Motivators for Planning for Long-Term Care


When you think about retirement, you also should start planning for long-term care. Even if retirement is years away, you should include a long-term care budget as part of your retirement strategy.

Like it or not, chances are you will need long-term care at some point in your life. Consider these statistics:

  • 70% of those turning 65 will need long-term care
  • 48% of those turning 65 will need paid long-term care
  • 24% will need care for more than two years
  • 15% will spend more than two years in a nursing home

And the need for long-term care isn’t just something retirees should think about; 40% of those in need of long-term care are between the ages of 18 and 64.

There are a variety of ways to include a long-term care budget as part of your retirement plan. The best place to start is to understand your options and consider how much you might need.

Understanding Long-Term Care

When we talk about long-term care, we aren’t just talking about a nursing home but about a variety of services that support your health and well-being for a short time or a long time. Long-term care is available from a variety of sources in several forms:

  • Home health care: Many people find they need in-home care to deal with a long illness or recuperation. They may be recovering from surgery, an accident, or illness and need nursing care, physical therapy, or some other kind of medical support administered at home.
  • In-facility care: If someone is recuperating or unable to care for themselves, then they may need care in a rehabilitation facility or care home.
  • Aging in place: As they age, most people prefer to stay in their homes as long as possible, which may mean using care products and services to support independent living when they become older.

No matter what type of long-term care you may need, you will need to find a way to pay for it. The United States has the highest cost of healthcare in the world. In 2018, the cost of care averaged $11,000 per person. By 2028, the Centers for Medicare and Medicaid Services expects the cost of health care to reach $6.2 trillion (20% of the U.S. GDP) or $18,000 per person. Some long-term care may be covered by health insurance or Medicare, but insurance seldom covers everything, and you still have to account for high deductibles, out-of-network costs, and medical care that isn’t covered.

If you set up a long-term care budget, then you will be in a better position to handle long-term care costs should they arise.

Financing Strategies for Long-Term Care

When developing your long-term care budget, you should consider what you can expect to pay for care and what types of insurance and government assistance are available.

If you are age 65 or older, Medicare is free to qualified participants and can help pay for medical and care expenses. Medicare Part A pays for hospital costs, short stays in a care facility (depending on your needs), and six months of hospice care. 

However, for more comprehensive care that includes doctor visits, outpatient services, and related services, you want to sign up for Medicare Part B, which has a nominal monthly premium. You might also consider Medigap insurance to pay for services not covered by Medicare Part A and Part B. If you are under age 65 and unable to work because of an injury or ailment, you also may qualify for Social Security Disability Insurance (SSDI).

You also might consider long-term care insurance to pay for nursing home or assisted living care. There are different types of long-term care insurance:

Traditional long-term care insurance 

This insurance pays for care and typically takes effect when you can no longer perform two of six daily activities such as eating, bathing, dressing, or transferring to a wheelchair. The cost of a policy is typically $3,500 for a plan if you are age 60 and it pays about $150 per day for care for up to three years.

Hybrid care insurance 

This combines life insurance and long-term care insurance. The policy is structured so you can access your death benefit while you are still alive to pay for long-term care. These types of policies tend to be expensive, and they aren’t tax-deductible, but if you don’t use them to pay for care, then your heirs get the benefits. Talk to an insurance professional before deciding if a hybrid policy is right for you.

Annuities with long-term care included 

These are another option, but they usually require you to pay a substantial amount in advance. There are immediate annuities and long-term care annuities, so talk to your financial planner before making a decision.


Some people opt for self-insurance where they opt to set savings aside for unexpected expenses, such as long-term care.

Saving for Long-Term Care

Even with insurance, you may want to save for long-term care. In 2020, the median annual cost for an assisted living facility was $51,600 per year, the cost for a home health aid was $54,912, and the cost of a private room in a nursing facility was $105,850. It makes sense to start saving now since long-term care costs are only going up.

As part of your long-term care budget, consider using retirement savings tools such as an IRA or a Roth IRA. You also should consider using a health savings account (HSA). An HSA lets you contribute to a tax-free savings account to pay for copays and medical fees before you reach your insurance deductible. In 2020, you could deduct up to $3,500 for an individual HSA or $7,000 for a married couple.

Of course, there are other savings tools as well, such as savings accounts, certificates of deposit (CDs), and investments. All of these are part of a balanced retirement strategy, and you should calculate the cost of long-term care as part of your retirement plan.

Planning for Retirement and Long-Term Care

iQ Credit Union has a team of retirement planning experts who can help you incorporate long-term care into your retirement strategy. Over time, your retirement plans will change, and so will your long-term care needs. A retirement expert can advise you as to the best savings and insurance options.

iQCU is proud to support the financial needs of its members at every stage of their lives. Part of our job is to help you plan for the future, including paying for long-term care.  

To get started, check out our guide, “Retirement Strategies: Building a Successful and Secure Retirement.”



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