Planning Ahead for Long-Term Care Costs
By Brian Famigletti, Managing Director & Head of Marketing
What Long-Term Care Includes
Long-term care costs refer to expenses associated with personal care and support as people age.
These services typically assist with activities of daily living, such as bathing, dressing, eating, and mobility. Long-term care is not limited to medical treatment and may involve ongoing personal support over extended periods.
Care can be delivered in several ways. Home health aides provide assistance in the home and help individuals maintain independence. Assisted living facilities offer structured support while allowing residents to live in private or semi-private settings. Nursing homes provide continual medical and personal care for individuals with more complex needs.
The type of care required often changes over time. Many individuals transition between home care, assisted living, and nursing facilities as their health evolves. This progression can make financial planning more complex, especially when timing and duration are uncertain.
Long-Term Care Costs Add Up
Long-term care costs can be substantial. National median costs already exceed tens of thousands of dollars per year, according to a 2024 Genworth/CareScout study, and nursing care often exceeds six figures annually. Costs in some states can be several times higher than in others.
Inflation compounds the challenge. Long-term care expenses have historically risen faster than general inflation, and health care-specific inflation has also outpaced broader consumer prices. Over long retirements, this gap can materially increase total costs.
UBS research suggests that a majority of households will use some form of long-term care. While many families incur modest expenses, a smaller group faces very high costs driven by prolonged or intensive care needs, with 20% of families typically driving 80% of long-term care costs. This uneven distribution makes long-term care difficult to self-fund with certainty.
The impact on financial plans can be significant. Simulations show that when long-term care expenses are included, the likelihood of portfolio depletion rises meaningfully, especially for households with lower starting asset levels. Even well-funded plans are likely to lose flexibility or see lower legacy outcomes when care costs are prolonged.
Evaluating Funding & Planning Options
No single strategy addresses long-term care costs for every household.
Some families plan to self-fund care from personal assets. This approach preserves flexibility, but exposes portfolios to large, unpredictable expenses.
Insurance-based solutions may help manage risk, but come with their own trade-offs. Traditional long-term care insurance allows customization of benefits, but may involve rising premiums and forfeited benefits if care is never needed. Hybrid policies combine long-term care coverage with life insurance features, offering death benefits if care is unused. These products may require substantial upfront commitments and include coverage limits.
Other solutions include annuities with long-term care riders, or permanent life insurance with care provisions. These approaches typically include caps, fees, or restrictions that must be evaluated carefully.
Meanwhile, public programs offer limited relief. Medicare covers skilled nursing care only under strict conditions and for limited durations. It does not cover most long-term custodial care, which accounts for the bulk of long-term care costs.
Effective planning will likely require the use of multiple tools. Reviewing these elements together can help families understand trade-offs and build resilience. If you’d like help evaluating long-term care costs and how they may affect your retirement plan, contact Griffin Asset Management to speak with an expert.
