Long-Term Care Planning: Prepare Before Care Is Needed

Long-term care is not only a healthcare issue—it can become a retirement-income problem. A care event can redirect tens of thousands of dollars per year away from the lifestyle, spouse, and legacy a retirement portfolio was built to support.

What long-term care can cost today

CareScout's 2025 national Cost of Care Survey reported the following median costs. Actual costs vary significantly by location, provider, care setting, and level of need.

Other 2025 national medians included $24,700 per year for adult day health care and $114,975 per year for a semi-private nursing-home room.

Source: CareScout 2025 Cost of Care Survey, released March 2026. CareScout collected more than 25,000 provider rates nationwide. In-home caregiver annual figure assumes 44 hours per week; other assumptions vary by care setting.

How care can drain retirement assets

Consider a retiree who needs assisted living at today's national median of $74,400 per year. Three years of care would total about $223,200 before accounting for future price increases. Three years in a private nursing-home room at today's median would total about $388,725.

Those dollars may have to come from the same accounts intended to produce retirement income. Large withdrawals can reduce the asset base that remains invested, potentially create taxable income depending on the account, and leave fewer assets available to support a healthy spouse or future years of retirement.

Long-term care is different from ordinary medical care

Long-term care generally means ongoing help with activities such as bathing, dressing, eating, toileting, transferring, continence, or supervision due to cognitive impairment. Medicare can cover certain skilled services under specific conditions, but it is not designed to provide unlimited payment for ongoing custodial care.

Who ultimately pays for care?

• Your income: Social Security, pensions, annuity income, or other cash flow may be redirected toward care.
• Your retirement assets: IRAs, 401(k)s, brokerage accounts, cash, and other assets may be liquidated to cover the gap.
• Your family: Adult children or a spouse may contribute money, time, housing, transportation, or unpaid caregiving.
• Long-term care insurance: A policy can transfer a defined portion of qualifying care costs to an insurer, subject to policy terms.
• Hybrid solutions: Certain life insurance or annuity contracts can include benefits designed for qualifying long-term care needs.
• Medicaid: A needs-based public program with financial, functional, and state-specific eligibility rules.

The retirement-income question

The goal of long-term care planning is not necessarily to insure every possible dollar of care. It is to decide intentionally how much risk you are comfortable self-funding and how much you may want to transfer. A well-designed strategy can help create a dedicated source of care funding so a care event does not automatically become a liquidation strategy for the rest of the retirement portfolio.

Why planning earlier can matter

Insurance-based options generally involve health underwriting, so waiting until significant health changes occur can reduce or eliminate available choices. Earlier planning also gives you more time to compare traditional LTC coverage, hybrid life/LTC strategies, annuity-based solutions, and self-funding.

Questions families should discuss

• If care costs $75,000–$130,000 a year, which assets would we spend first?
• How would that affect the income available to a healthy spouse?
• Who would coordinate care and who has authority to make decisions?
• Would we prefer care at home, assisted living, or another setting?
• How much of the risk do we want to retain versus transfer?