How Much Will Healthcare Cost in Retirement? Fidelity's 2026 Estimate Explained

What the $185,500 Estimate Actually Includes

Fidelity's 25th annual Retiree Health Care Cost Estimate puts the average lifetime healthcare spending for a 65-year-old retiring in 2026 at $185,500. That figure is based on a single retiree enrolled in traditional Medicare, meaning Medicare Part A for hospital coverage, Medicare Part B for medical coverage, and Medicare Part D for prescription drugs.

The estimate breaks down into three buckets. About 48% comes from Medicare cost-sharing provisions: the deductibles, copays, and coinsurance you pay each time you use a covered service. Another 45% comes from monthly premiums for Parts B and D. The remaining 7% covers out-of-pocket drug costs not fully covered by Part D, including branded, generic, and specialty medications.

The estimate assumes beneficiaries pay base-level premiums, which is what most people pay before any income-based adjustments. Higher-income individuals subject to IRMAA surcharges will face additional costs on top of this figure. It also assumes retirees are enrolled in Original Medicare, not Medicare Advantage, so the cost structure will differ for those in Advantage plans.

Why Costs Jumped 7.5% in One Year

A 7.5% year-over-year increase is notably higher than recent years, according to Helen Lloyd-Williams, vice president of workplace consulting at Fidelity. Three factors are driving the jump: rising costs for chronic conditions, increased utilization of medical services, and general healthcare inflation.

Chronic conditions such as diabetes, heart disease, and COPD are becoming more prevalent per capita among Medicare beneficiaries. More diagnoses mean more doctor visits, more medications, and more procedures. At the same time, utilization of healthcare services has increased broadly as deferred care from earlier years gets addressed.

Prescription drug costs have actually moved in the other direction. The Medicare drug price negotiations implemented under the Inflation Reduction Act have brought some costs down slightly. However, those savings are more than offset by increases in other areas, leaving the overall estimate higher than it has been in recent years.

The Big Gap: Long-Term Care Is Not in the Number

Fidelity's estimate explicitly excludes long-term care costs. This is a significant omission. Someone turning 65 today has a nearly 70% chance of needing some form of long-term care services at some point, according to data from the Department of Health and Human Services.

Long-term care costs are rising faster than inflation and faster than most retirees' incomes. In 2024, median annual costs for six types of long-term services ranged from roughly $26,000 for adult day care (five days per week) to nearly $128,000 for a private room in a nursing home, according to Genworth's Cost of Care Survey. The median household income for someone 65 and older is around $60,000 per year, which means a single year in a nursing home could consume two full years of income.

Medicare does not cover long-term custodial care, which is the kind of help with daily activities like bathing, dressing, and eating that most people associate with nursing homes. Medicare's skilled nursing facility benefit covers up to 100 days per benefit period for medically necessary skilled care, but it is not a long-term care solution.

What Medicare Doesn't Cover (And Why It Matters)

More than half of pre-retirees (54%) incorrectly believe Medicare will cover all of their health expenses in retirement, according to Fidelity's research. This misconception is one of the most dangerous planning gaps in retirement preparation.

Original Medicare has no out-of-pocket maximum. There is no cap on how much you can spend in a given year on deductibles, copays, and coinsurance under Parts A and B. This is why many beneficiaries choose to add a Medicare Supplement (Medigap) plan to cap their exposure and make costs more predictable.

Medicare also does not cover routine dental, vision, or hearing care. It does not cover most prescription drugs without a separate Part D plan. And as noted above, it does not cover long-term custodial care. Each of these gaps represents a real out-of-pocket cost that contributes to the lifetime total Fidelity is measuring.

How to Plan for These Costs

Healthcare costs in retirement are not fixed. They vary based on your health, the plans you choose, and how much care you actually use. Someone who is healthy and rarely needs medical attention will spend far less than the average. Someone managing multiple chronic conditions may spend considerably more. The $185,500 figure is a planning benchmark, not a personal prediction.

The most effective tool for building a retirement healthcare fund is a health savings account (HSA). Contributions are made pre-tax, investment growth is tax-free, and withdrawals for qualified medical expenses are also tax-free, giving you a triple tax advantage that no other savings vehicle offers. HSA balances roll over from year to year, so you can accumulate funds during your working years specifically for retirement healthcare costs. To be eligible, you must be enrolled in a qualifying high-deductible health plan.

Beyond HSAs, the plan you choose at 65 has a lasting impact on your lifetime costs. Choosing the right supplemental coverage during your Medigap open enrollment window, which is the six months starting when you first enroll in Part B, gives you guaranteed access to any Medigap plan without medical underwriting. Missing that window can mean higher premiums or denial of coverage later.

For prescription drug costs specifically, the Part D changes in 2026 have introduced a $2,100 annual out-of-pocket cap, which provides meaningful protection against catastrophic drug costs. This is a significant improvement from prior years and should factor into how you evaluate Part D plan options.

💡 Eddie's Pro Tip

I always tell people that the $185,500 number is a wake-up call, not a sentence. The people who end up spending the least in retirement are the ones who made smart plan decisions at 65 when they had full options. If you are still in your Medigap open enrollment window, that is the most valuable window you will ever have. Once it closes, you may not be able to get the same coverage at the same price again.

Frequently Asked Questions

Next Steps

Fidelity's estimate is a useful planning anchor, but the number that matters most is your own. Your health history, your plan choices, and the coverage gaps you leave unaddressed will determine what you actually spend.

The best time to review your Medicare coverage is before you need it. If you're approaching 65, understanding your enrollment windows and comparing your plan options now can prevent costly mistakes later. If you're already enrolled, the Annual Enrollment Period each fall is your opportunity to reassess.

A licensed Medicare agent can help you compare plans based on your specific doctors, medications, and budget at no cost to you. The goal is not just to find the lowest premium, but to find the coverage that protects you most effectively over the long term.