What is the $185,000 figure, and where does it come from?
A 65-year-old retiring in 2026 can expect to spend an average of $185,500 on health and medical expenses over the course of their retirement, according to new estimates from Fidelity Investments. That figure covers Medicare premiums, copayments, and other out-of-pocket costs for medical care and prescription drugs — assuming the retiree is enrolled in Medicare Parts A, B, and D.
The number represents a 7.5 percent increase from Fidelity’s estimate of $172,500 just one year ago, and it is more than double the firm’s inaugural projection from 2002. This year’s jump is nearly twice the size of the increase recorded between 2024 and 2025, signaling that healthcare inflation for retirees is accelerating, not stabilizing.
Fidelity attributes the surge to three compounding forces: rising prices for care, increased utilization of health services, and growing costs tied to chronic conditions. These are structural pressures, not anomalies — and they are hitting retirees at a moment when the system is least prepared to absorb them.
Why is this happening now?
The United States is in the middle of a major demographic shift. Roughly 4 million Americans turn 65 every year through 2027, flooding Medicare with new beneficiaries at the same time that the cost of delivering care continues to climb. More people drawing on the system, combined with an aging population managing more chronic illness, creates a fiscal pressure cooker.
The timing matters politically, too. Congress has repeatedly failed to address the structural underfunding of Medicare, and recent research from the Center for Retirement Research at Boston College warns that declining Medicare reimbursements for hospital and physician services are already threatening beneficiaries’ ability to access care. When providers are paid less, fewer of them accept Medicare patients — and the gap between what the program promises and what it delivers widens.
What does Medicare actually cover?
This is where a dangerous misconception does real harm. More than half of pre-retirees — 54 percent — incorrectly believe that Medicare will cover all of their healthcare expenses, according to Fidelity’s own research. It will not.
Medicare leaves significant gaps: dental, vision, and hearing care are largely excluded from standard coverage. Copayments, deductibles, and cost-sharing add up over time. “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.
The $185,500 estimate, large as it is, does not even account for long-term care costs — a category that catches many retirees entirely off guard.
What about long-term care — the cost nobody talks about?
Long-term care is the financial wildcard that the $185,500 figure leaves out entirely. A recent federal analysis prepared for the Department of Health and Human Services found that 56 percent of people turning 65 between 2021 and 2025 will need some form of long-term care during their lifetime. That is a majority — not a fringe risk.
Consulting firm Milliman estimates that 65-year-olds should set aside an additional $135,000 to cover future paid long-term care costs. Stack that on top of Fidelity’s $185,500, and a retiree is looking at over $320,000 in healthcare-related expenses — not counting housing, food, or other living costs.
The price of facility-based care gives those numbers concrete weight:
How does this affect people who haven’t retired yet?
The pressure is already reshaping decisions workers make long before they reach 65. Nearly 1 in 4 U.S. workers — approximately 23 million adults — say they are staying in jobs they want to leave because they fear losing employer-sponsored health insurance, according to a study from the West Health-Gallup Center on Healthcare in America. This is not a personal failing; it is a rational response to a system that ties healthcare access to employment.
That dynamic has a name: job lock. It suppresses worker mobility, depresses wages, and forces people to delay retirement not because they want to, but because the alternative — navigating the private insurance market or bridging the gap to Medicare — is financially prohibitive. A stronger public healthcare infrastructure would dissolve that trap entirely.
How much of a retiree’s income does healthcare actually consume?
The share is substantial and growing. Healthcare bills absorb roughly one-third of a typical retiree’s Social Security income and close to a quarter of their total income, according to the Center for Retirement at Boston College. Fidelity estimates that approximately 15 percent of the average retiree’s annual expenses will be health-related.
For retirees who depend heavily on Social Security — which describes the majority of American seniors — these numbers leave very little margin. Social Security was never designed to be a complete retirement income, yet for tens of millions of Americans it functions as exactly that, while healthcare costs continue to outpace both inflation and benefit adjustments.
What does this mean for retirement planning?
The combined weight of these estimates makes one thing clear: planning for retirement means planning for healthcare costs as a central line item, not an afterthought. The gap between what people expect Medicare to cover and what it actually covers is not a minor misunderstanding — it is a financial vulnerability that can derail decades of savings.
Policymakers have a role here that the market cannot fill on its own. Expanding Medicare’s scope, strengthening long-term care supports, and decoupling health insurance from employment are not abstract progressive talking points — they are concrete responses to a documented and worsening crisis. The $185,500 figure is a symptom. The system producing it is the problem.