Long-Term Care Planning
The financial consequences of an extended care event can reshape a family's future in just a few years. We help you understand the real costs — and build a plan before you need one.
What is long-term care?
Long-term care (LTC) encompasses a diverse array of services that address the health, personal care, and social needs of individuals who are chronically incapacitated, ill, or frail. Depending on the individual's needs, long-term care may include nursing home care, assisted living, home health care, or adult day care services.
The need for long-term care typically arises when a person becomes unable to perform basic activities of daily living (ADLs) independently. Most LTC policies use inability to perform two or more ADLs as the benefit trigger:
A wide range of conditions can trigger the need for long-term care — including Alzheimer's disease, other forms of dementia, stroke, mental illness, spinal cord or head injuries, AIDS, and physical frailty due to aging. While long-term care can become necessary at any age, it is primarily older individuals who will require such care.
Individuals with disabilities by age
Although long-term care is most commonly associated with retirement, disability affects Americans at every stage of life. Federal census data on the civilian non-institutionalized population shows how disability rates increase sharply with age — reinforcing why planning well before retirement is the most effective approach.
| Age Group | Approx. Population with a Disability | Rate |
|---|---|---|
| 18–34 | 3.7 million | 5.0% |
| 35–64 | 20.3 million | 12.5% |
| 65–74 | 6.0 million | 25.4% |
| 75 and older | 7.9 million | 47.2% |
Nearly half of all Americans aged 75 and older live with a disability — and disability rates rise sharply throughout the working years. Planning while you are young and insurable offers the most protection at the lowest cost.
¹ U.S. Census Bureau, 2019 American Community Survey 1-Year Estimates. Sex by Age by Disability Status for the Civilian noninstitutionalized population, male and female. Table B18101. Figures are approximate.
How much does long-term care cost?
Beyond the unpaid assistance provided by family and friends, long-term care costs can be substantial and vary significantly by service type and geography. A federal study found that, on average, men will require 2.3 years of long-term support services, while women will need approximately 3.2 years of similar care.²
Costs vary widely by care type, level of assistance required, and geographic market — regional expenses in the Northeast can run significantly above the national average. Nursing home care, assisted living, home health aides, and adult day services each carry different price points, and most care events span multiple years. We can walk you through current cost benchmarks for your area as part of a planning conversation.
Covering LTC costs with personal assets
Many long-term care expenses are paid from personal resources. There are several ways individuals and families fund care costs outside of government programs:
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01
Out-of-Pocket
Expenses covered directly using personal savings and investments. For those with substantial liquid assets, self-funding can work — but it exposes your entire portfolio to multi-year care costs and removes the leverage and risk-pooling that insurance provides.
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02
Reverse Mortgage
Some homeowners may be eligible for a reverse mortgage, allowing them to leverage home equity while retaining ownership of the property. Proceeds can be used to fund care costs, though this strategy reduces the value passed to heirs and has qualification requirements.
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03
Accelerated Death Benefits
Certain life insurance policies offer "accelerated death benefits" — also referred to as a living benefit — if the insured is diagnosed with a terminal or chronic illness. This allows policyholders to access a portion of the death benefit while still living to help cover care costs.
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04
Private Health Insurance
Some private health insurance policies may cover a limited duration of at-home or nursing home care, generally tied to a covered illness or injury. This coverage is typically narrow and should not be relied upon as a primary LTC funding strategy.
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05
Long-Term Care Insurance
Private insurance specifically designed to finance long-term care services — whether at home or in a facility, skilled or unskilled. Coverage structures, benefit amounts, elimination periods, and inflation protection options vary significantly across policies and carriers.
Medicare and Medicaid: what they cover — and what they don't
Long-term care funded by government sources comes from two primary programs. Understanding the difference — and the limitations of each — is essential to building a sound LTC strategy.
Health insurance, not LTC insurance
Medicare is a federal health insurance program for individuals 65 and older, certain disabled individuals under 65, and those with end-stage renal disease. Medicare Part A covers a limited provision for skilled nursing facility care — but only following a qualifying hospital stay of at least three days, and only for up to 100 days (with significant co-pays after day 20). It does not cover custodial care, assisted living, or long-term home care assistance.
