Did you know that once you've reached age 65, you have better than even odds of living until age 80? Your chances of living until 90 aren't that bad, either.

In fact, around one in five men and three in 10 women who've reached the age of 65 will live until at least 90, while about 6% of men and 12% of women will hit 95. For a senior couple, there's close to a one-in-five shot one of the two will still be around at 95. 

This is great news, right? Yes -- but there's a big caveat. Your savings may not always last until your 95th birthday, especially if you experience big health issues. 

It's hard to know how long you'll live -- although your family history could help provide a guide -- but it's best to err on the side of caution and assume longevity when planning for retirement and particularly when deciding how much to save for healthcare.

A smiling doctor with a clipboard sits at a table with a patient.

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Median out-of-pocket health expenses for older seniors

A recent study by Employee Benefits Research Institute (ERBI) underscores the need to save a substantial amount for healthcare, especially if you're likely to live a long time. 

According to ERBI, the cumulative median out-of-pocket health expenses for a senior who passes away between the ages of 80 and 84 is $11,608, while median out-of-pocket health expenditures reach $27,382 for those who live until 95 or longer. 

For those who need a lot of care, however, the gap is much greater. Those who pass away between 80 and 84 who are in the 90th percentile for medical care expenditures pay about $73,374 out of pocket. But for seniors who live until 95 or longer, spending for those in the 90th percentile of medical care use is a whopping $171,979. 

It makes sense that those who live longer will pay more for care.  However, as ERBI points out, the costs within the last 10 years of life go up exponentially for those who have the longest life spans. 

Nursing home expenses are a huge driver of healthcare costs

ERBI also warns that the longer you live, the more likely it is you'll end up needing nursing home care. While only 15.3% of people who pass away in their early 70s spend any time in a nursing home, more than six in 10 people who live until 95 spend at least one night in an institutional facility -- and sometimes much longer. 

Nursing home care has an average cost of more than $85,000 per year nationwide for a semi-private room, according to the Genworth Cost of Care survey. Because nursing home costs usually must be paid out of pocket since Medicare only provides very limited coverage and only for specific types of skilled nursing care, having to spend any time in a nursing home could mean serious financial hardship. 

How can you prepare to cover healthcare costs as a senior?

Because healthcare expenditures can be so substantial -- especially if you live a long life -- it's best to err on the side of caution and develop substantial savings dedicated to covering medical treatment.

If you think you'll live until 95, plan to spend at the high end because you can't guarantee how your health will hold up -- and of course, going back to work to pay for care at 95 is a nonstarter. 

One of the best ways to make sure you save enough is to invest in a health savings account throughout your lifetime. If you have a high deductible health insurance plan, you should be eligible to invest. While these accounts can be used to cover short-term medical expenses any time after money is invested, leaving the money in the account to grow and pay for care as a senior is often the smartest move. 

Also consider options for long-term care insurance -- although not all policies provide comprehensive coverage -- and compare Medicare programs carefully to determine if you should purchase a Medigap plan to provide supplementary coverage for things traditional Medicare won't pay for. 

Finally, working with an attorney to create a plan to qualify for Medicaid could be another approach. Medicaid is a means-tested benefit open to people with limited financial resources. However, many people work with attorneys to make effective use of legal tools that allow them to keep assets they've worked for throughout their lives while qualifying for Medicaid. 

Medicaid can cover nursing home care costs and, for eligible seniors, also subsidize Medicare premiums and co-insurance costs to make affording care easier. 

Don't retire without a plan for healthcare costs

Far too many people don't really think about healthcare costs when deciding how much they need to save for retirement. Don't make that mistake. You may need hundreds of thousands of dollars to pay for the costs of healthcare -- especially if you live a long life. Make a plan today to start setting aside money so you can afford the care when you need, even if you make it to 100.

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