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  • Latest Insights

    Is paying for long-term care part of your retirement plan?

    Cash Flow and Retirement

    The doubling of the elderly population over the coming decades means a substantial increase in the number of people who will need long-term care. As the need for care increases, so too does the cost of services.

    Long-term care services typically include institutional care (i.e., nursing home and assisted-living facilities) and home-based assistance, provided to meet the health or personal care needs of individuals for an extended period of time.

    With the growth in the elderly population and increases in longevity, public payments like Medicare for long-term care are growing, and will likely put stress on the program.

    Indeed, “paying for long-term care continues to be one of the great financial risks facing Americans during retirement,” declared the National Association of Insurance Commissioners in a joint study of long-term care needs conducted with the Center for Insurance Policy and Research.

    That makes many people approaching their retirement years concerned about paying for long-term care. In fact, over a third of pre-retirees in a survey said they were “very concerned” about paying for long-term care, making it one of their top financial concerns. Meanwhile, only 27 percent were not concerned.1

    How many people will need long-term care?

    Slightly more than half (52 percent) of individuals turning age 65 will need long-term care, according to NAIC estimates. The average need is expected to last about two years. However, for 26 percent of individuals, it will last longer. The statistics for women in the NAIC report are more compelling. Nearly 58 percent will need long-term care, and 30 percent will need it for more than two years.2

    The average lifetime long-term care expenditure for individuals turning 65 in 2020-2024 is $137,800. However, only about 28 percent of people will have an expected cost that will exceed $100,000. That percentage estimate shrinks as expenses get higher, with 24 percent facing expenditures over $150,000 and roughly 18 percent having expenses in excess of $250,000. Again, the expected expenditure is higher for women than for men.3

    What about government support?

    Beyond partisan battles that routinely affect budgets for entitlement and support programs, there are limitations to the extent of support available inherent in the programs themselves.

    • Medicare. This program actually plays a minor role in financing long-term care. The purpose of the program is to cover acute and post-acute medical care for people age 65 and older. Medicare will pay small amounts for supportive services so long as they are accompanied by a skilled care need. For example, it will pay medically necessary home health services but only for home-bound beneficiaries. It will not cover supportive non-skilled home care services for those who need care due to functional impairment, frailty, or cognitive impairment.
    • Medicaid. In order to qualify for public payments through the Medicaid program, individuals must first deplete their assets to pay for care. Often people cannot receive care in the setting of their choice because Medicaid restricts the providers it will cover and there is still a bias toward nursing home settings.

    Retirement planning options for long-term care

    There are a number of ways to be better prepared for the cost of long-term care during retirement.

    • Additional savings: Some people choose to save or “ear-mark” retirement funds to help pay for long-term care. There are retirement accumulation options better suited for such savings strategies. For example, Roth IRAs and accumulation annuities generally have no required minimum distributions as the owner gets older. But even so, it can be difficult to save enough for a long-term care event that could last for a number of years and be quite costly.
    • Insurance options: In the past, traditional long-term care insurance has been the choice for people who want to be prepared for the cost of care. However, some do not want to pay premiums for many years for coverage they may never need. In addition, the premiums for these types of policies are generally not guaranteed, and have increased significantly in recent years.
    • However, there are other insurance options available. These include so called “hybrid” life insurance policies that offer long-term care benefits. There are also some annuities available today that provide long-term care benefits.

    Finding a strategy that’s right for you

    There is no single “best” way to prepare for long-term care expenses during retirement. What is right for you will depend upon a number of factors that include your age, health, family history and how much control you want to have over your care. A financial professional who specializes in long-term care planning can help you make an informed decision. Planning sooner rather than later, may give you more and better options to choose from.


    Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 0111 1-0001.

    Society of Actuaries, “2017 Risks and Process of Retirement Survey,” January 2018.

    National Association of Insurance Commissioners and the Center for Insurance Policy and Research, “The State of Long-Term Care Insurance: The Market, Challenges and Future Innovation,” May 2016.

    Department of Health and Human Services Office of Disability, Aging and Long-Term Care Policy, “Long-Term Services and Supports for Older Americans: Risks and Financing,” Issue Brief, January 2021.

    The information provided is not written or intended as specific tax or legal advice. Lenox Advisors, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Lenox Advisors, Inc. (Lenox) is a wholly owned subsidiary of NFP Corp. (NFP), a financial services holding company, New York, NY. Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC and NFP Corp. Member SIPC. 90 Park Ave, 17th Floor, New York, NY 10016, 212.536.6000. Services will be referred by qualified representatives of MML Investors Services, LLC (MMLIS).

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