How to Estimate Health Care Costs in Retirement (2026)

$185,500. Fidelity says that's what a single 65-year-old retiring in 2026 can expect to spend on health care over retirement. It covers Medicare premiums, deductibles, copays and prescriptions. It does not cover long-term care. The figure is 7.5% higher than last year's $172,500 (Fidelity Investments, 25th Annual Retiree Health Care Cost Estimate, July 2026).

That number is a useful wake-up call, but you can't plan with it as it stands. If you want to know how to estimate health care costs in retirement for yourself, here's the short version. Use the lump sum as a benchmark. Then build an annual budget, split into the years before Medicare and the years after. Check how your income affects your premiums. Treat long-term care as a separate risk. Finally, look at a range of outcomes instead of one number.

The rest of this guide goes through each step.

The $185,500 figure is a benchmark, not your budget

Fidelity's estimate assumes Original Medicare plus a Part D drug plan. CNBC's July 2026 coverage breaks it down like this:

• 48%: Medicare cost-sharing (deductibles, copays, coinsurance)
• 45%: Part B and Part D premiums
• 7%: out-of-pocket prescription drug costs

That breakdown tells you something. Premiums are only part of the bill. Close to half of it is what you pay when you actually use care.

Vanguard and T. Rowe Price both make a further point: a lifetime lump sum isn't very useful for budgeting (Vanguard; T. Rowe Price). You don't pay $185,500 on your 65th birthday. You pay it a month at a time for decades, and the amount rises as you get older. Your plan needs it as an annual figure.

How to estimate health care costs in retirement: 6 steps

Step 1: Split retirement into two phases

Health care in retirement comes in two phases, and they cost very different amounts.

1. Before 65. If you retire early, you need private coverage until Medicare starts. This is often the most expensive stretch.
2. 65 and after. Medicare is your base coverage, plus whatever you add on top of it.

Retiring at 65? You can skip Step 2. Retiring at 62? Step 2 might be the most important part of your whole plan.

Step 2: Price the bridge years (and watch the ACA cliff)

Once you leave work, you lose your employer's help with premiums. Vanguard puts the average employer subsidy that disappears at retirement at about $5,300 a year (Vanguard).

Early retirees buying coverage on the ACA Marketplace face a further change in 2026. The enhanced premium tax credits ended on December 31, 2025, so the "subsidy cliff" is back. For 2026, subsidies stop completely once household income goes above 400% of the federal poverty level. That's $62,600 for a single person and $128,600 for a family of four (healthinsurance.org; CNBC, Oct 2025).

This is a cliff, not a slope. A dollar over the line can cost you the whole subsidy. And the income that counts includes your retirement account withdrawals. So in these years, where you draw your money from is also a health care decision.

What to do: get real Marketplace quotes for your zip code and age. Then price two cases, one with your income under the threshold and one with it over. The difference between them is the number to plan around.

Step 3: Build your Medicare budget line by line

From 65 on, build your annual cost from these parts.

The 2026 Medicare Trustees Report projects the 2027 Part B premium at $209.50 a month (getsmartquotes; comparemedicareadvantage.org). CMS usually announces official figures in mid-November, so check CMS.gov for the confirmed number before you rely on it. We'll update this page when it's out.

Your choice of coverage changes the shape of your costs. Medigap usually means higher premiums and more predictable cost-sharing. Medicare Advantage often has lower premiums, but what you pay out of pocket depends more on how much care you use (CFP Board / LetsMakeAPlan).

Step 4: Add what Medicare doesn't cover

Original Medicare generally leaves out routine dental, vision and hearing care (NerdWallet). These are steady costs that come back year after year, like crowns, glasses and hearing aids. Look at what you've spent on them in recent years and add a yearly allowance.

Step 5: Check your income against IRMAA

IRMAA stands for Income-Related Monthly Adjustment Amount. It's a surcharge added to your Part B and Part D premiums when your income is above certain levels. It's based on your tax return from two years earlier, so your 2027 premiums depend on your 2025 income (The Finance Buff).

That's why the years just before and just after you turn 65 matter. A big Roth conversion, a property sale or a large withdrawal can raise your Medicare premiums two years later. If your income is near a bracket edge, add the surcharge to your estimate for those years.

Step 6: Treat long-term care as a risk, not a line item

Fidelity's figure leaves out long-term care completely. That's not because it's rare. HHS data shows that someone turning 65 has close to a 70% chance of needing some kind of long-term care service (Benzinga, July 2026, citing HHS).

