Retirement Planning & Long-term Care

Long-term care is often overlooked, and the costs are underestimated in retirement planning. On top of that, long-term care expenses are growing every year. The possibility of needing help taking care of yourself later in life is probably hard to imagine and most likely not on your priority list. However, if you forget to add this to your planning, you might run out of your retirement savings before you know it.

Why is it important to plan for long-term care?

As we journey through life, it’s essential to consider our present needs and potential challenges that may arise in the future. Long-term care is a crucial aspect that often gets overlooked until it becomes an immediate concern. Research indicates that an astounding 70% of individuals over 65 will require some form of long-term care in their lifetime ( Therefore, proactive planning for long-term care is not only wise but necessary to ensure a worry-free and secure future. In this blog, we will delve into the significance of preparing for long-term care and explore various options that can help you navigate this complex terrain.

Ask yourself the following question;

If you need long-term care, how will you pay for it, or who will pay for it?

The Reality of Long-Term Care Costs: Before we dive into the planning options, let’s first understand the magnitude of long-term care expenses. According to the median cost survey conducted by Genworth in 2022, here’s an overview of the average annual costs for various care options:

  1. In-home homemaker services: $53,768
  2. In-home health aide: $54,912
  3. Community adult day care: $19,240
  4. Community assisted living facility: $51,600
  5. Nursing home semi-private room: $93,075
  6. Nursing home private room: $105,850

Based on the numbers, it’s clear that long-term care can have a major impact on your financial stability if you don’t plan for it properly.

What about Health Insurance and Medicare?

While many individuals may assume that their regular health insurance or Medicare will cover long-term care costs, this is unfortunately not the case. Medicaid can provide assistance if your income falls within the Medicaid income limits. However, relying solely on Medicaid might restrict your choices for care, limiting the options for location and type of care you receive. Early planning is, therefore, essential to ensure you have the freedom to make informed decisions about your long-term care preferences.

Please plan and be ready in case you need it

There are different ways to prepare for these costs, and they all have ups and downs. We will discuss five options.

Option 1: Long-term care insurance

Long-term care insurance is a reliable option that offers peace of mind for the future. People opt for this type of insurance for two primary reasons:

  1. Protecting Retirement Savings: Long-term care insurance shields your hard-earned retirement savings from being depleted by exorbitant care expenses.

  2. Choice and Flexibility: With long-term care insurance, you can choose the type of care you desire, be it in your home, an assisted living facility, adult daycare center, hospice care, memory care, or nursing home care.

This insurance covers not only routine daily activities like bathing and dressing but also chronic medical conditions, disabilities, and disorders. While the policy price may increase in the future, the benefits far outweigh the potential drawbacks. The cost of the policy can be influenced by factors such as age, the maximum amount it pays per day, the number of years it will pay, and optional benefits like inflation protection.

What does long-term care insurance cover?

Long-term care insurance not only covers the basic routine daily activities, like bathing, dressing, or getting in and out of bed, but it will also cover in case of a chronic medical condition, a disability, or a disorder.

  • Your home.
  • An assisted living facility.
  • An adult daycare center.
  • Hospice care.
  • Memory care.
  • Nursing home care.

The downside is that you may never use it, and your policy price could increase in the future.

The price of a policy can be based on the following:

  • Age: the younger you are, the lower your premium will be.
  • The maximum a policy pays per day
  • The maximum number of years a policy will pay
  • Optional benefits, such as inflation protection

Option 2: Living benefits (life insurance)

Some individuals may consider leveraging their permanent/whole life insurance policy with an accelerated death benefit. This enables you to use a portion of your death benefit to cover long-term or other medical costs while you are alive. However, it’s essential to review your policy carefully to understand its limitations and consider adding riders if needed.

Another innovative option is a hybrid life insurance long-term care policy, which combines both life insurance and long-term care coverage. This provides more flexibility and can be a suitable alternative for those who wish to address both needs in one comprehensive policy.

 It is essential to review your policy to determine what it includes and if you need to add riders. 

  •  Check if the accelerated death benefit will increase your premium or if it is included in your premium.
  • Check The triggers you need to get your accelerated death benefit approved. A common trigger is having a terminal illness. Check the triggers you can use for the accelerated death benefit.

Option 3: Retirement Savings

While using retirement savings to cover long-term care expenses eliminates the risk of paying for something you might not use, it could have adverse consequences. Depleting your retirement funds might leave your significant other or family members in financial hardship or lead to an unfortunate situation where you run out of money to support yourself in later years.

Option 3: Your family, friends, or go fund me

Unfortunately, many individuals find themselves unprepared for long-term care and end up relying on the support of their family, friends, or even resorting to crowdfunding. Research indicates that 64% of people who overlook planning for long-term care have to depend on the help of their family (, September 2016). However, this route is uncertain and does not guarantee that you will receive the care you need. This makes it unpredictable; you will depend on other people and won’t guarantee that you will get the care you need.

Option 4: Annuities

Funding long-term care costs can be achieved through annuities, which involve investing a lump sum with insurers. This generates a steady income that can be utilized for various expenses, including long-term care. The nature of the annuity chosen determines whether the income stream is consistent or variable. Although annuities are available for purchase at any age, they usually require a significant investment and may have a waiting period before payments begin..

Planning for long-term care can be tricky, but it is crucial. Feel free to schedule a meeting with one of our licensed financial planners if you need help creating a plan for long-term care or retirement. Identifying goals and objectives is critical to a successful retirement.