Financial Planning For Long-Term Care: What You Need To Know Now
Long-term care is something many people don’t want to think about before it’s necessary. However, waiting until you or a loved one needs it can limit your options. Planning ahead can make all the difference both emotionally and financially.
Why Long-Term Care Planning Matters
Long-term care includes a variety of services designed to support individuals who can no longer perform everyday tasks independently.
Options for care include:
Home health aides
Assisted living facilities
Adult day care
Nursing homes
This level of care comes at a significant cost. According to Genworth’s 2024 Cost of Care Survey, the national average for a private room in a nursing home exceeds $100,000 per year. Similarly, SeniorLiving.org reports that the average annual cost for a home health aide is over $75,000.
Whether care is provided in a facility or at home, both options represent a major financial commitment.
That’s why planning in advance is essential.
Steps to Financially Prepare for Long-Term Care:
Establish Your Potential Need and Preferences
Start by conducting a self-assessment to evaluate your potential need for long-term care and what type of support would best fit your lifestyle. This helps create a baseline for exploring your options.
Consider questions like:
Do you have any chronic conditions or a family history that increases the likelihood of needing care?
What type of care aligns with your preferences and quality of life—home care, assisted living, or a nursing home?
Understand Your Insurance Options
Getting a handle on your long-term care options helps you see what kind of financial planning or insurance coverage may be necessary.
Long-Term Care Insurance: These policies help cover services like in-home care or nursing facilities. The younger and healthier you are when you buy coverage, the more affordable the premiums.
Make sure you understand and make the most of your benefits.
Hybrid Life Insurance Policies: Some life insurance policies include long-term care riders.
Medicaid Planning: Medicaid does cover long-term care, but only for those who meet strict income limits. Some families work with elder law attorneys to develop strategies for Medicaid eligibility.
Determine Other Funding Sources
Long-term care is a major expense, and trimming expenses to create a realistic budget now can help ensure you are prepared for the care you may need down the road. In many cases, even with early planning, additional funding sources are needed to make long-term care more affordable and accessible.
Here are a few funding options:
Health Savings Account (HSAs): Funds can be used tax-free for qualified long-term care expenses.
Annuities and Investments: Income-producing investments can support care costs, but should be aligned with your retirement strategy.
Reverse Mortgages: For some homeowners, this can be a way to fund care without selling their home.
Discuss Your Plan With Family
It may seem like common sense, but one of the most overlooked steps in long-term care planning is simply talking about it.
Having open, honest conversations with your family about your care preferences, financial responsibilities, and any legal documentation can help reduce stress and eliminate confusion down the road.
Work With A Professional
Working with a financial advisor or daily money manager who understands elder care planning can help you:
Project potential long-term care costs
Model how those costs fit into your retirement plan
Recommend tax-advantaged ways to save
Coordinate with elder law attorneys for legal planning
Planning Today = Peace of Mind Tomorrow
Long-term care planning is not just about protecting your finances; it’s about preserving your independence, your dignity, and your family’s peace of mind. The earlier you start preparing, the more choices you’ll have.
If you’re ready to start planning, but don’t know where to begin, a Daily Money Manager can help you take the first steps. Contact us today to learn how we can help.