The Cost Of Long Term Care And How To Plan For It

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is the Average Cost of Long-Term Care in the United States?

Long-term care is necessary for many Americans and is an essential factor to consider when planning for the future. According to data from a 2021 report by Genworth, the median cost of care in the U.S. was approximately $59,488 to $108,405.

Many families find themselves unprepared for the costs associated with LTC and are searching for ways to ensure their loved ones are adequately cared for afterward. Therefore, it’s essential to explore insurance and financial options to help pay these expenses as part of a comprehensive retirement plan.

Type of CareAverage CostAdditional Information
Assisted Living FacilitiesApprox. $4,000/monthProvides a lesser degree of care compared to nursing homes.
Home CareApprox. $24/hour
(Approx. $3,840/month for 40 hours/week)
Cost varies based on specific services required.
Nursing Homes (Semi-Private Room)Approx. $7,500/monthCosts can vary based on location, level of care, and services.
Nursing Homes (Private Room)Approx. $8,500/monthCosts can vary based on location, level of care, and services.

What Is Long-Term Care Planning, And Why Is It Important?

Long-term care planning prepares for the potential need for ongoing care and support as we age or in case of a chronic illness or disability. It involves assessing your current and future healthcare needs, evaluating potential long-term care options, and identifying ways to pay for those services.

It is essential for several reasons:

  • It helps ensure that you have the resources and support you need to maintain your quality of life as you age or deal with chronic illness or disability.
  • It helps you and your loved ones make informed decisions about your care and support if you cannot make those decisions yourself.
  • It can help you avoid spending down your savings or assets on long-term care, preserving them for your loved ones, or leaving a legacy.

Finally, it can help you take advantage of government programs and benefits that can help pay for long-term care services. Also, it can help you avoid burdening your loved ones and allow them to continue with their own lives.

How Can Families And Individuals Create An Effective Plan For Long-Term Care

Creating an effective long-term care plan involves a few key steps:

  • Assessing needs: Determine what type of care may be needed and the potential costs.
  • Understanding options: Research the long-term care services available, such as in-home care, assisted living, and nursing homes.
  • Exploring funding options: Look into how long-term care will be financed, including private pay, Medicaid, and long-term care insurance.
  • Involving loved ones: Talk to family members and loved ones about what they want to see in a long-term care plan and how they can help.
  • Finding professional help: Seek out the help of an elder law attorney, financial advisor, and senior care manager to help guide the process and ensure that all legal and financial considerations are taken into account.
  • Tailoring the plan: Create a plan tailored to the individual’s specific needs and preferences, considering factors such as location, cultural background, and level of care needed.
  • Reviewing and updating: Regularly review and update the long-term care plan as needed to ensure that it continues to meet the individual’s needs and changing circumstances.

Long-Term Care Calculator

Get detailed calculation results on your long-term care and see what your financial future looks like.

How The Long-Term Care Insurance Calculator Works

  • Estimated Daily Cost– The daily cost of your care
  • Funds Currently Available- The amount of money you currently have saved for long-term care
  • Inflation Rate- The estimated average inflation rate.
  • Years of Care- How long will you need care

How can I start preparing for the costs of long-term care?

Long-term care costs can add up quickly and be challenging to prepare adequately. However, it is essential to research LTC options early on to ensure you are financially stable long into the future. To get started, consult a financial advisor specializing in LTC planning to evaluate any long-term needs and ensure you are sufficiently covered.

Additionally, planning through particular long-term care insurance policies or reverse mortgages may be possible so that when LTC costs become an issue, you already have a plan. You can focus on continuing to live with joy and dignity. However, with inadequate preparation comes risks; starting early with LTC cost planning protects you from future stressors associated with LTC finances.

What Are The Different Types Of Long-Care Options Available?

There are several types of long-term care options available, including:

  • In-home care: Family caregivers provide this type of care in the individual’s home and can include services such as bathing, dressing, and meal preparation.
  • Adult day careAdult day care centers provide a structured program of activities, meals, and health services for older adults who need assistance during the day.
  • Assisted livingAssisted living facilities offer a combination of housing, personal care services, and health care services.
  • Skilled nursing careSkilled nursing care is provided in a nursing home and is typically needed for individuals who need more extensive medical care.
  • Hospice careHospice care is designed for individuals nearing the end of their lives and provides comfort and support for the individual and their family.
  • Palliative carePalliative care is a specialized type of medical treatment designed to bring comfort and improve the quality of life for individuals suffering from serious illnesses. It can be provided in any setting, including homes, hospitals, or long-term care facilities. This service helps those afflicted and allows their families to breathe easier, knowing they are receiving support and consolation during this difficult time.

