Three workable paths to fund long-term care.
The most expensive event in retirement is the one most families plan for last. The decision about how you fund it shapes your surviving spouse’s income for the rest of their life.
A situation I see often
Watching both sets of parents face it. A married couple in Manhattan Beach, both in their mid-60s, came to me after their parents’ care journeys unfolded in the same five-year span. Her father had been in memory care for four years before he passed. His mother was still in assisted living. Two families, very different financial outcomes.
What they wanted wasn’t a sales pitch. They wanted somebody to actually do the math on the three workable paths, side by side, against the math of self-funding — before they were inside their own version of the same story. That’s the conversation this page exists to set up.
The numbers worth knowing first
56% · 70% · 22%. The U.S. Department of Health and Human Services projects that 56% of Americans turning 65 today will need long-term services and support during their lifetime. Federal estimates that include informal and unpaid care put the figure closer to 70%. About one in five — 22% — will need care for five years or longer.
California prices are among the highest in the country. Memory care typically runs $9,000 to $13,000 a month. Assisted living without memory care averages $5,500 to $8,500. In-home care with a paid aide for 8 hours a day, six days a week, runs $7,000 to $10,000. A three-year memory care event draws $324,000 to $468,000 out of a family’s balance sheet. Traditional Medicare doesn’t pay for any of it.
The three workable paths
Path 1. Traditional long-term care insurance. A standalone policy whose only job is to pay for care when you need it. If you never need the care, the premium does not come back to you or your heirs. Pricing has firmed up in the last decade and underwriting is selective, but the coverage is the most direct of the three options and the most flexible across settings.
Path 2. A hybrid life insurance and long-term care policy. Combines a life insurance death benefit with a long-term care rider. If you need care, the policy pays for care. If you do not need care, the policy pays the death benefit to your heirs. The premium is not lost. This is the path that has grown most in popularity over the last decade among families who want the coverage but resist the “use it or lose it” structure of traditional LTC.
Path 3. An annuity with a long-term care income rider. Uses retirement assets you already hold, or are about to roll over, to fund a contract that pays you lifetime income, and that income doubles or triples during a qualifying care event. Best suited for families who are otherwise planning to self-fund and want a guaranteed amplifier on the income side if care happens.
Self-funding is also a path
Sometimes self-funding is the right answer. It depends on the size of the asset base, the income trajectory of the surviving spouse after the care event, and the household’s tolerance for the worst-case scenario.
What I don’t advise: choosing it blind. Modeling the three paths above against the math of self-funding is the work. The math of self-funding looks different on paper than it does on a real balance sheet 36 months into a memory care event.
If you would like to pressure-test your retirement income plan alongside your LTC decision, the Retirement Income conversation is the right venue.