Long-term care: the retirement cost nobody plans for

What you’ll learn in this guide:

• What long-term care actually means — and why it’s different from medical care
• What care typically costs by setting (home, assisted living, nursing facility)
• What Medicare covers — and why the answer is “much less than most people expect”
• How Medicaid fits in, and what “spending down” actually means
• The four main approaches to funding long-term care, with honest tradeoffs for each
• Why the timing of planning matters more than most people realize
• How to start the family conversation before a crisis forces it

The number that should get more attention

Here’s what the research consistently shows: roughly 70% of people turning 65 today will need some form of long-term care at some point in their lives. And roughly 80% of Americans have no plan to pay for it.

Those two numbers don’t add up — which is exactly the problem.

This isn’t a topic most people avoid because they don’t care. It’s one they avoid because it’s uncomfortable, because it feels distant, because the variables are hard to predict, and because most retirement content glosses past it on the way to something easier. This guide tries to do the opposite: lay out what’s actually at stake, clearly and without dramatizing it, so the decisions that need to be made can actually get made.

This guide focuses on paying for care. Funding is necessary but not sufficient — why finding care is getting harder, not just paying for it covers the separate, growing problem of care availability itself.

What “long-term care” actually means

This matters more than it might seem, because long-term care and medical care are genuinely different things — and that distinction is why most insurance programs don’t cover it.

Medical care treats a condition: surgery, hospitalization, physical therapy to recover from a procedure. It’s time-limited and focused on restoration.

Long-term care is ongoing assistance with daily living activities — bathing, dressing, eating, moving around, managing medications, using the bathroom. It’s needed when someone can no longer manage these activities independently, due to a chronic illness, cognitive decline, physical disability, or the cumulative effects of aging. It is not, in the eyes of most insurers and government programs, “medical” care. It’s custodial care.

That distinction is the primary reason Medicare doesn’t cover it. And it’s the reason why people who’ve carefully managed every other part of their retirement finances can still find themselves facing costs they hadn’t planned for.

What long-term care actually costs

The costs vary significantly by type of care, geography, and how much help is needed. These are national median figures from Genworth’s most recent Cost of Care Survey — local costs in high cost-of-living areas can run substantially higher.

Home care: A home health aide providing part-time assistance costs a national median of around $33 per hour — which adds up quickly. For someone needing 40 hours of help per week, that’s roughly $68,000 per year. Full-time care at home is often more expensive than a facility.

Adult day care: For people who need daytime supervision and care but can live at home overnight, adult day programs run around $20,000–$25,000 per year nationally. They’re often the least expensive formal care option.

Assisted living: Residential communities that provide help with daily activities but not around-the-clock skilled nursing care. The national median is roughly $64,000 per year for a private apartment. Memory care — a specialized category for people with dementia — typically runs 20–30% higher.

Nursing home care: For people who need 24-hour skilled nursing supervision, the national median for a private room is over $108,000 per year. Semi-private rooms run around $95,000.

The average person who needs long-term care uses it for about 2.5 years. That’s a national average — for those with dementia or other progressive conditions, the duration is often significantly longer. About 20% of people will need care for more than five years.

What Medicare covers (and why it’s less than most people expect)

Medicare will cover skilled nursing facility care under specific, limited conditions: you must have been hospitalized for at least three consecutive days, and the nursing facility stay must be for continued recovery from that condition. Under those circumstances, Medicare covers the first 20 days in full. Days 21–100 come with significant daily coinsurance. After 100 days, Medicare coverage ends.

That’s it. Medicare does not cover:

• Ongoing help with daily activities (custodial care), regardless of how much it’s needed
• Assisted living or memory care facilities
• Long-term in-home care
• Most adult day programs

This is not an obscure footnote. It’s the central financial reality of long-term care planning, and it surprises a significant number of retirees when they encounter it.

For a full picture of what Medicare does and doesn’t cover across all healthcare in retirement, see our companion guide: Healthcare in retirement: what Medicare covers, what it doesn’t, and what that gap actually costs.

Where Medicaid fits in

Medicaid does cover long-term care — including nursing home care and, in many states, home and community-based care through waiver programs. For many Americans, Medicaid ultimately pays for sustained long-term care.

But Medicaid is a needs-based program, meaning it’s designed for people with limited income and assets. To qualify, most people need to have spent down their assets to a relatively low threshold. The specific rules — what counts as an asset, what’s exempt (a primary residence often is, up to a point), how look-back periods work for asset transfers — vary considerably by state and change over time.

Medicaid planning, which involves structuring assets in advance to qualify while preserving something for a spouse or heirs, is a real and legal practice. It’s also genuinely complex, state-specific, and time-sensitive — the rules include look-back periods that can penalize asset transfers made in the years before applying. This is an area where an elder law attorney with experience in Medicaid planning is the appropriate resource, not general financial guidance.

For married couples, there are specific Medicaid rules designed to prevent a healthy spouse from being impoverished by a partner’s care costs — these are called “spousal impoverishment protections” and are worth understanding as part of any Medicaid planning conversation.

The four main approaches to funding long-term care

There’s no single right answer here. The approaches that make sense depend on age, health, existing assets, family circumstances, and risk tolerance. What follows is an honest look at how people generally think through these options.

1. Self-funding

People with significant assets sometimes decide to set aside funds specifically for potential long-term care costs rather than purchasing insurance. The logic: if you never need care (or need very little), the money stays as part of your estate. If you do need care, the funds are there.

