How to Plan for Long-Term Care Costs in Retirement

30 June 2025

Let’s be honest—retirement planning already feels like a juggling act. You’re trying to figure out how to make your savings last for decades, manage healthcare expenses, maybe help the grandkids with college, and still enjoy some of the freedom you’ve worked so hard for.

But here’s something that often gets overlooked, even by the most financially-savvy folks: long-term care costs.

Yeah, it’s not the most glamorous topic. It doesn’t carry the excitement of a road trip across the country or sipping wine in Tuscany. But it’s a reality that many of us will face. Ignoring it? BIG mistake.

In this article, we’re going to break it down—what long-term care actually means, what it might cost you, and how you can prepare without feeling overwhelmed.

What Exactly is Long-Term Care?

When people hear “long-term care,” the first thought is often a nursing home. But it actually covers a whole spectrum of support. Think of it as help with everyday tasks when you no longer can do them on your own due to age, illness, or disability.

These tasks are called “Activities of Daily Living” (ADLs). They include:

- Bathing
- Dressing
- Eating
- Using the toilet
- Moving around
- Continence

Long-term care can happen in different settings—your own home, an assisted living facility, adult daycare, or a nursing home. And it’s not just for people in their 90s. A serious accident or illness can require long-term support at any age.

Why Should You Even Care?

Because it’s expensive—like REALLY expensive.

- The average cost of a private room in a nursing home? Around $110,000 per year.
- A one-bedroom apartment in assisted living? About $60,000 annually.
- Part-time home health aide? You’re looking at $25/hour on average.

And guess what? Medicare doesn’t cover long-term care. Let that sink in.

Sure, Medicare may cover short-term rehab or skilled nursing for a limited time, but if you need help getting dressed every morning or someone to prepare your meals? You're on your own unless you qualify for Medicaid or have long-term care insurance.

When Should You Start Planning?

Yesterday.

Okay, not literally—but the earlier, the better.

Ideally, your 50s is a good time to start thinking about long-term care. Why?

- You're still healthy, which could help you qualify for better insurance rates.
- You’re probably eyeing retirement within the next 10-15 years.
- You still have time to grow your investments and stash away money.

Waiting until you're older or already facing health challenges? That can limit your options and make everything pricier.

Step-by-Step: How to Plan for Long-Term Care Costs

Let’s roll up our sleeves. Don’t worry—you don't need a finance degree for this. We’ll simplify it down into bite-sized chunks.

1. Estimate Your Future Costs (Yes, Seriously)

First, get a rough idea of what care might cost where you live or plan to retire. Prices vary a LOT depending on location.

Check out Genworth’s Cost of Care Survey. It gives you an idea of current and future costs by state and city.

Then, multiply the average annual cost by the number of years people might need care—a typical range is 2 to 5 years. Women often need care longer than men.

> So, 3 years in assisted living at $60,000 a year? That’s $180,000. And that’s a conservative estimate.

2. Know Your Insurance Options

Long-term care can wipe out savings quickly, so let’s talk about ways to shield yourself.

Long-Term Care Insurance (LTCI)

Think of this as traditional insurance. You pay premiums over time, and if you need care, the policy helps foot the bill.

Pros:
- Can cover a variety of services at home or in a facility
- Preserves your nest egg

Cons:
- Premiums can be pricey and may increase over time
- Not everyone qualifies (health underwriting required)

You’ll generally get better rates if you start in your fifties or early sixties.

Hybrid Life Insurance

This one’s interesting—it combines life insurance with LTC benefits. If you don’t end up needing care, your family still gets a death benefit.

It’s like a financial “two-for-one.”

Annuities with LTC Riders

You give a lump sum to an insurance company, and they offer income plus long-term care coverage. It’s a less common option but worth exploring if you’re not into traditional insurance.

3. Consider Medicaid (But Don’t Count on It Yet)

Medicaid does cover long-term care, but there’s a catch—it’s generally only available once you’ve spent down most of your assets.

Many people make the mistake of assuming they’ll qualify, but the rules can be strict depending on your state. There’s also a look-back period (usually five years), which penalizes folks who give away assets to qualify.

That said, Medicaid planning can be part of your strategy—with help from an elder law attorney.

4. Set Aside Savings Specifically for Long-Term Care

Got a Health Savings Account (HSA)? Max it out if you can.

HSAs are a unicorn in the tax world—triple tax advantages:
- Contributions are tax-deductible
- Growth is tax-free
- Withdrawals for qualified medical expenses = tax-free

You can even use HSA funds to pay for long-term care insurance premiums (with limits based on age). So don’t underestimate the power of this little account!

If you don’t have an HSA, consider earmarking a portion of your retirement savings (like in a Roth IRA or brokerage account) specifically for healthcare or long-term care expenses.

5. Talk to Your Family About Your Plans

Not the easiest convo, but it's important.

Let your loved ones know what kind of care you’d prefer—whether it's aging in place or moving to a facility. If you’ve set aside money, tell someone. If you’ve bought insurance, make sure they know how to access it.

Having that open dialogue can ease stress down the road. It’s a priceless gift of clarity during what can be a chaotic time.

6. Create a Legal Safety Net

Planning for long-term care isn't just about money—it's about control.

Make sure you’ve got:
- A Power of Attorney (financial and medical)
- A Living Will
- A clear will or trust

These documents ensure your wishes are respected and someone you trust can step in if you’re no longer able to make decisions.

7. Think About Where You’ll Live

Want to stay in your home? Great—but is it age-friendly?

Ask yourself:
- Are there stairs?
- Is the bathroom accessible?
- Could you add grab bars or a walk-in tub?
- Do you live near family or community services?

Sometimes moving to a smaller, one-story home (or even a retirement community) in your 60s can be a game-changer when it comes to aging comfortably and affordably.

A Quick Word About DIY Caregiving

Many people assume their kids or spouse will take care of them. And many families do pitch in. But caregiving is a HUGE commitment—physically, emotionally, and financially.

It can take a toll on relationships, and many caregivers cut back on work or retire early to help. That’s why having a financial plan in place isn’t just about your peace of mind—it’s an act of love for your family.

Final Thoughts: Don’t Leave It to Chance

Here’s the deal—long-term care is one of the biggest potential threats to your retirement savings. Ignoring it won’t make it go away. Planning for it can feel scary, but it’s also incredibly empowering.

Just like you’ve planned for vacations, home remodels, or your kids’ college funds—you can plan for this too. It doesn’t have to be perfect, but it does have to be intentional.

Start small. Get educated. Talk to professionals. And most importantly—start today.

Your future self (and your family) will thank you.

Frequently Asked Questions (FAQs)

1. Does Medicare pay for long-term care?

Not really. Medicare covers short-term skilled care (like rehab after surgery), but it doesn't cover custodial care like help with bathing, dressing, or long-term assisted living.

2. What’s the difference between LTC insurance and a hybrid policy?

Traditional LTC insurance only covers care if you need it. A hybrid policy combines long-term care coverage with a life insurance benefit—so your family still gets something even if care isn’t needed.

3. Can I use a 401(k) for long-term care costs?

Yes, but be mindful of taxes. Withdrawals from a traditional 401(k) are taxable. You might want to set aside part of your savings in a Roth IRA or HSA to minimize taxes later on.

4. Is it too late to buy LTC insurance in my 70s?

It depends on your health and finances. Premiums may be higher, and underwriting tougher—but some policies or hybrid options might still be available.