The expense Medicare was never built to pay.

What the numbers say

Federal projections indicate that roughly 70% of people turning 65 will need some type of long-term services and supports during their remaining years, though the duration varies enormously and a substantial share of that care is unpaid family care rather than facility care.¹

On cost, the 2023 Genworth Cost of Care Survey put the national median at about $116,800 a year for a private room in a nursing home and about $75,500 a year for a home health aide.² Those are national medians; local costs in the Raleigh market and elsewhere differ, and the figures have generally risen year over year.

Medicare is not long-term care coverage

This is the most expensive misunderstanding in retirement planning. Medicare covers skilled nursing facility care only after a qualifying hospital stay, only while skilled care is needed, for a maximum of 100 days per benefit period, with daily coinsurance from day 21.³ It does not cover custodial care: help with bathing, dressing, eating and mobility, which is what the overwhelming majority of long-term care actually is.

Medicaid does cover custodial care, but it is means-tested. Qualifying generally requires spending down assets, is subject to a look-back on transfers, and may involve estate recovery afterward. Planning for Medicaid is legal work and belongs with an elder law attorney.

Self-fund, insure, or share the risk

There are three honest answers, and the plan tells us which ones are actually available:

• Self-fund. Viable for balance sheets large enough that several years of care at local cost does not compromise the surviving spouse’s income. We model it explicitly rather than assume it.
• Traditional long-term care insurance. Leverages premium into benefit, but premiums are generally not guaranteed and rate increases have been common across the industry. Benefit period, elimination period and inflation rider drive both cost and usefulness.
• Hybrid life or annuity contracts with a long-term care benefit. Trade some leverage for a death benefit or cash value if care is never needed, which removes the “use it or lose it” objection at a higher cost per dollar of benefit.

There is no universally correct answer. There is an answer that is correct for a given balance sheet, health history, family situation and tolerance for premium risk.

The part that is not financial

Care decisions are made in a hospital corridor by adult children who have never discussed them. The planning work that costs nothing is worth doing first: naming who decides, recording preferences, executing a healthcare power of attorney and an advance directive. It belongs in the same conversation as the funding decision.