Fidelity Investments: Tax & Retirement Health Care Warnings

As Americans race to file their 2025 tax returns and plan for retirement, Fidelity Investments has issued two urgent warnings that every saver needs to hear. In back-to-back publications this April, Fidelity flagged a pair of financial blind spots that could cost households tens — or even hundreds — of thousands of dollars: ignoring critical tax forms and catastrophically underestimating health care costs in retirement. If you've been putting off financial planning, these numbers may change your mind.

Fidelity's Tax Form Warning: Don't Ignore These Documents

On April 6, 2026, Fidelity published a pointed guide warning Americans about the consequences of overlooking tax forms during the 2025 filing season. The core message is simple but easy to forget: every tax form mailed to you is also sent directly to the IRS. That means any mismatch between what you report and what those forms say can trigger an audit, a recalculated tax bill, or both.

According to Fidelity's tax forms guide, the most commonly overlooked documents include 1099-DIV forms for dividends, 1099-INT for interest income, 1099-B for brokerage transactions, and 1099-R for retirement account distributions. Missing even one of these can create a paper trail that draws IRS scrutiny.

Two major threshold changes are also reshaping how Americans report income in 2025 and beyond:

• 1099-K (2025 tax year): The reporting threshold has been restored to $20,000 in gross payments and more than 200 transactions. This affects gig workers, freelancers, and anyone using payment platforms like PayPal or Venmo for business income.
• 1099-NEC (2026 tax year forward): Under the One Big Beautiful Bill Act, signed into law on July 4, 2025, the reporting threshold for non-employee compensation increases to $2,000 — up from the previous $600 level. This change affects independent contractors and self-employed individuals starting with income earned in 2026.

Fidelity's advice is direct: gather every form, reconcile them with your records, and report accurately. An expensive mistake starts with a document tossed in the recycling bin.

The Retirement Health Care Crisis You Probably Aren't Ready For

Two days after the tax warning, on April 8, 2026, Fidelity dropped an even more alarming report. Its 2025 Retiree Health Care Cost Estimate projects that a single 65-year-old retiring in 2025 will need approximately $172,500 to cover out-of-pocket medical expenses throughout retirement — and a married couple will need a staggering $345,000.

According to Fidelity's health care retirement warning, the average American believes they'll spend only about $75,000 on health care in retirement — less than half of what Fidelity projects. That gap between expectation and reality could derail even the most carefully constructed retirement plan.

"Year after year, Americans underestimate how much they need to save for health care in retirement." — Shams Talib, Head of Fidelity Workplace Consulting

How Health Care Costs Have Exploded Since 2002

To understand just how fast these costs are rising, consider the historical trend. When Fidelity first published its retiree health care estimate in 2002, the figure stood at $80,000 per individual. Today, that number has more than doubled to $172,500 — and the pace is accelerating.

The 2025 estimate represents a 4.5% increase over the prior year's figure of $165,000 per individual. For context, that's faster than general inflation and signals that health care costs are consuming an ever-larger share of retirement savings. If this trend continues, future retirees could face even steeper burdens.

Crucially, the $345,000 estimate for couples does not include long-term care costs such as nursing homes, memory care facilities, or assisted living. Those expenses can run tens of thousands of dollars per year on top of standard medical costs — making the real lifetime health care burden potentially far higher for many Americans.

Medicare Costs Are Rising Too — And Coverage Has Gaps

Many pre-retirees assume Medicare will cover most health care expenses. Fidelity's data shows that assumption is dangerously optimistic. Medicare has significant premium costs, deductibles, and coverage gaps that erode retirement income faster than most people expect.

Here's what retirees need to know about Medicare costs in 2026:

• Medicare Part B standard monthly premium: $202.90 in 2026, up $17.90 from $185.00 in 2025.
• IRMAA surcharges: Higher-income retirees can face Part B premiums as high as $689.90 per month due to Income-Related Monthly Adjustment Amount (IRMAA) surcharges — more than triple the standard rate.
• Part A hospital deductible: Rises to $1,736 per benefit period in 2026.
• Coverage gaps: Original Medicare does not cover dental care, vision, hearing aids, or long-term care — four of the most common and expensive health needs for older Americans.

