Fidelity Investments said its 25th annual estimate of retiree healthcare costs shows a notable increase from the prior year, as medical care and related expenses continue to rise. Healthcare costs have historically outpaced general inflation, making them one of the most difficult expenses for retirees to budget for over a retirement that can span two to three decades.

According to the report, a 65-year-old retiring in 2026 can expect to spend an average of $185,500 on healthcare and medical expenses over the course of retirement. The estimate is per individual, meaning a retired couple could face roughly double that amount. Fidelity said the estimate is up 7.5% from last year, citing higher healthcare prices, increased use of medical services and rising costs tied to chronic conditions.

"Financial planning for retirement is about more than reaching a savings target, especially as retirement itself continues to evolve," said Shams Talib, head of Fidelity Workplace Consulting.

"Whether Americans fully stop working, phase into their retirement, or pursue new ways to stay engaged, healthcare consistently remains one of the largest expenses they will face," Talib added. "Providing a benchmark to consider can help them plan with purpose and more confidence."

Fidelity has compiled the estimate annually since 2002. Over that period, the benchmark has climbed steadily, reflecting broader trends in medical cost growth and an aging population living longer with chronic conditions. The company describes it as a benchmark for long-term planning around potential healthcare costs that retirees may face even with standard Medicare coverage.

The estimate assumes the retiree is enrolled in Original Medicare, including Parts A and B, as well as Medicare Part D. It includes premiums, copayments and out-of-pocket costs for medical care and prescription drugs throughout retirement. The figure does not include potential long-term care expenses, such as in-home assistance, assisted living, or nursing home care, which studies from the U.S. Department of Health and Human Services suggest a majority of older adults will need at some point.

Of the total $185,500 estimate, Fidelity's analysis found that about 45% is expected to go toward monthly premiums for Medicare Part B and Part D.

Another 48% is projected to cover other medical expenses under Medicare cost-sharing provisions, including copayments, coinsurance and deductibles for services such as hospital visits and outpatient care. That portion also includes medical services not covered by Medicare plans, such as vision and hearing exams.

The remaining 7% of the estimate is attributed to out-of-pocket expenses, including co-payments and costs not covered by Medicare Part D for generic, branded or specialty drugs.

"Medicare is a critical part of retirement health coverage, but it does not eliminate every healthcare expense," said Steve Betts, head of Fidelity Health.

"This estimate helps illustrate why both pre-retirees and retirees alike will benefit from carefully considering out-of-pocket expenses and how they will pay for them as they build out their retirement income strategy," Betts added.