70 percent of older Americans could face this colossal expense


We hear a lot about how healthcare is a major burden for retirees. In fact, the average healthy 65-year-old couple that retired last year will spend an estimated $377,000 on healthcare costs throughout retirement. But while that number paints a pretty scary picture on its own, here's something even more frightening to chew on: It doesn't even account for long-term care expenses like assisted living facilities or nursing homes.

A good 70% of people who reach age 65 can expect to need some type of long-term care at some point in time. And that care doesn't come cheap. According to Genworth Financial's 2016 Cost of Care Survey, the average assisted living facility in the country costs $3,628 per month, or $43,539 per year. Meanwhile, the average nursing home costs $225 per day, or $82,125 per year, and that's for a semi-private room. A private room will set you back $253 per day, or $92,345 per year.

Unfortunately, many seniors are left to absorb the majority of these costs on their own. While Medicare offers some coverage, it typically only pays for skilled nursing or rehabilitation services for a limited period of time. In fact, the average Medicare-covered stay in a nursing home is just 22 days. Furthermore, Medicare won't pay for non-skilled assistance with daily living activities, which constitutes the majority of long-term care services seniors need.

Private or employer-sponsored health insurance companies aren't much better, as their coverage typically mimics that of Medicare. And given the fact that seniors typically require long-term care for extended periods of time, many are left to foot those hefty bills on their own. It's estimated that 69% of people requiring long-term care need it for three years, while 20% of today's 65-year-olds will need long-term care for five years or more. And the sooner you start preparing and saving for the possibility of this common expense, the better.

RELATED: See the average retirement age in every state:

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Average retirement age in every state
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Average retirement age in every state

Alabama - Age 62

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Alaska - Age 65

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Arizona - Age 63

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Arkansas - Age 62

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California - Age 64

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Colorado - Age 64

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Delaware - Age 62

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Connecticut - Age 64

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Florida - Age 63

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Georgia - Age 62

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Hawaii - Age 63

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Idaho - Age 63

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Illinois - Age 63

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Indiana - Age 63

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Iowa - Age 64

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Kansas - Age 65

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Kentucky - Age 62

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Louisiana - Age 63

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Maine - Age 64

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Maryland - Age 64

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Massachusetts - Age 64

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Michigan - Age 62

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Minnesota - Age 63

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Mississippi - Age 63

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Missouri - Age 63

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Montana - Age 63

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Nebraska - Age 65

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Nevada - Age 63

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New Hampshire - Age 65

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New Jersey - Age 65

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New Mexico - Age 63

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New York - Age 64

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North Carolina - Age 63

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North Dakota - Age 63

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Ohio - Age 63

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Oklahoma - Age 63

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Oregon - Age 63

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Pennsylvania - Age 63

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Rhode Island - Age 64

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South Carolina - Age 62

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South Dakota - Age 63

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Tennessee - Age 63

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Texas - Age 64

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Utah - Age 65

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Vermont - Age 65

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Virginia - Age 63

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Washington - Age 64

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West Virginia - Age 62

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Wisconsin - Age 63

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Wyoming - Age 65

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Look into long-term care insurance

The downside of long-term care insurance is that it tends to be expensive. A 60-year-old couple, for example, pays an average of about $3,400 per year. The upside, however, is that the right insurance policy could pick up a large chunk of the bill if you wind up needing long-term care like so many older Americans do. And the sooner you sign up for a plan, the less costly it's likely to be.

According to the American Association for Long-Term Care Insurance, over 50% of long-term care insurance applicants aged 50 to 59 qualify for health-based long-term discounts. That figure drops to 42%, however, among 60- to 69-year-olds, and it plummets down to 24% for 70- to 79-year-olds. If you're going to get long-term care insurance, don't wait too long to apply. Otherwise, you might face higher premiums for life, and you can't rule out the possibility of your application getting denied altogether.

Save, save, save

While long-term care insurance can help absorb the cost of a nursing home, assisted living facility, or any other associated service you might need, you shouldn't expect it to cover your expenses entirely. That's why it's so important to set aside money for retirement during your working years. It's not just those theater tickets and luxury cruises you're saving for; it's the more pressing items, like your health, that can end up eating a large chunk of your retirement income.

The good news is that if you save consistently and invest wisely, you can amass a nest egg large enough to make those costs seem less insurmountable. And thanks to the power of compounding, the sooner you begin saving, the more wealth you stand to accumulate.

The following table shows how much money you could wind up with if you start saving $500 a month for retirement at various ages:

If You Start Saving $500 a Month at Age:

Here's What You'll Have by Age 65 (Assumes an 8% Average Annual Return):

25

$1.55 million

30

$1.03 million

35

$680,000

40

$438,000

45

$274,000

TABLE AND CALCULATIONS BY AUTHOR.

As you can see, if you begin saving early on in your career, you stand a good chance at accumulating well over $1 million in time for retirement, which can go a long way toward covering your health-related expenses. Also keep in mind that these calculations assume an average yearly 8% return, and while you won't get that with safer investments, it's a reasonable goal for a stock-focused portfolio -- which is a solid strategy for anyone who's a decade or more away from retirement.

The next time you sit down to create or update your retirement plan, make sure to take long-term care expenses into account. Though the costs of long-term care are indeed sobering, a little up-front planning, and a lot of up-front saving, can make them all the more bearable when you're older.

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Maurie Backman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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