Fidelity Says Most Americans Aren't Ready for This $185,500 Retirement Expense

While many Americans expect expenses to arise once they reach 65, many are looking for a stress-free retirement. It turns out that there is a hidden six-figure expense that catches many retirees off guard. And if you're not careful, it can be an expensive financial mistake and put you in a tough spot.

Here is the $185,500 retirement expense that most older Americans aren't ready for.

The real cost of retirement

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

This number is Fidelity's official estimate for a single 65-year-old retiring in 2026 with Original Medicare Parts A and B plus Part D, and no employer retiree coverage. The figure is up 7.5% from last year's $172,500.

Two people facing that same average are looking at $371,000. Fidelity did not publish a number for couples this year. That second figure is just $185,500 multiplied by 2.

Actual dollars needed can run higher or lower based on health, where you live, and how long you live.

The estimate excludes long-term care, most dental care, and over-the-counter costs. Things like the toothpaste, the Advil, and the dentist. So the real tab can run higher than $185,500 even if you never set foot in a nursing home.

Where that $185,500 actually goes during retirement

Fidelity splits the money into three buckets.

• 45% is Medicare Part B and Part D premiums, or roughly $83,500 of the lifetime total.
• 48% is other medical expenses, about $89,000: copays, coinsurance, deductibles, hospital and outpatient bills, plus excluded benefits like vision and hearing exams.
• 7% is out-of-pocket prescriptions, a little under $13,000 in leftover drug costs Part D does not pick up.

If you treat $185,500 like a nest egg and use a 4% first-year withdrawal, that is about $7,420 a year. That is one way to see the size of the bill next to Social Security. Premiums are the part you can see coming. The 48% shows up after a fall, a scan, or a hearing exam you assumed was covered.

Why Medicare still leaves retirees with a large bill

Medicare still costs money. In 2026, most people pay a $202.90 monthly Part B premium and a $283 Part B deductible. That premium alone is about $2,435 a year, before Part D, and before a single specialist visit. After the deductible, Part B usually leaves you with 20% coinsurance and no yearly cap unless you buy extra coverage.

Original Medicare also skips a lot of the services people actually use, and it does not cover long-term care. Most dental, routine eye exams, and hearing aids are on you. Steve Betts, head of Fidelity Health, said it this way: "Medicare is a critical part of retirement health coverage, but it does not eliminate every health care expense."

That is the big mistake that older Americans make: thinking that Medicare alone will cut it. 54% of pre-retirees still think Medicare will cover all of their health expenses.

How to prepare for this health care bill now

If that number makes you uneasy, you still have options. Start with the ones you can access while you are working.

Fund an HSA while you are still working

If your employer offers an HSA-eligible plan, fund the HSA. For 2026, the IRS cap is $4,400 for self-only coverage or $8,750 for family, plus $1,000 if you are 55 or older. Contributions can go in pretax, and growth sits untaxed, and qualified medical withdrawals come out tax-free. That's why Fidelity calls that the triple tax advantage.

After 65, the IRS lets you use the account for Medicare and other health coverage premiums, including Part B, Part D, and Medicare Advantage. So the HSA can pay the premiums inside Fidelity's 45% bucket. And once you enroll in Medicare, new HSA contributions stop. So, it's important to take advantage of it now while you're still working.

Put health care on the budget as its own line

Do not bury this under miscellaneous and hope the 401(k) covers the surprise. Write health care as its own retirement line, the same way you would write the mortgage or the property tax. Then you can see whether that 4% or $7,420 per year fits alongside the rest of the plan.

Compare Medigap and Medicare Advantage at 65

At enrollment, compare Original Medicare plus Medigap with Medicare Advantage. Medigap can pick up the 20% coinsurance. Advantage plans usually add a yearly out-of-pocket cap and cover extras Original Medicare skips, but you give up the open doctor list and cannot buy Medigap on top.

Plan long-term care as a separate cost

Medicare does not pay for custodial care. If you treat Fidelity's number as the whole health care story, the year someone needs help dressing or bathing is sitting outside the spreadsheet.

Costs vary by health, location, and coverage choices

A healthy 67-year-old in a cheap county is a different case from someone with three specialists and a specialty drug. The estimates also use Part B base premiums, so higher-income retirees who pay IRMAA sit above this line.

Use $185,500 as the starting point. Then rebuild the estimate as you get closer to 65, when you can see real premiums and real doctors.

Bottom line

Medicare covers a lot, but not everything, and the gap runs an average of $185,500 over the rest of retirement for a 65-year-old. Premiums are only 45% of that. The rest is copays, coinsurance, and care that Original Medicare skips entirely. Fund an HSA while you can, budget health care as a separate line item, and price long-term care separately. These are all components of a solid retirement plan that will save you from a headache later on.

One thing worth knowing if you retire after a high-earning year is that Medicare sets your premium using your tax return from two years prior. If retiring dropped your income, you can file Form SSA-44 and ask Social Security to use your current number instead. The last thing you want to deal with is having some of your highest-earning final years of work cost you when you enroll in Medicare.

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