A 65-year-old couple retiring in 2016 will need an estimated $260,000 to cover health care costs throughout retirement, according to Fidelity’s Retiree Health Care Cost Estimate. The level represents a 6% increase from last year’s estimate of $245,000 and marks the highest projection since Fidelity began making calculations in 2002.

The estimate applies to retirees with traditional Medicare insurance coverage and general, monthly expenses associated with Medicare premiums, co-payments and deductibles, as well as prescription drug and out-of-pocket expenses.

Fidelity attributes much of the increase to a boost in the utilization of medical services and a rise in the costs of prescription drugs.

“In recent years, the health care industry has experienced a period of historically low spending levels, due to a range of factors including a period of slow economic growth,” says Adam Stavisky, senior vice president of Fidelity Benefits Consulting. “Looking forward, we expect health care spending to pick up from where it’s been in recent years, though less than what we’ve seen over the last few decades.”

According to Fidelity, health care cost estimates for retirees has increased by at least 29% since 2005. This year, Fidelity also examined estimates of long-term care costs, which usually are covered by Medicaid in only limited circumstances and could affect seven in 10 Americans who reach age 65 within the next five years.

Fidelity estimates that a 65-year-old couple would need $130,000, in addition to savings in order to cover long-term care expenses such as nursing home costs and other services.

“Long-term care is an increasingly important part of retirement planning, as a significant percentage of retirees will likely need some level of long term-care in retirement,” Stavisky says. “Unfortunately, recent Fidelity research on family finances has shown that less than half of parents surveyed have not had detailed conversations about long-term care with their kids. Planning on how to address these potential costs will help avoid placing the burden of care on family and friends.”

Fidelity argues that although the numbers can be daunting, the situation provides an opportunity for service providers and benefit-plan sponsors to work together on creating a clearer picture of health-care savings for participants approaching retirement.

To help people better understand options for long-term health care coverage, Fidelity published Long Term Care: Challenges and Changes. The firm also advocates the use of tax-sheltered Health Savings Accounts (HSAs).

These accounts are becoming increasingly popular in the U.S. covering 16.7 million people by the end of 2015 and reaching a 22% increase from last year, Fidelity reports. HSA contributions generally are deferred pre-tax, accrue interest free of taxes, and finally are spent on qualified services free of taxes.

The firm also points out that decades of regular, tax-deferred contributions to HSAs could be among the few options that can help investors reach a goal like $260,000 in savings, especially for employees in low-wage industries.