Fidelity puts 2026 retiree health costs at $185,500

A 65-year-old retiring in 2026 may need an average of $185,500 for health and medical costs over retirement, according to Fidelity Investments. For everyday investors, that number is a reminder that a retirement target is not only about replacing a paycheck, it also has to cover costs that Medicare does not fully absorb.

Fidelity said its latest estimate is 7.5% higher than the figure for people who retired last year. Helen Lloyd-Williams, vice president of workplace consulting at Fidelity, told CNBC the increase is larger than the firm has seen in the past few years.

The firm attributed the rise to higher health-care costs, more spending tied to chronic conditions and greater use of medical services. Lloyd-Williams said prescription drug costs have dipped slightly after new Medicare price negotiations took effect, but that relief has been outweighed by increases elsewhere.

What the Fidelity number includes

Fidelity’s estimate assumes a retiree has traditional Medicare, the federal health insurance program for older Americans. That includes Part A, which covers hospital insurance, Part B, which covers medical insurance, and Part D, which covers prescription drugs.

The estimate breaks the $185,500 into three broad buckets. Fidelity said 48% comes from Medicare cost-sharing, which means out-of-pocket charges such as copayments, coinsurance and deductibles. Another 45% comes from monthly premiums for Medicare Parts B and D. The remaining 7% reflects prescription drug copayments and other drug costs that Part D does not cover, including branded, generic and specialty medications.

Fidelity said many near-retirees may be underestimating the bill. In the firm’s research, 54% of pre-retirees incorrectly believed Medicare would pay for all of their health expenses.

“This is education for people who may not have thought about how they might need to pay for healthcare in retirement, that their Medicare isn’t automatically going to cover everything, and that Medicare isn’t entirely free,” Lloyd-Williams told CNBC.

The research comes as a record number of baby boomers are reaching the traditional retirement age, a demographic shift sometimes called “peak 65.” Fidelity’s report uses data from the Centers for Medicare and Medicaid Services, including future cost projections and current retiree spending data, according to Lloyd-Williams. It also assumes beneficiaries pay base-level Medicare premiums, before income-based surcharges that typically apply to higher-income individuals.

Long-term care is outside the estimate

The $185,500 figure does not include long-term care, a category that can change the retirement math sharply. Long-term care includes services such as nursing home care and home care for people who need help with daily activities.

A person turning 65 has a nearly 70% chance of needing some form of long-term care services, according to 2020 data from the Department of Health and Human Services. The AARP Public Policy Institute recently reported that long-term care costs, including nursing home and home care, are rising faster than inflation and older adults’ incomes.

Genworth and CareScout data showed that in 2024, median annual private-pay costs for six types of long-term services ranged from $26,000 for adult day care five days a week to nearly $128,000 for a private nursing home room. AARP said the median annual income for a household led by someone 65 or older was about $60,000, including Social Security and other retirement income.

Planning for a variable bill

Health costs vary widely by person. Carolyn McClanahan, a physician and certified financial planner who founded Life Planning Partners in Jacksonville, Florida, told CNBC that people who rarely need care will face different costs than those who regularly use medical services.

Fidelity said earlier saving gives households more room to plan. Financial advisors cited by CNBC said health savings accounts can help eligible savers because contributions are pretax, qualified withdrawals are tax-free and investment gains are not taxed. To use an HSA, a person must be enrolled in a qualified high-deductible health plan.

McClanahan also told CNBC retirees should ask whether a test or prescription is necessary, noting that the fee-for-service health system pays providers for doing more. That kind of scrutiny may help retirees better understand which costs are unavoidable and which deserve a closer look.

This story draws on original reporting from CNBC.