Long-term care is the planning topic most retirees least want to discuss and most need to. The numbers are sobering: roughly 70% of Americans over 65 will need some form of long-term care. The average woman who needs care needs it for 3.7 years; the average man for 2.2 years. Costs are rising faster than general inflation.
What it actually costs
National median costs (2024 Genworth Cost of Care Survey, projected to 2026):
- Home health aide: ~$33/hour (~$70,000/year for 8 hours/day)
- Assisted living: ~$60,000/year
- Nursing home, semi-private room: ~$108,000/year
- Nursing home, private room: ~$120,000/year
These are medians. In high-cost states (CA, MA, CT, NY, AK), nursing home costs routinely exceed $160,000/year. A six-year stay can run well over $1 million in current dollars.
What Medicare covers (and doesn't)
Medicare is the most misunderstood piece of this. It covers up to 100 days of skilled nursing care following a qualifying hospital stay, with significant copays after day 20. It does not cover custodial care — the help-with-bathing-and-dressing kind that most long-term care actually consists of.
Medicaid covers long-term custodial care, but only after the client has spent down to roughly $2,000 in assets ($3,000 for couples in some states). For households with meaningful net worth, Medicaid is not a plan; it's the result of not having one.
The four real options
1. Self-insure
If your portfolio comfortably absorbs $250,000–$1M+ in additional spending without changing your survivor's lifestyle, self-insuring is rational. The threshold is usually $4M+ in liquid assets, or substantial enough cash flow that even a long stay doesn't crack the plan.
2. Traditional long-term care insurance
Pure-play LTC insurance is cheaper than hybrid policies but carries premium-increase risk. Several large carriers have hiked premiums dramatically over the last 15 years. Most are no longer issuing new traditional policies.
3. Hybrid life/LTC policies
A permanent life insurance policy with a long-term care rider. Premiums are typically locked. If LTC is needed, it draws against the death benefit. If not, heirs receive the death benefit. More expensive but more popular for the past decade because of the certainty.
4. Annuity-based LTC
Some annuities allow tax-free withdrawals for qualifying LTC expenses. Useful for clients with money already in non-qualified annuities and limited interest in life insurance.
When to address it
The cost-effective window for traditional or hybrid LTC underwriting is ages 50 to 65. Premiums rise sharply with age, and underwriting tightens after a major health event. By the time you're certain you'll need it, you usually can't get it.
Long-term care isn't an insurance question; it's a household risk allocation question. Self-insure if you can; transfer the risk if you can't. Either is a legitimate plan. "We'll figure it out later" is not.
At IronBridge, we run side-by-side LTC scenario modeling with each household's actual portfolio, family medical history, and tax situation. Schedule a conversation.