Planning for retirement involves a lot more than just saving money or choosing a nice spot in a retirement community. One of the most overlooked, yet crucial, parts of retirement planning for any retiree is understanding long-term care. It’s a topic many shy away from because it feels distant, or worse, overwhelming. But here’s the truth — the need for long-term care will touch more retirees than most realize, and the costs are rising faster than inflation.
Take Samir Shah, for example. He’s not predicting the weather, but he is an expert who keeps a close eye on the storm brewing in the U.S. long-term care system. His company, CareScout, tracks how costs and availability are shaping up. What Shah sees is a growing gap: more retirees needing help and fewer workers available to provide that care.
Why Long-Term Care Matters for Every Retiree
Think about the aging population. The baby boomers, a huge part of the retiree group, are hitting their 80s by 2026. And as people get older, the chances of needing help with daily activities — like bathing, dressing, or even cooking — go up dramatically. According to the U.S. Census Bureau, by 2035, the number of people aged 85 and older will nearly double, reaching almost 12 million. By 2060, that figure could be around 19 million.
That’s a lot of people who may need long-term care services. But here’s the catch — the people who provide these services, the direct care workers, are in short supply. The work is tough, and wages aren’t great. In 2023, the median hourly wage for these caregivers was about $16.72, which is lower than many other entry-level jobs. This gap makes it hard to attract and keep workers, especially as the demand keeps rising.
Adding to the challenge, immigration policies have tightened, and immigrants make up more than a quarter of the long-term care workforce. This shrinking labor pool is pushing costs higher and threatening the quality of care many retirees rely on.
What Does Long-Term Care Cost?
Let’s get real about the costs because they can be jaw-dropping. CareScout’s latest research showed some long-term care options rising by about 10 percent in 2024. To put that in perspective, inflation that year was just under 3 percent. Assisted living communities averaged around $5,900 a month, private nursing home rooms were over $10,000 a month, and homemaker services hovered near $6,300 monthly.
For retirees who thought Medicare would pick up these costs, it’s a surprise to learn that Medicare usually covers only short-term skilled nursing after hospital stays — not long-term care. Medicaid might help, but it’s reserved mostly for those with very low income and assets.
Surveys reveal a big misunderstanding among retirees. Nearly half of people aged 65 and over wrongly believe Medicare will pay for nursing home care if they get sick or disabled. Even more concerning, less than 30 percent of near-retirees have saved money specifically for long-term care.
What Are the Chances You’ll Need Long-Term Care?
Nobody can predict exactly how long or how much care someone will need. But research from the Center for Retirement Research suggests about 20 percent of retirees won’t need any long-term care, while another 20 percent will face severe needs. The rest fall somewhere in the middle, with moderate or low care requirements.
This unpredictability makes planning tricky. Some retirees might pay thousands a month for assisted living or nursing home care, while others might only need help at home or not at all.
How Can Retirees Prepare for Long-Term Care?
This is where smart retirement planning makes all the difference. There’s no one-size-fits-all solution, but retirees have several options to consider.
1. Long-Term Care Insurance
Long-term care insurance has been around since the 1980s, but it’s never become wildly popular. These policies can be expensive and confusing. Many people hesitate to pay premiums for something they might never use. Plus, some insurers have raised premiums unexpectedly, making it riskier to buy later in life.
Still, insurance remains an option, especially newer “hybrid” policies that combine life insurance with long-term care benefits. These let you tap into the death benefit early if you need care, which can feel less like throwing money away. A couple in their mid-50s, for instance, might pay around $16,500 a year for a hybrid policy that provides a $5,000 monthly benefit.
2. Self-Funding
Some retirees have enough savings or retirement income to cover long-term care costs without insurance. Financial planners often suggest setting aside money for two to five years of care, depending on health risks like dementia. Keeping this cash accessible, in accounts like cash or short-term bonds, is key.
It’s important to factor in whether the funds need to cover one person or a couple since care needs can wipe out a surviving spouse’s savings. Many retirees use a mix of taxable accounts, IRAs, and Health Savings Accounts to cover these costs efficiently.
3. Family and Informal Care
Most long-term care actually comes from family or friends. About 64 percent of caregiving hours are unpaid, provided by loved ones. This support can be invaluable, but it often comes with financial sacrifices for the caregivers themselves. Some reduce spending on essentials, face trouble paying bills, or miss work — all of which affect their financial future.
The Bigger Picture for Retirees and Long-Term Care
The looming shortage of care workers is a big red flag. Federal projections estimate over 800,000 new direct care jobs will open by 2032. That’s more than any other job category in the country. But with wages low and job demands high, it’s not clear who will fill those positions.
If Medicaid funding is cut, as some fear, care providers might stop accepting Medicaid patients, raise prices for private payers, or even close facilities. For retirees relying on these services, that could mean fewer options and higher out-of-pocket costs.
So, what can retirees do? Starting the conversation early with family is crucial. Few people want to think about needing help, but discussing preferences, financial plans, and trusted decision-makers can make a huge difference down the line.
It’s also smart to revisit retirement savings with an eye on long-term care. That means thinking beyond pensions and Social Security to include potential care expenses. Delaying Social Security benefits to increase guaranteed income can help cover these extra costs.
Final Thoughts on Long-Term Care and Retirement
Long-term care isn’t glamorous or fun to plan for. But ignoring it could jeopardize a retiree’s lifestyle and financial security. Rising costs, a shrinking workforce, and common misconceptions about coverage make it vital for retirees to understand the risks and options.
Whether through insurance, savings, family support, or a combination of these, preparing for long-term care should be a key part of retirement planning. It might feel uncomfortable now, but a little foresight can save a lot of stress — and money — later.
If you’re a retiree or soon to be, don’t wait to get informed and start planning. Your future self will thank you.
For more detailed information on retiree benefits and senior living options, check resources like LeadingAge, CareScout or the Kaiser Family Foundation.
