Picture a couple, both 65, both in good health, retiring this year with solid savings and Medicare cards in hand. According to Fidelity Investments, they should still expect to spend roughly $345,000 of their own money on health care before they die. That figure, drawn from Fidelity’s closely watched annual Retiree Health Care Cost Estimate, covers Medicare premiums, copays, deductibles, and prescription drugs. It has climbed steadily for more than a decade, and the 2024 edition set another record.
What it does not cover is the expense most likely to break a retirement budget: nursing homes, assisted living, and extended home health aides. Fidelity is upfront about the exclusion, but the gap between what the estimate counts and what it leaves out is large enough to upend even a well-funded plan.
What the $345,000 actually covers
Fidelity builds its model on publicly available federal data, primarily from the Centers for Medicare and Medicaid Services. CMS sets the prices retirees pay for Original Medicare each year, and those prices keep rising. For 2025, the standard Part B monthly premium climbed to $185, up from $174.70 the year before, while the annual Part B deductible rose to $257. CMS confirmed both figures in its official fact sheet on 2025 Part B premiums and deductibles.
On the prescription drug side, the Inflation Reduction Act’s $2,000 annual cap on out-of-pocket Part D spending took effect in 2025, shifting some costs from beneficiaries to insurers. CMS released 2025 Part D bid information alongside a premium stabilization demonstration designed to prevent sharp year-over-year spikes in drug plan premiums. The cap is real relief for people with expensive prescriptions, but the underlying spending trend has not reversed. CMS is smoothing premium increases so enrollees are not hit all at once.
The broader trajectory reinforces the point. CMS national health expenditure projections covering 2023 through 2032 forecast that total health spending will grow faster than the economy over the coming decade, driven by an aging population and rising medical prices. Those macro trends feed directly into the actuarial models behind Fidelity’s per-couple number.
The estimate also implicitly includes Part A costs that many retirees overlook. While most people pay no monthly Part A premium, hospital stays carry a deductible of $1,676 per benefit period in 2025, plus daily coinsurance charges for extended stays. Over a 20- to 25-year retirement, those charges add up.
The long-term care blind spot
The most consequential number missing from the $345,000 figure is the cost of long-term care. According to a widely cited analysis from the Department of Health and Human Services’ Administration for Community Living, roughly 56% of Americans turning 65 today will need some form of long-term care services during their remaining years. That ranges from a few months of help with bathing and meals at home to multiple years in a skilled nursing facility.
The costs are severe. Genworth’s 2023 Cost of Care Survey, one of the most widely used benchmarks in the insurance and financial planning industries, pegs the national median cost of a private room in a nursing home at about $116,000 per year. A semi-private room runs roughly $104,000. Even home health aide services, often viewed as the more affordable option, carry a national median cost above $75,000 annually for full-time care. Those figures have been rising at rates that outpace general inflation for years, and the 2024 and 2025 data from providers suggest no slowdown.
Traditional Medicare does not cover custodial long-term care. It will pay for limited skilled nursing stays after a qualifying hospitalization, typically up to 100 days with significant coinsurance after day 20, but once a patient’s needs shift to help with daily activities like dressing, eating, or moving around the house, Medicare steps aside. Medicaid covers long-term care for people who have exhausted nearly all of their assets, but qualifying typically means spending down savings to very low thresholds. For married couples, that process can devastate the surviving spouse’s financial security.
Add even a modest long-term care need to Fidelity’s baseline, and the total out-of-pocket exposure for a couple can climb well past half a million dollars. For couples where one or both partners require extended nursing home stays, the combined figure can approach or exceed $700,000. The $345,000 estimate, in other words, functions as a floor, not a ceiling.
Why the number still matters
None of this means Fidelity’s estimate is misleading. The firm is transparent about what it includes and excludes, and for many households a single, concrete savings target is more useful than a sprawling range that feels impossible to act on. Financial planners routinely use the figure as a starting point in retirement conversations precisely because it is grounded in verifiable CMS data and updated annually.
The danger is in treating it as the whole story. Couples who anchor their savings plan to $345,000 without separately budgeting for long-term care risk a painful surprise in their late 70s or 80s, the years when care needs tend to spike.
Geographic variation makes the problem worse. According to Genworth’s state-level data, nursing home costs in parts of the Northeast and along the West Coast can run 40% to 60% above the national median, while several Southern and Midwestern states come in below it. A couple retiring in Connecticut or California faces a fundamentally different cost picture than one settling in Arkansas or Iowa.
Health status matters too. A couple with no chronic conditions and strong family longevity may spend less than the Fidelity average on premiums and copays but face a longer window of potential long-term care need simply because they live longer. A couple managing diabetes, heart disease, or early cognitive decline could blow past the estimate on both fronts.
Medicare Advantage adds another variable. More than half of all Medicare beneficiaries are now enrolled in Advantage plans, which bundle Parts A, B, and often D into a single product with different cost-sharing structures. Out-of-pocket maximums, provider network restrictions, and supplemental benefits like dental and vision vary widely by plan and region. Couples choosing Advantage over Original Medicare with a Medigap supplement may face lower premiums but higher exposure if they need expensive care outside their network.
What retirees and near-retirees can do now
Financial advisors working with pre-retirees in mid-2026 are generally recommending a layered approach rather than a single savings target.
The first layer is covering the basics Fidelity’s model captures: Medicare premiums, supplemental (Medigap) or Medicare Advantage plan costs, copays, and prescriptions. Health Savings Accounts, for those still eligible to contribute before enrolling in Medicare, remain one of the most tax-efficient vehicles for building this fund. In 2025, the IRS allows couples with family HDHP coverage to contribute up to $8,550, and those 55 and older can add a $1,000 catch-up contribution per person.
The second layer is long-term care. Traditional long-term care insurance has become more expensive and harder to qualify for as insurers have tightened underwriting after years of underpricing risk. But hybrid policies that combine life insurance or an annuity with a long-term care rider have grown in popularity, according to industry data from LIMRA. These products guarantee a death benefit if care is never needed and convert to a care funding source if it is. For households that cannot afford or qualify for insurance, earmarking a separate pool of liquid savings specifically for potential care needs is the fallback strategy most planners suggest.
The third layer is stress-testing. Rather than relying on a single projection, couples can model several scenarios: one where both partners stay healthy and costs track the national average, one where a chronic illness drives higher-than-average spending in the early retirement years, and one where a multi-year nursing home stay hits in the late 70s or 80s. Running those scenarios against actual portfolio balances and income sources, including Social Security, pensions, and annuities, reveals whether a plan holds up under pressure or falls apart when it matters most.
A floor, not a ceiling
Fidelity’s $345,000 estimate does what it is designed to do: it quantifies the Medicare-related costs that virtually every retiree will face and puts them in terms a household can plan around. The federal data backing it, from CMS premium schedules to national spending forecasts, are solid and publicly verifiable.
But the estimate’s value depends on understanding its boundaries. It covers the predictable, recurring costs of being a Medicare beneficiary. It does not cover the unpredictable, potentially catastrophic cost of needing someone to help you live your daily life when your body or mind can no longer manage alone. For a generation entering retirement in larger numbers than ever before, that omission is not a footnote. It is the central financial risk of growing old in the United States, and it belongs at the center of every retirement health care conversation, not outside the frame.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
