The New Numbers, and Why They Matter
Fidelity Investments projects that a 65-year-old leaving the workforce in 2026 will see their lifetime medical costs increase by 7.5%. The pace of medical expense growth for those in retirement is quickening.
According to Fidelity financial consultant Marlon Deleon, "The $185,500 figure isn't meant to suggest people need to figure out a way to get that money right away, but it does reinforce the importance of incorporating healthcare costs into a retirement income plan."
Why the Cost Keeps Climbing
Rising costs will impact a growing number of people as the country's demographic shifts. Per AARP, individuals aged 65 and above constitute roughly half of all those over 50, with the 75-plus cohort expanding most rapidly.
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Citing Consumer Price Index data from the Bureau of Labor Statistics, the AARP Public Policy Institute reported that home healthcare costs jumped 7.9% over the 12 months ending May 31, and nursing home charges rose 4.6%.
At the national level, health spending reached $5.3 trillion in 2024, amounting to 18% of U.S. GDP. According to July projections from CMS actuaries, that figure is expected to grow to about $9 trillion - equivalent to 20.6% of GDP - by 2034.
What It Means for Your Plan
Fidelity's analysis does not include substantial long-term care costs, which can increase lifetime outlays by hundreds of thousands of dollars. This omission is important because many retirees may underestimate their eventual medical spending if they only consider Medicare premiums and routine care.
People across all age and income brackets are postponing or forgoing medical treatment. In a 2025 survey by the West Health-Gallup research group, 47% of people earning $90,000 to under $120,000 annually said they had made at least one daily sacrifice for healthcare, whereas only 11% of households with incomes of $240,000 or more did so. Among those with insurance, the most frequent compromise was stretching out an existing medication, mentioned by 14% of participants. For uninsured individuals, 32% indicated they had taken out loans to cover medical bills.
Looking ahead, employers are feeling the pinch too. According to a Mercer survey of CFOs and finance executives, a third of respondents placed healthcare benefit outlays among their three biggest operating cost worries. Another Mercer poll indicated that nearly 50% of major U.S. companies intend to modify their medical plans - for instance, by increasing deductibles or copayments - leading to greater out-of-pocket expenses for employees come 2027.
Given these trends, the growing burden of healthcare expenses is not just a concern for retirees. Workers still in their earning years may need to adjust savings goals and insurance choices now to prepare for steeper medical costs later. The demographic shift toward an older population will only amplify these pressures, making it essential for both individuals and policymakers to address the sustainability of health spending.
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