Preparing for a life without a paycheck means that seniors need to be sure they have a plan in place to cover all of the essentials they'll need during retirement.

Unfortunately, disturbing new data from the Center for Retirement Research (CRR) found millions of older Americans are woefully underprepared for one big expense that could be the largest cost they face -- and the most crucial one to cover. 

Doctor talking with patient.

Image source: Getty Images.

Retirees could be in trouble if they can't cover this expense

According to CRR's data, around one-third of all retirees are currently lacking the funds to cover even minimal long-term care services. And only around one-fifth of seniors in total would have the money available to cover long-term care if their need for such assistance became severe. 

This is a huge problem, as 7-in-10 people end up requiring long-term care at some time during the course of their lives. This long-term care can come at a huge price, with the Genworth Cost of Care survey revealing shocking costs for long-term care in a nursing home or home setting.

According to Genworth's data, in 2020, these were the median monthly costs for various services:

  • Home health aide: $4,576. 
  • Assisted living facility: $4,300.
  • Semi-private room in a nursing home: $7,756.
  • Private room in a nursing home: $8,821.

This means you could be looking at anywhere from $51,600 to $105,852 in annual costs if you end up requiring care. This amount of money could very quickly drain your nest egg, leaving you without funds to support yourself. And if you have a spouse, their future financial security could be at risk. And you may be left without assets to provide for heirs. 

How to prepare for long-term care expenses

You obviously don't want any of these outcomes to occur, so it's crucial to prepare to cover your long-term care costs. You can do this in a number of ways:

  • You could save money dedicated to covering long-term care expenses: This could be a huge challenge, due to the high costs and the fact you can't predict how long you'll actually need nursing home care or the help of a home health aide. 
  • You could buy long-term care insuranceThis approach can work, but you need to read the fine print on policies, as some are better than others in terms of how comprehensive the coverage is. If you don't buy a long-term care insurance policy relatively early on before you become very sick, the costs may be prohibitively expensive, or it may be difficult to get covered. 
  • You could work with an attorney to make a Medicaid plan: Medicaid covers long-term care, but only if you have limited financial assets. Attorneys can help you find ways to protect your wealth while still qualifying for Medicaid services. 

If you're one of the one-third of retirees without funds for this huge expense, there's no time to waste in making a plan. It's best to explore these options sooner rather than later, as you never know when a health issue could arise that leaves you temporarily or permanently in need of long-term care services.