critical part of retirement health coverage, but it does not eliminate every health care expense,” said Steve Betts, head of Fidelity Health.

“This estimate helps illustrate why both pre-retirees and retirees alike will benefit from carefully considering out-of-pocket expenses and how they will pay for them as they build out their retirement income strategy.”

“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,” Helen Lloyd-Williams, vice president of workplace consulting at Fidelity, said, according to CNBC.

Ryan Viktorin, vice president and financial consultant at Fidelity, said eligible Americans should consider using a health savings account as part of their retirement planning because it offers tax advantages and can help cover future medical expenses, according to MarketWatch.

Bigger Picture

The report comes as healthcare affordability remains under pressure across the U.S. A June Mercer report projected employer health benefit costs will rise 6.7% in 2026, the largest annual increase in 15 years, with insurers expected to increase employer health plan costs for a fourth consecutive year. Separately, CDC data released in May showed about 28 million Americans remained uninsured in 2025 despite gains in private health insurance coverage.

Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.

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