Retirement is often envisioned as a time of freedom—traveling, spending more time with family, and focusing on the activities they love. Yet one critical factor can alter these expectations: the rising cost of healthcare expenses, particularly long-term care services.

Many individuals underestimate how significantly medical care, including support with daily living activities, can impact retirement savings. Without a strategy, long-term care needs may force retirees to redirect funds intended for lifestyle, legacy, or even essential living expenses.

What Is Long-Term Care and Why Does It Matter

Long-term care refers to a broad range of care services—including in-home support, adult day care, assisted living, or a private room in a skilled nursing facility. These services help individuals with activities of daily living (ADLs) such as bathing, dressing, or managing medications. These medical services aren’t typically covered by Original Medicare, which only provides limited short-term skilled care. Some Medicare Advantage plans may offer supplemental benefits, but comprehensive medical coverage is generally limited.

As people live longer, the probability of needing long-term care increases. The ability to fund qualified medical expenses without compromising retirement income becomes essential.

The Financial Impact of Medical and Long-Term Care Costs

According to Genworth’s Cost of Care Survey, the median cost for a private room in a nursing facility in 2024 is over $110,000 annually. Home health care and assisted living facilities are also major expenses. Depending on location and level of care, these costs often exceed $60,000 per year.

Other healthcare costs—such as health insurance premiums, out-of-pocket medical costs, Medicare Part D (prescription drug coverage), or a Medigap plan—can further add to the burden.

For retirees relying on Social Security and personal savings, these cumulative costs may result in financial stress unless addressed early and strategically.

Individual Circumstances Require Tailored Solutions

No two retirees face the same combination of financial resources, health history, or current health conditions, including family history. That’s why long-term care planning should be personalized. Factors such as life expectancy, the likelihood of chronic illness, and family caregiving support should all be evaluated.

Working with a financial advisor can help determine how various funding strategies align with your specific goals and risks.

Common Funding Options for Long-Term Care Services

Retirees have several tools to prepare for potential medical care and long-term support needs. Each carries trade-offs based on your financial resources, individual circumstances, and personal preferences.

1. Self-Funding

Using personal assets or retirement savings to pay out of pocket may appeal to those with sufficient resources.

Pros:

• Full control over how and when funds are used
• No underwriting or policy requirements

Considerations:

• Requires high asset liquidity and may expose your nest egg to market risk
• May affect spousal security and estate planning

Self-funding can be viable when modeled carefully and backed by stress-tested retirement projections.

2. Traditional Long-Term Care Insurance

These policies reimburse expenses related to qualifying care services, up to defined limits. Under the Consolidated Omnibus Budget Reconciliation Act. Premiums vary based on current health, age, and benefit design.

Pros:

• Offers benefit leverage relative to premium cost
• May ease pressure on family caregivers

Considerations:

• Premiums may rise over time
• “Use-it-or-lose-it” structure; no benefit if care is never needed

It’s often best suited for individuals in good health, typically in their 50s or early 60s.

3. Hybrid Life Insurance with LTC Benefits

Hybrid products combine permanent life insurance with long-term care benefits. If care is not needed, a death benefit may pass to beneficiaries.

Pros:

• Benefit flexibility: funds can be used for care or passed on
• Premiums are generally fixed

Considerations:

• Higher upfront cost, often requiring a lump sum or scheduled payments
• May reduce life insurance benefit if LTC is used extensively

This option may appeal to those balancing legacy goals with care planning.

4. Annuities with Long-Term Care Riders

Certain annuities offer enhanced income if used for qualified medical expenses or LTC needs. These may not require medical underwriting.

Pros:

• Provides guaranteed income that increases during LTC events
• May offer access even for those with health limitations

Considerations:

• Benefit amounts may not cover full medical costs
• Typically limits liquidity and may involve surrender charges

These can be particularly useful for retirees seeking income stability and moderate LTC protection.

Integrating LTC Into Retirement Cash Flow Planning

To evaluate whether your plan can sustain potential healthcare expenses, it’s important to incorporate scenario analysis. This might include:

• 3 years in assisted living at $75,000 per year
• 5 years in a nursing facility at $120,000 annually
• A mix of home care and facility care, plus rising medical costs

Running these models with your financial advisor helps determine whether your retirement savings can absorb such shocks without jeopardizing income or goals.

Coordination With Health Insurance

Understanding how Original Medicare, Medicare Advantage, Medicare Part D, and Medigap plans coordinate with LTC funding is essential. While these programs cover various forms of medical care, they generally do not provide extended coverage for personal care or custodial services.

Being clear on what your health insurance does and doesn’t cover enables better decisions about supplemental funding strategies.

How TruNorth Supports Clients

At TruNorth, we help clients evaluate the financial implications of long-term care in the context of their overall plan. This includes:

• Assessing care cost scenarios within retirement projections
• Comparing funding strategies based on individual circumstances
• Coordinating LTC solutions with Social Security, insurance, estate, and income planning
• Identifying the right timing for underwriting or funding decisions

Planning early—and with guidance—can help secure both quality care and financial resilience.

Conclusion

Long-term care isn’t just a healthcare issue—it’s a retirement risk. Whether you self-fund, consider insurance options, or explore annuity-based strategies, the key is to align your LTC plan with your financial goals, resources, and values.

Addressing this need early with a qualified financial advisor allows you to protect your retirement savings, reduce uncertainty, and maintain flexibility no matter how your future unfolds.

Disclosure

This material is for informational purposes only and does not constitute investment advice or a recommendation. All strategies discussed involve risk and may not be suitable for all investors. Resolute Capital, LLC, dba TruNorth Advisors, is a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training.