By Eric Hutter
As life expectancy increases, so does the likelihood that you or a loved one will need some form of long term care—whether that’s in-home assistance, assisted living, or skilled nursing care. Unfortunately, these services come with a high and rising cost. The good news? With the right strategy, you can plan ahead and protect your assets.
Whether you are preparing for your own future or helping a family member navigate care options, here are the most common ways to cover long-term care costs—along with some guidance on how to choose the right path.
Understanding the Costs of Long-Term Care (LTC)
The cost of care varies widely depending on where you live and the level of care required. On average in 2024:
- Home Care costs around $30-$40 per hour.
- Assisted living runs $4,000 - $6,000 per month.
- Nursing home care can exceed $100,000 per year.
7 Ways to Pay for Long-Term Care
- Long-Term Care Insurance - This is the most direct way to prepare. Traditional long-term are insurance policies cover services like home care, adult day care, assisted living, and nursing facilities. Premiums are based on age, health, and the amount of coverage you select. Tip: The best time to consider a policy is in your 50s or 60s, when premiums are affordable and you’re most likely to qualify.
- Hybrid Life Insurance with LTC Riders - These are life insurance policies that include a long-term care rider. If you need care, the policy can accelerate death benefits to pay for it. If you don’t use it, your beneficiaries still receive a death benefit. This option is appealing for those who want flexibility and don’t like the “use it or lose it” nature of traditional LTC insurance.
- Annuities with Long Term Care Benefits - Certain annuities offer enhanced payouts if you require long-term care. These can be attractive for people who want to turn a portion of their retirement savings into a guaranteed income stream—with added protection if care is needed.
- Self-Funding (Out-of-Pocket) - Some people choose to use personal savings, investment income, or retirement accounts to pay for care directly. This gives you full control—but it can be risky if care is needed for an extended period or comes unexpectedly.
- Medicaid - Medicaid is a government program that covers long-term care for those with limited income and assets. However, qualifying can require spending down assets and not all facilities accept Medicaid. Planning ahead with an advisor can help preserve more of your estate while preparing for possible Medicaid eligibility.
- Veterans Benefits (Aid & Attendance) - For qualifying veterans and their spouses, the VA offers the Aid & Attendance benefit, which can help cover the cost of in-home care, assisted living, or nursing care. This is a highly underutilized benefit—if you are a veteran or the spouse of one, it is worth exploring.
- Reverse Mortgages - For homeowners age 62 or older, a reverse mortgage can convert home equity into tax-free income, which can be used to pay for care. This can be a lifeline for those who want to stay at home but lack liquidity. Important: Reverse mortgages are complex and require careful consideration of your long-term housing and financial plans.
Planning Tips: What I tell My Clients
- Start early. The earlier you plan, the more options and better pricing you’ll have.
- Think holistically. Long term planning should align with your retirement, estate, and tax strategies.
- Talk with your family. Having open conversations about care preferences and financial realities is essential.
- Work with a trust advisor. The right strategy depends on your unique goals, resources, and risk tolerance.
Final Thoughts - Long-term care is one of the biggest financial risks in retirement—but it doesn’t have to catch you off guard. With proper planning, you can ensure that care is available when you need it—without compromising your lifestyle or legacy.
If you haven’t yet built a long-term care strategy into your financial plan, now is a great time to start. Let’s talk about how to protect your wealth and your well-being.
