3 Ways to Pay for Long-Term Care in Retirement

     There’s nothing wrong with needing a little extra help to get by. But when you’re older, that little extra help comes with a big bill. With price tags approaching $50,000 a year for assisted living and $100,000 a year for nursing home care, long-term care is one of the largest expenses seniors may face during their retirement years. Here are your options to pay for it.


For seniors, Medicare is a primary resource for financing medical care like hospital stays, skilled nursing, outpatient care, and medical equipment. While Medicare Parts A and B, also known as Original Medicare, don’t cover vision and dental care or prescriptions, seniors can supplement their policy with a low-cost Medicare Advantage plan to include these benefits. However, seniors can only enroll in supplemental coverage during specific times of the year. If you’re currently eligible for Medicare or nearing the age of eligibility, be sure to research enrollment dates and plan options to avoid gaps in health coverage.

Unfortunately, there’s no Medicare option to cover long-term care. That means seniors must look elsewhere to pay for custodial care received in a nursing home or assisted living facility.


While Medicare is available to all Americans age 65 and older, Medicaid benefits are restricted to low-income households. Because Medicaid is administered at the state-level, specific eligibility requirements vary by state. In general seniors must have less than $2,000 in countable assets to qualify for Medicaid.

Some seniors who can’t afford to buy long-term care insurance or self-insure long-term care opt to spend down their assets until they qualify for Medicaid. Spending down doesn’t have to mean putting your future financial security at risk; seniors can spend down by investing in exempt assets including life insurance policies and final expense insurance. These are sound investments as they can help a senior’s family pay for expenses left behind, such as funeral costs and medical bills.


On the opposite end of the spectrum of Medicaid is self-insurance. Seniors with adequate wealth can pay for assisted living or nursing home care out of private funds without going through an insurer. This spares seniors the hassle of figuring out what is and isn’t covered by their insurer or paying years’ worth of premiums for a policy they never need.

The best way to self-insure is by saving more throughout your working years. By socking away extra funds into an IRA, HSA, or other savings vehicle, you can build a nest egg adequate for living expenses, medical costs and long-term care. If savings prove insufficient, tapping into a life insurance policy or home equity can free up additional funds for long-term care. These financial decisions have drawbacks, so seniors should discuss options with their financial advisor before choosing to self-insure. Some seniors choose to purchase a small amount of long-term care coverage to limit financial risk in the event their care needs exceed expectations.

Long-Term Care Insurance

Seniors who have too much wealth to spend down for Medicaid but not enough to pay for care out of pocket should consider long-term care insurance. Whether purchased as a stand-alone policy or as a rider on a life insurance policy, long-term care insurance covers costs associated with custodial care. Policies differ regarding the types of care they’ll cover, how long they’ll pay for care and benefit caps. It’s important that consumers understand the options and choose a policy carefully to avoid paying high premiums for an insurance policy they can’t use.

No matter what you do, don’t assume you won’t need long-term care. According to LongTermCare.gov, a person turning 65 today has a nearly 70 percent chance of needing long-term care at some point during the senior years, and 20 percent of seniors will need care for longer than five years. To keep long-term care from bankrupting your senior years, start planning now for how you’ll pay for this common retirement expense.

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