"Some" covers a lot of ground. It could be a few months of home help or years in a care facility. A flat annual allowance doesn't fit that kind of risk. It's better to ask a different question: if I needed significant care late in retirement, would my plan still hold up? Then decide how you'd pay for it. The options include insurance, a dedicated reserve, home equity, or a mix.

Why a range beats a single number

Every estimate you'll find, including Fidelity's, is one number followed by "your costs may vary." They will vary. What you need to know is how much, and whether your plan can cope.

The biggest swing factors are:

• How long you live. Social Security's planning guidance says about one in three 65-year-olds may live to at least 90 (SSA, Retirement Information for Medicare Beneficiaries, 2026). Each extra year means another year of premiums and care, and those are usually the most expensive years.
• Your health. Someone who stays healthy and someone managing a chronic condition can have very different cost-sharing bills.
• Health care inflation. Fidelity's estimate rose 7.5% in one year. Over a long retirement, small differences in the growth rate add up to a lot.
• Your income in a given year, because of IRMAA and the ACA cliff.

So don't settle on one estimate. Build three:

1. Base case: your line-by-line budget from Steps 2–5, growing each year.
2. Bad case: higher cost-sharing for several years, faster inflation, and a longer life.
3. Long-term care case: the base case plus a period of significant care late in life.

If your plan holds up in all three, you're in good shape. If it only works in the base case, you've learned that while you still have time to adjust.

Putting the estimate into your full plan

Health care isn't a separate pot of money. It comes out of the same savings as everything else, during the same market ups and downs and over the same uncertain lifespan. A bad decade for markets plus a bad stretch of health is the combination that sinks plans, and you can't see that with an average-return projection.

That's what Monte Carlo simulation is for. It's a simple idea: instead of assuming one smooth future, you run your plan through many possible ones, with good markets, bad markets and different orders of returns, and count how often the money lasts. Monte Climb runs your plan through 1,000 simulated futures. It charges Medicare premiums and income-based surcharges year by year instead of adding a flat guess. Plans run to age 95 by default, and you can extend them, so the longer-life case is built in.

The result is a probability, not a promise. It also tells you something a lump sum can't: whether your savings survive the health care costs you're likely to face, and how close to the edge you are.

The bottom line

Here's the process in brief:

• Start with Fidelity's $185,500 as a reality check, not a budget.
• Turn it into annual numbers, priced separately for before and after 65.
• Get real quotes. Watch the ACA cliff before 65 and IRMAA from 65 on.
• Add dental, vision and hearing.
• Plan for long-term care as a risk you test against.
• Look at a range of outcomes, not one number.

Then see how it fits with everything else. Enter three numbers (your age, your savings and your monthly spending, with your health care estimate included) and see how many of 1,000 futures stay funded. If you have questions about the result, ask William, our AI planner, whether you're on track or what a sustainable spending level looks like. Everything runs in your browser, and nothing is saved until you choose. It's planning software, not advice.

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Frequently asked questions

How much should I budget for health care in retirement?

Fidelity's 2026 estimate is $185,500 over retirement for a single 65-year-old. It covers Medicare premiums, cost-sharing and prescriptions and leaves out long-term care. Use it as a benchmark, then build your own yearly budget from real plan quotes, your prescriptions, and dental, vision and hearing costs.

What is the Medicare Part B premium for 2026 and 2027?

The standard Part B premium is $202.90 a month in 2026. The 2026 Medicare Trustees Report projects $209.50 a month for 2027, but check CMS.gov for the official figure, which CMS usually announces in mid-November.

What is the ACA subsidy cliff for early retirees in 2026?

The enhanced ACA premium tax credits ended on December 31, 2025. In 2026, Marketplace subsidies stop entirely once income goes above 400% of the federal poverty level, which is $62,600 for a single person and $128,600 for a family of four. Retirement account withdrawals count toward that income.

Does Fidelity's retiree health care estimate include long-term care?

No. Fidelity's estimate leaves out long-term care completely. HHS data suggests someone turning 65 has close to a 70% chance of needing some long-term care services, so it's worth testing your plan against that risk separately.

What is IRMAA and how does it affect retirement health costs?

IRMAA is an income-based surcharge added to Medicare Part B and Part D premiums. It's based on your tax return from two years earlier, so large withdrawals, Roth conversions or asset sales can raise your Medicare premiums two years later.