We all like to believe that we'll stay healthy during our golden years, but the statistics don't lie. Among adults 65 and older, 68% will require long-term care at some point, according to a study by the Insured Retirement Institute (IRI.) However, only 25% of retirees surveyed believed that they are likely to need long-term care.

This misguided optimism is a huge problem and could completely derail your retirement. A closer look at the cost of long-term care demonstrates what can happen if you fail to plan accordingly.

The costs of long-term care

The overall cost of long-term care depends on where you live, what kind of services you need, and how long you require care, but under no circumstances is it cheap. Estimates from the U.S. Department of Health and Human Services put the cost of a private room in a nursing home at more than $92,000 per year. Even home health aides can easily cost more than $50,000 per year.

Doctor holding x-ray in front of his chest.

Image source: Getty Images.

According to the IRI study, 61% of people mistakenly assume that if they do find themselves in need of long-term care, Medicare will cover most of the costs. But this is not true. Medicare covers hospital visits, prescription drugs and specific medical treatments, but it offers no coverage for long-term care. You have to come up with this money on your own. If you aren't prepared, your only option may be to dip into your retirement savings.

62% of Americans surveyed said they would expect to pay at least some of the costs of long-term care out of pocket if they needed it. The trouble is, most people don't understand how quickly these costs can climb and the consequences that can have on their financial security.

Say that your estimated annual living expenses are about $30,000 during retirement. Then tragically, you suffer a serious injury or develop an illness that forces you to hire a home health aide. Your living expenses for the year could easily double. Even if you recover from your condition and no longer require long-term care, you've lost a sizable chunk of your retirement savings.

Planning for the unexpected

Fortunately, avoiding this fate is not difficult. Adding a long-term care insurance policy to your retirement plan could help offset these costs up to a set dollar amount. Some policies even adjust for inflation so you don't have to keep reevaluating your coverage.

The cost of a long-term care policy varies depending on your age and desired level of coverage. Policies are available for individuals and couples. It's a good idea to shop around before making a purchase to ensure you're getting the best possible rate.

You could also look into a life insurance policy or an annuity with a long-term care rider. These options are often more affordable than traditional long-term care insurance and they offer many of the same benefits. If you purchase a whole life insurance policy with a long-term care rider, for example, and you find that you need to use it, you can access your death benefit early to cover your costs. And if you don't need it, the money will go to your beneficiaries upon your death.

A health savings account (HSA) is another option for covering long-term care costs, if you have a high-deductible health insurance plan (Defined as a deductible of at least $1,350 for an individual or $2,700 for a family.)Individuals may contribute up to $3,450 to their HSA in 2018 and families may contribute up to $6,850.

Any money you put in an HSA can be deducted from your taxable income for this year, and if you use it for a qualified medical expense, you won't pay any taxes on it at all.  Plus, you can keep the money in the account for as long as you need to. Even if you decide not to re-enroll in a high-deductible health insurance plan, you can still keep the HSA, though you won't be able to make more contributions to it.

Health problems are unpleasant enough without having to worry about how you're going to pay for your care. If your current retirement plan doesn't include any long-term care coverage, you should consider adding a policy that does. It might raise your expenses,  but a planned expense is better than getting slammed by a huge unexpected cost later should you require long-term care. According to the IRI study, 24% of surveyed retirees said they encountered a significant unexpected expense and 29% said they experienced a serious health event. 

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