A means-tested program with strict limits
Medicaid is a joint federal-state welfare program that provides healthcare — including long-term care — to the financially disadvantaged. Eligibility is based on income and assets, which typically must be spent down to very low thresholds (often $2,000 in countable assets for a single individual). Facility choice is limited to Medicaid-certified providers, and quality and availability vary widely by state and region.
The Medicaid look-back period is a critical planning consideration. Historically, some individuals attempted to qualify for Medicaid by transferring or gifting assets prior to application. Legislation has significantly restricted this strategy:
The Omnibus Budget Reconciliation Act of 1993 (OBRA '93) established that asset transfers made within 36 months (or 60 months for certain trusts) prior to applying for Medicaid could result in a delay in benefit eligibility — a "penalty period" proportional to the value transferred.
The Deficit Reduction Act of 2005 (DRA) tightened these rules further by extending the look-back period for all asset transfers to 60 months. Under the DRA, the penalty period typically begins on the later of: (1) the date the gift was made, or (2) the date the individual would otherwise have been eligible for Medicaid benefits. The DRA also tightened rules around certain types of annuities used to shelter assets before application.
² "Long-Term Services and Supports for Older Americans: Risks and Financing, 2020," Table 1. U.S. Department of Health and Human Services, Office of Behavioral Health, Disability, and Aging Policy. January 2021.
Frequently Asked Questions
What clients ask most often about long-term care planning.
The conventional wisdom is that the optimal window for purchasing long-term care insurance is between ages 50 and 65. LTC policies are health-underwritten, meaning both your eligibility and your premium are determined by your health at the time you apply. Applying while you are younger and healthier locks in lower premiums and ensures you qualify for coverage before any chronic conditions develop.
Many people delay because the need feels distant — but by your late 60s, conditions like diabetes, heart disease, cognitive changes, or musculoskeletal issues may result in premium surcharges, coverage exclusions, or outright denial. Some conditions will disqualify an applicant entirely. The cost of waiting is real: a $3,000 annual premium at age 55 may become $6,000 or more at age 65 — for the same level of coverage. Applying while healthy is the single most important factor in securing affordable, comprehensive LTC coverage.
This is one of the most widespread misconceptions in retirement planning. Medicare does not cover custodial long-term care. It covers skilled nursing facility care only after a qualifying hospital stay of at least three days, and only for up to 100 days — with significant co-pays beginning after day 20. It does not pay for assisted living, memory care, adult day services, or ongoing home care assistance with daily activities like bathing and dressing.
Medicaid does cover long-term care — but it is a means-tested welfare program. To qualify, you generally must spend down countable assets to very low thresholds (typically around $2,000 for a single individual). This means depleting savings, selling non-exempt assets, and accepting limited facility choices. The 60-month Medicaid look-back period also means that asset transfers made in the five years before application can trigger penalty periods during which benefits are withheld. For most clients with retirement savings and a desire to preserve their financial legacy, Medicaid should not be the primary LTC strategy.
Traditional LTC policies are stand-alone insurance contracts with ongoing annual premiums. They typically offer more coverage flexibility — higher daily benefit amounts, longer benefit periods, and stronger inflation protection — often at a lower initial cost than hybrid products for an equivalent level of LTC benefit. The trade-off is that premiums can increase over time (carriers must petition state regulators, but increases do occur), and if you never need care, no benefit is paid to heirs.
Hybrid life/LTC policies address the "use it or lose it" concern by combining a life insurance death benefit with a long-term care acceleration rider. If you need care, the policy pays for it. If you don't, your heirs receive the death benefit. Premiums are typically fixed and guaranteed — either as a single lump sum or a structured limited-pay schedule. Annuity-based LTC products work similarly, using a lump sum to generate a tax-advantaged pool of LTC benefits. The right choice depends on your available assets, risk tolerance, premium preference, and estate planning goals. We help clients compare both options with real projections before recommending any approach.
Protect your independence and your family's future.
A prolonged care event can reshape a family's financial picture in just a few years. Let us help you build a strategy that preserves your assets, your choices, and the people you love.