If you’re a retirement planner, you’ve probably spent plenty of time working through key decisions — when to start tapping your savings, what withdrawal rate to use, and when to sign up for Social Security. You may also be aware that healthcare tends to be one of the biggest expenses for seniors, and that you need funds set aside to cover Medicare premiums, coinsurance, and deductibles.

But there’s one major retirement expense that far too many people fail to plan for — long-term care. An estimated 70% of people who live until age 65 end up needing some type of long-term care in their lifetime. If you think Medicare will pay for it, you’re wrong. So it’s important to have a solid plan to tackle this potentially enormous expense.

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Why Medicare won’t pick up the tab for long-term care

The reason Medicare won’t pay for long-term care is simple. It’s designed to cover medical care, not custodial care, which means assistance with daily living.

If you need skilled nursing or rehabilitation after a qualifying hospital stay, Medicare will often pay for a limited period. But if you need help bathing, dressing, or managing everyday tasks because of aging, that’s considered custodial care. Medicare generally doesn’t cover those services, whether they’re provided at home, in an assisted living facility, or in a nursing home.

The cost of long-term care can quickly add up

The problem with long-term care is that the cost can be exorbitant. If you end up needing it for a longer period of time, it could easily end up wiping out your retirement savings.

On a national scale, the median annual cost for an in-home non-medical caregiver is $80,080, according to CareScout. The median annual cost for assisted living is $74,400.

If you need a nursing home, it gets worse. The median annual cost for a shared room is $114,975. For a room of your own, it’s $129,575.

Your options for covering long-term care

Since you can’t expect Medicare to pick up the tab for long-term care, you have two basic options for covering the cost — buying insurance or paying yourself, otherwise known as self-insuring.

Long-term care insurance transfers much of the financial risk to an insurance company. If you eventually need covered services, your policy can reimburse some or all of your costs, depending on the coverage you buy.

If you self-insure, you’ll have to cover the cost of your care yourself. However, if you’re able to set aside enough funds to pay directly, you may find that this approach works better for you.

The problem with long-term care insurance is that it’s expensive. If you don’t end up needing it, your money goes to waste.

If you allocate a portion of your IRA or 401(k) to long-term care, you can invest that money and manage it as you see fit. If you don’t end up needing to use those funds for long-term care, you can pass the money along to your heirs or find another good use for it.

While there’s no right or wrong choice when it comes to how you’ll pay for long-term care, if you’re thinking of going the insurance route, the timing of your application is crucial. The ideal window to apply is generally in your 50s or very early 60s, while you’re still relatively healthy. Buying coverage earlier usually means locking in lower premiums.

Planning now can protect your retirement later

It’s not an easy thing to wrap your head around the fact that you might one day need help with everyday living. But it’s important to have a plan for long-term care so you don’t end up scrambling or burdening your loved ones.

So in the course of figuring out a withdrawal strategy for your IRA and your optimal Social Security filing age, research long-term care costs and decide whether you should buy insurance or self-insure. If it’s the former, start shopping around if you’re over 50, to improve your chances of qualifying for coverage and getting an affordable rate.

The sooner you start making a plan, the more options you might have — and the more peace of mind you might gain.

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