Did you know that Fidelity does a study every year looking at healthcare costs in retirement? Did you know the average married couple who retires at age 65 should expect approximately $220,000 in healthcare costs over their retirement years? While that may seem like a lot of money, surprisingly, this number only applies to traditional healthcare expenditures and does not include the costs of nursing homes or long-term care expenses.

The good news is that the average life expectancy will continue to increase with technological and medical advancements, as seen in today’s health and longevity among older Americans. The bad news is a recent study conducted by Genworth states that at least 70% of people over 65 will need some form of long-term care services and support at some point.

While you may not be concerned at this stage of life about long-term care, keep in mind that healthcare costs are increasing faster than inflation at an annual rate of 5.8%. According to Genworth, the average cost for home care today is around $45,000 per year and the average stay is about 3 years, so you would be looking at around $135,000. Over the course of 20 years, based on the projected annual growth rate of these types of health care expenses, this cost could easily be about $400,000. In addition, the average nursing home care cost today is roughly $90,000 per year and with an average 3 year stay you would be looking at $270,000. But, 20 years from now, when you may need care, this number could easily reach $800,000. Do you have money set aside to pay for these costs?

These are some real numbers, which makes having a long-term care plan in retirement all the more important for your financial well-being. Having a healthcare plan is one of the core components of an effective retirement plan. This is why everyone need to have a Compass -Retirement Stress Test done.