Health costs are a major worry for U.S. retirees. Long-term care, like nursing homes and home health aides, isn't covered by Medicare. This can lead to huge bills late in life. Planning for these costs is key, says Christine Benz, director of financial planning at Morningstar.

    Retirement expenses usually go down, but long-term care can cause them to spike. This is called the "retirement smile." Spencer Look from Morningstar explains that long-term care can be a huge financial burden.

    Many U.S. retirees are worried about running out of money. A recent study by Morningstar found that 45% of households may not have enough money in retirement. Health issues top the list of concerns, with 31% of current retirees saying it's their biggest worry.

    Long-term care isn't cheap. Assisted living facilities can cost around $64,200 a year. Home health aides cost even more, at $75,504 a year. Planning for these costs involves figuring out how to pay.

    There are three main ways to cover long-term care costs. Some rely on family or Medicaid. Others saves enough money to cover the costs themselves. The last option is buying long-term care insurance.

    Medicaid has strict rules. In 2024, you can't make more than $2,829 a month and have assets worth more than $2,000, excluding your home. This can be tough for couples, as it might mean one person has to live in poverty to qualify.

    Wealthier folks can save up for long-term care. Men need care for about 2.2 years, while women need it for 3.7 years on average. That means planning for a six-figure bill.

    Long-term care insurance is a middle-ground option. It can be pricey, but it offers peace of mind. It's best to buy it in your 50s to keep costs down.

    No matter how you plan, talking to loved ones and a financial professional is important. They can help you decide the best way to cover long-term care costs.

Retirement Woes: Why Health Costs Scare U. S. Retirees

Actions