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Americans retiring this year may need to devote a much larger portion of their savings to health care than they expected.

A 65-year-old retiring in 2026 can expect to spend an average of $185,500 on health care and medical expenses over the course of retirement, according to Fidelity Investments’ 25th annual Retiree Health Care Cost Estimate.

That is an increase of 7.5% from Fidelity’s 2025 estimate of $172,500. The company attributed the increase to rising prices for medical care, greater use of health services, and the growing expense of managing chronic health conditions.

The latest estimate is more than twice the $80,000 that Fidelity projected when it began issuing the annual calculation in 2002.

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What the estimate includes

Fidelity’s figure applies to an individual retiring at age 65 in 2026. It assumes that the retiree does not have employer-provided retiree health coverage and is enrolled in traditional Medicare.

The estimate includes Medicare Part B and Part D premiums, along with deductibles, copayments, coinsurance, and out-of-pocket prescription drug expenses. Medicare Part A covers inpatient hospital care, while Part B generally covers doctor visits and outpatient services. Part D provides prescription drug coverage.

However, Medicare does not pay every medical bill. Fidelity research cited in reports on the estimate found that 54% of people approaching retirement mistakenly believe Medicare will cover all their health expenses.

The $185,500 figure also does not include long-term care, such as an extended stay in a nursing home, assisted living, or ongoing help with daily activities at home. Those services can add tens or even hundreds of thousands of dollars to a retiree’s lifetime expenses.

Actual costs will vary depending on a person’s health, lifespan, location, and insurance choices. People enrolled in Medicare Advantage plans may face a different combination of premiums and out-of-pocket expenses than those with traditional Medicare.

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Planning ahead can help

The increase comes even as Fidelity’s broader research suggests Americans are feeling more optimistic about retirement. In its 2026 State of Retirement Planning Study, 72% said they expected to retire on their own terms, while 74% said they had a plan for reaching their retirement goals.

Fidelity says medical expenses should be treated as a separate and significant part of that plan rather than assumed to be covered by Medicare or an ordinary household budget.

Workers who are eligible for a health savings account, or HSA, may be able to use it to prepare. Contributions can be tax-deductible, the money can grow tax-free, and withdrawals for qualified medical expenses are generally not taxed.

HSA contributions must stop after a person enrolls in Medicare, but money already accumulated in the account remains available. It can be used for many qualified expenses in retirement, including certain Medicare premiums and out-of-pocket medical costs.

People nearing retirement may also want to compare traditional Medicare, Medicare Advantage, Part D, and supplemental Medigap coverage carefully. Premiums are only part of the calculation; deductibles, provider networks, prescription coverage, and annual out-of-pocket limits can make a major difference.

The new estimate does not mean every retiree needs to have $185,500 sitting in a separate account on the day retirement begins. The expenses generally occur over many years. But Fidelity says including them in a long-term financial plan can reduce the risk that medical bills will consume money intended for housing, food, and other retirement needs.