Long-Term Care and Where It Fits into a Retirement Plan
The cost of needing long-term care can be one of the biggest financial challenges in retirement, and it is also one of the least planned for. Most people know the term in a general sense being help with daily living but far fewer have thought through what it actually costs, what insurance covers, or how the decision to plan for it fits into everything else they are already doing with their retirement savings.
What Long-Term Care Actually Means
Long-term care at its core refers to help with basic daily activities that a person can no longer safely do alone. This includes things like bathing, dressing, eating, using the bathroom, and moving around the house. It is different from medical care in the traditional sense because a doctor is not treating an illness in most long-term care situations; someone is simply providing hands-on assistance so a person can get through activities of daily living.
This kind of care can happen in several settings. Some people receive it at home from a family member or a hired aide. Others may move into an assisted living facility that provides support with daily activities while still allowing some independence. At the higher end, a nursing facility provides round-the-clock skilled and custodial care for people who need more constant supervision.
The need for long-term care is not rare. A large share of people who reach 65 will likely need some form of it before they die, and the duration varies widely. Some people need only a few months of help while others may need assistance for multiple years. That range is part of what makes long-term care so hard to plan for using savings alone, since you are not planning for a fixed cost but for a wide range of possible outcomes.
What It Actually Costs
The cost of long-term care depends heavily on where you live and your specific situation, but the numbers involved are often large enough to affect a retirement plan on their own. A single year in a nursing facility commonly runs into six figures in many parts of the country.
While assisted living tends to cost less than care in a nursing facility, it can still represent a significant monthly expense. Home care, while often assumed to be the cheapest option, can add up quickly once a person needs many hours of assistance per day. The cost of this care has been rising steadily.
The larger concern is that these are not one-time costs. Long-term care needs often stretch across multiple years, and the bill generally continues the entire time. A retirement plan built around a comfortable withdrawal rate can be seriously disrupted by an extended care need that was never built into the numbers.
Why Medicare Does Not Solve This
A common and costly misunderstanding is assuming Medicare will cover long-term care if the need arises. It does not, beyond a narrow exception. Medicare will cover a short stint of skilled nursing care following a qualifying hospital stay, but only for a limited number of days and only under specific conditions. Once that window closes, Medicare stops paying, regardless of whether the person still needs help. This gap is one of the most consequential misunderstandings in retirement planning, since people often assume that being on Medicare means they are covered for this kind of need.
Medicaid, on the other hand, can cover long term care, but only after a person has spent down their assets to qualify, which is a very different outcome than protecting their assets. The threshold for qualifying for Medicaid also varies by state and can involve multiple eligibility requirements.
How People Cover This Risk
There are a handful of ways households address the possibility of needing long-term care, and most retirement plans end up relying on some combination of them.
Paying Out of Pocket
Some households simply plan to pay for care directly from their portfolio if the need arises. This can work well for people with significant assets, where even extended care needs would not meaningfully threaten their financial security or achieving their financial goals. For these households, buying insurance may cost more over time than the risk of being insured against, so in these cases self-funding can be the more efficient choice. The risk with this approach typically shows up for households in the middle: enough assets to feel secure day-to-day, but not so much that a multi-year care need would not create real strain, especially if it affects a spouse who still needs income from the same portfolio to cover expenses beyond the cost of care.
Traditional Long-Term Care Insurance
Long-term care insurance is a standalone policy designed specifically to pay for long-term care expenses, typically up to a daily or monthly benefit amount for a set period of time or a lifetime benefit, depending on the policy. Premiums are paid over time, similar to other insurance, and the policy is generally designed to pay out if you need qualifying care. The costs associated with traditional long-term care insurance has been steadily increasing, since insurers underestimated how many people would use their benefits and for how long. Premiums for long term care insurance may also increase over time as you age, which is worth understanding clearly before purchasing, since a policy assumed to be a fixed cost may not stay that way.
Hybrid Policies
A more common option today combines long-term care coverage with a life insurance policy or an annuity. These hybrid products allow the long-term care benefit to be paid from the policy if needed, and if it is never used, the death benefit or account value typically passes to beneficiaries instead. This addresses one of the biggest objections people have to traditional long-term care insurance: the feeling of paying for coverage for years and getting nothing back if the coverage is never used. Hybrid policies tend to cost more upfront, often through a lump sum or a limited number of years of premium payments, and the long-term care benefit can be more limited compared to a dedicated long-term care insurance policy. The tradeoff is that the money in these policies typically is not simply lost if care is never needed, since it converts into a death benefit or remaining value instead.
Relying on Family
Some families plan, formally or informally, to have a spouse or adult child provide care directly rather than paying for outside help. This can work, but it carries costs that are easy to underestimate, both financial and personal. A family caregiver may need to reduce work hours or leave a job, which can affect their own retirement savings. The physical and emotional toll on a caregiver is real as well, and it is worth having an honest conversation about whether this is a sustainable plan or simply the default because no other plan was made.
Why This Belongs in a Retirement Plan Conversation
Long-term care costs are directly connected to your retirement income and investment planning, so addressing them is an important part of a complete retirement strategy. A retirement plan is built with many moving pieces, one of those being a withdrawal strategy designed to make a portfolio last comfortably throughout your lifetime. An extended long-term care need, especially one that arrives early in retirement, can pull far more from that portfolio than the plan assumed, which can affect everything downstream, including what is left for a surviving spouse or for heirs.
It also matters for a spouse who is not the one needing care. If one spouse requires years of paid care, the household is often still supporting two people. Usually that means one in a facility or receiving home care, and one continuing to live independently on the remaining income and assets. Planning for this ahead of time, rather than reacting to it, typically gives couples more options and less financial stress at a difficult time.
The right approach depends on the numbers. Age and health at the time you consider coverage matter significantly, since long-term care insurance typically becomes more expensive and harder to qualify for the longer you wait, and a serious health event can close the door on traditional coverage entirely. The size of your portfolio matters too, along with how much of your estate you intend to preserve for the next generation versus how much flexibility you are comfortable building around uncertainty.
None of this has one correct answer that applies across every household. What matters is treating the decision as a deliberate part of the plan rather than something addressed only after a health event forces the issue. If you have not looked at how a long-term care need, for yourself or a spouse, would affect your retirement income plan, our team at Corbett Road Wealth Management can walk through the numbers with you and help you decide what level of protection, if any, makes sense for your situation.
IMPORTANT DISCLOSURES
Any opinions expressed through Claude-powered analysis, or by Concurrent Investment Advisors, LLC, reflect viewpoints as of the date produced. They are subject to change without notice and should not be interpreted as personalized advice or predictions.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials does not constitute tax or legal advice and may change at any time and without notice. Long term care costs, insurance products, and Medicaid eligibility rules vary by state and individual circumstance. Please consult a qualified advisor for guidance specific to your situation.
Corbett Road Wealth Management provides all investment advisory services through Concurrent Investment Advisors, LLC, an SEC Registered Investment Advisor. Corbett Road Wealth Management and Concurrent Investment Advisors, LLC are not affiliated companies.
