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Advisors see long-term care as critical piece of retirement planning

As health care costs rise, more wealth managers are speaking with clients about long term care options. Here’s what they are saying:

The unrelenting surge in health care costs is making long-term care a critical piece of retirement planning, advisors say.

Medical care costs in August were up 4.2% on an annualized basis, according to the Labor Department’s Consumer Price Index (CPI), versus an overall inflation rate of 2.9%. The cost of a visit to the doctor jumped 3.5%, while hospital and outpatient services spiked 5.3%. Meanwhile, prescription drug prices rose a healthy 0.9% in August.

And the eye-popping increases are not expected to stop anytime soon. A number of surveys of large employers predict overall health coverage costs will rise an average of 9% in 2026, which would be the highest level of health-care inflation since 2010.

With health care costs so dramatically outpacing inflation, advisors are helping clients, and often clients’ parents, prepare for the financial and personal challenges of long-term care – even if it’s a topic most clients would rather not broach.

With costs rising faster than inflation, Tracy Byrnes, vice president of women & investing at Lebenthal Global Advisors, believes the question isn’t “if” your family should plan, but “how.”

“The average cost of a semi-private nursing home room now tops $100,000 a year – and in the tri-state area, it can be much higher. So it helps to start with some realistic assumptions: What would three to five years of care cost in today’s dollars? How might that grow at 3% to 5% each year? Then build those costs into your financial plan or family budget – just like healthcare, college, or even travel,” Byrnes said.

Elsewhere, Amy L. Jucoski, head of family office services & advisory at Callan Family Office, says part of planning is understanding and assessing costs and different risk factors. That means identifying key sources such as state & local Medicaid/long-term care (LTC) agencies for finding data on the average LTC expenses for in-home care, assisted living, nursing home care, and adult day care. There are also a number of websites that specialize in elder care and oftentimes will publish comparative cost data, by state, as regional costs can vary.

“Consider your preferences when budgeting such as your preferred lifestyle and whether you want to age at home, in assisted living, or in a nursing facility because these decisions will affect planning. Also knowing your family’s medical history can help you gauge your potential risk factors when contemplating future care needs,” Jucoski said.

Those clients that have savings income, investments, or other financial resources may be in a position to pay care costs for in-home care, assisted living, nursing home care, or adult day care directly. In such cases, Jucoski points out those monthly costs can be extremely high, between $4K and $8K per month depending on location.

“Some families create trusts or other financial structures in advance of the look-back period if they’re worried about depleting their assets too quickly. By transferring assets to an irrevocable trust, they are no longer countable assets for Medicaid purposes,” Jucoski said.

Mallon FitzPatrick, head of wealth planning at Robertson Stephens, recommends modeling different funding options — such as insurance, hybrid policies, or self-funding — and then analyzing how they influence overall retirement cash flow and estate plans.

“Explore the use of Health Savings Accounts (HSAs) for tax-advantaged savings and accessing home equity through reverse mortgages or sales as potential funding sources. Since care costs change over time, the long-term care plan should undergo reviews every few years, much like a financial check-up,” FitzPatrick said.

Making the best trade-offs

Once the ballpark cost has been determined, then the conversation turns to trade-offs.

Byrnes points out that traditional long-term care insurance provides dedicated coverage, but premiums can rise and if a client never uses it, the money is gone. In other words, use it or lose it.

On the other hand, hybrid life/LTC policies cost more upfront, but if long-term care isn’t needed, the value flows back to the clients’ heirs, which is more of a “use it or return it” approach, making the upfront costs more bearable. Wealthier households, meanwhile, may choose to self-fund, but that can chip away at assets meant for a spouse or the next generation.

“For many, the end result may be a mix of coverage from insurance or a hybrid policy, plus some self-funding,” Byrnes said.

When it comes to self-funding, Jucoski says it provides maximum flexibility because the client keeps control of the assets until care is needed, and there are no rules, restrictions, or premium costs. However, if they don’t properly budget for LTC costs, the impact could be significant – assets may be consumed, a surviving spouse is left without proper means for care, and/or families may be left managing complex finances under stress.

“The bottom line is your risk tolerance, liquidity needs, legacy goals, health, and insurability are all considerations when deciding which approach makes sense for you,” Jucoski said.

Reflecting family values

Callan’s Jucoski stresses to clients that LTC is not just about the money. It’s about dignity, family priorities, and family values. In her view, having a plan that prioritizes family care needs and includes strategies that align with family preferences is key to preserving family relationships, family communication, reducing burden on family caregivers, balancing independence and safety, protecting assets, and respecting any cultural or religious values.

