While 70% of Americans over 65 will need long-term care, most have no financial plan to cover these potentially devastating costs that can deplete a lifetime of savings and derail retirement dreams.
At a Glance
- Long-term care costs can rapidly deplete retirement savings, with many incorrectly assuming Medicare will cover these expenses
- Approximately 70% of people aged 65+ will require long-term care, yet most Americans lack adequate financial protection
- Retirement advisors can help navigate options including traditional LTC insurance, hybrid policies, and alternative funding strategies
- Women face disproportionate financial impact, often serving as caregivers and losing over $300,000 in lifetime earnings
The Long-Term Care Crisis
Long-term care costs represent one of the most significant threats to retirement security that many Americans fail to adequately address. These expenses—covering assistance with daily activities or skilled care for chronic conditions—can rapidly deplete savings intended for retirement and inheritance. The crisis is intensifying as care costs consistently outpace inflation, facilities face staffing shortages, and public funding falls short. Most concerning is the widespread misconception that Medicare will cover these expenses, when in reality, it provides only limited coverage for skilled nursing care, typically for just 100 days following hospitalization.
“I’m getting more and more calls from agents and advisors asking how they can help clients needing to fund long-term care,” says Jackie Slaughter
The statistics are sobering: approximately 70% of people aged 65 and older will require long-term care at some point. While Medicaid does cover certain long-term care services, qualifying typically requires “spending down” assets to meet strict eligibility requirements—essentially forcing individuals into poverty. This predicament leaves many retirees in a vulnerable position, having to choose between depleting their life savings or going without necessary care. Family members often step in as unpaid caregivers, creating additional financial and emotional strain that can impact multiple generations.
Understanding Long-Term Care Options
Long-term care encompasses a range of services beyond traditional medical care, including assistance with daily activities like bathing, dressing, and eating. These services can be provided in various settings—from in-home care to assisted living facilities, adult day care centers, nursing homes, or hospice facilities. The costs vary significantly based on location, type, and setting of care, but the financial burden is substantial regardless. For example, the annual cost of a private room in a nursing home can exceed $100,000 in many areas, while full-time home health aide services might cost $50,000 or more annually.
Funding options for long-term care include self-funding through personal savings, relying on family support, seeking government assistance through Medicaid, or purchasing long-term care insurance. Self-funding may involve dedicated savings, home equity lines of credit, or reverse mortgages, each with their own financial implications. The insurance market has evolved significantly, with hybrid policies that combine life insurance or annuities with long-term care benefits gaining popularity over traditional stand-alone LTC policies. These newer products address concerns about “use it or lose it” premium payments and often provide more flexible benefits.
“But it’s a whole new world today. The LTC market has matured, clients are asking for LTC coverage, and there are ways to avoid the bad experience of rejection in underwriting,” notes Jackie Slaughter
How Financial Advisors Can Help
Retirement advisors play a crucial role in helping clients navigate the complex landscape of long-term care planning. They can assess individual risk factors based on family health history, potential care needs, and personal financial goals to develop appropriate strategies. Advisors can explain the various insurance options, including traditional long-term care insurance, hybrid policies that combine life insurance with LTC benefits, and innovative funding methods such as Health Savings Accounts (HSAs) that offer tax advantages for qualified medical expenses including certain long-term care costs.
“Women are often the safety net, providing care, absorbing the cost, and sometimes sacrificing career opportunities,” Kaylee Ranck said. “Planning for long-term care helps redistribute that burden.”
Advisors can also guide clients through recent legislative developments such as the SECURE 2.0 Act, which allows for qualified account distributions to pay for long-term care premiums without penalties. They can help determine appropriate coverage levels and premium amounts that fit within overall retirement budgets, while explaining how these protections complement other retirement planning elements like Social Security, Medicare, and investment strategies. Importantly, advisors can facilitate family discussions about care preferences and financial responsibilities, helping to create comprehensive plans that address both financial and emotional aspects of care decisions.
The Cost of Waiting
Procrastination in long-term care planning can have severe consequences. Insurance premiums increase substantially with age, and health issues that develop over time may make obtaining coverage difficult or impossible. Many financial experts recommend beginning LTC discussions in one’s 50s, when premiums are more affordable and qualification is more likely. Early planning also provides more time to build dedicated funds if self-funding is the preferred approach. The emotional benefit of having a plan in place should not be underestimated – knowing that care needs won’t create a financial crisis for oneself or loved ones provides significant peace of mind.
“When clients wait until a crisis hits, the options narrow, and the emotional toll spikes,” Ranck said. “Planning proactively means preserving choices and a sense of control.”
Perhaps most importantly, addressing long-term care planning early helps preserve what many retirees value most: independence and choice. Having financial resources dedicated to care needs means maintaining control over where and how care is received, rather than being limited to whatever options Medicaid might cover. It also protects assets intended for inheritance, ensuring that a lifetime of savings can benefit future generations rather than being consumed by care costs. With proper planning and professional guidance, the potential financial devastation of long-term care costs can be mitigated, allowing for greater security and peace of mind throughout retirement.