How To Pay for long-term care?

Long-term care can be expensive, from home health services and hospital stays to nursing homes or LTC facilities. Most LTC services are not covered by insurance like the Medicare program, so individuals may be responsible for covering these costs. Here are several options:

  • Long-term Care Insurance: A dedicated insurance policy that covers the costs of various long-term care services. Premiums vary based on age, health, and coverage amount.
  • Annuities: Financial products that provide a steady income stream. They can be structured to ensure individuals have consistent funds to cover long-term care expenses.
  • Personal Savings: Setting aside money in savings accounts, CDs, or other financial instruments to cover future care costs.
  • Reverse Mortgages: Allows homeowners to convert part of their home equity into cash, which can be used to pay for long-term care.
  • Medicaid: A joint federal and state program that can cover long-term care costs for eligible individuals with limited income and assets.
  • Veterans Benefits: Some veterans may qualify for long-term care benefits through the Department of Veterans Affairs.
  • Life Insurance: Some policies offer riders or options that allow policyholders to tap into the death benefit for long-term care needs.
  • Home Equity: Selling or renting out one’s home can provide funds for long-term care.
  • Family Support: Family members may choose to pool resources or provide direct care to help cover costs.
How Much Does Long-Term Care Cost Per Month

Are There Any Resources Available To Help People Create And Manage Their Long-Term Care Plans?

Yes, there are several resources available to help people create and manage their long-term care plans:

  • Government agencies: The federal and state governments offer a wide range of information, health and human services, and resources to help older adults and people with disabilities plan long-term care. For example, the federal government’s website, the Administration for Community Living, provides information on long-term care planning, including benefits and community services available through Medicaid and Medicare.
  • Non-profit organizations: Many non-profit organizations, such as the National Council on Aging, provide information and resources on long-term care planning, including guides, worksheets, and online calculators to help you estimate your long-term care costs.
  • Professional advisors: Financial advisors, attorneys, geriatric care managers, and other professionals can provide guidance and advice on long-term care planning, including options for paying for long-term care and legal issues that may arise.
  • Insurance companies: An Insurance company will offer long-term care insurance policies to help pay for long-term care services. They can also provide educational resources and tools to plan and pay for long-term care services.
  • Online resources: There are also many online resources available, such as websites, blogs, and forums that provide information and support for long-term care planning.

Are There Any Government Programs That Can Help With Long-Term Care Costs?

Yes, several government programs can help with long-term care costs:

  • Medicaid: Medicaid is a joint federal and state program that provides health coverage for low-income individuals and family members. It covers a wide range of long-term care services, including nursing home care, in-home care, and adult day care. Eligibility for Medicaid is based on income and assets, and each state has its own rules and guidelines.
  • Veterans Affairs (VA) Aid and AttendanceThe veteran benefits program offers monetary support to veterans and their surviving spouses who regularly require assistance in activities such as eating, bathing, grooming, taking medication, or using the restroom.
  • PACE (Program of All-Inclusive Care for the Elderly)This program provides comprehensive health care services to older adults who require long-term care services but wish to live in their own homes and communities.
  • State programs: Some states offer additional programs to help with long-term care costs. For example, many states have Medicaid waiver programs that provide additional services and support to help older adults and people with disabilities stay in their homes.
How Much Does Long-Term Care Cost Per Month

What happens when you run out of money for Long-Term Care?

Annuities are an effective solution for long-term care insurance because they offer a consistent income stream, either for a set period or for life. Their primary advantage is that they ensure individuals don’t run out of money, essential for covering the unpredictable and often high long-term care costs. By investing in an annuity, people can safeguard their financial stability, ensuring they can afford the necessary care throughout their later years without financial worries.

Are tax incentives available for those who pay for long-term care services?

Most individuals are not aware that tax incentives can partially cover LTC services. Depending on which LTC services you receive, your dues may be deferred or even reduced through certain tax write-offs. For example, long-term care insurance premiums, LTC expenses such as nursing home fees, and medical expenses not covered by health insurance are all examples of expenditures that may qualify for LTC-related tax breaks.