“You oftentimes hear parents say, ‘I don’t want to be a burden on my children.’ Proper planning for LTC can help provide for caregiving so family members can be loving supporters, not full-time nurses. Having care coordinators to help manage decisions regarding who will provide the care, where, and how can be extremely helpful during emotional times,” Jucoski said, adding that family members usually don’t have the skills, knowledge, training, or physical strength to meet the demands of caring for their loved ones.

Yet while family members may not have all the skills to care for a loved one, they still need to act as a team.

FitzPatrick advises families to address their respective roles within the plan and budget for professional care to prevent burnout.

“Decide whether to pay the family, reimburse an adult child, or hire professionals to relieve family burden,” FitzPatrick said.

He also recommends ensuring legal documents are up to date and confirming the accuracy of durable powers of attorney and healthcare directives to ensure they accurately reflect the clients’ wishes for their appointed agent.

“And don’t forget to review every one to two years to keep clients in control, ensuring their values steer decisions even if they cannot communicate them,” FitzPatrick said.

SEP 29, 2025
InvestmentNews

Long-term care costs can be a ‘huge problem,’ experts say. Here’s why…

Long-term care costs can be a ‘huge problem,’ experts say. Here’s why

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Greg Iacurci@GregIacurci
Key Points
  • About 1 in 7 Americans will spend at least $100,000 out of pocket for long-term care.
  • Health insurance generally doesn’t cover long-term care services, and Medicare doesn’t cover most expenses. Not everyone qualifies for Medicaid, and few households have long-term care insurance.
  • There are several questions households should consider before there’s a need for long-term care.

Long-term care can be costly, extending well beyond $100,000. Yet, financial advisors say many households aren’t prepared to manage the expense.

“People don’t plan for it in advance,” said Carolyn McClanahan, a physician and certified financial planner based in Jacksonville, Florida. “It’s a huge problem.”

Over half, 57%, of Americans who turn 65 today will develop a disability serious enough to require long-term care, according to a 2022 report published by the U.S. Department of Health and Human Services and the Urban Institute. Such disabilities might include cognitive or nervous system disorders like dementia, Alzheimer’s or Parkinson’s disease, or complications from a stroke, for example.

The average future cost of long-term care for someone turning 65 today is about $122,400, the HHS-Urban report said.

But some people need care for many years, pushing lifetime costs well into the hundreds of thousands of dollars — a sum “out of reach for many Americans,” report authors Richard Johnson and Judith Dey wrote.

The number of people who need care is expected to swell as the U.S. population ages amid increasing longevity.

“It’s pretty clear [workers] don’t have that amount of savings in retirement, that amount of savings in their checking or savings accounts, and the majority don’t have long-term care insurance,” said Bridget Bearden, a research and development strategist at the Employee Benefit Research Institute.

“So where is the money going to come from?” she added.

Long-term care costs can exceed $100,000

While most people who need long-term care “spend relatively little,” 15% will spend at least $100,000 out of pocket for future care, according to the HHS-Urban report.

Expense can differ greatly from state to state, and depending on the type of service.

Nationally, it costs about $6,300 a month for a home health aide and $9,700 for a private room in a nursing home for the typical person, according to 2023 data from Genworth, an insurer.

It seems many households are unaware of the potential costs, either for themselves or their loved ones.

For example, 73% of workers say there’s at least one adult for whom they may need to provide long-term care in the future, according to a new poll by the Employee Benefit Research Institute.

However, just 29% of these future caregivers — who may wind up footing at least part of the future bill —had estimated the future cost of care, EBRI found. Of those who did, 37% thought the price tag would fall below $25,000 a year, the group said.

The EBRI survey polled 2,445 employees from ages 20 to 74 years old in late 2024.

Many types of insurance often don’t cover costs

 There’s a good chance much of the funding for long-term care will come out-of-pocket, experts said.

Health insurance generally doesn’t cover long-term care services, and Medicare doesn’t cover most expenses, experts said.

For example, Medicare may partially cover “skilled” care for the first 100 days, said McClanahan, the founder of Life Planning Partners and a member of CNBC’s Financial Advisor Council. This may be when a patient requires a nurse to help with rehab or administer medicine, for example, she said.

But Medicare doesn’t cover “custodial” care, when someone needs help with daily activities like bathing, dressing, using the bathroom and eating, McClanahan said. These basic everyday tasks constitute the majority of long-term care needs, according to the HHS-Urban report.

