Navigating the Financial Implications of Long-Term Care
When most people envision retirement, their minds often drift to enjoyable activities—perhaps extended travel, spoiling grandchildren, volunteering, or finally picking up that long-neglected hobby. Retirement is typically framed as a time to enjoy the fruits of your labor, a phase when financial freedom and personal fulfillment take center stage.
Yet one crucial aspect of retirement planning that is frequently overlooked, and potentially the most financially impactful, is the cost of long-term care. Many retirees underestimate how likely they are to need care and how expensive it can become, especially since traditional health insurance and even Medicare offer only limited coverage.
At James Investment, we believe the best way to address the challenges of long-term care is through proactive, holistic financial planning. Preparing now not only protects your future but also helps your loved ones avoid the burden of making tough decisions under pressure. Here’s a deeper dive into why long-term care matters and how you can smartly prepare for it.
What Is Long-Term Care, and Who Needs It?
Long-term care encompasses a variety of services designed to help individuals who can no longer perform basic activities of daily living (ADLs) independently. These activities include bathing, eating, dressing, transferring (getting in and out of bed or a chair), toileting, and managing medications. Long-term care may be provided in a variety of settings; at home, in assisted living facilities, or in nursing homes, and the need can arise gradually due to aging or suddenly due to illness or injury.
It’s a common misconception that only the very elderly need long-term care. In reality, people in their 60s, or even 50s, can require assistance due to early-onset cognitive issues like Alzheimer’s disease, complications from chronic illnesses, or mobility challenges following surgeries or accidents.
The statistics are sobering: According to the U.S. Department of Health and Human Services, nearly 70% of people over the age of 65 will require some form of long-term care during their lifetime. This statistic alone highlights the importance of incorporating long-term care planning into your overall retirement strategy.
The Price Tag: What Can Long-Term Care Cost?
The cost of long-term care varies significantly based on geographic region, the type of care needed, and the length of time care is required. Here’s a snapshot of average monthly costs in 2024:
- In-home care (home health aide): ~$5,000/month
- Assisted living facility: ~$4,500/month
- Skilled nursing facility (private room): $9,000/month or more
To put this into perspective, if a couple requires care for just three years, one in an assisted living facility and two in a nursing home, it could easily result in out-of-pocket costs of $200,000 to $300,000, or more, depending on their location. For many families, this level of expense can quickly erode retirement savings, leaving fewer assets for the surviving spouse or for legacy goals like supporting children or charitable giving.
And costs are only projected to rise in the years ahead. Inflation in the healthcare sector consistently outpaces general inflation, making early planning even more critical.
Three Smart Strategies to Prepare
1. Consider Long-Term Care Insurance Early
One of the most direct ways to prepare for long-term care expenses is by purchasing a long-term care insurance (LTCI) policy. These policies help cover the cost of care in various settings, including at home, in adult day care, in assisted living, or in nursing homes. The key to LTCI is timing. Premiums are significantly more affordable when policies are purchased in your 50s or early 60s, before serious health conditions make you ineligible or drive costs up.
Hybrid policies are also worth considering. These combine long-term care benefits with life insurance, allowing you to maintain some value even if long-term care is never needed. Some hybrid products offer a return of premium or death benefit to your heirs, creating a dual-purpose solution.
2. Maximize the Use of Health Savings Accounts (HSAs)
If you are enrolled in a high-deductible health plan (HDHP), you are eligible to contribute to a Health Savings Account (HSA). These accounts offer a triple tax advantage: contributions are tax-deductible, growth is tax-deferred, and withdrawals for qualified medical expenses—including long-term care—are tax-free.
In 2025, the HSA contribution limits are $4,300 for individuals and $8,550 for families, with a $1,000 catch-up contribution for those age 55 or older. Over time, regular contributions and compounding growth can build a meaningful reserve. Importantly, HSAs can be used in retirement to pay for qualified long-term care insurance premiums and actual care expenses, providing significant flexibility.
3. Protect Your Assets Through Thoughtful Estate Planning
For those concerned about preserving wealth or qualifying for government programs like Medicaid, strategic estate planning is essential. Certain types of trusts, such as irrevocable income-only trusts, can protect assets from being counted when determining Medicaid eligibility. These must be set up well in advance, often five years or more before needing care, due to Medicaid’s look-back period.
Additionally, working with an attorney to structure your estate using durable powers of attorney, living wills, and healthcare proxies ensures that your wishes are carried out and decisions are made in your best interest should you become unable to advocate for yourself.
In some cases, gifting strategies or converting assets into exempt forms, such as an annuity, may be part of a broader asset protection plan. Every situation is unique, which is why working closely with a financial advisor and an elder law attorney is critical.
A Holistic Approach: Blending Long-Term Care Into Retirement Planning
Planning for long-term care isn’t just about money; it’s about peace of mind. No one likes to think about the possibility of declining health or needing help with daily tasks, but addressing the possibility now means you and your family are better prepared emotionally and financially if that day comes.
Incorporating long-term care planning into your broader retirement and estate plan allows you to:
- Make choices about the type of care you’d prefer
- Stay in control of how your resources are used
- Avoid burdening your spouse or children with care decisions or unexpected costs
- Preserve your legacy for future generations
Bottom Line: Plan Today, Preserve Tomorrow
Long-term care is not a topic most people are excited to discuss, but it is a reality that millions of families face each year. With Americans living longer and healthcare costs continuing to rise, being prepared is more than just smart; it’s essential.
At James Investment, we help clients navigate these complex and deeply personal decisions with compassion and clarity. Whether you’re curious about insurance options, want to integrate long-term care into your retirement forecast, or need help coordinating with an estate attorney, we’re here to provide thoughtful, personalized guidance every step of the way.
Let’s start the conversation now—so you and your loved ones can focus on living well later.