The consideration: self-funding works most cleanly for people with enough assets that a substantial long-term care need wouldn’t fundamentally destabilize their financial situation. For someone with $3 million in assets, absorbing even a five-year nursing home stay is painful but survivable. For someone with $600,000, it’s a different calculus. Self-funding also concentrates the risk: if the need is large, the cost is entirely borne by the individual (and often their family).

2. Traditional long-term care insurance

Standalone LTC insurance policies work like other insurance: you pay premiums and the policy pays benefits if you need qualifying care. Benefits are typically defined in terms of a daily or monthly maximum and a benefit period — and policies usually include inflation protection as an optional feature that keeps benefit levels from eroding over time.

The challenge with traditional LTC insurance is that it’s become harder to purchase in recent years. Many insurers exited the market after underestimating how much people would use it; those that remain have raised premiums significantly. Premium increases on existing policies have also been common. For people who purchased policies a decade or more ago, those policies can represent real value. For people looking to purchase now, the market is more limited and the premiums are higher than they were.

The general guidance among financial planners who work in this area is that LTC insurance tends to be most worth evaluating when purchased in your mid-50s to early 60s — premiums are meaningfully higher for older applicants, and health conditions that develop later in life can make someone uninsurable. Waiting significantly reduces options.

3. Hybrid life/long-term care policies

A growing alternative to traditional LTC insurance. These are life insurance policies (or sometimes annuities) with a long-term care rider — if you need care, you can draw on the policy’s death benefit to pay for it. If you die without needing significant care, the death benefit passes to heirs.

The appeal is that the premium isn’t entirely “lost” if you never need care, which addresses a common objection to traditional LTC insurance. The tradeoffs include higher upfront costs and the fact that the long-term care benefit is typically capped at the death benefit amount. These policies have grown significantly in market share and are worth including in any comparison.

4. Medicaid planning

As described above — working with an elder law attorney to structure assets in a way that positions someone to eventually qualify for Medicaid while protecting what’s possible under the law. This is most relevant for people who lack the assets to self-fund and for whom LTC insurance premiums are financially difficult, or who have health conditions that make private insurance unavailable.

The timing element matters significantly: Medicaid has look-back periods (typically five years) that examine prior asset transfers and can result in periods of ineligibility if transfers were made without proper planning. Starting the conversation with an elder law attorney well before a crisis is typically far more productive than trying to navigate the rules under time pressure.

Why the timing of this decision matters

Long-term care planning has a window that closes gradually, then faster than expected. The factors that close it:

Health. Long-term care insurance and hybrid policies involve medical underwriting. Conditions that develop in your 60s and 70s — diabetes, heart disease, early cognitive changes — can make policies more expensive or unavailable. Many planners suggest that the mid-50s to early 60s is often the practical window for evaluating private insurance options, when premiums are more manageable and health is more likely to allow it.

Medicaid look-back periods. If Medicaid planning is part of the strategy, the five-year look-back period means that decisions about asset transfers or irrevocable trusts need to be made well in advance — not during a health crisis when someone is already heading toward a care facility.

Cognitive capacity. Planning for long-term care requires making decisions, signing documents, and in some cases restructuring assets. Once significant cognitive decline sets in, legal capacity to make these decisions may be limited. Advance directives, powers of attorney, and healthcare proxies need to be in place before they’re needed.

None of this means there’s an emergency at any particular age. But “I’ll think about it later” has a shorter runway than most people realize.

The family conversation nobody wants to have — and why it matters

Long-term care is not only a financial question. It’s also a family question, because in practice, families are often the primary providers of care — whether they planned to be or not.

An estimated 53 million Americans provide unpaid care to an adult family member. Most of them didn’t sign up for it explicitly; they stepped in when a need arose and there was no other plan. That can mean adult children reducing work hours, moving parents nearby or into their home, managing medications and appointments, and navigating the healthcare system — often while managing their own careers and families.

The financial and emotional cost of family caregiving is real and often invisible until it arrives. Having explicit conversations — about preferences, about finances, about what different scenarios might look like, about who would do what — is one of the most protective things a family can do for all of its members, not just the person who might eventually need care.

These conversations are hard to start. A useful framing: rather than “what do we do if you can’t take care of yourself,” try “I want to make sure we know what you’d actually want, so we can make the right decisions.” Most people have preferences about where they’d want to live and what kind of help they’d want — and expressing those preferences is easier and more useful before there’s a crisis.

If you’re an adult child helping a parent think through these decisions, we cover the full scope of that role — including how to navigate these conversations — in Helping a parent plan retirement: a guide for adult children.

Where to get help

An elder law attorney is the right starting point for Medicaid planning, advance directives, powers of attorney, and trust structures. The National Academy of Elder Law Attorneys (naela.org) has a directory of attorneys by state.

A financial planner with retirement income experience can model how different long-term care scenarios interact with your overall financial picture — including how care costs would interact with Social Security, RMDs, and a spouse’s finances. Look for a CFP with experience in retirement income and long-term care planning.

Your state’s SHIP program — free Medicare counselors who can help clarify what Medicare covers and doesn’t, and what supplemental options exist in your area. Not long-term care specialists, but a good starting point for separating Medicare from LTC. Find your local counselor at shiphelp.org.

Genworth’s Cost of Care Survey — an annually updated, region-specific database of long-term care costs across the country. Useful for getting a realistic sense of what care costs in the area where you or a parent lives. Available at genworth.com.

Also in the Money pillar: Healthcare in retirement: what Medicare covers, what it doesn’t, and what that gap actually costs — a companion guide covering Medicare structure, enrollment timing, and how to think about Medigap and Medicare Advantage.