Medicaid is the largest payer of long-term care costs today, Bearden said. Not everyone qualifies, though: Many people who get Medicaid benefits are from lower-income households, EBRI’s Bearden said. To receive benefits for long-term care, households may first have to exhaust a big chunk of their financial assets.

“You basically have to be destitute,” McClanahan said.

Republicans in Washington are weighing cuts to Medicaid as part of a large tax-cut package. If successful, it’d likely be harder for Americans to get Medicaid benefits for long-term care, experts said.

Long-term care insurance considerations

Few households have insurance policies that specifically hedge against long-term care risk: About 7.5 million Americans had some form of long-term care insurance coverage in 2020, according to the Congressional Research Service.

By comparison, more than 4 million baby boomers are expected to retire per year from 2024 to 2027.

Washington state has a public long-term care insurance program for residents, and other states like California, Massachusetts, Minnesota, New York and Pennsylvania are exploring their own.

Long-term care insurance policies make most sense for people who have a high risk of needing care for a lengthy duration, McClanahan said. That may include those who have a high risk of dementia or have longevity in their family history, she said.

McClanahan recommends opting for a hybrid insurance policy that combines life insurance and a long-term care benefit; traditional stand-alone policies only meant for long-term care are generally expensive, she said.

Be wary of how the policy pays benefits, too, she said.

For example, “reimbursement” policies require the insured to choose from a list of preferred providers and submit receipts for reimbursement, McClanahan said. For some, especially seniors, that may be difficult without assistance, she said.

With “indemnity” policies, which McClanahan recommends, insurers generally write benefit checks as soon as the insured qualifies for assistance, and they can spend the money how they see fit. However, the benefit amount is often lower than reimbursement policies, she said.

How to be proactive about long-term care planning

“The challenge with long-term care costs is they’re unpredictable,” McClanahan said. “You don’t always know when you’ll get sick and need care.”

The biggest mistake McClanahan sees people make relative to long-term care: They don’t think about long-term care needs and logistics, or discuss them with family members, long before needing care.

For example, that may entail considering the following questions, McClanahan said:

  • Do I have family members that will help provide care? Would they offer financial assistance? Do I want to self-insure?
  • What are the financial logistics? For example, who will help pay your bills and make insurance claims?
  • Do I have good advance healthcare directives in place? For example, as I get sicker will I let family continue to keep me alive (which adds to long-term care expenses), or will I move to comfort care and hospice?
  • Do I want to age in place? (This is often a cheaper option if you don’t need 24-hour care, McClanahan said.)
  • If I want to age in place, is my home set up for that? (For example, are there many stairs? Is there a tiny bathroom in which it’s tough to maneuver a walker?) Can I make my home aging-friendly, if it’s not already? Would I be willing to move to a new home or perhaps another state with a lower cost of long-term care?
  • Do I live in a rural area where it may be harder to access long-term care?

Being proactive can help families save money in the long term, since reactive decisions are often “way more expensive,” McClanahan said.

“When you think through it in advance it keeps the decisions way more level-headed,” she said.

Three Ways to Prepare for Long-Term Care Expenses in Retirement

It’s likely that most of us will need some kind of long-term care as we age, so it’d be a good idea to start planning for those expenses now.

(Image credit: Getty Images)

When you think of your future retirement, you may be concerned about how much Social Security you will receive or if your 401(k) and other investment accounts will last. You should also be adding the cost of long-term care to your list of retirement necessities. Between unforeseen medical expenses and the possibility of nursing homes or assisted living facilities, the costs can add up quickly.

We see far too many people who simply ignore the topic of long-term care because they are worried about whether they can afford it. But it should not be forgotten because many, if not most of us, will need it at some point in our lives. Someone turning age 65 has about a 70% chance of needing some kind of long-term care service or support for the rest of their life. The cost of long-term care is continuing to rise, but there are ways you can start planning and preparing for higher costs now.

1. Understand long-term care options

Life expectancy in the United States has risen to 77½, according to the CDC, increasing for the first time in two years. This is why it is important to research and understand all of the long-term care options available. Discuss your wishes with your spouse and family members so they know what you want, if and when the time comes.

After you discuss your options with your family, consider talking with your financial adviser to see if long-term care insurance may be right for you. Without a proper plan, healthcare costs can drain your savings. Regular health insurance doesn’t cover long-term care, and relying on Medicare alone will not be enough. Long-term care insurance can help cover nursing home costs and home health care later in life. It can also help pay for any chronic medical issues, like Alzheimer’s or cancer. While some employers may offer long-term care insurance as part of their benefits, most people buy it through their financial professional.

