Most retirement projections treat health care as a line item to be estimated later. New survey data suggests it has quietly become one of the largest fixed costs retirees actually face — and that a majority walked into retirement expecting otherwise.
The Number Retirees Report
Schroders' 2026 US Retirement Survey, which polled 1,500 US investors, found that retirees devote an average of 16% of their monthly income to health care — premiums, prescriptions and out-of-pocket spending combined. That is roughly one dollar in six, before housing, food or anything discretionary.
The more revealing finding is the expectation gap. 58% of retirees said they expected Medicare to cover a greater share of their health care expenses than it does. Fidelity's research points the same direction from the other side of the retirement date: 54% of pre-retirees incorrectly believe Medicare covers all retirement health care costs.
That misconception has consequences. In the same Schroders survey, 49% of retirees said their expenses in retirement are higher than expected, 19% described themselves as "struggling" financially, and 64% wished they had done more planning before retiring.
What the Lifetime Estimate Looks Like
Fidelity's 2026 Retiree Health Care Cost Estimate puts the average lifetime out-of-pocket total for a 65-year-old retiring this year at $185,500 — up 7.5% from $172,500 in the 2025 estimate. For a couple retiring at the same age, that roughly doubles.
Two caveats matter more than the headline figure. First, the estimate covers premiums, copayments and out-of-pocket medical care — it does not include long-term care, which is the single largest tail risk in most retirement plans. Second, it is an average across a full retirement, not an annual budget. Treating it as a lump sum to be saved is less useful than translating it into a monthly line item.
Why the Cost Curve Outpaces Your Raise
The 2026 Medicare numbers show the mechanism. The standard Part B premium rose to $202.90 per month, an increase of $17.90 — just under 10% — from $185.00 in 2025. The Part B deductible rose to $283. Meanwhile, the 2026 Social Security cost-of-living adjustment was 2.8%.
When a major fixed cost grows near 10% and the income covering it grows 2.8%, health care consumes a larger share of the check each year even if nothing about your health changes. That is the arithmetic behind the 16% figure — and why it tends to drift upward.
Higher-income retirees face a steeper version. Income-related adjustments push 2026 Part B premiums to between $284.10 and $689.90 per month, with the first threshold beginning at $109,000 in modified adjusted gross income for individuals and $218,000 for joint filers.
Practical Takeaways
- Budget health care as a fixed cost, not a contingency. Sixteen percent of income is a mortgage-sized line item. Build it into your withdrawal plan explicitly rather than absorbing it into "miscellaneous."
- Know what Medicare does not cover. Dental, vision, hearing and long-term care sit largely outside traditional Medicare. The 58% who expected more coverage are describing a planning gap, not a benefits cut.
- Use the HSA as a retirement account. Fidelity found only 35% of HSA holders were saving for retirement health costs, and just 28% had invested their balance. An HSA is the only account offering a deduction going in and tax-free withdrawals for qualified medical expenses coming out — but only if the money is invested long enough to grow.
- Assume the premium grows faster than the COLA. Modeling both at the same inflation rate will understate the squeeze.
As Karen Volo, Fidelity's head of health and benefit accounts, put it: "Education and awareness is probably the best thing that an employer can offer."
Sources: Schroders – 2026 US Retirement Survey: Living in Retirement; Fidelity – 2026 Retiree Health Care Cost Estimate (via PLANADVISER); Centers for Medicare & Medicaid Services – 2026 Medicare Parts A & B Premiums and Deductibles; Federal Register – Medicare Part B Monthly Actuarial Rates, Premium Rates, and Annual Deductible Beginning January 1, 2026