The Long-Term Care Gap: What It Actually Costs, and How to Prepare

Most retirement planning conversations focus on the number you need to stop working. Fewer focus on a specific cost that a lot of plans quietly leave out entirely: long-term care. It's not a small or exotic risk — it's closer to a coin flip, and the gap between how likely it is and how prepared people actually are might be the single biggest blind spot in retirement planning.

The odds, honestly

According to a 2022 research brief from the U.S. Department of Health and Human Services (HHS/ASPE), about 56% of Americans turning 65 will develop a disability serious enough to require long-term services and supports — paid or unpaid — at some point in their remaining years. An older HHS/ACL page puts the chance of needing some type of care at almost 70%, so you'll see both numbers quoted; either way, it's more likely than not. Narrow that down to paid care specifically, and the figure drops to about 45%. About one in five (20–22%) will need some care for more than five years, though only about 4% will use paid care for that long. The rest fall somewhere in between: a real need, but a shorter, more manageable one.

What it actually costs

Type of care	Typical cost
Private nursing home room (2025 survey, released 2026)	~$10,800 / month ($129,575 / year)
Home health aide / non-medical caregiver (44 hours a week)	~$80,000 / year
Average lifetime paid-care cost, everyone turning 65 / those who actually use paid care (2020 dollars)	~$120,900 / ~$245,400

Facility and caregiver figures come from the CareScout (a Genworth subsidiary) 2025 Cost of Care Survey, an industry survey of median prices; lifetime figures come from HHS/ASPE. Prices vary a lot by state. These aren't rare, catastrophic-only price tags — they're the going rate. At $129,575 a year, a three-year facility stay would run roughly $390,000, which can make it one of the largest single expenses a household ever faces.

The Medicare misconception

Here's the detail that catches the most people off guard: Medicare does not cover ongoing long-term care in any meaningful way. It pays for short-term skilled nursing or rehab following a qualifying hospital stay — up to 100 days, with a daily copayment starting on day 21 — not the custodial care (help bathing, dressing, eating, moving around) that makes up most actual long-term care. Assuming Medicare "has this covered" is one of the most common and most expensive assumptions in retirement planning.

The preparation gap

Given a better-than-even chance of needing care, you might expect insurance ownership to be common. It isn't. ASPE reports that fewer than 6% of people age 50 and older had long-term care insurance in 2018. Separately, the National Council on Aging estimates that roughly 80% of people age 60 and older don't have the financial resources to cover a long-term care need or a financial emergency. That's a genuinely wide gap between the risk and the readiness.

How people actually prepare

• Traditional long-term care insurance. Built specifically for this. Premiums can be high and can rise over time, so check a policy's price history and the insurer's financial strength before you buy.
• Hybrid life insurance or annuity policies with an LTC rider. A popular alternative to standalone coverage — pays a death benefit if you never need care, and accelerates payouts for care costs if you do.
• Self-funding. Earmarking a specific portion of a portfolio for potential care costs rather than assuming the whole nest egg absorbs it if needed.
• Medicaid spend-down. The safety net many people end up relying on by default — but it's means-tested, asset limits and spend-down rules vary by state, and there's a look-back period (60 months, or five years) on asset transfers made to qualify early.
• HSA funds. If you've built one up (see our HSA guide), qualified long-term care insurance premiums — up to IRS-set, age-based limits — can be paid tax-free from an HSA, and HSA funds can also generally be used for qualified long-term care services.

Why the 4% rule doesn't really plan for this

A standard withdrawal-rate plan — including the nest egg math we walk through elsewhere on this site — assumes a fairly steady, predictable annual spending level. A multi-year long-term care need is the opposite of steady: it can add tens of thousands of dollars a year on top of ordinary retirement spending, arriving with little warning. Building a plan that assumes zero long-term care cost isn't wrong, exactly — it's just an assumption, and one worth making consciously rather than by accident.

Sources

• HHS ASPE, Long-Term Services and Supports for Older Americans: Risks and Financing (2022) — odds of needing care (56%), paid care (45%), more than five years, lifetime costs, and insurance ownership
• HHS ACL, How Much Care Will You Need? — the older "almost 70%" estimate (page last modified February 2020)
• CareScout (Genworth), 2025 Cost of Care Survey — nursing home and caregiver prices; an industry survey, not a government source
• Medicare.gov, Long-term care and Skilled nursing facility care — what Medicare does and doesn't cover
• IRS Publication 969 — HSA funds can pay qualified long-term care insurance premiums, up to age-based limits
• CMS, Deficit Reduction Act backgrounder — the 60-month Medicaid look-back
• National Council on Aging — 80% of people 60 and older lack the resources to cover long-term care or another financial shock

This article is for educational purposes only and is not financial, insurance, or legal advice. Costs, coverage details, and Medicaid eligibility rules vary by state and change over time — consult a licensed financial advisor or elder law attorney for guidance specific to your situation.