Planning for long-term care (LTC) is a crucial step in retirement planning that many overlook. According to the U.S. Department of Health and Human Services, According to the U.S. Department of Health and Human Services, approximately 70% of Americans aged 65 and older will require some form of long-term care during their lifetime.(HHS, 2025)  With costs for nursing homes, assisted living, and in-home care rising every year, it’s essential to prepare financially for the possibility of needing these services. Here’s why LTC planning matters and some of the options available to you.

1. Understanding Long-Term Care Costs

Long-term care is costly, and expenses vary widely based on the type of care. In 2023, the average cost of a private room in a nursing home is approximately $108,000 per year, while assisted living averages $54,000 annually (Genworth, 2023). These expenses can quickly erode retirement savings if not accounted for in advance.

2. Long-Term Care Insurance

Long-term care insurance (LTCI) is designed to help cover expenses associated with long-term care services, which are often not covered by Medicare or standard health insurance. In 2023, LTCI companies paid out a record $14.1 billion in claims, reflecting the significant role these policies play in supporting individuals who need long-term care services (American Association for Long-Term Care Insurance, 2024). However, it’s important to note that only about 3% to 4% of Americans aged 50 and older have purchased long-term care insurance, which may be due to factors such as cost, perceived need, and understanding of the benefits (Kaiser Family Foundation Health News, 2024).

Nonetheless, for those who do invest in LTCI and later require extended care, the financial support provided by these policies can be substantial, potentially offsetting high out-of-pocket expenses associated with long-term care services.3. Hybrid Insurance Policies

For those who want flexibility, hybrid policies that combine life insurance with LTC benefits can be a smart option. These plans allow you to access funds for long-term care, with the assurance that unused benefits will go to your beneficiaries as a death benefit.

4. Self-Funding

For high-net-worth individuals, self-funding is an option. However, since over half of LTC recipients will need care for more than one year, even significant retirement savings can be depleted quickly if a plan isn’t in place.

5. Medicaid

Medicaid can cover LTC costs, but eligibility requirements are strict, and planning often requires a five-year “look-back” period. Early planning is key if you anticipate using Medicaid.

By addressing long-term care planning early, you can help protect your financial security and ensure your future care needs are met.

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Sources:

• Giese, C., Gunnlaugsson, A., & Brown, K. (2025). Actuarial Analysis of Long-Term Services and Supports Reform Proposals. U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation. Retrieved from https://aspe.hhs.gov/reports/long-term-services-supports-reform​
• Genworth Financial. (2023). Cost of Care Survey. Retrieved from https://www.genworth.com
• American Association for Long-Term Care Insurance. (2024). Paid long-term care insurance claims increased in 2023. Retrieved from https://www.aaltci.org/news/long-term-care-insurance-association-news/paid-long-term-care-insurance-claims-increased-in-2023
• Kaiser Family Foundation Health News. (2024). Dying broke: Why long-term care insurance falls short. Retrieved from https://kffhealthnews.org/news/article/dying-broke-why-long-term-care-insurance-falls-short

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