Fidelity: Retirees Face $185,500 in Medicare Gaps While the Program Heads Toward 2033 Insolvency

The bill nobody budgets for

A 65-year-old retiring in 2026 and enrolling in Original Medicare will spend an average of $185,500 out of pocket on healthcare over the rest of their life, according to Fidelity Investments' 25th annual Retiree Health Care Cost Estimate. That figure is up 7.5% from last year's estimate, driven by rising care costs and a higher Medicare Part B premium, and it does not include long-term care.

Personal finance author Suze Orman flagged the number on her website, urging people in their 30s, 40s and 50s to "push yourself" to save more now. Orman's point isn't that Medicare is worthless. It's that people assume it's comprehensive, and it isn't.

That assumption is common. Fidelity's 2026 State of Retirement Planning research found 54% of pre-retirees mistakenly believe Medicare will cover all their healthcare expenses in retirement, according to Minute Brief. Shams Talib, head of Fidelity Workplace Consulting, said the gap between what people expect to spend and what they actually spend has persisted for years.

What Medicare actually leaves out

Original Medicare doesn't cover routine dental work, vision exams for glasses, hearing aids, or long-term custodial care, according to Louis Velazquez's reporting citing Medicare.gov. Medicare Part A only pays for skilled nursing facility stays after a qualifying three-day inpatient hospital admission, and only when daily skilled care is required.

The cost-sharing adds up fast. The standard Part B premium is $202.90 a month in 2026, up from $185 last year, with a $283 annual deductible and 20% coinsurance on most services and no annual out-of-pocket cap. Part A carries a separate $1,736 deductible per benefit period. Higher earners pay more: modified adjusted gross income above $109,000 for single filers or $218,000 for joint filers triggers surcharges.

Switching to Medicare Advantage doesn't make the problem disappear, Orman writes on her website. MA plans have lower upfront costs but carry their own deductibles and copays, with a 2026 legal out-of-pocket limit above $9,000, though most plans cap it around half that. Orman notes that someone with a chronic condition requiring ongoing care could end up paying more under MA than under Original Medicare paired with a Medigap policy, which in 2026 limits deductibles to under $300 but costs $150 to $300-plus a month in premiums depending on the state.

How much can retirees actually spend?

Separately, Bill Bengen, the financial adviser who created the 4% withdrawal rule in 1994, told Business Insider he now considers 4.7% the safe floor for retirees planning for worst-case markets, and 5.5% more realistic under current conditions, according to MoneyWise. Bengen's original rule was built on large-cap U.S. stocks and intermediate-term Treasurys. Testing portfolios with small- and micro-cap stocks let him raise the number. For a retiree staring at a $185,500 lifetime healthcare tab, the difference between a 4% and 5.5% withdrawal rate is real money that can either cover those costs or run out early.

The other side of the ledger: Medicare's own waste

While retirees are told to save more, the program itself is hemorrhaging money on care that doesn't help anyone. The Epoch Times reports that Medicare spends about $1 billion a year on urine tests for roughly 15% of seniors who show no symptoms of a urinary tract infection, a practice an independent task force recommended doctors stop performing back in 1996. More than a third of Medicare beneficiaries receive some form of "low-value care" annually, costing taxpayers billions, according to a landmark 2012 study by Donald Berwick, who ran the Centers for Medicare & Medicaid Services under President Obama.

Dr. Mehmet Oz, the current CMS administrator, launched a voluntary pilot program to reevaluate low-value care coverage, the Epoch Times reports. In June, House Appropriations Committee members from both parties unanimously pushed back against it. Since 2010, the HHS secretary has had legal authority to ban 21 categories of low-value care outright. No secretary has used it, including Robert F. Kennedy Jr.

The stakes go beyond wasted spending. The U.S. Treasury's annual report projects Medicare will become insolvent by 2033 and will be $60.4 trillion short of what's needed to pay promised benefits over the next 75 years. Researchers who spoke with RealClearInvestigations, as cited by the Epoch Times, say the fixes on the table range from raising premiums and deductibles to cutting people off the program entirely.

A fair objection: seniors on fixed incomes already stretched by a $185,500 lifetime healthcare bill have little room to absorb higher premiums or deductibles, and cutting even "low-value" tests risks denying care to patients whose doctors believed it was warranted in their specific case. The tension is real.

But the math doesn't move just because it's politically uncomfortable. Congress had the tool to eliminate specific wasteful treatments since 2010 and hasn't used it under either party. The 2033 insolvency date is now seven years out. Whether lawmakers act before then, or whether the fix arrives only after the trust fund runs dry, remains an open question with a fixed deadline attached to it.