Long-Term Care and Its Impact on Your Retirement Plans

15 June 2025

Let’s be real for a second. When most of us dream about retirement, we picture sandy beaches, golf courses, extra sleep, and finally having time to read that towering pile of books. What we don’t picture? Needing help getting dressed, paying thousands of dollars a month for care services, or watching our nest egg slowly drain away. But here’s the thing: for many people, long-term care becomes a very real part of their golden years.

Let’s talk about how long-term care can impact your retirement plans—and what you can do now to prepare for it. Because burying your head in the sand? That’s not a plan.

What Is Long-Term Care, Anyway?

Before we dive into the impact, let’s clear up what we’re actually talking about. Long-term care (LTC) refers to a range of personal care services that help people with everyday tasks like bathing, dressing, eating, or moving around. These aren’t doctor visits or quick hospital stays—long-term care could mean having a caregiver come to your home a few times a week, or even living full-time in an assisted living facility or nursing home.

It’s not just for the elderly either. Accidents, chronic illnesses, or disabilities can cause someone at any age to need long-term care. That said, aging is definitely the leading cause.

Why You Should Care About Long-Term Care

Here’s the hard truth: 7 in 10 people over age 65 will need some form of long-term care during their lifetime. It’s way more common than we like to admit. But because it’s not fun to think about, most people don't plan for it.

You might be thinking, “Isn’t that what Medicare is for?” Sadly, no. Medicare only covers limited skilled nursing care after a hospital stay—and that’s short-term. It won’t pay for months or years of help dressing or feeding yourself.

And those costs? They add up—fast.

Sticker Shock: The High Cost of Care

Let’s talk numbers. Brace yourself.

- In-home care: Around $5,000/month for 44 hours per week.
- Assisted living facility: About $4,500/month (and rising).
- Nursing home care: Over $9,000/month for a private room.

Multiply that by years, and... yikes. Even a few years of care can drain hundreds of thousands of dollars.

So, if you’re relying solely on Social Security, or you’ve saved just enough for a modest retirement lifestyle, these care costs could tip your financial plan on its head. Imagine budgeting for road trips and brunches, only to end up spending it all on adult diapers and round-the-clock care.

Let’s not let that happen.

How Long-Term Care Can Derail Your Retirement Plans

Let’s say you’ve been diligent—you’ve got a 401(k), maybe an IRA, and a decent Social Security payout coming your way. You’re feeling pretty good about retirement. But…

1. Your Savings Might Not Be Enough

Most people plan their retirement savings based on daily living expenses, occasional travel, and inflation—not on the possibility of a $90,000-a-year care bill for three or more years.

If long-term care becomes necessary, your portfolio may shrink faster than you ever imagined. You'll start dipping into your savings earlier and more frequently, which means less money for your spouse, heirs, or even just for enjoying your retirement.

2. You May Need to Cash Out Investments

Selling investments (especially in a down market) to pay for LTC can be like sawing off the branch you’re sitting on. It’s a double whammy: you lose your assets, and you might trigger taxes or penalties, depending on your age and account type.

3. Your Spouse Could Be Left Holding the Financial Bag

If you’re married, one partner needing care can have a domino effect on the other. Money that was supposed to support both of you might end up going solely toward care. That could leave your spouse dealing with financial insecurity or even hardship during their own retirement years.

4. It Can Throw Your Estate Plan Into Chaos

Maybe you've got dreams of leaving a legacy—helping the grandkids with college, donating to charity, or passing down the family home. But if long-term care eats up your assets? Those dreams might have to go on pause… or go out the window entirely.

Planning Ahead: How to Protect Your Retirement

Okay, enough doom and gloom. The good news? You can do something about it—starting now. Think of it as buying peace of mind. Let’s dive into strategies that can help you stay in control.

1. Long-Term Care Insurance

This is the obvious first stop. LTC insurance is designed specifically to cover long-term care costs, so you don’t have to dip into your retirement savings.

Pros:
- Covers in-home care, nursing homes, assisted living.
- Protects your retirement nest egg.
- Provides options for care.

Cons:
- It can be pricey, especially the older you are when you buy it.
- Premiums can increase over time.
- It’s use-it-or-lose-it in many cases.

Some people avoid it because of the cost, but consider this: paying $2,500 a year now could save you tens (or hundreds) of thousands later.

2. Hybrid Life/LTC Insurance Policies

Not a fan of “use-it-or-lose-it”? There are hybrid policies that combine life insurance with long-term care coverage. If you need care, you can pull from the death benefit; and if you never need it, your beneficiaries still get a payout.

It’s like a financial Swiss Army knife—versatile and efficient.

3. Health Savings Accounts (HSAs)

If you're still working and have access to an HSA-eligible health plan, maxing out your HSA contributions is a smart move. HSAs offer tax-free growth and tax-free withdrawals for qualified medical expenses—including some long-term care costs.

Think of it as a retirement slush fund specifically for medical needs.

4. Medicaid Planning

For people with limited resources or who anticipate outliving their assets, Medicaid may eventually help. But qualifying isn’t automatic—it requires careful planning years in advance to avoid penalties or disqualification.

This is where an elder law attorney or financial planner can be invaluable.

5. Creating a Long-Term Care Plan (And Actually Talking About It)

Yeah, those dinner table conversations about future care needs might feel awkward. But they’re vital. Talk with your spouse, kids, or whoever might be involved in your future care.

Ask yourself:

- Would I prefer in-home care, or am I open to assisted living?
- Who do I trust to make medical decisions if I’m unable?
- How much am I willing or able to spend?
- Do I want family members involved in my care—or not?

Having a written care plan can prevent confusion and stress later on.

The Emotional Cost: Don't Overlook This Piece

We’ve talked a lot about the financial side, but long-term care isn’t just a budget line item—it’s emotional. Watching someone you love struggle physically or mentally is tough. Being the one struggling? Even tougher.

By planning financially, you can ease some of that emotional burden—on yourself and your family. You’ll not only have more say in your care, but you’ll also spare your loved ones from making rushed or painful financial decisions on your behalf.

It’s the ultimate gift of love and peace of mind.

Final Thoughts: Prepare Now, Relax Later

We all want our retirement to be full of joy, freedom, and dignity. Long-term care is one of those things that can quietly sneak up on you and derail all of that—unless you’re prepared.

Here’s the bottom line: ignoring long-term care is like ignoring a slow leak in your tire. You won’t notice at first, but eventually, that flat will force you off the road. And no one wants to call a tow truck in their golden years.

So take a breath, make a plan, and start small if you have to. Because the earlier you start thinking about long-term care, the more options—and freedom—you’ll have later.

Here’s to a happy, healthy retirement—with your dignity and finances intact.