A 65-year-old retiring in 2026 can expect to spend $185,500 on healthcare during retirement, up 7.5% in just one year, according to Fidelity Investments.
For women, the math is worse.
Women are likely to spend up to 18% more on healthcare than men, largely because they live about five years longer. Yet they often enter retirement with less savings after lower lifetime earnings and time away from work for caregiving, according to Fidelity.
That double whammy makes planning critical, Fidelity experts said Thursday during a webinar on financing health care later in life.
"Women are more likely to face higher lifetime healthcare costs than men," said Michelle Howell, vice president and financial consultant at Fidelity. "Of course, that means more years of healthcare spending and longer retirement timeframes to fund."
The $185,500 estimate assumes roughly 20 years in retirement and works out to about $9,000 annually. But Americans dramatically underestimate the expense. They expect to spend only about $75,000, said Sarah Haflett, Fidelity vice president of health care thought leadership.
And the $185,500 tab does not include long-term care, she warned.
"In some years, that health inflation rate has outpaced the consumer price index by almost a two-to-one margin," Haflett said. Costs can also vary dramatically based on health and geography.
So how can advisors help clients prepare?
One powerful tools is the health savings account (HSA). Howell calls an HSA a "healthcare Roth IRA." Contributions are tax deductible, assets grow tax-deferred and withdrawals for qualified medical expenses are tax-free.
Rather than spending HSA balances on today's medical bills, clients who can afford to pay those expenses from other funds can invest their HSA and allow it to compound, Howell said.
It's never too late to start saving, they all agreed.
Fidelity calculated that someone maximizing HSA contributions from age 55 through 65, including catch-up contributions and assuming a 6% annual return, could accumulate about $75,000 in federal income tax-free money for healthcare by 65.
"There's no time left to save" is a myth, Haflett said.
For clients without access to an HSA, Howell said a Roth IRA may be the next-best alternative because qualified withdrawals can provide tax-free money for medical bills or other retirement expenses.
Advisors should also pay close attention to Medicare's income-related monthly adjustment amount, or IRMAA.
Higher-income retirees pay Medicare Part B and Part D surcharges based on taxable income from two years earlier. That makes decisions beginning around age 63 particularly important.
Interest, dividends, pensions, Social Security, IRA distributions, Roth conversions, capital gains and even retirement payouts can push clients over an IRMAA threshold.
But avoiding the surcharge isn't always the best strategy.
A large Roth conversion might trigger higher Medicare premiums today but reduce required distributions and lifetime taxes later.
"Sometimes long-term benefits of the strategy can outweigh the short-term pain" of IRMAA, Howell said.
Howell also offered a lesser-known IRMAA escape hatch.
When a retiree's income falls because of a qualifying life-changing event, the client can file Social Security's Form SSA-44 and request that Medicare recalculate premiums using current income rather than the older tax return.
"We find many retirees might be able to benefit from that reduction," Howell said.
Retirement timing itself can also save substantial money.
Howell encourages some couples to consider staggered retirement, allowing one spouse to continue working and carrying employer health insurance while the other retires.
She tells clients to think of private insurance before Medicare eligibility as a "healthcare mortgage payment."
The broader message for advisors is to treat healthcare as a major retirement liability rather than another line item.
"The costs are not fixed," Howell said. "The timing and the magnitude of the costs are unknown."
Facts Only
* A 65-year-old retiring in 2026 can expect to spend $185,500 on healthcare during retirement.
* This estimate is based on roughly 20 years in retirement and calculates to about $9,000 annually.
* Women are likely to spend up to 18% more on healthcare than men.
* Women often enter retirement with less savings due to lower lifetime earnings and caregiving time.
* The $185,500 estimate does not include long-term care costs.
* Healthcare inflation rates have sometimes outpaced the consumer price index by almost a two-to-one margin.
* Maximizing HSA contributions from age 55 through 65, assuming a 6% annual return, could accumulate about $75,000 in federal income tax-free money for healthcare by age 65.
* Medicare's Income-Related Monthly Adjustment Amount (IRMAA) causes higher-income retirees to pay Medicare Part B and D surcharges based on taxable income from two years prior.
* Retirement timing, such as staggered retirement or utilizing private insurance before Medicare eligibility, is suggested.
Executive Summary
Retirement healthcare spending is estimated at $185,500 for a 65-year-old retiring in 2026, equating to approximately $9,000 annually, though Americans significantly underestimate this cost, expecting only about $75,000. Women are projected to spend up to 18% more on healthcare than men, partly due to longer lifespans, yet often face lower retirement savings due to lower lifetime earnings and caregiving responsibilities. The data emphasizes the need for proactive financial planning regarding health costs, as inflation rates can outpace the consumer price index, and costs vary by geography and health status.
Advisors are encouraged to utilize tools like Health Savings Accounts (HSAs), which function as a tax-advantaged investment vehicle, and Roth IRAs as alternatives. Further considerations involve Medicare's Income-Related Monthly Adjustment Amount (IRMAA), which adjusts premiums based on income from two years prior, necessitating careful consideration of retirement income streams. Strategies like staggered retirement or considering private insurance before Medicare eligibility are presented as potential ways to mitigate healthcare liabilities.
Full Take
The narrative frames healthcare costs not as a fixed budget line item but as an uncertain liability, powerfully suggesting that the current financial planning assumptions are dangerously insufficient. The core tension lies between public underestimation of these costs and the complexity introduced by demographic differences (gender) and regulatory adjustments (IRMAA). The promotion of specific vehicles like the HSA serves both an educational function—showing a mechanism for tax-advantaged saving—and a prescriptive function—directing behavior toward a specific savings strategy.
The emphasis on avoiding IRMAA surcharges versus accepting short-term tax implications highlights a classic conflict between immediate financial comfort and long-term strategic maneuvering. The suggestion of staggering retirement or considering pre-Medicare insurance acts as an appeal for client agency against perceived inevitability. A critical implication is that the system structures planning around predictable savings mechanisms (like HSAs) while leaving complex regulatory navigation (like IRMAA) to individual interpretation, potentially obscuring systemic disadvantages faced by specific groups, such as women who face higher long-term costs but potentially lower accumulated resources.
The challenge for a reader is to move beyond the fear of an unknown future cost and recognize how financial structures are designed to guide behavior toward certain, rather than all, optimal outcomes. What assumptions about the stability of healthcare cost inflation and the effectiveness of tax-advantaged vehicles underpin these recommendations? How does framing uncertainty as a "liability" impact the perception of individual control over complex socio-economic variables?
Sentinel — Human
The article successfully blends statistical data with expert-driven financial strategy, resulting in a contextually rich analysis that appears grounded in real-world financial consultation.