When most people think about retirement planning, they focus on the big three: income, taxes, and investments. But there’s a fourth category that can quietly undo even a strong plan if it’s ignored:
Long-Term Care (LTC) — the cost of ongoing help when someone needs assistance with daily activities (like bathing, dressing, eating) or supervision due to cognitive decline.
What long-term care really means (and what it doesn’t)
Long-term care is often misunderstood as “nursing home care.” In reality, it’s a spectrum that can include:
In-home help (home health aide, homemaker services)
Adult day care
Assisted living
Skilled nursing/nursing home care
Memory care (often part of assisted living or skilled nursing)
It’s also important to know that LTC is usually custodial care (help with daily living), not “medical care” in the way most people think about doctor visits and procedures.
The 2026 reality: costs keep rising
Even before you factor in future inflation, current national median costs are already meaningful:
Nursing home (private room): $127,750/year (national median, 2024)
Assisted living: $70,800/year (national median, 2024)
Home health aide: reported at $34/hour national (2024)
And those are medians — your local market, care level, and provider availability can push costs much higher.
“Doesn’t Medicare cover that?”
This is the #1 planning trap.
Medicare can help with limited skilled nursing facility (SNF) care under specific rules, but it does not function as long-term custodial care coverage.
Medicare Part A coverage for SNF care is limited to up to 100 days per benefit period, if you meet requirements.
That’s very different from ongoing help at home, assisted living, or extended custodial care.
The three main ways people pay for long-term care
Most LTC funding strategies fall into three buckets:
1) Self-funding (paying out of pocket)
This can work well for households with strong assets and flexibility — but it’s worth stress-testing:
“What happens if care lasts longer than expected?”
“What if both spouses need care at different times?”
2) Medicaid planning (needs-based support)
Medicaid is a major payer of long-term services and supports in the U.S.
However, eligibility rules and planning strategies are state-specific, and timing matters (often years in advance).
3) Insurance-based strategies (transfer some risk)
This may include:
Traditional long-term care insurance
Hybrid/combination policies (life insurance or annuity with LTC benefits)
Policies with tax-qualified LTC features may require the insured to be “chronically ill” (ADL help or severe cognitive impairment), per federal standards.
A helpful planning mindset: insurance doesn’t have to cover everything — it can be designed to cover the most disruptive years/costs.
2026 planning note: state programs are evolving (example: Washington)
More states are experimenting with LTC approaches. For example, Washington’s WA Cares Fund is funded by a 0.58% payroll deduction and provides a lifetime benefit (public materials commonly cite up to $36,500) with benefits becoming available starting July 2026 for eligible participants.
Even if you’re not in Washington, it’s a good reminder: LTC planning is becoming more mainstream, and rules/programs can be state-driven.
A practical LTC planning checklist for 2026
If you want a clean, “advisor-style” way to guide clients, use this flow:
Step 1: Clarify the care preference
“Do you want to stay at home as long as possible?”
“Would assisted living be acceptable if needed?”
“Is family support likely… or limited?”
Step 2: Estimate a planning range
Use a local cost-of-care estimate (not a national average) and model:
2–4 years of care (common planning range)
plus a “longer-duration” scenario
(Genworth/CareScout’s tools are widely used for state-by-state baselines.)
Step 3: Choose a funding strategy (or blend)
Self-fund + earmarked reserves
Insurance (traditional or hybrid)
Medicaid/asset-protection planning (state-specific)
A blended plan (often the sweet spot)
Step 4: Coordinate the legal and family pieces
Health care directive / POA
Who can make decisions?
Where are key documents stored?
How will care decisions be made quickly?
The bottom line
Long-term care isn’t just a “retirement expense.” It’s a retirement plan stress test.
The best time to plan is when you have choices — not when a health event forces decisions on a deadline.
Disclosure
This content is for informational purposes only and is not intended as individualized investment, tax, legal, or insurance advice. Coverage, benefits, costs, and availability vary by state and carrier. Consult appropriate professionals regarding your specific situation.