If you've ever watched a family member move into a nursing home, you know the bill doesn't wait for a good time to show up.
Long-term care costs $60,000 to $120,000 a year. Most people assume Medicare covers it.
It doesn't.
Medicare pays for short-term rehab after a hospital stay. It doesn't pay for the months or years of custodial care that come after. That gap is where retirement savings disappear.
Today we're going to talk about the four real ways to fund long-term care, and how to figure out which one actually fits your situation.
DEEP DIVE
The Truth About Long-Term Care Insurance
Here's the problem. Waiting until you need care to plan for it isn't planning. It's hoping.
And hope isn't a strategy when the average stay in a nursing home runs three to four years.
There are four legitimate ways retirees fund long-term care. None of them is one-size-fits-all.
1. Traditional long-term care insurance. You pay a premium. The policy pays out if you need care. It's the most direct option, but premiums can rise over time, and if you never need care, you don't get the money back.
2. Hybrid life/LTC policies. These combine life insurance with a long-term care benefit. If you need care, the policy pays for it. If you don't, your family gets a death benefit instead. Nothing gets wasted.
3. Self-insuring with a dedicated account. You set aside a specific pool of money, invested and earmarked only for care. This works if you have enough assets to absorb a $300K-plus hit without derailing the rest of your plan.
4. Medicaid planning. For retirees with fewer assets, this means structuring finances now so Medicaid can step in later without forcing you to spend down everything you own first.
The right answer depends on three things: your age, your health, and your net worth. A 62-year-old in good health has different options than a 74-year-old managing a chronic condition.
Traditional insurance works best while you're younger and healthy, when premiums are lower.
Hybrid policies work well if you also want a legacy for your family either way.
Self-insuring only makes sense once you've stress-tested whether your portfolio can actually absorb the cost.
WEEKLY MAILBAG
"My mother needed a nursing home for 4 years. It wiped out everything she saved. How do I avoid that?" — Sarah M., GA
Hi Sarah. I'm sorry about your mother, and I hear this question more than almost any other.
The honest answer: the earlier you plan, the more options you have.
At this point, you likely can't undo what happened to your mother's savings, but you can build a different outcome for yourself.
If you're in your 60s and healthy, traditional or hybrid LTC coverage is usually still affordable. If you're older or managing a health condition, self-insuring or Medicaid planning may be the more realistic path.
Either way, the mistake to avoid is doing nothing. That's what turned your mother's four years of care into four years of losses.
MARKET MINUTE
The U.S. Treasury 10-year yield is holding near 4.1%, keeping fixed-income options like CDs and bond ladders more attractive than they've been in years, useful if you're building a self-insured care reserve.
FROM OUR PARTNERS
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This is the dip. Don’t miss it.
Stay safe, stay invested, and I'll see you in your inbox next Tuesday.
- Retire Plan team