June 7, 2023

Long Term Care: What Are My Options?

Long-term care planning is an important consideration for individuals and families as they age, but it can often be a complex process. In this article, we will explore the various aspects of long-term care planning, including the types of care available, the costs associated with care, and the options for financing care. We will also discuss the importance of planning ahead and offer tips for creating a long-term care plan that meets your needs and goals. Whether you are just starting to think about long-term care or are already in the midst of planning, this article will provide valuable insights and guidance to help you make informed decisions.


The Cost of Long-Term Care:

The cost of long-term care in the United States is expected to rise due to several factors, such as the aging population and increasing life expectancy. According to the U.S. Department of Health and Human Services, about 70% of people over the age of 65 will require some form of long-term care in their lifetime.1 This can range from assistance with daily activities, such as bathing and dressing, to skilled nursing care in a facility. As the demand for long-term care services increases, the costs associated with providing these services are also likely to rise.

The actual cost for care can vary significantly depending on several factors, including gender, health status, the level of care needed, the location, and the length of stay. For example, women tend to live longer than men and may require longer stays in long-term care facilities, leading to higher costs. The individual’s health status and the level of care needed can also affect the length of stay in long-term care facilities.

In addition to nursing homes, there are other types of long-term care, such as in-home care or assisted living facilities, each with their own associated costs. In-home care can be a more affordable option, but the level of care provided may be limited. Assisted living facilities can be more expensive than in-home care, but they may offer more comprehensive services.

According to the latest Genworth Cost of Care Survey, the average annual cost for a private room in a nursing home is $9,034 per month. The average cost for a semi-private room is slightly lower at roughly $7,908 per month.2 However, these costs can vary significantly depending on location and the level of care needed.

It is important for individuals and families to plan ahead for potential long-term care needs and to consider options for financing these costs.


Self-Insure through Investment Assets:

Self-insuring through investment assets means relying on your investment portfolio to pay for long-term care services should the need arise. While this may seem like a good option, there are several factors that can make this problematic (unless you are in the top 1% wealth wise). Generally, if you have a net worth of $7M or more, then self-insuring is a viable option. However, for most, self-insuring, can present the following issues:

  1. To cover the cost of long-term care, withdrawing funds from your portfolio can result in accelerated portfolio withdrawals. This may force you to withdraw more money than you had planned, and in the event that the need arises during a down market, you may have to sell investments at a loss, negatively impacting your retirement savings even more.


  1. Accelerated portfolio withdrawals may result in higher tax rates and Medicare rates, depending on the type of account you withdraw from, such as a Traditional IRA or pretax 401k, which is taxed as income. This can further diminish your savings and make it challenging to meet the cost of long-term care, stay financially independent for a surviving spouse, and also reach your legacy goals (if you plan on passing wealth to kids).


  1. Relying entirely on investment assets to finance long-term care is risky since it’s hard to estimate the extent and duration of care. If you miscalculate the cost or duration of care, you may run out of funds, and Medicaid or other government programs may have to cover the remaining costs.

For these reasons, it’s important to explore other options, such as purchasing a long-term care insurance policy or a hybrid policy (EWA’s favorite choice). These options can help protect your retirement savings and help ensure you have the resources needed to pay for long-term care services.


Purchase a Stand-Alone Long-Term Care Policy:

A stand-alone long-term care policy is a type of insurance policy specifically designed to cover the costs associated with long-term care. It is an option to consider for individuals who don’t want to self-insure or don’t have enough assets to cover the costs of long-term care. However, there are several downsides to this approach, and why EWA generally steers clear of these “use it or lose it” policies:

One of the main drawbacks of a stand-alone long-term care policy is that it is a “use it or lose it” proposition. This means that if you pay premiums for years and don’t end up using the policy, all of the money you put in will be wasted. Unlike life insurance policies that have an eventual death benefit, long-term care policies only provide a benefit if you require long-term care.

Another factor to consider is the cost of long-term care policies. These policies can be expensive, and the premiums can increase over time. It’s important to carefully review the policy to understand the costs and any potential rate increases that may occur over time. Additionally, there may be exclusions or limitations to coverage that could impact your ability to receive benefits.

While a stand-alone long-term care policy can provide coverage for long-term care needs, it’s crucial to consider the pros and cons of this policy and assess your individual financial situation and needs before making a decision. Other options, such as hybrid policies, may offer more flexibility and additional benefits that could better meet your needs. It’s essential to carefully evaluate all available options and consult with a financial advisor to make an informed decision about your long-term care planning.


