Our Parents Lived 'Forever.' Could Long-Term Care Drain Our $3.5 Million IRA?

Dear Wealth Wise: My spouse is 77. I'm 79. Our combined portfolio includes two traditional IRAs totaling $3.5 million and two Roth accounts totaling $600K. Our non-retirement brokerage account is worth $2 million. We have no mortgage or debt. Social Security pays $4,200 monthly plus my spouse has a monthly pension of $1,700. We don't have long-term care insurance. We make annual cash/stock gifts to two adult children and two adult grandchildren. Are we set up to self-fund long-term care? Three of our four parents lived to 94+, and one lived to 101. — Not Quite Immortal

Dear Not Quite Immortal: Fidelity puts the average cost of healthcare in retirement at $185,000 for a typical 65-year-old today. But that estimate does not include long-term care, which could easily surpass that figure.

CareScout's long-term care data and calculator reveal some staggering numbers. Here is the breakdown of annual costs in 2025 and projected 20 years forward to 2045, when our readers will be 97 and 99.

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Source: CareScout. State-level medians are provided for in-home private duty nursing and adult day health care. Assumes 3% inflation.

It’s no wonder our couple worries about paying for long-term care, even though they're quite wealthy. They might need to shell out over $200,000 a year for a private room in a nursing home when they are in their late 90s.

The data also shows that aging in place, while it might seem to save money, could be extraordinarily expensive if you need an in-home caregiver or nurse.

While the couple doesn’t necessarily need to worry, they’re right to be cautious. And they definitely need a game plan.

You can probably self-insure at this wealth level

There are two primary ways to pay for long-term care — buy long-term care insurance, or self-insure, which basically means saving enough money to cover the cost of extended care yourself.

Long-term care insurance can provide some financial security, but it has its drawbacks. Premiums can be high, underwriting rules can be strict, and benefits can be limited. Plus, if you don't use it, you lose the money you spent to get it.

When retirees have plenty of savings, financial planners often suggest self-insuring. And that’s what Shane O'Hara, CFP, COO, and executive vice president at ProVise Management Group, suggests here, too.

This couple "can most likely self-fund a significant long-term care need," he says. "You have significant investment assets, no debt, and more than $70,000 per year of guaranteed income from Social Security and your pension before any portfolio withdrawals. Additionally, it appears that your income is more than your current lifestyle needs because you are able to gift annually to children and grandchildren."

Jim Davis, CFP, Partner, and Senior Wealth Advisor at Aspen Wealth Management, agrees.

"On paper, this couple looks very well positioned to self-fund long-term care," he says.

But Davis cautions, "I would still want to stress-test the plan through age 100 or beyond, particularly given their family history."

As Davis explains, long-term care can become expensive quickly, especially when both spouses need it.

"For a married couple, you also have to account for the possibility that both spouses eventually need some level of care," he says.

Davis insists that at ages 77 and 79, buying a new traditional long-term care policy may be expensive and difficult to qualify for, making self-insuring the logical choice.

You still need a long-term care plan

O'Hara insists that "just because you can potentially self-insure doesn’t mean you don’t need a long-term care plan."

The good news, he says, is that even a substantial long-term care event is unlikely to jeopardize your financial security.

"Even if both of you eventually required care at the same time, your portfolio is large enough that these expenses would likely represent a manageable percentage of your overall net worth, especially when we consider the other lifestyle expenses you have now that tend to slow down or stop completely if you needed significant care," he says.

However, O'Hara insists long-term care planning isn't just about funding. It's also about decision-making.

"If one of you experiences cognitive decline, who will manage finances, coordinate care, and make healthcare decisions? For many affluent retirees, the biggest challenge isn't paying for care. It's having the legal documents, family communication, and care preferences in place before they are needed," he says.

Figure out where the money will come from

It’s clear that our couple has plenty of money to pay for long-term care. But choosing the right funds for the job is crucial.

"The more important question is not whether you can afford care, but how a prolonged care need might affect other goals," O'Hara explains.

O'Hara also cautions that with two large traditional IRA balances, required minimum distributions (RMDs) can generate a big tax hit. Because of our readers' ages, they already must take RMDs, and the percentage they must withdraw each year will continue to increase. (See our RMD Calculator for an estimate of what you might owe.)

"Depending on your tax situation, there may be opportunities to improve flexibility through tax planning strategies," he says, which should tie into your long-term care plans. For example, you could offset some RMDs from traditional IRAs through the Medical Expense Tax Deduction.

Davis says that while you may be inclined to use your IRAs to pay for long-term care if needed, that's not necessarily the best route.

"You may not want every dollar of care coming from a traditional IRA, where withdrawals can create ordinary income, or from selling appreciated investments and realizing capital gains," he says. "Roth assets and even home equity can all be part of the conversation."

As Davis explains, some families may use a HELOC or another home equity strategy to create liquidity for care rather than immediately selling investments.

"Loan proceeds generally are not taxable income, so that can sometimes give the family more flexibility while other assets remain invested. It can also preserve options for the next generation, since inherited taxable assets may receive a new basis at death under current law," he says.

To be clear, Davis says you shouldn't assume borrowing against the home is the right answer.

"Interest rates, loan terms, spending, gifting goals, and the family’s estate plan all matter. The point is simply that self-funding long-term care does not have to mean writing every check out of the investment portfolio," he says.

Give it the good old stress test

All told, our two experts are pretty confident you’ll be able to cover a lengthy long-term care event and not risk running out of money. But if you want peace of mind, both O'Hara and Davis say the next step is to stress-test your financial plan under scenarios where one or both of you require care for several years while living into your mid-to-late 90s and beyond.

"If those scenarios still support your spending, gifting, and legacy objectives, you can be much more confident that self-funding is a viable strategy," O'Hara says.

Read More

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