New research from Fidelity Investments shows a 65-year-old retiring in 2026 will need approximately $185,500 to cover healthcare expenses in retirement, a 7.5% increase from last year and the largest annual jump in more than a decade.
The findings highlight how rising medical costs are becoming one of the fastest-growing financial pressures facing retirees, even those enrolled in Medicare.
Fidelity says most of those ready to retire are already planning for the higher cost.
Inside the report, 81% understand health care costs in retirement to be high, and 26% identify health care costs as a top retirement savings challenge.
But health insurance analyst Mike Smith, who is president-emeritus for The Brokerage Inc, says the biggest retirement risk facing Americans isn’t running out of money but underestimating the cost of healthcare.
“Too many Americans still assume Medicare will cover most of their healthcare costs when, in reality, retirees remain responsible for premiums, deductibles, copays, prescription drugs and many other out-of-pocket expenses. Long-term care, one of the largest potential retirement expenses, isn’t covered by Medicare at all,” says Smith.
Here is the cost breakdown from Fidelity.
Medicare Parts B and D premiums (45%): Monthly expenses associated with Medicare Parts B and D premiums.
Other medical expenses (48%): Medicare cost-sharing provisions such as co-payments, coinsurance, and deductibles for things like hospital visits and outpatient services, as well as excluded benefits like vision and hearing exams.
Out-of-pocket prescription drug expenses (7%): Co-payments and amounts not covered by Medicare Part D that individuals pay out-of-pocket for generic, branded, or specialty drugs.
The company’s own research showed 54% of pre-retirees incorrectly believe Medicare will cover all their health expenses.
“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.
