How Much Could Long-Term Care Cost You?

healthcare in retirement

If you have elderly parents or know someone who does, you already know that there are many hard decisions to make when it comes to long-term care, especially during the pandemic. And figuring out the finances can be even harder. Trends could change in the coming decades, such as moving long-term care into the home, and it’s important to think about how you want to be cared for when creating your retirement plan. Luckily, November is long-term care awareness month, so let’s talk about how much long-term care could cost you and how you can plan for costs.

You May Not Be Able to Necessarily Rely on Medicare and Medicaid

Medicare can cover doctor visits, hospital stays, and other services but does not necessarily cover long-term care costs. Under most circumstances, Medicare only covers short-term stays in skilled nursing facilities. If qualifications are met, Medicare will pay the full cost for the first 20 days and a portion of the cost for the following 80. After 100 days, you are responsible for covering costs.[1] Even if you purchase a Medicare supplemental insurance policy, you may need to find another way to cover long-term care costs.

Similarly, some people think they can rely on Medicaid to cover long-term care costs, but this won’t necessarily happen. Medicaid will cover a large portion of long-term care costs, but there are strict functional and financial requirements. To start, applicants must be 65 or older, and have a permanent disability or be blind. The asset limit to qualify for Medicaid tends to be as low as $2,000.[2]

Paying With Retirement Accounts Could Have Downsides

If you’re thinking of paying for long-term care out of a pre-tax retirement account such as a 401(k) or IRA, consider the potential tax burden. The median annual cost for an assisted living facility is over $48,000, and the median annual cost for a private room in a nursing home is over $102,000.[3] Withdrawing that much per year from a retirement account could mean pushing yourself into higher tax brackets and potentially draining your retirement accounts faster than you had planned. It’s also important to keep in mind that no one knows what tax rates will be in the coming decades.

What Are Other Options for Covering Long-Term Care Costs?

There are several other potential options for paying for long-term care. One of these options is traditional long-term care insurance, an asset-based long-term care insurance policy that allows you to use part of your life insurance death benefit to pay for nursing care costs. Another option includes an immediate annuity that can help cover expenses in the event that you need long-term care and a long-term care annuity. Traditional long-term care policies could have some downsides though, especially for those who don’t buy a policy by their 70’s: A 65-year-old couple can purchase a policy for $4,800 per year, but the same policy would cost $8,700 per year if the couple waits until age 75[4].

Long-term care costs can be staggering, but there are ways to plan for them. To figure out what the best strategy is for you and your loved ones, talk to a financial professional. A long-term care plan is an important part of a comprehensive retirement plan and should work in concert with your retirement income plan, tax minimization strategies, and estate plan. Because we believe in tailoring long-term care plans to the individual, we offer complimentary reviews where we can learn more about you and your long-term needs. Come talk with us to find out about your options.






Join Our Mailing List

Join our mailing list for exclusive financial insights, updates, and offers tailored to your needs. Stay informed and take control of your financial future today!


We've Made Some Big Changes

We're delighted to introduce our new and improved online space tailored to elevate your online experience.

If you have any thoughts, questions, or if you’d like to schedule a consultation drop us a line. Your insights help us refine our services.

Making the Transition to Retired Life

Making the Transition to Retired Life

After all your years of hard work and disciplined saving, you’ve made it to retirement – congratulations! Now, the challenge becomes tackling common retirement transition concerns so that you can live out the ideal retirement you’ve dreamed of.

Still have questions?

Skip to content