According to Fidelity Investments’ 25th annual retiree healthcare cost estimate, a 65-year-old retiring in 2026 can expect to spend an average of $185,500 on medical expenses throughout retirement. This figure marks a 7.5% increase from the previous year, driven by rising healthcare prices, greater utilization of medical services, and growing costs associated with chronic conditions, according to the report data.
Retiree Healthcare Costs Rise 7.5% in Annual Fidelity Estimate
Financial planning for retirement requires looking beyond basic savings targets as retirement expenses evolve, according to Shams Talib, head of Fidelity Workplace Consulting. “Whether Americans fully stop working, phase into their retirement, or pursue new ways to stay engaged, healthcare consistently remains one of the largest expenses they will face,” Talib stated, noting that the benchmark helps individuals plan with greater confidence.
Fidelity has compiled the report annually since 2002 to serve as a long-term planning benchmark for potential healthcare costs despite standard Medicare coverage. The baseline estimate assumes enrollment in Original Medicare Parts A and B, along with Medicare Part D, covering premiums, copayments, and out-of-pocket costs for medical care and prescription drugs. The projection excludes potential long-term care expenses.
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Fidelity’s analysis indicates that about 45% of the total $185,500 retirement healthcare estimate goes toward monthly premiums for Medicare Part B and Part D. Another 48% covers medical expenses under Medicare cost-sharing provisions, including copayments, coinsurance, deductibles, and services not covered by Medicare such as vision and hearing exams. The remaining 7% stems from out-of-pocket costs for generic, branded, or specialty drugs not fully covered by Medicare Part D.
Managing Out-of-Pocket Expenses Beyond Medicare Coverage
Medicare serves as a critical component of retirement health coverage, but it does not eliminate every medical expense, according to 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,” Betts said.
Frequently Asked Questions
What does Fidelity’s $185,500 retiree healthcare estimate include?
The estimate assumes enrollment in Original Medicare Parts A and B, plus Medicare Part D. It covers premiums, copayments, out-of-pocket medical care, prescription drugs, and certain services not covered by Medicare like vision and hearing exams. It excludes long-term care expenses.
Why did the estimated retiree healthcare costs increase?
According to the report, the 7.5% increase is driven by rising healthcare prices, growth in the utilization of medical services, and increasing costs stemming from chronic conditions.
Does Medicare cover all healthcare expenses in retirement?
No. Medicare does not cover every expense. Retirees face out-of-pocket costs including deductibles, coinsurance, copayments, prescription drug expenses, and services such as routine vision and hearing care.
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