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What happens if you need help with daily activities like bathing, dressing, or eating—and Medicare won't pay for it?
Long-term care is one of the most overlooked—and potentially most expensive—aspects of retirement planning. It's uncomfortable to think about, but the reality is that most Americans will need some form of long-term care in their lifetime.
Without a plan, long-term care costs can devastate retirement savings, forcing difficult decisions on you and your family.
At Chesapeake Financial Planners, we help clients address long-term care proactively—exploring insurance, hybrid solutions, and self-funding strategies so you're prepared for whatever the future holds.
What is long-term care?
Long-term care refers to assistance with activities of daily living (ADLs)—basic tasks like:
- Bathing and showering
- Dressing
- Eating
- Using the bathroom
- Transferring (moving from bed to chair)
- Continence management
It also includes help with instrumental activities of daily living (IADLs) such as meal preparation, medication management, housekeeping, and transportation.
Long-term care can be provided:
- At home (by family members or paid caregivers)
- In assisted living facilities
- In nursing homes
- In adult day care programs
How likely are you to need long-term care?
More likely than you think.
According to the U.S. Department of Health and Human Services:
- 70% of people turning 65 today will need some form of long-term care
- Women are more likely to need care than men (due to longer life expectancies)
- The average person needs care for about 3 years, but 20% will need care for more than 5 years
The question isn't "Will I need long-term care?"—it's "How will I pay for it if I do?"
How much does long-term care cost?
Long-term care is expensive, and costs vary significantly by location and level of care.
National median annual costs (2024 estimates):
Home care:
- Homemaker services: $30–$35 per hour (~$60,000/year for 40 hours/week)
- Home health aide: $30–$35 per hour
- Adult day care: $1,700–$2,000 per month
Facility care:
- Assisted living facility: $4,500–$6,000+ per month ($54,000–$72,000/year)
- Nursing home (semi-private room): $8,000–$9,000 per month (~$100,000/year)
- Nursing home (private room): $9,000–$10,000+ per month (~$115,000/year)
In high-cost areas like New York, California, or Massachusetts, costs can be 50% higher or more.
Over 3–5 years, long-term care can easily cost $200,000–$500,000+. That's a significant portion of most retirees' savings.
Why Medicare doesn't solve the problem
Medicare does not cover long-term custodial care.
Medicare will cover:
- Skilled nursing care for short periods (up to 100 days) following a hospital stay
- Home health services if you're homebound and need skilled care
But Medicare does not cover:
- Custodial care (help with daily activities)
- Assisted living facilities
- Most nursing home stays
- Long-term in-home care
This is a common misconception that leaves many families unprepared.
What about Medicaid?
Medicaid does cover long-term care, but there are strict eligibility requirements:
- Income limits: You must have very limited income
- Asset limits: In most states, you can have no more than $2,000–$3,000 in countable assets (your home and one car are typically exempt)
- Spend-down requirements: You may need to "spend down" your assets to qualify
For many middle-class retirees, Medicaid isn't a viable option without significant advance planning (which has its own legal and ethical considerations).
Your long-term care planning options
Option 1: Self-fund (pay out of pocket)
If you have substantial savings, you may choose to self-fund long-term care costs.
Pros:
- No insurance premiums
- Full control over care decisions
- Flexibility to use funds for other needs if care isn't required
Cons:
- High costs can deplete retirement savings quickly
- Uncertainty about how long care will be needed
- May leave less for a surviving spouse or heirs
Who it's for: Individuals with $2 million+ in assets who can absorb potential costs without jeopardizing their retirement security.
Option 2: Traditional long-term care insurance
Traditional long-term care insurance pays a daily or monthly benefit if you need care.
How it works:
- You pay annual premiums (typically $2,000–$6,000+ per year depending on age, health, and coverage)
- If you need care, the policy pays a set amount per day (e.g., $150–$300/day)
- Policies have a maximum benefit period (e.g., 3 years, 5 years, lifetime)
Pros:
- Protects your assets from being depleted by care costs
- Provides access to quality care without draining savings
- Premiums may be tax-deductible (subject to limits)
Cons:
- Premiums can increase over time
- If you never need care, you may receive no benefit
- Requires good health to qualify (best purchased in your 50s or early 60s)
Who it's for: Individuals with $500,000–$2 million in assets who want to protect their retirement savings and legacy.
Option 3: Hybrid life insurance or annuity policies
Hybrid policies combine life insurance or annuities with long-term care benefits.
How it works:
- You pay a lump sum or annual premiums into a life insurance or annuity policy
- If you need long-term care, the policy accelerates the death benefit to pay for care
- If you don't need care, your beneficiaries receive the death benefit
Pros:
- If you don't use the long-term care benefit, your heirs still get something
- No "use it or lose it" dilemma
- Premiums typically won't increase
Cons:
- More expensive upfront than traditional long-term care insurance
- Benefits may be lower than standalone long-term care policies
Who it's for: Individuals who want long-term care protection but also want to ensure their premiums aren't "wasted" if care isn't needed.
Option 4: Family caregiving (with support)
Many families provide care for aging loved ones, but this comes with financial and emotional costs.
Considerations:
- Caregiving can strain relationships and impact the caregiver's health
- Lost income if the caregiver reduces work hours or leaves the workforce
- Home modifications or equipment may be needed
- Respite care can provide temporary relief but adds costs
Who it's for: Families with strong support systems and realistic expectations about the demands of caregiving.
How to decide which option is right for you
Choosing a long-term care strategy depends on:
Your assets: Do you have enough to self-fund, or would care costs threaten your financial security?
Your health: Are you healthy enough to qualify for traditional insurance?
Your family situation: Do you have a spouse or dependents who would be financially impacted if you needed care?
Your risk tolerance: Are you comfortable with the uncertainty of self-funding, or do you prefer the security of insurance?
Your legacy goals: Is leaving an inheritance important, or is your priority ensuring your own care?
At Chesapeake Financial Planners, we help you evaluate these factors and model different scenarios to determine the best approach for your situation.
When should you plan for long-term care?
The best time to plan is in your 50s or early 60s, when:
- You're more likely to qualify for insurance (health underwriting becomes stricter as you age)
- Premiums are lower
- You have time to save or adjust your retirement plan if needed
But it's never too late to create a strategy—even if insurance isn't an option, you can still build self-funding plans or explore hybrid solutions.
Your next step
Long-term care isn't a pleasant topic, but avoiding it doesn't make the risk go away. Planning now gives you control, options, and peace of mind—for you and your family.
At Chesapeake Financial Planners, we help clients create comprehensive long-term care strategies that fit their financial situation and goals.
Ready to address long-term care in your retirement plan? Schedule a complimentary consultation with our team today.
This material is for educational purposes only and is not intended as insurance, legal, or tax advice. Long-term care insurance is subject to underwriting, and premiums can increase over time. Coverage options and costs vary significantly by carrier and policy design.
Medicaid eligibility rules vary by state and are subject to change. Consult with an elder law attorney or Medicaid specialist for guidance specific to your situation.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a registered investment advisor and separate entity from LPL Financial.
Chesapeake Financial Planners | 2402 Scotlon Ct, Forest Hill, MD 21050 | (410) 652-7868 | www.chesapeakefp.com