Recent data reveals a startling disconnect between how we expect to age and how we are actually preparing for it. While roughly 7.5 million Americans hold long-term care insurance policies, statistics suggest that approximately 70 percent of us will require some level of professional care during our lives. This highlights a critical need to evaluate how to pay for long-term care before a crisis occurs.
In a past article on the Blog, we explored the fundamentals of LTC policies, but it is important to recognize that traditional insurance is just one piece of the puzzle. A recent article from Kiplinger reporter Elaine Silvestrini offers a comprehensive look at the various ways to fund these expenses. While we cannot cover every detail here, we want to highlight the most applicable strategies for this aspect of your retirement planning.
Our primary takeaway is simple: do not let denial dictate your future. Unprepared families often face devastating financial consequences when long-term care costs arise unexpectedly.
Why a Longer Lifespan Increases the Need for LTC Planning
Silvestrini notes that most people will likely need long-term care at some point. The primary driver for this is basic demographics, as medical advancements allow us to live significantly longer than previous generations.
For example, JP Morgan reports that a 65-year-old non-smoker has a high probability of reaching age 85: 78 percent for women and 64 percent for men. Given this longevity, planning for potential care needs is no longer optional; it is crucial. A 2024 AARP report further estimates that 56 percent of people turning 65 between 2021 and 2025 will require some type of long-term care. Overall, the odds of seniors needing this assistance approach 70 percent.
The Preparedness Gap Among Middle-Income Boomers
Despite these statistics, Silvestrini points out that many adults have taken no steps to prepare for these costs during retirement planning. A 2022 AARP report indicates that only 33 percent of middle-income baby boomers have a formal plan for long-term care.
This lack of preparation is particularly concerning when looking at the growing demand for facilities. The National Center for Health Statistics expects the number of residents in assisted living, memory care, and skilled nursing facilities to grow by over 75 percent by 2030, reaching 2.3 million people.
Common Misconceptions and Rising Long-Term Care Costs
Many people avoid planning due to financial constraints or a misunderstanding of how care is funded. Silvestrini observes that some underestimate their personal need for care or mistakenly believe Medicare will cover these expenses.
The actual costs of care are substantial and continue to climb. According to the 2024 Genworth Cost of Care survey released in 2025, the national median cost for an assisted living community is now $70,800 per year, a 10 percent increase.
Home health aides now cost up to $77,792 annually, while homemaker services have risen to a median of $75,504. For those requiring skilled nursing, a semi-private room averages $111,325, and a private room has risen 9 percent to $127,750.
(Note that Genworth’s 2025 report released after the Kiplinger article was originally published shows care costs continuing to rise at an average rate well above inflation.)
The Truth About Medicare and LTC Funding
A recent report from USA Today found that nearly 60 percent of American adults believe Medicare pays for long-term care. This is a dangerous misconception that can lead to a rude awakening.
Silvestrini warns that Medicare does not cover long-term care expenses, leaving individuals to fund their own care. The Kiplinger article outlines several ways to manage these bills, including various insurance types, self-funding, or qualifying for Medicaid after assets are depleted.
Many seniors eventually sell or mortgage their homes to cover costs, while others rely on family members. However, relying on family can jeopardize the financial security and well-being of loved ones.
Is Traditional LTC Insurance Right for You?
Silvestrini interviewed Jesse Slome, director of the American Association for Long-Term Care Insurance, who noted that traditional policies are suitable for a relatively small percentage of the population. Currently, fewer than 4 percent of people over age 50 carry traditional LTC coverage.
To qualify, you must apply at an age where you are eligible, remain in good health, and possess the financial means to maintain the premiums. Our companion article on the Blog provides more depth on these specific insurance requirements.
Understanding the Barriers of High Insurance Premiums
Cost remains the primary reason people avoid traditional LTC insurance. Silvestrini writes that stand-alone policies are expensive and increasingly difficult to find on the open market.
