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A 65-year-old retiring in 2026 can expect to spend an average of $185,500 on healthcare and medical expenses throughout retirement, according to Fidelity Investments. That figure is up 7.5% from a year ago amid rising prices for care, people using more healthcare services as they age, and growing costs tied to managing chronic conditions.
The estimate assumes the retiree is enrolled in traditional Medicare Part A and Part B, which covers most hospital care and doctor visits, as well as Part D, which covers prescription drugs. The estimate includes Medicare premiums, out-of-pocket prescription-drug costs and other medical expenses such as copayments, coinsurance and deductibles for doctor and hospital visits.
Fidelity’s retiree healthcare tally is calculated annually to help drive awareness around one of the largest expenses Americans may face in retirement, and to help them make more informed decisions about saving and planning for the future. The rate of increase for this year’s forecast was 7.5%, which outpaced last year’s 4% rise.
Qualifying for social security is a major milestone on the road to retirement. But if you aren’t strategic about your planning, you may end up stopping work too soon. Here’s how to decide the right time to retire.“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, healthcare consistently remains one of the largest expenses they will face,” Talib said. “Providing a benchmark to consider can help them plan with purpose and more confidence.”
The annual healthcare tally comes as more than 11,000 Americans are turning 65 each day through 2027. People also are living longer and may have retirements that last decades. Meanwhile, healthcare costs continue to outpace inflation.
Those with Medicare — the federal health insurance for people age 65 and older — should still plan for hefty healthcare expenses over time. Yet 54% of preretirees incorrectly believe Medicare will cover all of their health expenses, according to Fidelity.
“Medicare is a critical part of retirement health coverage, but it does not eliminate every healthcare expense,” said Steve Betts, head of Fidelity Health. “This estimate helps illustrate why both preretirees 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.”
Fidelity’s forecast does not include long-term-care expenses, such as home healthcare support, assisted living or extended nursing-home stays. The firm said there are too many factors that vary considerably from individual to individual — such as current health, family history and where they live — to provide an accurate estimate for long-term care.
Long-term care comes with its own daunting price tag: A nonmedical caregiver in the home costs more than $80,000 a year, assuming 44 hours of care a week, while the median cost of assisted living is $74,400 a year, according to CareScout. The national median rate for a private room at a nursing home tops $129,000 a year.
A total of 70% of adults who survive to age 65 develop severe “long-term services and support” care needs before they die, and 48% receive some paid care over their lifetime, according to the U.S. Department of Health and Human Services. Long-term services and support include medical and personal-care services like medication management and help with bathing, dressing, eating, walking and toileting.
The Fidelity healthcare forecast assumes that a retiree is enrolled in traditional Medicare. However, more than half of Medicare beneficiaries are enrolled in Medicare Advantage plans, which are private-insurance alternatives to the government program.
While the overall price tag of healthcare in retirement may seem daunting, the costs will likely be spread out over decades, noted Ryan Viktorin, a vice president and financial consultant with Fidelity.
As part of a retirement plan, Viktorin said those eligible for a health savings account, or HSA, should consider one as another tool to help save. An HSA is a tax-advantaged savings account that is only available to those with a high-deductible health-insurance plan. The funds in an HSA are portable — meaning they stay with you no matter where you work — and can be used to pay for qualified medical expenses.
A total of 25% of Americans are contributing to an HSA as a way to help cover healthcare costs in retirement, according to Fidelity.
With HSAs, contributions can be made pretax, withdrawals for qualified medical expenses can be made tax-free, and any potential investment growth is tax-free as well. HSA balances also are rolled over annually, giving savers the ability to use funds for qualified medical expenses today or save them for future healthcare costs in retirement.
While HSA balances can be invested, 40% of Americans don’t invest those funds, leaving the potential for growth on the table, Fidelity said.