2. Invest in a health savings account

If you are still working and saving for your retirement, consider a health savings account. An HSA is a tax-advantaged savings account that you can use at any age to pay for qualifying health care expenses. To contribute to an HSA, you must have a high-deductible health plan (check

your policy’s coverage details or contact your insurance company to see if your plan is HSA-

eligible). An HSA can be used to fund current healthcare costs, but the balance carries over each year and that money can be invested to grow for the future.

The IRS sets HSA contribution limits each year. In 2024, you can contribute up to $4,150 if you have health coverage just for yourself and $8,300 if you have coverage for your entire family. Those age 55 and older are eligible for a catch-up contribution of $1,000. Being able to pay for some of those expenses with tax-free money would be much more efficient than paying for them with money you have to pay taxes on first.

3. Strategize when to claim Social Security benefits

We pay into Social Security throughout our career, and when we hit retirement age many are eager to start claiming those benefits. However, most people do not understand how their benefit amount is calculated. Your monthly benefit is calculated by using your 35 highest-earning years. The earliest you can claim Social Security is age 62. While it may be tempting to turn on your Social Security benefits as soon as you reach that age, it can be beneficial to delay your benefits.

Claiming benefits before full retirement age results in a permanent reduction by as much as 30% of your benefit. If you delay claiming, it can be a big bonus. Your benefit will grow by as much as 8% per year from your full retirement age through age 70.

If you are married, Social Security spousal benefits are designed to provide additional retirement income for couples. If you are divorced and have not remarried, you may be able to claim benefits based on your ex-spouse’s benefits if their benefits are higher than your own. And if you are a widow, you are eligible for your partner’s benefit if it is higher than yours.

It’s important to talk through claiming strategies with your financial adviser before your 62nd birthday; claiming at the right time for your unique situation often means more money in your monthly check!

When saving for retirement, you should always include a plan for any unexpected medical bills. Healthcare expenses can take up a large amount of your retirement income. Working with your financial adviser is a great way to come up with a plan to boost your retirement savings and prepare for the cost of long-term care.

 

A PUBLIC LONG-TERM CARE INSURANCE PROGRAM?

By Louis H. Brownstone

The California Legislature and Governor Newsom recently proposed establishing a statewide public long-term care insurance program.  The central goals are to aid our citizens as they age and become sick and to reduce the billions of dollars of growing long-term care costs to Medi-Cal.

Citizens should make their voices heard regarding this program because as much as they would like to have long-term care protection, they would have to be taxed in order to cover the cost.  They will have to weigh the costs versus the benefits and in the end will probably have to vote their preference by ballot.

A Task Force was appointed and has met some twenty-four times over the past year.  At the end of 2023, an actuarial report assessing the cost and viability of such a program was submitted to the Legislature.  Will the Legislature pass a bill based on the Task Force recommendations?

Few doubt the significance of the growing cost of long-term care and its impact on whole families as their older members age.  According to the Genworth Cost of Care Survey, 2021 costs in California were $ 201/day for a home health aide, $ 173/day for an assisted living facility, $322/day for a semi-private room in a nursing facility, and $ 400/ day for a private room.  The average period of care in a nursing home varies from about two years for males to over three years for females.  Very few families can cover the cost of a long scenario.

Because most cannot afford to pay for outside help, most care today is provided by family members and friends, often at great personal sacrifice.  But families are shrinking in size and care by family members is becoming less available.

The United States is the only developed country where you have to be poor in order for the Government to cover your long-term care needs.  Bills to further fund long-term care are introduced often in Congress, but have not passed due to lack of funding.

The lack of Congressional action has led many states, including California, to consider their own program.  The first state program is now being implemented in Washington State, covering a minimal long-term care benefit, paid for by a payroll tax on employees of Washington companies.

The issues are similar in California and were considered by the California Task Force.  The California Task Force is made up of three disparate groups: (1) heads of caregiving organizations, (2) actuaries from insurance companies, and (3) members of the Department of Insurance.  Due to their different backgrounds, they wound up recommending five different plan designs, not one, which vary greatly in costs and benefits, giving the Legislature a maze of alternatives to consider.

In my opinion, the only design which has a chance of passing the Legislature is one of the least expensive ones and is an adaptation of the Act in Washington State.  Even with this minimal design, the tax could be about one percent of income, or $ 700 per year for a person with an income of $ 70,000.  This would only create a minimal public long-term care program.  Those who could afford it would want to augment their coverage with private long-term care insurance.

