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A friend of mine in the insurance industry once told me, “We don’t deal in probability. We deal in consequences.”
That quote comes to mind when I think of the need so many people have for long-term care — and the financial consequences they face when they are unprepared to pay for it. They may need to drain their assets, take on debt or even call on the financial assistance of their children. None of these are a preferred option.
Unfortunately, many myths persist around long-term care. And when those myths lead people to misunderstand what long-term care is, how they can pay for it and whether they will need it at all, planning for it becomes even more difficult.
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Let’s cut through a few of the myths and get to the underlying truths.
Myth No. 1: Long-term care means a nursing home
In many cases, when people think of long-term care, the image that comes to mind is a nursing home. Indeed, about 1.2 million Americans are in such facilities.
But a nursing home is just one type of long-term care. Here are some other examples:
- Homemaker services assist older people with such tasks as meal planning, grocery shopping, transportation and other non-medical needs.
- A home health aide is a professional who monitors the health and well-being of individuals with disabilities or chronic illnesses, assisting them with daily living activities.
- Adult day health care provides older adults with physical or mental ailments an opportunity to socialize in a supervised setting.
- Assisted living facilities are for older people who need help with their daily care, but not as much as someone in a nursing home. Residents usually have their own apartment or rooms but share common areas.
Regardless of which type of care you are talking about, the nationwide average cost for those services can add up quickly, according to the Genworth-CareScout cost-of-care report.
In 2024, homemaker services cost an average of $75,504 annually. A home health aide averaged roughly the same amount, coming in at $77,796 per year.
Adult day health care was the least expensive, though still a bracing $26,004 annually, while an assisted living community was $70,800.
As you might imagine, a nursing home was the most expensive of all. A semi-private room in a nursing home cost an average of $111,324 annually in 2024, and a private room averaged $127,752.
As you examine those numbers, the obvious question arises: How do you pay for it?
People sometimes pay for long-term care using the government’s Medicaid program, but there are serious drawbacks to doing so. The most significant drawback is that to be eligible for Medicaid, your income and assets must be below a certain amount.
If they are not, you can spend down those assets to get where you need to be, but under very specific rules.
Of course, in the process of spending the assets, you have nothing left to leave as a legacy to your loved ones, making this option one that is best avoided if at all possible.
Fortunately, other options exist, which takes us to another myth.
Myth No. 2: You need long-term care insurance
One way to pay for long-term care is with a long-term care insurance policy. These policies work like many insurance policies: You pay a monthly premium and, if you ever need long-term care, you put the policy into effect to pay for it.
But there are drawbacks to long-term care insurance, not the least of which is that it can be expensive. Also, long-term care insurance has just one use. If you never require long-term care, the money you paid all those years goes for naught.
For many years, long-term care insurance was touted as the best way to pay for care and avoid the damage the cost of it could do to someone’s bank account. These days, though, you can consider alternatives that offer greater flexibility.
One of those alternatives is a life insurance policy that includes a long-term care rider. This allows you to avoid the all-or-nothing approach inherent with long-term care insurance.
Here’s how it works: If, like so many people, you do require long-term care at some point, the life insurance policy lets you use part of your death benefit to pay for it.
Yes, that will reduce the amount of money your beneficiaries receive upon your death. But you avoid the crushing out-of-pocket expenses of long-term care, or worse, the need to spend down assets to qualify for Medicaid.
The real advantage, though, is that if you never need long-term care, the money doesn’t disappear. The policy still functions like any other life insurance, providing your beneficiaries with a payment upon your death, so the premiums you paid over the years don’t go to waste.
Another option is an annuity with a long-term care rider. Annuities can function like a personal pension, delivering income for life, while some are designed to limit exposure to market volatility.
When paired with a long-term care rider, they can also help offset the cost of extended care, integrating income planning, risk management and long-term care considerations.
And if, as in the case of the life insurance policy, you don’t end up needing long-term care, the portion of the annuity money that was set aside to pay for it will go to your beneficiaries when you die.
Myth No. 3: The need for long-term care won’t apply to me
All of us might like to think we somehow won’t need long-term care, but statistics say the odds are roughly even that we will.
One government analysis reported that 56% of Americans who turn 65 will need some form of long-term care services or support at some point in the remaining years of their lives.
Many people understand this because their parents required long-term care, often at great expense that they hadn’t prepared for, leading to depletion of assets and leaving them with nothing for their children or grandchildren.
In some cases, adult children are disappointed and frustrated that they can’t afford a nice facility for their parents, which adds an extra emotional component to the financial strain.
Perhaps you will be one of the lucky people who don’t require long-term care, but because of the expense involved, it’s best to be prepared just in case. And even if you don’t need the care, your spouse may.
A financial professional with experience in this area can help you understand the options and make a plan that works for you. Then, if the worst does happen, you will be in a better position to handle the expense — easing a lot of responsibility and anxiety from your family.
Ronnie Blair contributed to this article.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
