You Don't Want It, But You Should Plan for It Anyway: An Expert Guide to Long-Term Care

Planning for long-term care is crucial to protect your independence, family and financial stability against unexpected health events and rising care costs not covered by standard insurance.

By Mallon FitzPatrick, CFP®, AEP®, CLU®

published 3 August 2025

in Features

A serious couple work on financial planning together on their sofa.

(Image credit: Getty Images)

You've worked hard, saved wisely and planned for a fulfilling retirement. But what if the unexpected happens — early-onset Alzheimer's or another serious health event — and changes your day-to-day life?

We've heard it often: "It wasn't supposed to happen this way."

We don't plan to need long-term care, but we do need to plan how we would pay for it, just in case.

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One of retirees' most significant challenges is covering the cost of long-term care (LTC). It's not just about dollars; it's about preserving independence, protecting your family and ensuring your financial plan stays on track.

Let's break down what LTC is, how much it costs and your options for funding it.

What is it?

Long-term care refers to the services and support needed when a person can't perform at least two activities of daily living, such as bathing, dressing, eating or getting in and out of bed.

It's not typically covered by standard health insurance or Medicare. While Medicare might pay for up to 100 days of skilled nursing care, it doesn't cover custodial care, such as help with daily living over the long term.

Most of us will need some form of care. According to LongTermCare.gov, 70% of people age 65 and older will require LTC during their lifetimes, and 20% will need it for five years or more.

The cost of care

LTC costs vary depending on location and the type of care needed. Nationally, the median annual cost of a private nursing home is $127,000, according to Genworth and CareScout, but it ranges widely by state. In Alaska, for example, the cost is $364,000 a year.

Those who would like the same private nursing services at home 24/7 could pay as much as double the private nursing home rate.

Part-time home care also isn't cheap — roughly $65,000 a year for 40 hours a week — but it's more flexible.

The cost depends on how many hours a nurse is needed. Some people start with home care and transition to a facility; it depends on needs and preferences.

These costs are rising faster than the inflation rate. At an average annual increase of about 5.5%, they can quickly derail even the best-laid plans.

Types of long-term care

There are four main types of LTC, listed from least to most costly:

Home care. Part-time skilled or unskilled services delivered in your home.
Assisted living. Support with daily activities in a residential setting (usually without 24/7 medical supervision).
Skilled nursing facilities. Twenty-four-hour care for those with significant medical needs.
24/7 at-home nursing care. Staffed 24 hours a day for those with significant medical needs who want to stay in their homes.

Having a plan can help you protect and maintain control of the care you receive.

How to fund long-term care

Understanding potential funding sources is a wealth-planning activity. We suggest working with your wealth manager or advisor to develop a plan.

Here, we explore some options, which can be combined to meet your funding needs.

Rely on personal savings and assets

Some people choose to self-fund their LTC needs. If you go this route, ensure you've set aside enough to cover three or more years of care — at today's rates, that could be $400,000 or more.

Sources might include retirement accounts (401(k), IRA, Roth) and taxable investment accounts.

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If you have a health savings account (HSA), it's a triple-tax-advantaged way to cover qualified care costs.

Sell your home

If you live alone when you need LTC and don't need it, selling your home to move into a nursing home facility is easy. If someone else still lives there, other options exist to unlock the equity.

Get a reverse mortgage

Today's reverse mortgages are safer than ever and can efficiently tap into equity while you stay in your home. Depending on your needs, there are several options from which to choose.

Buy traditional LTC insurance

Long-term care insurance policies are designed to cover LTC costs. Premiums are lower if they're purchased in your 50s or early 60s and are influenced by age, health and gender.

Policies typically cover one to five years of care. Inflation protection riders help your benefit keep pace with rising costs.

Premiums can be tax-deductible depending on your age and income.

Employer group plans might offer lower-cost options with a higher probability that the insurance carrier will cover you.

It's critical to understand that premiums can increase over time, so this isn't a "set it and forget it" option.

Consider hybrid insurance policies

Hybrid policies combine life insurance with LTC benefits, allowing you to access your death benefit early to pay for care. Linked-benefit policies provide a pool of LTC benefits and a residual death benefit.

These are appealing because you (or your heirs) can receive money back from the policy even if you never need LTC. While more expensive upfront, the premiums are fixed and won't increase.

Look at synthetic LTC plans

Can't get LTC insurance — or prefer not to? Some clients opt for a synthetic LTC strategy using low-cost variable annuities. Investment-only variable annuities (IOVAs) offer tax-deferred growth with flexibility to withdraw funds if care is needed.

IOVAs can be a great fit if you're ineligible for insurance due to medical conditions, and they pass assets to heirs if not used.

Apply to government programs

There are also several government programs, such as Medicaid, for those who need financial assistance.

Long-term care planning is about much more than insurance or assets. It's about ensuring your care aligns with your values and lifestyle, while minimizing the burden on your family.

Your CERTIFIED FINANCIAL PLANNER® and wealth manager can help you explore the best funding options based on your unique situation. Build an LTC plan into your long-term plan — so you can focus on living well today, with peace of mind about tomorrow.

Mallon FitzPatrick leads Robertson Stephens' Wealth Planning Team and delivers comprehensive wealth planning solutions for high-net-worth and ultra-high-net-worth clients. He collaborates with clients to develop a strategy that integrates tax planning, risk management, philanthropy, liquidity and balance sheet management, estate planning and investments. Ultimately, the client is provided with a cohesive wealth plan that helps increase the likelihood of experiencing good outcomes, meets their objectives and aligns with their preferences.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Mallon FitzPatrick leads Robertson Stephens’ Wealth Planning Team and delivers comprehensive wealth planning solutions for high-net-worth and ultra-high-net-worth clients. He collaborates with clients to develop a strategy that integrates tax planning, risk management, philanthropy, liquidity and balance sheet management, estate planning and investments. Ultimately, the client is provided with a cohesive wealth plan that helps increase the likelihood of experiencing good outcomes, meets their objectives and aligns with their preferences.