<\/p>\n
Decades of Medicare payroll deductions create an expectation of full coverage in retirement. That assumption could prove more expensive than any other budget mistake made after 65.<\/p>\n
A 65-year-old retiring in 2026 can expect to spend $185,500 on healthcare throughout retirement, Fidelity Investments estimated in its 25th annual Retiree Health Care Cost Estimate. <\/p>\n
The figure assumes enrollment in Original Medicare (Parts A and B) and Part D, and covers premiums, deductibles, coinsurance and out-of-pocket prescription drug costs. It rose from the prior year’s estimate of $172,500. <\/p>\n
The 2026 increase is the largest jump in recent years and reflects rising medical prices, growing utilization, and higher costs tied to chronic conditions. <\/p>\n
Fidelity’s research found that 54% of pre-retirees believe Medicare will cover all of their healthcare costs.<\/p>\n
The Medicare program falls short of that, and for a married couple both retiring at 65, the combined lifetime cost would reach roughly $371,000, based on Fidelity’s estimate.<\/p>\n
Fidelity’s healthcare cost projection just posted its steepest annual jump<\/p>\n
Fidelity’s retirement healthcare estimate climbed by nearly 5% in 2024, about 4% in 2025, and 7.5% in 2026, the firm reported in a press release. <\/p>\n
Medical inflation outpaced general consumer price increases throughout that period, driving each annual revision higher.<\/p>\n
Fidelity’s cost breakdown shows Medicare cost-sharing provisions such as copayments, coinsurance and deductibles account for about 48% of the lifetime total. <\/p>\n
Premiums for Medicare Parts B and D represent 45%, while out-of-pocket costs for branded, generic and specialty drugs not covered by Part D make up the remaining 7%, Fidelity’s press release detailed.<\/p>\n
More Fidelity:<\/p>\n
Fidelity breaks down IRA rules that catch heirs off guard<\/p>\n
Fidelity says retirement health costs just hit a new high<\/p>\n
Fidelity warns Roth IRA conversions can backfire<\/p>\n
Long-term care, over-the-counter medications, and most dental services fall entirely outside the estimate. <\/p>\n
Fidelity’s methodology excludes those categories from its annual calculation, which means the actual lifetime cost could climb much higher for retirees who develop chronic conditions.<\/p>\n
Retirees and near-retirees who based their savings targets on an earlier version of this projection may already face a shortfall. <\/p>\n
A couple using the 2024 estimate faces a shortfall of roughly $41,000 relative to the current figure, a deficit that grows each year the acceleration continues, the firm showed.<\/p>\n
Medicare Part B premiums are absorbing retirees’ annual raises<\/p>\n
The Social Security Administration (SSA) set the 2026 cost-of-living adjustment (COLA) at 2.8%, adding roughly $56 per month for the average retiree. <\/p>\n
The standard Part B monthly premium jumped to $202.90 for 2026, a 9.7% increase from $185, the Centers for Medicare and Medicaid Services (CMS) confirmed in a Federal Register notice. <\/p>\n
That $17.90 premium hike absorbs nearly a third of the monthly raise before any other medical expenses arrive.<\/p>\n
Steve Feinschreiber, senior vice president of the Financial Solutions Group at Fidelity Investments, has cautioned in a Fidelity analysis that the mismatch will keep widening as retirees on fixed incomes lose ground each year premium hikes exceed their benefit adjustment.<\/p>\n
<strong>Health care is creating a 'retirement cost gap' for many pre-retirees … Many people assume Medicare will cover all your health care costs in retirement, but it doesn't, so you should carefully weigh all options<\/strong><\/p>\n
Higher-income enrollees face steeper costs through the Income-Related Monthly Adjustment Amount (IRMAA), which activates at $109,000 for single filers. <\/p>\n
The Part B premium can reach $689.90 monthly for individuals reporting modified adjusted gross income above $500,000, according to the Federal Register notice.<\/p>\n
IRMAA also stacks on top of taxes and RMDs on large retirement accounts, adding another layer of cost that standard projections often miss, Fidelity warned.<\/p>\n
Medicare Part B premiums rose 9.7% in 2026, absorbing nearly a third of the average retiree’s $56 monthly Social Security increase.<\/p>\n
Maskot \/ Getty Images<\/p>\n
Health savings accounts offer a hedge most savers miss<\/p>\n
The Health Savings Account (HSA) carries tax advantages no other retirement vehicle can match, Fidelity pointed out. Contributions go in tax-deductible, the balance grows tax-free, and withdrawals for qualified medical expenses owe no federal tax at all. <\/p>\n
After age 65, non-medical withdrawals lose the penalty and are taxed as ordinary income, making the account function like a traditional Individual Retirement Account (IRA).<\/p>\n
For 2026, the Internal Revenue Service (IRS) set HSA contribution limits at $4,400 for individuals and $8,750 for families. Workers aged 55 and older can add a $1,000 catch-up contribution on top of those limits. <\/p>\n
New eligibility rules also extend HSA access to Bronze and Catastrophic marketplace plan holders, the IRS confirmed.<\/p>\n
About 40% of Americans with HSAs have not yet invested the funds sitting in their accounts, leaving potential tax-free growth on the table that could offset rising retirement healthcare costs, Fidelity reported. <\/p>\n
Workers approaching retirement should treat the HSA as a long-term investment account rather than a spending tool for current medical bills, Feinschreiber recommended. <\/p>\n
Starting contributions even a few years before Medicare eligibility begins gives the balance more time to compound tax-free, Fidelity advised.<\/p>\n
What Fidelity’s $185,500 estimate means for your planning<\/p>\n
Fidelity recalculates this projection annually, and each new figure resets the savings target for anyone approaching retirement. <\/p>\n
Separating healthcare from general living costs in a retirement budget helps track whether medical reserves keep pace with the inflation rate behind this estimate, Feinschreiber recommended.<\/p>\n
Medicare’s Annual Enrollment Period runs from October 15 through December 7, giving Medicare Advantage and Part D enrollees an annual window to compare coverage before the next round of premium changes takes effect, Fidelity advised. <\/p>\n
A plan that worked last year may no longer offer the best value after the latest adjustments, the firm cautioned.<\/p>\n
Retirees already enrolled in Medicare should treat each annual premium and deductible change as a prompt to reassess their spending against Fidelity’s updated figure, the firm recommended. <\/p>\n
The projection is designed to inform every stage of retirement, not only the accumulation years before enrollment begins, Feinschreiber explained.<\/p>\n
Related: Fidelity flags overlooked traps in old 401(k) decisions<\/p>\n
#Fidelity #puts #stark #number #healthcare #retirement<\/p>\n","protected":false},"excerpt":{"rendered":"
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