Furthermore, some state and federal programs assist with LTC through specific programs. You must check with your employer, financial advisor, or accountant to ensure you take advantage of every possible tax incentive when paying for LTC services.

Is Long-Term Care Tax Deductible?

Long-term care (LTC) costs can be significant, leading many to question if they’re tax-deductible. While generally not deductible, there are exceptions based on location and individual circumstances. Some may qualify LTC as a medical expense for tax deductions, but rules vary. As advised by experts, it’s crucial to allocate 10-20% of your income for LTC to ensure financial security and peace of mind.

Next Steps

Long-term care is a significant financial concern for families across the United States. However, if you are unprepared for the high cost, you could quickly find yourself in financial trouble. There are several ways to prepare for the high price, and we have outlined some of those methods in this guide. We have also provided some tips on reducing the estimated payment as much as possible. If you would like more information on how to prepare for the high cost, or if you would like a free quote, please get in touch with us today.

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Questions From Our Readers

At what age should you start investing in long-term care?

Start considering long-term care insurance in your mid-50s to early 60s. Premiums are lower for younger, healthier individuals, and the risk of being denied due to health issues is smaller. However, personal health, family history, and financial situation are key factors to consider in your decision.

What type of living facilities are covered by long-term care?

Long-term care insurance covers nursing homes, assisted living facilities, adult day care centers, in-home care, and memory care facilities.

What are the most common types of Long-Term Care?

The most common types of long-term care are in-home care, assisted living facilities, nursing homes, and adult day care services.

What is the largest source for financing long-term care?

The largest source for financing long-term care in the U.S. is Medicaid, a government program assisting those with limited income and resources.

What government programs can help with the cost of Long-Term Care?

Medicaid and Medicare are the main government programs helping with long-term care costs. Medicaid covers extensive long-term care for eligible low-income individuals. Medicare provides limited coverage for short-term rehabilitation and skilled nursing care following hospitalization.

How do I reduce my Long-Term Care premiums?

To minimize the premiums for long-term care insurance, consider purchasing a policy at a younger age when rates are generally lower. Opting for a longer elimination period before benefits kick in can also reduce premiums. Choosing a shorter benefit period and selecting lower daily benefit amounts can further lower costs. If you are married, consider shared care policies which allow couples to share a pool of benefits. Additionally, look for potential discounts, such as those offered through group plans or for maintaining good health.

Where can I receive long-term care?

Long-term care can be received in various settings, such as your own home with in-home care services, assisted living facilities, nursing homes, adult day care centers, and community centers that offer specialized services.

What long-term care expenses are tax deductible?

Tax-deductible long-term care expenses include premiums paid for qualified long-term care insurance policies within certain limits based on age. Additionally, unreimbursed expenses for long-term care services, which are necessary and prescribed by a healthcare professional, can also be deductible as medical expenses.

Why is long-term care protection important?

Long-term care protection is important because it safeguards against the high costs of extended care, reduces the financial burden on family members, ensures access to quality care, and provides peace of mind for future health needs, especially as one ages or in case of chronic illness or disability.

What affects the cost of long-term care?

Long-term care costs are affected by factors such as the type and duration of care needed, the care setting (home care, assisted living, nursing home), geographical location, and the individual’s age and health condition. Inflation also plays a significant role in increasing future care costs.

What is the biggest drawback of long-term care insurance?

The biggest drawback of long-term care insurance is its high cost, including potentially steep premium increases over time. Additionally, the possibility of paying premiums for years without ever needing the coverage, and the complexity and limitations of policies (like coverage caps and exclusions), can also be significant downsides.

Can Medicare pay for long-term care?

Medicare primarily covers medical services and short-term skilled care, not long-term care. While it can pay for limited stays in skilled nursing facilities or home health care after particular hospital stays, it doesn’t cover extended stays in nursing homes or ongoing assisted living costs. Individuals often rely on Medicaid or private long-term care insurance for extensive long-term care.

Husband requires long-term care. I have annuities that I converted from my 401k. Is my annuity counted in Illinois as income for Medicaid?

When checking if you qualify for Medicaid, whether you own a certain type of savings plan called an annuity can affect your eligibility. There are special annuities called “Medicaid-compliant annuities” made to help people qualify for Medicaid. But these have very specific rules you need to follow. If your annuity doesn’t meet these rules, it will count as part of your assets, which could impact whether you qualify for Medicaid.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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