As retirement approaches for many Americans nearing age 65, there’s an expectation that Medicare will serve as the primary source of coverage for their healthcare expenses.
Fidelity Investments published new research showing that the majority of pre-retirees underestimate what Medicare covers, a gap the firm says can leave them exposed to high out-of-pocket costs in retirement.
A 65-year-old retiring in 2026 can expect to spend an average of $185,500 on healthcare and medical expenses throughout retirement, Fidelity reported.
That number jumped 7.5% from the prior year’s estimate of $172,500, and the annual increase rate is itself speeding up year over year.
For a married couple retiring at the same age, the combined lifetime projection reaches $371,000 in total out-of-pocket healthcare costs, the firm noted.
Fidelity’s healthcare estimate reaches its highest level in 25 years of tracking
Fidelity’s projection has gained speed over the last three years, climbing roughly 4% in 2024, 5% in 2025, and 7.5% this year, Bloomberg reported.
When Fidelity first published this annual benchmark in 2002, the estimated lifetime healthcare cost for a 65-year-old retiree stood at $80,000.
The figure has now more than doubled over roughly two decades, tracking a healthcare inflation rate that consistently outpaces the broader consumer price index.
“It definitely is a higher increase than we’ve had in the past few years,” Helen Lloyd-Williams, Vice president of workplace consulting at Fidelity, told CNBC.
Fidelity’s estimate assumes enrollment in Original Medicare, covering Part A hospital insurance and Part B medical coverage, alongside Part D prescription drug coverage.
The projection includes premiums, copayments, coinsurance, deductibles, and out-of-pocket drug expenses, but it does not include potential long-term care costs.
Those long-term care expenses can become surprisingly high and would push total retirement medical costs significantly higher for many retirees and their families.
A private room in a nursing home carried a median annual cost of $129,575 in 2025, according to CareScout, a wholly owned subsidiary of Genworth Financial.
More than half of pre-retirees misunderstand what Medicare will cover
One of the most striking findings in Fidelity’s research is the disconnect between what people expect Medicare to pay and what the program will cover.
About 54% of pre-retirees incorrectly assume the federal program will cover all of their healthcare expenses once they leave the workforce, CNBC reported.
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