Due to past pricing errors and inaccurate forecasts regarding longevity, the number of insurers offering standard LTC policies has dwindled from over 100 firms 25 years ago to just six today, according to Forbes. These current providers include Mutual of Omaha, Thrivent, National Guardian Life, New York Life, Northwestern Mutual Life, and Bankers Life.
Why Timing Matters When Purchasing a Policy
Applying for a policy at a younger age is the most effective way to keep premiums manageable. Older applicants face significantly higher rates and the risk of being denied due to health issues.
A 2020 study showed that nearly 40 percent of applicants in their seventies were rejected. The American Association for Long-Term Care Insurance found that a couple at age 55 might pay a combined annual premium of $2,080 for a $165,000-benefit policy. Waiting just five years can increase that premium to $2,600, with costs rising rapidly thereafter.
However, Silvestrini acknowledges that timing is tricky. Buying too early may result in wasted money, while buying too late risks underinsurance or total denial.
Managing Rising Premiums and Policy Adjustments
It is vital for buyers to understand that LTC premiums are generally not locked in. Silvestrini notes that one analysis found average rates rose by 112 percent over 25 years, though newer policies may be more accurately priced.
If a policyholder finds a premium increase difficult to manage, companies usually offer options to adjust the terms. Strategies include opting for a longer waiting period, reducing the coverage duration, or choosing a smaller monthly benefit. Some firms also provide discounts for paying an annual premium rather than monthly installments.
Workplace Benefits and Portable LTC Coverage
Silvestrini suggests checking with your employer to see if they offer LTC insurance as a benefit. This route often allows employees to secure coverage without a health assessment.
While recent comprehensive data on the percentage of companies offering this in 2025 is limited, older data showed that 65 percent of employers offering group LTC made it available to all employees. Jesse Slome notes that these policies are typically portable, meaning you can keep the coverage after leaving your job as long as you continue paying the premiums.
Hybrid Policies: Combining Life Insurance and LTC
As traditional options have decreased, insurers have introduced creative “hybrid” policies. These plans bundle long-term care and life insurance into a single product.
With a hybrid policy, you can use some or all of the death benefit to pay for care if needed. If you pass away without using the care benefits, your heirs receive the full death benefit. While the upfront investment for these policies is high, Slome indicates that overall costs are beginning to drop.
Using Annuities as a Long-Term Care Solution
Annuities are becoming a more popular part of the long-term care conversation. Some income annuities now include provisions for higher payouts if you require care.
However, Silvestrini warns that these “riders” can reduce your standard annuity payout and may not cover the full cost of care. Slome suggests that annuities can sometimes be a better choice than hybrid life insurance because they provide payments regardless of whether care is needed. Additionally, they often have less stringent health requirements and accept applicants up to age 85.
The Strategy and Risks of Self-Insuring
For some retirees with sufficient assets, self-insuring is a viable option. This means paying for care out of pocket rather than through an insurance policy.
Slome advises that those choosing this path should generally have $300,000 to $700,000 in liquid, cashable assets. This can include IRAs, 401(k) plans, and taxable accounts, alongside Social Security or pension income. Many people also utilize home equity through a reverse mortgage or by selling their home to fund a move into a retirement community.
The Emotional and Financial Impact on the Family
Silvestrini concludes her guide by emphasizing the role of the family. It is highly probable that your loved ones will be involved in your care, and your financial choices should reflect that reality.
AARP reports that nearly 1 in 4 adults provided care for someone with a medical condition or disability in the past year. The total number of caregivers reached 63 million in 2025, an increase of 20 million over the previous decade. These caregivers often sacrifice their own financial futures and health to provide this essential support.
Preparing Your Heirs for Future Care Needs
Regardless of how you plan to pay for care, your family must be part of the conversation. Rajiv Nagaich notes that the impact on family caregivers—many of whom are also raising children—is impossible to measure.
Planning for long-term care is about more than just money; it is about ensuring your heirs know your wishes and how those wishes will be funded. As the saying goes, the best time to start planning was yesterday, but the second-best time is today.
The post Navigating the High Cost of Long- Term Care: A Guide to Your Options appeared first on Home.
