A research-focused look at care costs, coverage limitations and the effect long-term care can have on retirement assets.
This publication is educational and uses government, regulatory, legal-industry and institutional sources. It is not individualized legal, tax, investment or insurance advice.
Long-term care is not synonymous with a nursing home. It can include help with activities of daily living at home, adult day services, assisted living, memory support and nursing-home care. Medicare states plainly that it does not pay for most long-term custodial care when that is the only care a person needs. Medicare may cover limited skilled services when its conditions are met, but that is different from paying for years of ongoing help with bathing, dressing, eating, transferring or supervision.
The financial scale can be substantial. CareScout’s 2025 national medians report a non-medical caregiver at $35 per hour, or about $80,080 per year when modeled at 44 hours per week; assisted living at $6,200 per month, or $74,400 per year; a semi-private nursing-home room at $114,975 per year; and a private room at $129,575 per year. Actual costs vary materially by geography, care intensity and provider, but these figures show why long-term care is a retirement-income issue as much as a health issue.
Care costs create withdrawals at exactly the wrong time
A retirement portfolio is normally designed to support housing, food, travel, taxes and ordinary health costs over decades. A sudden additional withdrawal of $75,000 to $130,000 per year changes that equation. If those withdrawals occur during a market decline, the retiree may have to sell more shares at depressed prices, reducing the assets available to participate in a later recovery.
A simple illustration
Consider a household with a $1 million investable portfolio. Three years of private-room nursing care at the 2025 national median would be about $388,725 before inflation. That is nearly 39% of the starting portfolio, without counting the household’s ordinary living expenses or taxes. The actual effect depends on returns, account types and other income, but the scale shows why care risk cannot be treated as a minor line item.
The healthy spouse still needs income
For couples, spending retirement assets on one spouse’s care can reduce the resources available to support the other spouse for the rest of his or her life. This is sometimes called the “surviving spouse” problem in long-term-care planning. The objective is not simply to pay the care bill; it is to pay it without unintentionally destabilizing the rest of the household plan.
Planning is about choosing the payer
Every care bill will ultimately be paid by someone: the individual, family, an insurer, Medicaid if eligible, or some combination. Planning strategies may include earmarking assets, maintaining larger reserves, purchasing traditional long-term-care insurance, considering hybrid life/LTC solutions, or intentionally self-funding. The best approach depends on assets, income, health, age, family support and willingness to transfer risk.