These gaps mean retirees often need supplemental Medigap policies, Medicare Advantage plans, or separate dental and vision coverage — all adding to the monthly cost burden. Comprehensive planning resources, such as those reviewed through Fidelity's retirement studies, consistently reinforce that Medicare alone is not a complete solution.

Investment Strategies to Close the Health Care Savings Gap

Given the scale of the problem, what should Americans actually do? Financial planners and Fidelity's own guidance point to several concrete strategies:

• Max out HSA contributions: Health Savings Accounts are the most tax-efficient way to save for medical expenses. Contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free — a triple tax advantage.
• Delay Social Security strategically: Waiting until age 70 to claim can significantly increase your monthly benefit, providing more income to absorb health care costs.
• Diversify with inflation-resistant investments: Funds like the Fidelity Series Commodity Strategy Fund (FCSSX) or the Fidelity SAI International Market Index Fund (FITMX) can provide portfolio diversification and potential protection against health care inflation over time.
• Plan for long-term care separately: Consider long-term care insurance or a hybrid life insurance/LTC policy to cover nursing home or assisted living costs that Medicare won't touch.
• Use a tax-efficient withdrawal strategy: Drawing from taxable accounts first, then tax-deferred, then Roth accounts can help manage IRMAA thresholds and keep Medicare premiums lower throughout retirement.

For self-employed individuals and freelancers, properly handling tax forms is a precondition for effective retirement planning. Missing a 1099-NEC or underreporting income can create IRS complications that drain savings and distract from long-term goals.

Frequently Asked Questions About Fidelity's Retirement Warnings

How did Fidelity calculate the $172,500 health care retirement estimate?

Fidelity's estimate is based on projected out-of-pocket costs for a 65-year-old retiring in 2025 and living through an average life expectancy. It includes Medicare premiums, cost-sharing (deductibles, copays, coinsurance), and prescription drug costs — but excludes long-term care expenses. The figure assumes enrollment in traditional Medicare.

Does the $345,000 couples estimate cover both spouses equally?

Yes, roughly. The couples figure is essentially double the per-individual estimate. However, actual costs vary based on each spouse's health status, life expectancy, income level (which affects IRMAA), and geographic location. Women statistically live longer than men, which can increase their individual share of lifetime health care costs.

What happens if I miss a 1099 form on my tax return?

Because the IRS receives copies of all 1099 forms directly from payers, any discrepancy between what you report and what the IRS has on file can trigger an automatic correction notice or a full audit. You may owe back taxes, interest, and potentially penalties. The safest approach is to wait until you've received all expected forms before filing.

Who is affected by the new 1099-NEC threshold of $2,000?

Starting with the 2026 tax year, freelancers, independent contractors, and self-employed individuals who receive payments from businesses will only receive a 1099-NEC if they earn $2,000 or more from a single payer. This is an increase from the previous $600 threshold. Note: you are still legally required to report all income, even if you don't receive a form.

Is $172,500 enough, or should I save more for health care in retirement?

Fidelity's estimate is a median projection — half of retirees will spend less, and half will spend more. Those with chronic conditions, high prescription drug needs, or who require long-term care could easily exceed this figure by a wide margin. Financial advisors generally recommend treating it as a floor, not a ceiling, and planning for additional long-term care costs separately.

The Bottom Line: Act Now Before Costs Compound

Fidelity's April 2026 warnings aren't abstract projections — they are data-driven signals that two of the biggest financial risks facing Americans are being dramatically underestimated. The gap between the $75,000 Americans expect to spend on health care in retirement and the $172,500 Fidelity projects isn't a rounding error; it's a retirement plan failure waiting to happen.

Similarly, treating tax forms as junk mail is a gamble with IRS consequences that can be far more expensive than the tax owed in the first place. With threshold changes from the One Big Beautiful Bill Act reshaping reporting requirements for gig workers and freelancers, staying informed has never been more important.

The path forward is straightforward: file your taxes accurately with every form accounted for, build health care costs explicitly into your retirement savings target, and revisit your plan annually as these figures continue to climb. Given that Fidelity's health care estimate has more than doubled since 2002 — and rose another 4.5% in just the last year — waiting is a luxury most Americans cannot afford.