A woman and a man sit together at a table with a tablet and talk. (Photo Illustration by Juliane Sonntag/Photothek via Getty Images)
BOSTON - Americans retiring at age 65 in 2026 can expect to spend an average of $185,500 on health care and medical expenses throughout retirement, according to Fidelity Investments' 25th annual Retiree Health Care Cost Estimate.
By the numbers:
The estimate represents a 7.5% increase from last year and reflects broader trends driving up health care spending, including higher medical prices, increased use of health care services and rising costs associated with chronic conditions.
RELATED: These Social Security recipients will receive 2 payments in July
Despite the higher projected costs, Fidelity said Americans are feeling more optimistic about retirement overall. Company research found that 72% of respondents believe they will retire on their own terms, while nearly three-quarters said they have a plan in place to achieve their retirement goals.
According to Fidelity, the estimated $185,500 breaks down into:
- 45% for Medicare Parts B and D premiums.
- 48% for other medical expenses, including copayments, deductibles, coinsurance and services not covered by Medicare, such as many vision and hearing costs.
- 7% for out-of-pocket prescription drug expenses not covered by Medicare Part D.
What they're saying:
"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."
Big picture view:
Fidelity has published its annual health care cost estimate since 2002 as a planning benchmark for retirees. The estimate assumes an individual is enrolled in Original Medicare Parts A and B, along with Medicare Part D prescription drug coverage. It includes Medicare premiums, copayments, deductibles and other out-of-pocket medical and prescription drug costs throughout retirement, but does not include potential long-term care expenses.
RELATED: Disney reportedly lays off hundreds of employees, Pixar hit hard despite blockbuster success
Why you should care:
While 81% of pre-retirees recognize that retirement health care costs are high, more than half — 54% — incorrectly believe Medicare will cover all of their health care expenses. Meanwhile, 26% identified health care costs as one of their biggest retirement savings challenges.
What you can do:
Fidelity said planning ahead remains one of the most effective ways to prepare for rising health care expenses. The company highlighted health savings accounts, or HSAs, as a potential tool for eligible workers because they offer tax advantages on contributions, investment growth and withdrawals used for qualified medical expenses.
RELATED: Buc-ee's reveals managers can earn up to $275K without college degree
Unlike flexible spending accounts, HSA balances roll over from year to year and can be invested for long-term growth. However, Fidelity's research found that 40% of Americans with HSAs have not invested their account balances, potentially missing an opportunity to grow savings for future retirement health care expenses.
Fidelity said understanding potential medical costs — including Medicare premiums, dental and vision expenses, over-the-counter medications and long-term care — can help Americans build a more comprehensive retirement income strategy.
The Source: The information in this story comes from Fidelity Investments' 25th annual Retiree Health Care Cost Estimate, along with accompanying consumer research released by the company. This story was reported from Los Angeles.