Key takeaways

• A fifth of Americans 65 and older could spend over $200,000 on long-term care.

• Long-term care insurance can cover daily hygiene tasks, in-home care, and facility stays.

• Adding a long-term care insurance policy can be more tax-efficient with health savings accounts.

The majority of older Americans prefer to age in place, and long-term care insurance could be part of the transition.

Retirement can be a pathway for exploration, reinvention — and often reinvesting in one’s health. Nearly three in 10 people (29%) believe having access to healthcare makes for a happy retirement, according to Empower research.

Health conditions and costs can vary, though generally people are likely to pay more for healthcare later in life compared to earlier. When it comes to the long haul, around one in five Americans age 65 and over could need to pay long-term care costs of over $200,000.

Getting a formal long-term care insurance policy could be a smart money move to help cover costs — considering a person’s health expectations, current cash flow, and overall plans for their retirement savings.

What is considered long-term care?

On average, around 11,200 Americans were turning 65 each day in 2024, a common age milestone for future and current retirees since that is when people qualify for Medicare benefits. However, the federal healthcare program does not pay for all healthcare expenses.

Medicare and most health insurance plans don’t cover long-term care costs. These expenses are not seen as medical needs; they’re focused more on the assistance needed to complete everyday, essential tasks including:^{1, 2}

• Personal hygiene (bathing, dressing)

• Meal delivery

• Getting in/out of bed, moving around

• Recovering from an illness or injury

• Facility costs, such as a nursing home, skilled nursing, or assisted-living facility

• Home health care or aides

• Adult day care

A common misconception about long-term care is that the costs only apply to assisted living options. Depending on the policy, long-term care activities can take place at home, or in a more formal community program or housing setup, such as active adult communities. With three-quarters of Americans age 50 and older saying they’d want to stay in their homes as they age, paying for long-term care can bring flexibility and comfort in familiar surroundings.

Read more: Golden age of living: 55-and-over communities ready to welcome Gen X

It’s also important to note that the need for long-term care can come at any age. People younger than 65 with chronic conditions or disabilities could find long-term care valuable depending on their situation.

How much does long-term care insurance cost?

Traditional long-term care insurance is a formal policy a person can purchase to reimburse themselves for the costs associated with living-assistance services. Policies can cover a range of daily dollar amounts and eligible expenses.³

The cost of a traditional long-term care insurance policy can depend on:⁴

• Age when the policy was purchased

• The amount of expenses the policy will cover each day (“benefit amount”)

• The maximum number of days or years the policy will cover (“benefit period”)

• How long the policy holder must wait before coverage begins (“elimination period”)

As of 2022, the American Association for Long-Term Care Insurance gathered cost data on leading insurers, and the annual premiums illustrate how many factors could substantially change the overall price of long-term care insurance.⁵

Determining long-term care insurance cost by age is not a simple calculation, as many elements go into how coverage is decided. This example compares people of different genders, age at purchase, and marital status — while the amount of coverage remains the same (at $165,000 of level benefits) and with equal health status:

Source: American Association for Long-Term Care Insurance. Premiums amounts apply to people with “Select health” status.⁶

This type of traditional policy tends to be less expensive than other options, though it is typically a “use it or lose it” setup where a policyholder may not see a return on investment for their yearly premiums if they don’t require long-term care services in their lifetime.⁷

Existing insurance policies can come into play when figuring out if long-term care insurance is worth it for your family. People who already have a life insurance policy may be able to exchange it for a new insurance policy that includes long-term care coverage, or an annuity, through what the IRS calls “1035 exchanges.”⁸

Read more: What is an annuity & how does it work?

Policy costs can have significant swings (premiums are not always locked in) — along with the plan options that insurance carriers offer (such as additional inflation protection, where the benefit amount changes over time) — so it’s wise to compare choices carefully yourself, with family, or with a tax or financial professional.

Ways to save on long-term care insurance

Once the amount of benefits is decided, there can be logistical ways to try and reduce the overall cost of the best long-term care insurance for your situation.

• Possible workplace perk: Employers may offer a discount on a group long-term care insurance plan.

• Rethink the timing: As seen in the chart above, buying a policy earlier in life can be an opportunity to save — along with possibly being healthier at a younger age. Adjustments to the elimination period could help lower premiums.

• Pay ahead: Similar to other insurance products, there may be an overall discount for people who pay their premiums in full once a year, rather than monthly.

• Family matters: People can shop around and see differences in pricing as individuals or a couple.

There are also ways to use existing wealth strategies to offset the cost of long-term care insurance.

Some Millennials and Gen Z have started stocking up in healthcare savings accounts, where the funds can be used for expenses related to long-term care. Even the insurance premiums for long-term care can be an eligible expense for which HSA funds can be used, though there are limits on how much can qualify based on age.⁹ These thresholds are also adjusted by the IRS each year, so it’s worth checking what the latest limits are.¹⁰

Put another way, people may be able to pay for some amounts of long-term care insurance premiums pre-tax, if they use money from a health savings account. For those without a HSA, the insurance premiums for long-term care can still be part of the deduction calculation for total unreimbursed medical expenses on an annual tax return:

Source: Internal Revenue Service.¹¹

An Empower study found that 31% of Americans say a healthcare fund is a top retirement milestone. Leveraging the triple-tax advantages of HSAs can be one way to meet that goal. Health savings accounts’ 2025 contribution limits are $4,300 for an individual and $8,550 for a family, with an additional $1,000 allowed for those 55 and older.

Thinking for the long term

The average American is living to age 78, and women in particular are living above 80.¹² Long-term care insurance can be one way to try and plan ahead for both the estimated and unexpected costs that could pop up before and during retirement.