Long-term care is one of the largest financial risks many retirees will ever face, yet it’s also one of the most commonly avoided planning conversations.
A long-term care event is a period when you are unable to perform at least two of the six Activities of Daily Living: bathing, dressing, eating, toileting, transferring, and continence. Cognitive impairment, such as Alzheimer’s disease or dementia, can also require substantial long-term supervision. Unfortunately, statistics show that roughly 70% of adults turning 65 will need some form of long-term care (LTC) during their lifetime. About 40% of adults will need care for less than two years, while another 22% will require care for between two and four years.
With nursing homes, assisted living facilities, and in-home care often costing thousands of dollars per month, retirement savings can disappear quickly. Medicare generally covers hospital stays and limited skilled nursing care following a hospitalization, but it does not cover long-term custodial care. Medicaid may provide coverage for those who meet strict income and asset eligibility requirements.
As part of retirement planning, it’s important to discuss how you would pay for the potential cost of long-term care. When developing financial plans and running cash flow projections, we calculate the gap between the retirement lifestyle you want to maintain and the maximum amount you could spend while assuming your assets are fully depleted by the time the younger spouse reaches age 92. With long-term care costs often averaging $75,000 to $130,000 per year, depending on the type of care, it’s important to consider how a long-term care event could affect your financial plan, particularly if one spouse requires care while the other continues living at home and maintaining the lifestyle you’ve planned together.
The conversation then becomes, “Is that spending cushion enough to absorb the cost of long-term care for one or both spouses?” Some affluent families choose to self-insure by setting aside a portion of their wealth to cover future care expenses. Others may prefer to preserve assets for future generations and use insurance to help offset the financial risk.
Traditional LTC insurance can be expensive, and premiums generally increase the longer you wait. Waiting may also increase the likelihood that health conditions could make you ineligible for coverage. While purchasing insurance earlier may mean lower premiums and easier underwriting, it also means paying premiums for a longer period. Since the early 2000s, hybrid policies that combine LTC benefits with life insurance or annuities have become a popular option for those concerned about paying for traditional LTC coverage they may never use. Insurance doesn’t have to be an all-or-nothing decision. Many families choose to self-fund a portion of potential long-term care expenses while using insurance to help manage the remaining risk.
Finally, consider the impact on your family. If a long-term care event leaves you unable to make financial or medical decisions, will your children feel obligated to pay for your care out of their own pockets? For many members of the “sandwich generation,” already balancing the financial responsibility of children while caring for aging parents, that burden can be significant.
Planning for long-term care isn’t simply a decision about whether to buy insurance. It is understanding how a potential long-term care event could affect your retirement income, your legacy goals, and the people who may one day be asked to care for you.
If you have questions on how a long-term care event could affect your retirement plan, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the June 27, 2026 “Henssler Money Talks” episode.
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