The Task Force assumed that employers could pay half the cost, but I believe there would be tremendous opposition by employers to being further taxed in California.  This new tax could encourage more employers to move their domiciles to a state, such as Arizona or Texas, where there is no corporate income tax, thus depriving California of needed revenue.

The Legislature only has a few weeks to introduce new legislation in the 2024 session.  If a new bill is not introduced by late February, nothing will be passed in 2024.  Then we’ll see what happens in 2025 to enable a bill to become law, possibly by early 2026.  That’s all assuming that there is wide public support for such a program.  Currently, most citizens are unaware of the considerable work that has been done and the many issues involved. The selling of a program will be a major undertaking and hasn’t yet been funded.

Nothing has happened yet, but watch what the Legislature does.  Stay tuned, as this issue could have a big effect on your future.

What is long-term care insurance good for?

MONEYWATCH: MANAGING YOUR MONEY 

BY JOSHUA RODRIGUEZ

 / CBS NEWS

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Long-term care insurance is good for far more than simply paying for nursing homes. MASKOT/GETTY IMAGES

You have a nearly 70% chance of needing some form of long-term care by the time you turn 65, and that care can be expensive. If you’ve looked into how you’ll pay for it, you may have come across the option for long-term care insurance.

This unique type of insurance is designed to help cover the large and growing cost of long-term care. But what exactly does that mean? Does it mean you’ll need to be confined to a nursing home or assisted living community before your benefits kick in, or is long-term care insurance good for something else?

You might be surprised at the ways this type of insurance can help you as you age. Moreover, the benefit of this insurance may extend to your loved ones.

What is long-term care insurance good for?

In general, long-term care insurance is important for most people.

“Since those who reach age 65 have a 70% chance of needing care, planning is needed,” says John Hill, president of Gateway Retirement.

Long-term care insurance could help you with that planning process. But what exactly is long-term care insurance good for? Here are a few things coverage could help with:

To help cover the cost of aging in place

There’s a widespread misconception that long-term care insurance is only for people who plan on moving into a nursing home or assisted living facility. That’s not exactly true. It is true that some plans only provide coverage if you move into one of these facilities, but there are plenty of other plans that can help you age in place. These plans can come with coverage features like:

  • Home renovations: Some long-term care insurance policies may help with the cost of home renovations to make your home more accessible as you age. For example, these policies may help with the cost of installing a ramp to your front door or handles in your bathroom.
  • Equipment: Long-term care insurance policies may also help cover the cost of the equipment that makes it possible for you to age in place.
  • Care: Long-term care insurance can help cover the cost of home healthcare as well. It could even pay your family members to provide your care.

To pay for a skilled nursing home

Even if aging in place is your plan, there may be a time when a skilled nursing home is the more feasible option. After all, even if your family members have intentions of handling your care, medical conditions may lead to a need for around-the-clock skilled medical care. At this point, a nursing home is typically the best option.

On the other hand, nursing homes can be expensive. According to the American Council On Aging, the cost of a nursing home can easily exceed $100,000 per year. Long-term care insurance can help cover this expense, potentially preserving your privacy, your dignity and your ability to choose as you age.

To ease the burden of care on your loved ones

Long-term care insurance is especially important if you plan on aging in place with family caregivers. There are a few ways this type of insurance helps in this scenario:

  • Adult daycare: Your family members may not be able to provide 24-hour care. After all, they may have their careers to maintain or need time off every once in a while. Adult daycare facilities can provide the care you need during these times, but they can also be expensive. Long-term care insurance may help cover this expense.
  • Family caregivers: It’s important to try and provide compensation for your family caregivers. Sure, they’re willing to provide your care out of love, but offering payment makes it more rewarding for them to do so. Long-term care insurance may give you a way to pay your family caregivers. However, if that’s your plan, be sure that the policy you purchase covers both formal and informal caregivers.
  • Skilled care: At some point, you may need care that goes above and beyond the skills your family members have. At this point, you’ll likely need in-home skilled care or a skilled nursing facility. Your family may struggle to find a way to help you cover these costs if you haven’t already planned for them. Long-term care insurance can help ease this burden.

The bottom line

Long-term care insurance is a good way to plan for countless potential circumstances. The simple fact is that when you turn 65 the chance that you’ll need some form of care tends to increase. With that in mind, it’s a wise idea to plan for the cost of this care with long-term care insurance.