When Should You Start Investing in Long-Term Care Insurance?
6 min read
As we age, caregivers play an increasingly vital role in our lives—whether it’s family, friends, or neighbors. Caregivers are the backbone of long-term care, enabling us to age in place and enjoy a full life for longer. In 2020, 53 million Americans served as unpaid caregivers to family members or friends. Since roughly 73 million people in the U.S. will be age 65+ by 2023, the demand for caregivers is only expected to grow.1
While the job can be fulfilling, unpaid caregivers have high levels of mental stress and physical exhaustion. Many also face unreimbursed expenses (e.g., gas, co-payments, groceries) that can strain their financial resources. According to the Nationwide Retirement Institute Long-Term Care Survey, nearly half of adults age 28+ (43%) said they fear caregiving costs will prevent them from retiring. A similar percentage (42%) believed being a caregiver will likely use up the money they had planned for their children.2
Paid long-term care support, such as in-home services or assisted living, can take some of the weight off caregivers. But the costs can be significant. That’s why it’s essential to include long-term care in your larger financial plan.
What is long-term care?
Long-term care refers to a range of supports designed to meet the personal and health care needs of people who can’t perform daily living activities on their own. These services include help with tasks like bathing, dressing, eating, and mobility, as well as medical care and therapy. Long-term care may be provided at home or in assisted living facilities, nursing homes, and adult day health centers.
Below are three facts you might not know about long-term care
1. Most of us will need long-term care
Americans are living longer these days—and the longer we live, the more likely it is we'll need some extra help. Whether it’s due to a disability, a chronic illness, or other challenges, a person turning 65 today has a nearly 70% chance of needing long-term care in the years they have left.3 Women live an average of six years longer than men4, which means they should plan for more years of long-term care.
2. Long-term care is expensive
Long-term care costs vary based on the type of care and geographical location. According to Genworth’s Cost of Care Survey, the average monthly cost for assisted living in Baltimore was $6,650 in 2023. A nursing home in this location ran about $11,756 per month, while adult day health care had a price tag of $2,247 per month.5 Understanding the real costs of long-term care now can help you better plan for future potential expenses.
3. Health insurance doesn’t pay for long-term care
Private health insurance plans do not cover the costs of long-term care, and Medicare coverage is limited. Under Part A, Medicare only pays for short-term stays in a skilled nursing facility, typically following an inpatient hospital stay.
How do people pay for long-term care?
There are several ways to cover the costs of long-term care services and supports, depending on your financial situation. These include:
- Government programs: Medicaid will pay 100% of nursing home costs, but only if you meet the program's strict eligibility requirements (which vary by state). If you’re a veteran, the Department of Veterans Affairs (VA) may help pay for the costs of nursing home facilities. The amount of aid you receive depends on your income and the level of your service-related disability.
- Out of pocket: People without government funding often must pay out of pocket to cover long-term care costs—whether through personal savings, home sale proceeds, investment or retirement accounts, or Social Security benefits. Others rely on financial help from family and friends. However, these funding methods aren’t always cost-efficient or reliable, and drawing on these resources can make it more difficult to cover other living expenses.
- Long-term care insurance: This type of policy can help pay for supplementary supports and services should you one day need them. Depending on the long-term care insurance policy, it may cover not just custodial care, but also home care, adult day health services, and residence in continuing care retirement communities (CCRCs). There are different ways to buy long-term care insurance, including standalone policies, linked-benefit policies, and long-term care riders on life insurance policies.
Long-term care insurance can complement your retirement savings, Health Savings Accounts (HSAs), and life insurance by providing additional financial protection and flexibility. For example, this policy can help cover long-term care costs that may not be fully addressed by a retirement account or HSA, (which are often reserved for other expenses). Together, these financial tools create a comprehensive strategy to ensure you’re well-prepared for the future without draining your resources.
The best time to explore and purchase long-term care insurance is well before you have an immediate need for it—when you're younger and relatively healthy. In fact, the longer you wait to purchase a policy, the more expensive it will be.
When should you buy long-term care insurance?
When it comes to the possibility of needing long-term care in the future, the first thing many people consider is the impact on their family, friends, and personal financial situation. Yet, despite the known financial strain of caregiving, only 17% of Nationwide survey respondents said they have discussed long-term care planning with a financial professional.2
Understanding the long-term insurance costs and safeguards available is the first step in preparing for this expense. And these options are more accessible than you may think, and planning can start at an earlier age. For example, in the Nationwide survey, most respondents overestimated the monthly cost of a long-term care policy. Of those who had not purchased this insurance, 49% cited cost as a reason. Yet, after being presented with a description of a sample long-term care insurance policy and told it cost $130 per month, 40% said they were willing to consider one.2
“One mistake many people make is assuming they can’t afford long-term care insurance before retirement, or that they should wait until retirement or after to buy a policy,” said Holly Snyder, president of Nationwide's Life Insurance business. “But it's best not to delay. If you're in your 50s, or even younger, consider purchasing long-term care insurance now. Thoughtful, informed planning can help you avoid being overwhelmed with care costs later in life.”
A certified financial professional can help you estimate your potential long-term care costs and create a personalized plan to fund these expenses—and you can start this process in your 50s or earlier, rather than your 60s or 70s. Not to mention, you may have a better chance at qualifying for long-term care insurance at a younger age. Your financial professional can also provide guidance on choosing appropriate long-term care insurance, exploring tax-advantaged accounts, and integrating these products together for your overall financial success.
Being proactive with your long-term care planning is a smart strategy. We are all aging: From a young age to living in our golden years. Not only will long-term care insurance help you build a foundation for financial stability—it can also greatly reduce the burden on the people you care about.
Many companies offer comprehensive guides to understanding long-term care insurance, including this one from Nationwide.
Sources
1. Centers for Disease Control and Prevention (CDC). Alzheimer's Disease and Healthy Aging: Supporting Caregivers. Found on the internet at ttps://www.cdc.gov/aging/publications/features/supporting-caregivers.htm
2. Nationwide Long-Term Care Survey (PPT). April 2024.
3. Administration for Community Living. LTC: How Much Care Will You Need? Found on the internet at https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
4. Centers for Disease Control and Prevention (CDC). National Center for Health Statistics. Life Expectancy. Found on the internet at https://www.cdc.gov/nchs/fastats/life-expectancy.htm
5. Genworth Cost of Care Survey. Found on the internet at https://www.genworth.com/aging-and-you/finances/cost-of-care
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