Retirement planning has a new flashpoint: health care costs. A January 2026 survey by the Allianz Center for the Future of Retirement, part of Allianz Life Insurance Company of North America, found that 60% of Americans worry they won't be able to afford medical expenses in retirement. The anxiety is especially acute among Generation X, with 76% expressing concern, compared with 60% of millennials and 56% of baby boomers.
The survey of 1,000 respondents aged 25 and older lands as the financial math grows steeper. Fidelity Investments projected in July 2026 that a 65-year-old retiring this year will spend an average of $185,000 on health care over retirement—covering Medicare Parts A, B, and D but excluding long-term care. HealthView Services' 2026 Retirement Healthcare Costs Data Report pegs long-term health care inflation at 5.8% annually, well above the 2.4% Social Security cost-of-living adjustment projected for the same period.
Long-term care remains a separate pressure point. The Allianz study found 62% of Americans worry they cannot afford long-term care costs, and 60% are unsure Medicare will still be available throughout their retirement. These fears are compounded by a knowledge gap that has real financial consequences.
Medicare Misunderstandings Abound
Roughly one in three respondents (34%) incorrectly believed Medicare covers long-term care services, which it does not. More than a third (37%) said Medicare is guaranteed available at retirement, when in fact eligibility begins at age 65—meaning early retirees face a coverage gap. Two in five (43%) thought prescription drugs are covered under Medicare's standard plan, though Original Medicare requires separate Part D enrollment. One in four (23%) believed Medicare is free, when premiums, deductibles, and out-of-pocket costs vary by income and work history.
These misconceptions translate into undersaving. Separate Fidelity research shows 54% of pre-retirees believe Medicare will cover all their health care expenses—a belief that can expose clients to tens of thousands of dollars in unplanned costs. Kelly LaVigne, vice president of consumer insights at Allianz Life, said, "Health care is one of a retiree's largest ongoing expenses, and many Americans don't realize that Medicare won't cover everything, especially long-term care. That knowledge gap can leave retirees paying more out of pocket than anticipated."
Advisors as the Last Line of Defense
For financial advisors, the data presents both a challenge and an opportunity. Fifty-five percent of survey respondents worry about navigating Medicare and making the right coverage choices, signaling that clients are actively seeking guidance. Health care spending per person aged 65 and older is more than double that of working-age adults, according to the U.S. Centers for Medicare & Medicaid Services, and the agency projects health spending growth to outpace GDP growth from 2025 to 2034.
One approach gaining traction is anchoring essential retirement expenses—including health care—to guaranteed income sources. Annuities, alongside Social Security, can provide a predictable income floor that insulates clients from market volatility and the risk of spending down savings too quickly. LaVigne emphasized the advisor's role: "A financial professional can help build a strategy that addresses health care costs alongside other retirement risks like inflation and market volatility."
Advisors who can speak fluently to Medicare structure, long-term care options, and income protection strategies are positioned to offer something clients demonstrably need. As LIMRA research shows, many pre-retirees skip advisors despite worrying about retirement income—a gap that health care planning can help close. Similarly, Cerulli finds pre-retirees demand flexibility and guarantees, which aligns with the income-floor approach. And Prudential reports 86% of older Americans fear spending retirement savings, underscoring the need for careful planning.
With health care spending projected to remain one of the largest and least predictable expenses in retirement, advisors who integrate Medicare education and cost projections into their planning processes can differentiate themselves. The Allianz data suggests that clients are not just worried—they are misinformed, and correcting those misconceptions may be the most valuable service an advisor can offer.
