Americans are worried about affording health care in retirement and misconceptions about Medicare could leave many unprepared for the true cost, according to the 2026 Annual Retirement Study* from the Allianz Center for the Future of Retirement, part of Allianz Life Insurance Company of North America (Allianz Life).

The majority of Americans (61%) worry health care costs will be so high they won’t be able to afford needed care. Gen X (76%) is more likely than millennials (60%) or boomers (56%) to have this concern.

In particular, 62% of Americans worry they won’t be able to afford the high cost of long-term care.

“You don’t want to pinch pennies when it comes to your health,” says Kelly LaVigne, VP of consumer insights at Allianz Life. “Medical expenses only increase as you age. Americans need a strategy that accounts for the risk of rising health care costs and ensures their essential expenses are covered by income they can count on.”

Health care is a significant and essential expense in retirement. Health care spending is more than double per person age 65 and older than for working-aged people, according to the U.S. Centers for Medicare & Medicaid Services1. What’s more, the costs are rising. Growth of average national health expenditures is projected to outpace that of average Gross Domestic Product (GDP) growth from 2025 to 20341.

One strategy to help address rising health care costs in retirement is to ensure essential expenses are covered by reliable income sources like Social Security and annuities. Annuities can help meet long-term retirement goals by offering tax-deferred growth potential, a death benefit during the accumulation phase, and a guaranteed stream of income at retirement. These sources can provide a foundation to help pay for health care with a layer of protection against market swings or drawing down savings too quickly.

Americans’ Medicare knowledge gap

While government programs can help with medical costs in retirement, many Americans overestimate what that coverage will look like and have misconceptions about how Medicare works and its role in their retirement strategy.

A few critical knowledge gaps exist for Americans:

  • About one in three (34%) say Medicare covers long-term care services. In fact, Medicare does not pay for long-term care.
  • More than one in three (37%) say Medicare is guaranteed to be available when you retire. Medicare is available at age 65 or earlier if you have a qualifying disability. If you retire prior to 65, you will need other health care coverage.
  • Two in five (43%) say Medicare covers prescription drugs under its standard plan. Original Medicare provides hospital and medical insurance. Outpatient prescription drugs require a separate plan.
  • One in four (23%) say Medicare is free for everyone. Medicare has premium, deductible, and out-of-pocket expenses for people using the program. The exact amount depends on work history, income, and plan selection.

“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,” LaVigne says. “That knowledge gap can leave retirees paying more out of pocket than anticipated. Understanding what Medicare does and doesn’t pay for is an important part of building a retirement strategy.”

Still, 55% worry about navigating Medicare and health insurance and making the right choices for their health care. At the same time, 60% worry that Medicare will not be available throughout the entirety of their retirement.

“It’s so important to have reliable income sources that can help cover essential expenses like health care, “ LaVigne says. “A financial professional can help build a strategy that addresses health care costs alongside other retirement risks like inflation and market volatility.”

* Allianz Center for the Future of Retirement® conducted the 2026 Annual Retirement Study in January 2026 with a nationally representative sample of 1,000 respondents age 25+ with an annual household income of $50K+/$75K+ (single/married) OR investable assets of $150K+.

The Allianz Center for the Future of Retirement® produces insights and research as a part of Allianz Life Insurance Company of North America.

1 U.S. Centers for Medicare & Medicare Services, National Health Expenditures Fact Sheet, July 2026

Allianz Life Insurance Company of North America and Allianz Life Financial Services, LLC do not provide financial planning services.

Long-term care insurance may require medical and financial underwriting. Allianz Life Insurance Company of North America does not offer long-term care insurance.

Registered index-linked annuities (RILAs) are subject to investment risk, including possible loss of principal. Investment returns and principal value will fluctuate with market conditions so that contract value, upon distribution, may be worth more or less than the original cost.

Withdrawals will reduce contract values (including any Cash Value) and the value of any potential protection benefits. All withdrawals are subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal additional tax.

Guarantees are backed solely by the financial strength and claims-paying ability of the issuing insurance company. Registered index-linked annuity guarantees do not apply to the performance of the variable subaccount(s), which will fluctuate with market conditions.

Annuities and life insurance are issued by Allianz Life Insurance Company of North America (Allianz). Registered index-linked annuities are distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.542.5427 www.allianzlife.com

This content does not apply in the state of New York.

About Allianz Life Insurance Company of North America

Allianz Life Insurance Company of North America (Allianz Life), one of the Ethisphere World’s Most Ethical Companies®, has been trusted since 1896 to help millions of Americans prepare for financial uncertainties and retirement with a variety of innovative risk management solutions. In 2025, Allianz Life provided additional value to its policyholders via distributions of more than $18.7 billion. Allianz Life is a leading provider of fixed index annuities, registered index-linked annuities, and indexed universal life insurance. Additionally, Allianz Investment Management LLC (AllianzIM), a registered investment adviser and wholly owned subsidiary of Allianz Life, manages the suite of AllianzIM exchange-traded funds (ETFs). Allianz Life and AllianzIM are part of Allianz SE, a global leader in the financial services industry with more than 156,000 employees in nearly 70 countries. Allianz Life is a proud sponsor of Allianz Field® in St. Paul, Minnesota, home of Major League Soccer’s Minnesota United.

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