Retirement plans often account for rising grocery prices and higher home insurance premiums, but another expense category may be growing faster than many Americans anticipate.
Health care costs have been rising faster than general consumer prices, and projections from Fidelity Investments suggest the gap is widening, not slowing.
The firm released its 25th annual Retiree Health Care Cost Estimate in July 2026, with 2026 projections showing a sharp increase over the previous year.
Findings from Mercer and HealthView Services point to similar pressures, suggesting that rising medical expenses are becoming an increasingly difficult challenge for both employers and retirees.
Also Read: Fidelity puts a stark number on healthcare in retirement
Fidelity’s retiree cost estimate jumps 7.5%
Medical care costs rose 3.3% over the 12 months ending September 2025 while overall inflation came in at 3.0%, the Bureau of Labor Statistics reported.
That faster pace is reflected in Fidelity’s numbers, which put a 65-year-old retiring in 2026 at $185,500 in lifetime health care costs.
For a couple, the projection reaches $371,000, a 7.5% jump from last year’s $345,000 estimate and one of the sharpest annual increases since Fidelity began tracking the figure in 2002, the firm reported.
Steve Betts, Head of Fidelity Health at Fidelity Investments, stressed that standard Medicare enrollment still leaves retirees covering a substantial share of their medical bills throughout retirement.
<strong>Medicare is a critical part of retirement health coverage, but it does not eliminate every healthcare expense,</strong>
The estimate excludes long-term care, which means the true lifetime figure for retirees who need extended assistance runs higher still.
Employers brace for the biggest health benefits increase in 15 years
The cost acceleration extends beyond retirees, as employer-sponsored health plans are absorbing the steepest annual increase in more than a decade and a half.
Total health benefit cost is projected to rise 6.7% on average in 2026, Mercer’s final 2025 National Survey of Employer-Sponsored Health Plans found, extending the sharpest trajectory the firm has tracked in 15 years.
That projection already reflects cost-reduction strategies, and without those measures, the projected increase would have was 9.2%, Mercer’s preliminary survey of more than 1,700 employers found.
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Fidelity puts a stark number on healthcare in retirement
The year 2026 marks the fourth straight year of acceleration, following a decade of moderate cost growth averaging roughly 3%. In response, 59% of employers said they will make cost-cutting changes to their health plans this year, up from 48% in 2025.
Coverage averaged $17,496 in 2025 and is projected to exceed $18,500 this year, with workers absorbing an additional 6%-7% in premium contributions.
Employer health benefit costs are projected to hit a 15-year high in 2026, putting additional pressure on companies and workers through rising premiums.izusek / Getty Images
Medicare premiums eat into the 2026 Social Security increase
For retirees enrolled in Medicare, the mismatch between medical cost growth and income growth is compounding with each passing year.
The standard monthly Part B premium rose from $185 to $202.90 in 2026, according to the Centers for Medicare & Medicaid Services (CMS), a 9.7% increase that far exceeded the 2.8% Social Security COLA.
A substantial portion of the 2026 benefit increase was consumed by higher Medicare charges before retirees could spend it on anything else.
The annual Part B deductible climbed from $257 to $283, and the Part D drug deductible rose from $590 to $615 over the same period, CMS showed.
HealthView Services’ 2026 Retirement Healthcare Costs Data Report projects long-term health care inflation at 5.8% annually, compared with projected Social Security COLAs of approximately 2.4%.
A healthy 65-year-old couple choosing common traditional Medicare options can expect annual costs starting at $17,003 in their first year of retirement. Those expenses are projected to more than triple over the following two decades of retirement, reaching $55,513 by age 85.
Most pre-retirees overestimate what Medicare will cover
The cost pressure is compounded by a widespread misunderstanding of Medicare’s scope, leaving many workers underprepared for what they will owe out of pocket.
Around 54% of pre-retirees incorrectly believe that Medicare will cover all of their health care expenses during retirement, Fidelity found.
A March 2026 Employee Benefit Research Institute (EBRI) report modeled how much savings retirees need to cover health expenses with a reasonable degree of confidence. A couple with high prescription drug costs would need $469,000 to have a 90% chance of meeting their lifetime medical expenses.
Why retirement savings assumptions may need recalibrating
Jake Spiegel, Research Associate, Health and Wealth at EBRI, warned that workers who fold medical expenses into a general retirement budget face the greatest exposure, and should not assume Medicare will fully shield them.
Michael Daley, Head of Research and Marketing at HealthView Services, pointed to premiums and out-of-pocket costs varying widely by state, plan type, and health status, which makes advisor-guided planning essential.
Savings plans built around general inflation benchmarks fall short of medical expenses that follow a steeper cost curve, HealthView Services’ data confirmed.
Reviewing those assumptions before they erode purchasing power is a step that grows more urgent each year.
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