Paying for Long-Term Care
According to the U.S. Department of Health and Human Services (HHS), nearly 70% of retirees will require some form of long-term care (LTC) during their lifetime. The median annual cost of care ranged from $53,768 to $105,850 in 2020 (Genworth). As retirees live longer, these expenses—and the risk of outliving one’s assets—have become a growing concern.
Importantly, HHS data shows that 82% of people receiving long-term care live in the community, while only 18% live in an institution such as a nursing home. This means most long-term care costs are associated with home care, adult day health services, and community-based programs.
The Challenge of Affording Long-Term Care
Planning how to pay for LTC can be daunting. Costs can add up quickly, and few Americans are fully prepared. Long-term care insurance can help cover some or all of these services, but premiums vary widely based on age, gender, health, and location.
For example, the American Association of Long-Term Care Insurance reports that, in 2021:
- A healthy 55-year-old man could expect to pay $1,375 to $3,685 per year for initial coverage of $165,000 with a 1–5% annual growth rate.
- A healthy 55-year-old woman could expect to pay $2,150 to $6,400 for the same coverage.
Premium increases are common, as older actuarial models underestimated the true cost of care.
Exploring Hybrid Long-Term Care Policies
Another option is a hybrid policy, which combines life insurance or an annuity with long-term care benefits.
- These policies are often funded with a single upfront premium, avoiding future price hikes.
- If you never need LTC, your heirs may receive a death benefit.
This option can be attractive if you want coverage but hope not to use it. However, comparing hybrid policies can be more challenging than evaluating traditional LTC insurance.
Using a Health Savings Account (HSA)
If you have a Health Savings Account (HSA), you can use pre-tax funds to pay for:
- Qualified LTC insurance premiums (up to IRS limits)
- Out-of-pocket LTC expenses
Additionally, taxpayers who itemize deductions can write off unreimbursed LTC expenses that exceed 7.5% of adjusted gross income.
Medicaid and Long-Term Care
For retirees with limited income and assets, Medicaid may help cover nursing home or community-based long-term care. To qualify, applicants must meet strict financial requirements and pass a five-year lookback period to ensure assets were not given away to qualify.
Planning ahead with an elder law attorney can help:
- Preserve more of your assets through legal strategies
- Avoid penalties for improper asset transfers
- Navigate the complex application process successfully
The Role of Family Caregivers
Most LTC begins with family members providing informal care—helping with one or two activities of daily living such as bathing or meal preparation. Community programs, in-home services, and adult day health programs can supplement family caregiving and keep loved ones engaged and independent for as long as possible.
Because institutional care is expensive and Medicaid funding is limited, home- and community-based solutions are often the most practical first step.
Take Action Now
Unfortunately, access to paid LTSS is not equal. Lower-income individuals face higher risks of needing care but may struggle to afford it, while higher-income individuals may outlive their resources. The best way to protect yourself and your family is to plan early.
📞 We can help you start your long-term care planning today. Call us at (207) 848-5600 or visit our Contact Page to learn more about your options and create a plan that safeguards your future.
