Retirement savings plans typically cover housing and travel, while providing a cushion for years of post-paycheck living. But unexpected costs can quickly put a strain on those savings.
Dave Ramsey, personal finance radio host and CEO of Ramsey Solutions, recently told Kiplinger that three mistakes cost Americans the most in long-term savings: carrying debt past age 65, retiring before they are financially ready, and leaning too heavily on Social Security.
Fidelity Investments sharpens Ramsey’s warning by putting a dollar figure on a retirement expense many households may underestimate: healthcare. Its 2026 retiree healthcare estimate puts projected lifetime healthcare spending for a 65-year-old at $185,500.
Also Read: Dave Ramsey sounds alarm on 401(k), IRA mistake to avoid
Debt can leave less room for healthcare in retirement
Debt that persists into retirement competes directly with healthcare spending for the same pool of savings, a trade-off Fidelity’s latest estimate makes harder to ignore.
Unlike during their working years, retirees generally have less opportunity to increase their income to absorb those payments.
Average outstanding debt for households aged 65 to 74 now sits at $45,000. For those 75 and older, balances climbed from under $5,000 in 1992 to $36,000 by 2022, a trend spanning three decades, AARP reported.
That debt can include mortgages, credit cards, auto loans, and other balances, leaving retirees with monthly payments that can eat into money otherwise available for living expenses and medical costs.
Craig Copeland, Director of Wealth Benefits Research at the Employee Benefit Research Institute, told Yahoo Finance that healthcare catches workers off guard.
<strong>In our report published this spring, the expense that stood out for retirees was healthcare. In fact, nearly 4 in 10 retirees said that these expenses were higher than they expected when they first retired</strong>.
Fidelity’s 2026 Retiree Health Care Cost Estimate pegs a 65-year-old’s projected lifetime medical spending at $185,500, a 7.5% jump from 2025.
The estimate covers Medicare premiums, cost-sharing, and prescription drugs, but excludes long-term care, dental, and vision expenses.
Fidelity survey reveals health insurance coverage gap most have not priced
The Fidelity survey of 2,015 adults found that roughly 54% of pre-retirees believe Medicare will cover all of their healthcare expenses in retirement.
The belief leaves millions of workers exposed to costs that compound over decades, as the gap between federal coverage and actual spending widens each year.
Medicare Parts B and D premiums account for 45% of the projected total, with cost-sharing provisions such as copays, coinsurance, and deductibles making up another 48% of the lifetime bill.
Prescription drugs make up the remaining 7%, with long-term care, dental, and vision expenses falling outside the projection.
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Health Savings Accounts (HSA) can help bridge part of the gap, but 40% of current holders have not invested their balances for growth, Fidelity reported.
Workers who leave those balances uninvested forfeit tax-free growth that could offset years of rising medical costs in retirement.
Fidelity’s analysis showed that workers depending on federal coverage alone face out-of-pocket costs that rise higher each year after turning 65.
The firm concluded that pre-retirees who have not priced those gaps into their savings targets risk carrying a widening shortfall into retirement.
Fidelity finds 54% of pre-retirees expect Medicare to cover all healthcare costs, leaving many unprepared for significant retirement medical expenses.Tinpixels / Getty Images
Couples face up to $637,000 in lifetime healthcare costs
The 2026 Milliman Retiree Health Cost Index projects that a healthy 65-year-old couple could spend up to $637,000 on lifetime healthcare under a Medigap pathway.
Couples choosing Medicare Advantage with a stand-alone Part D plan face a lower but still significant projected total of roughly $320,000. The gap between the two figures reflects differences in premium structures, cost-sharing, and coverage breadth across the two pathways.
Retirement timing sharply affects those projections, with the index showing that workers who leave at age 60 instead of 65 face 59% higher Medigap costs.
Under Medicare Advantage, that same five-year shift drives costs 91% higher, largely because early retirees must self-fund coverage before Medicare eligibility begins, Milliman actuaries reported.
Steve Betts, Head of Fidelity Health at Fidelity Investments, said that Medicare “does not eliminate every health care expense” for millions of American workers approaching retirement.
Betts urged pre-retirees to factor those costs directly into their savings targets before committing to a final retirement date.
Fidelity and Milliman projections point to widening retirement planning gap
Steve Feinschreiber, senior vice president of the Financial Solutions Group at Fidelity, said rising costs do not have to eat into a retiree’s standard of living.
Feinschreiber advised workers aged 50 and older to close savings shortfalls with catch-up contributions to a 401(k) or IRA.
Workers 55 and older can also make an additional $1,000 annual catch-up contribution to a Health Savings Account (HSA) to build a tax-advantaged cushion for retirement medical expenses.
Ramsey’s counter to the debt risk is to clear all outstanding balances before the last paycheck, Kiplinger reported.
The 2026 Trustees Report projects that payroll tax income would cover 78% of scheduled benefits after the trust funds are depleted. This underscores Ramsey’s third warning: Retirees should be cautious about building their budgets around receiving full Social Security benefits.
Related: Dave Ramsey warns American workers on 401(k)s, IRAs, Social Security