If a 65-year-old couple purchases a $10k/year total (with no cost increase) long-term care policy that is stand alone, and then lives to age 90, and pays in $250,000 over their retirement:

  • If they never use it, they would have wasted 10k x 25 years = 250k which would be “Wasted”.
  • If they did use it, the policy would pay out returns that would have otherwise been hard to replicate in the stock market.

However, insurance companies are smart, so make sure you look at the provisions of the policy. Most people will never use the full benefit as males stay for about 2.3 years, and most females stay in a nursing home for 3.2 years.3 So even for someone that has a robust LTC stand-alone policy, there is a strong likelihood they will not use the full benefit due to the provisions of the policy vs. the statistics of how long an individual actually will stay in care.


Hybrid Whole Life/Long-Term Care Policy:

A hybrid whole life/long-term care policy is generally the most efficient option for long-term care planning. This type of policy combines permanent life insurance with long-term care insurance. These policies have three components that ensure that some sort of benefit is derived from the policy.  The example below references a participating whole life policy with a LTC rider attached to it:

  1. Death Benefit: The death benefit provides 100% tax-free payouts for beneficiaries when the insured passes away. This ensures that your loved ones are taken care of if you pass away without requiring long-term care. This component can provide peace of mind to those who are concerned about leaving their family without financial support.
  2. Cash Surrender Value: The cash surrender value grows tax-deferred through the insurance company’s dividend (in the case of a participating whole life policy). This means that the cash value in your policy can be withdrawn or loaned against and can be used to supplement your portfolio during distribution years. One significant advantage of the cash surrender value is that it is not tied to the stock market. Unlike an investment portfolio, the cash value in your policy is guaranteed by the insurance company and grows steadily over time. This allows you to use the cash value to supplement your portfolio during “down years” in the market and can help avoid selling investments at a loss. The overall benefit here is flexibility, meaning you can still use this policy to support your retirement even if you don’t require long-term care.
  3. Long Term Care: The third component is the long-term care benefit rider, which provides 100% tax-free payouts if the insured needs to use it for long-term care or medical costs. This component provides a safety net in case you need long-term care and helps ensure that you will not have to spend down your assets to cover the cost. Compared to using a portfolio to cover long-term care costs (self-insuring), the long-term care benefit component of a hybrid policy can be much more efficient because we do not have to worry about market timing (selling investments at a gain or loss) or taxes (since LTC policy pays out tax-free). Overall, the long-term care benefit rider of a hybrid whole life/long-term care policy can provide significant financial protection and peace of mind for individuals who may require long-term care services in the future. By helping ensure that these costs are covered, in whole or part, through a guaranteed benefit, individuals can potentially avoid having to spend down their savings and assets and can instead focus on their health and well-being during a potentially difficult time. One of the main advantages of this is that it allows you to navigate tax brackets efficiently during retirement.


It’s Important to note that the specific details of a hybrid whole life/long-term care policy can vary depending on the insurance provider and policy. Therefore, it’s crucial to research and review the specific policy before making a decision.

Overall, a hybrid whole life/long-term care policy is a good option to consider for long-term care planning. With three components that help ensure some sort of benefit is derived from the policy, you can have greater peace of mind that your long-term care needs are covered while also having the flexibility to use the policy for other purposes if needed.

As always, it’s best to consult with a financial advisor to determine the best option for your individual situation.


Additional Resources:

If you are interested in learning more about long term care planning see here for an educational video that our firm published on this topic.

Links here:

  1. https://vimeo.com/548159445?share=copy
  2. https://vimeo.com/784605411?share=copy


1 U.S. Department of Health and Human Services. (2020). Long-Term Services and Supports for Older Americans: Risks and Financing Research Brief. Retrieved from https://aspe.hhs.gov/basic-report/long-term-services-and-supports-older-americans-risks-and-financing-research-brief

2 Genworth. (2021). Genworth Cost of Care Survey 2021. Retrieved from https://www.genworth.com/aging-and-you/finances/cost-of-care.html

3MedicareGuide. (n.d.). How Much Long-Term Care Will You Need? Retrieved from https://medicareguide.com/how-much-long-term-care-will-you-need-337811


Share This Article:

Get In Touch

In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.


Add me to the weekly newsletter to say informed of current events that could impact my investment portfolio.

Important Disclosures:

Securities and advisory services offered through EWA LLC dba Equilibrium Wealth Advisors (a SEC Registered Investment Advisor).
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you.  The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.

Request An Appointment

In 15 minutes we can get to know you – your situation, goals and needs – then connect you with an advisor committed to helping you pursue true wealth.