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.