Here's an uncomfortable truth: 70% of people over 65 will need some form of long-term care. Medicare doesn't cover it. Medicaid only kicks in after you've spent down most of your assets. Long-term care can cost $100,000 or more per year. Without a plan, this single expense can devastate a lifetime of careful saving.
What Is Long-Term Care?
Long-term care (LTC) refers to assistance with daily living activities when you can no longer perform them independently. This includes:
- Activities of Daily Living (ADLs): Bathing, dressing, eating, toileting, transferring (moving from bed to chair), continence
- Instrumental Activities: Managing medications, cooking, housework, finances, transportation
LTC can be provided at home, in assisted living facilities, or in nursing homes. The setting affects both quality of life and cost.
The Cost Reality
Long-term care costs vary dramatically by location and type of care. National averages for 2025:
- Home health aide: $32-$38/hour ($65,000-$75,000/year for 40 hours/week)
- Assisted living facility: $5,000-$6,000/month ($60,000-$72,000/year)
- Nursing home (semi-private): $8,500-$10,000/month ($102,000-$120,000/year)
- Nursing home (private): $10,000-$12,000/month ($120,000-$144,000/year)
In high-cost states like California, New York, and Massachusetts, these figures can be 50-100% higher.
The average nursing home stay is 2.5 years, but many people need care for much longer. A five-year nursing home stay could cost $500,000 or more.
What Medicare and Medicaid Cover
Medicare covers very limited LTC—only skilled nursing care following a hospitalization, and only for up to 100 days. It does not cover custodial care (help with daily activities), which is what most people need long-term.
Medicaid does cover nursing home care, but only after you've spent down your assets to poverty level (typically under $2,000 for an individual). Medicaid planning can protect some assets, particularly for the healthy spouse, but it's complex and has look-back periods for asset transfers.
The gap between Medicare's limitations and Medicaid's poverty requirements is where most families struggle.
Long-Term Care Insurance
Traditional LTC insurance pays a daily or monthly benefit when you can't perform a specified number of ADLs or have cognitive impairment.
Pros:
- Protects assets from LTC costs
- Provides choice in care settings
- Can include inflation protection
- May include home care benefits
Cons:
- Expensive—premiums can be $3,500-$9,000+/year per person
- Premiums can increase over time (many policyholders have faced significant hikes)
- Use it or lose it—if you never need care, you've paid for nothing
- Complex policies with elimination periods, benefit limits, inflation riders
- Underwriting may deny coverage for pre-existing conditions
Best candidates for traditional LTC insurance:
- Ages 55-65 (before health issues make it unavailable or expensive)
- Assets of $300,000-$2,000,000 (enough to protect, not enough to easily self-insure)
- Good health (to qualify for coverage)
- Ability to afford premiums without strain
The Zen Take
Long-term care planning is uncomfortable—it requires confronting vulnerability, decline, and mortality. But ignoring it doesn't make it go away. The families who plan, even imperfectly, handle these situations far better than those who are blindsided. Make peace with the uncertainty by preparing for it.
Hybrid Policies: The New Alternative
Hybrid or combination policies link life insurance or annuities with LTC benefits. They've become increasingly popular as traditional LTC insurance has become more expensive and unpredictable.
Life insurance + LTC: A permanent life insurance policy with an LTC rider. If you need care, you can access the death benefit early to pay for it. If you don't, your heirs receive the death benefit. You don't "lose" the premiums if you never need care.
Annuity + LTC: An annuity that provides enhanced payments if you need long-term care. Similar concept—you get value either way.
Pros of hybrids:
- Guaranteed premiums (typically paid upfront or over limited years)
- Death benefit if LTC never needed
- No "use it or lose it" concern
Cons of hybrids:
- Large upfront premium (often $50,000-$150,000+)
- Opportunity cost of that lump sum
- LTC benefits often less comprehensive than standalone policies
Self-Insuring
Some people choose to self-insure—essentially setting aside assets specifically for potential LTC needs rather than paying insurance premiums.
When self-insuring makes sense:
- Very high net worth ($3M+)—you can afford care without insurance
- Very low net worth—you'd qualify for Medicaid anyway
- Poor health that makes insurance unavailable
- Strong preference against insurance products
The middle class squeeze: Those with $500,000-$2,000,000 in assets face the toughest decisions. They have enough to lose but not enough to easily absorb $500,000+ in LTC costs. This is the group for whom insurance solutions often make the most sense.
Other Strategies
Health Savings Accounts (HSAs): If you have a high-deductible health plan, maximize HSA contributions. HSA funds can pay LTC insurance premiums (within limits) and LTC expenses tax-free.
Home modifications: Aging in place is often preferred and less expensive than facilities. Consider modifications—grab bars, stair lifts, accessible bathrooms—that could allow home care.
Family care: Many families provide informal care, but this has its own costs—caregiver burnout, lost income, family stress. Be realistic about what family can and should provide.
Continuing care retirement communities (CCRCs): These facilities offer a continuum from independent living through nursing care. Large upfront fees but guaranteed care as needs increase.
When to Plan
The ideal time to purchase LTC insurance is your mid-50s to early 60s. Earlier means lower premiums but more years of paying them. Later means higher premiums and potential health-related denials.
At minimum, start the conversation in your 50s:
- Understand your family health history (especially dementia)
- Model potential LTC scenarios in your retirement projections
- Research insurance options and costs
- Discuss preferences and plans with family
Making the Decision
There's no universally right answer. Consider:
- What's your asset level? Very high or very low may not need insurance.
- What's your health? Can you even qualify for coverage?
- What's your family history? Higher risk may justify insurance.
- What are your preferences? Home care vs. facility, burden on family.
- What can you afford? Premiums shouldn't strain your budget.
- What's your risk tolerance? Can you stomach the possibility of large LTC costs?
The Bottom Line
Long-term care is one of the biggest financial risks in retirement—and one of the most commonly ignored. Whether through insurance, self-funding, or some combination, you need a plan.
The goal isn't to eliminate all risk. It's to ensure that whatever happens, you have resources, choices, and dignity—and that your family isn't devastated financially or emotionally by a crisis that could have been anticipated.
Have the conversation. Make a plan. Then move forward with peace of mind.