Retirees face $185,000 healthcare bill as Medicare gaps widen

A 65-year-old retiring in 2026 can expect to spend $185,000 on healthcare in retirement, a 130 percent increase since 2002 that Medicare's coverage gaps leave most retirees unprepared to absorb, according to Fidelity Investments.

"Health care is the most unpredictable expense because Medicare doesn't cover everything," Tyler End, a certified financial planner, told AARP. "Out-of-pocket costs, deductibles, prescription drugs and the potential need for long-term care add up."

The Fidelity estimate excludes long-term care, which can run $6,000 to $11,000 a month depending on the level of care, according to CareScout. Medicare Part A, which covers inpatient hospital stays, carries a $1,736 deductible per benefit period in 2026, per the Centers for Medicare & Medicaid Services, while a single day in a U.S. hospital averaged $3,297 in 2024, according to KFF. Original Medicare also excludes routine dental, vision and hearing care, and covers only the first 20 days of a skilled-nursing stay in full, with partial coverage up to 100 days.

The exposure grows with age. CDC data shows 26.1 percent of Americans 85 and older had at least one hospital stay in 2019, versus 16.9 percent of those 65 to 74. For a couple retiring together, the combined bill can approach $370,000, and the odds of a large, unplanned expense climb with each decade of life.

Why Medicare leaves a gap

Medicare Part B premiums are tied to modified adjusted gross income, so higher earners pay income-related surcharges on top of the standard monthly premium. Beneficiaries also face coinsurance — typically 20 percent of the Medicare-approved amount for most Part B services — that carries no annual cap under Original Medicare. Financial adviser Suze Orman has urged retirees on Original Medicare to carry a Medigap policy to cover that 20 percent share, though such supplement plans come with premiums of their own.

Enrollment timing carries its own cost. Retirees who delay Part B without qualifying employer coverage face a 10 percent premium penalty for each full year they were eligible but did not enroll, a surcharge that persists for life. Those still working past 65 with employer insurance can delay Part B without penalty and sign up during a special enrollment period after leaving the job. Chris Dixon, co-founder of Oxford Advisory Group in Orlando, Florida, who specializes in tax-efficient planning for retirees, calls the late-enrollment penalty "a devastating and unnecessary expense that will follow you throughout your retirement."

Closing the gap before the bills arrive

For workers still years from 65, a health savings account offers the most tax-efficient vehicle: contributions are deductible, growth is tax-free and withdrawals for qualified medical expenses are untaxed, with unused balances rolling over year to year. HSAs require enrollment in a high-deductible health plan, and funds can be invested and drawn down in retirement to cover premiums, deductibles and services Medicare does not pay for.

Long-term care insurance, purchased while still healthy, can shield a nest egg from costs that exceed $100,000 a year in some states, according to Fidelity. Hybrid policies that combine life insurance with long-term care benefits offer an alternative for those who want coverage they can draw on even if they never need custodial care.

The planning window matters more than the dollar figure. A worker who opens an HSA in their 40s and contributes the family maximum each year can build a six-figure medical reserve by 65, while someone who waits until Medicare age has far fewer levers to pull. The figures cited here reflect Fidelity's latest estimate and 2026 Medicare parameters; premiums, deductibles and penalty rules change annually, so retirees should verify current amounts against official announcements from CMS before making enrollment or coverage decisions.

This article is for informational purposes only and does not constitute investment advice.