January 18, 2019 • Retirement 101 / Articles and Insights

Five Options to Fund Long-term Care in Retirement

Here’s some good news and some bad news. First, the good news: Americans are living longer than ever before. Now, the bad news: our longer lives mean that we’re more likely to need healthcare services, especially long-term care, in our final stages of life.

When we’re young, we think we’ll be healthy forever. But, ironically, the best time to start planning for long-term care is when you’re young. There are a variety of ways to plan for how to deal with the cost of long-term care, but let’s start with reviewing some long-term care basics.

What does “long-term care” mean?
Long-term care refers to any day-to-day help you may as you age and/or deal with an illness or condition. For example, you could need help bathing, dressing, or eating. But long-term care can also refer to less personal tasks, like housework or grocery shopping. 

But Medicare covers long-term care…right? Not usually.

Who provides long-term care?
Long-term care is offered by providers or institutions, like:

  • Companions. These are people with some training who can do household chores and prepare meals. They do not offer medical care or physical assistance.
  • Home health aides. These are licensed professionals who can help with tasks like going to the bathroom, walking, or eating.
  • Continuing care retirement communities. Also called life plan communities, they help you transition from lower levels of care, like independent living, through higher levels, such as assisted living and nursing homes.
  • In-home professional care. In-home professional care allows you to have the assistance of a home health aide or medical professional in the privacy of your own home.
  • Health-related facilities. Health-related facilities, such as rehabilitation centers, typically bridge the gap between a hospital stay and your return home. 
  • Skilled nursing facilities. Skilled nursing facilities provide intensive medical, as well as personal, care. Residents of a skilled nursing facility require 24/7 care that cannot be delivered in the home. 

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How much is long-term care?
If you think long-term care sounds expensive, you’re right! According to a recent Genworth study, a private room in a nursing home averages $8,517 a month. An assisted living facility costs around $4,051 a month. In-home skilled nursing care will run you about $87.50 per visit.

But Medicare covers long-term care…right?
Not usually. It is possible to qualify for Medicaid-funded nursing home care, but you must have exhausted most of your assets. Laws vary by state but, in general, you are responsible for paying for your long-term care. Your best option is to plan ahead for long-term care needs in retirement. 

Here are five ways you can help make sure that you will be cared for throughout your retirement years:

  1. Pay with your own assets. You generate enough interest and dividends from your investments or savings to cover the cost. If not, you sell investments to free up funds.
  2. Downsize. You sell your home and downsize, perhaps moving into a continuing care retirement community, starting with more independent living. You pay monthly expenses associated with the community. The sale of your property gives you a cash reserve.
  3. Long-term care insurance. Traditional long-term care policies can help protect you against the mounting costs of care. As you shop for policies, be aware of lifetime caps in terms of the amount of coverage or number of years covered and that premiums can rise over time. 
  4. Cash value life insurance policies. Some life insurance policies can accumulate cash value that can be accessed during your lifetime, either through a loan or policy withdrawal, as long as you follow the policy's provisions. Loans and withdrawals will reduce the policy's death benefit and cash value, and could cause the policy to lapse unless you carefully manage the policy's cash values
  5. Long term care riders on insurance products. Some insurance and annuity products offer the ability to purchase additional benefits that can provide funds for long term care needs. Availability and cost may vary by state.

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No matter what route you choose, preparing for long-term care is an important part of creating a retirement strategy that will protect you long after your last day on the job. 

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