Long-Term Care Costs More Than You Think. Here's How to Plan for It

The jobs report came in nearly double what was expected. Markets treated it as catastrophic news.

The quick scan: Friday produced the worst single-day decline in months. A May nonfarm payrolls report that showed 172,000 jobs added – against a consensus estimate of 88,000 – should, in any normal year, be cause for celebration. In 2026, with the Fed's first meeting under new chair Kevin Warsh approaching, it was the worst possible number. Strong jobs data means the Fed has no reason to cut rates – and plenty of reason to hike. The market absorbed that logic in real time.

S&P 500: -2.64% to 7,383.74 – Erased roughly $1.8 trillion in market value in a single session; technology led the losses, with semiconductors taking the worst of it
Dow Jones: -1.35% to 50,866.78 – A more moderate decline as the Dow's lower tech exposure provided some buffer; still its worst week since the Iran escalation of early May
NASDAQ: -4.18% to 25,709.43 – Its steepest single-day fall since April 2025; AI and chip stocks bore the brunt as rate-hike fears repriced the entire growth trade in one session.

What's driving it: May payrolls at 172,000 – with April revised up to 214,000 – mean the labour market is considerably stronger than the slowdown narrative suggested. Treasury yields responded immediately: 10-year yields jumped 5.5 basis points, 30-year yields rose back above 5%, and 5-year yields climbed 7.6 basis points. The market now prices a meaningful probability of a Fed rate hike at the June meeting – the first under Kevin Warsh. That repricing hit hardest where valuations were most stretched: AI-adjacent semiconductors, whose earnings multiples depend on falling rates.

Bottom line: One bad Friday doesn't erase ten winning weeks, but it arrives with a message: the inflation-rate-hike sequence is back. Diversified portfolios weathered Friday better than concentrated tech exposure. Cash and short-duration instruments continue to reward patience.

The Retirement Expense Most People Completely Underestimate

The scoop: Thomas Jefferson Trombino was a World War II veteran. When he moved to assisted living near his son at 93, his Social Security and veterans' benefits covered most of his costs. He thought he'd be fine.

By the time Thomas passed away at 98 in 2024, his son Dennis and daughter-in-law Kelly were spending $3,000 a month out of pocket. Over four and a half years, the family collectively spent more than $80,000.

"He never planned for retirement or his health needs as he got older," says Kelly. "He thought he was going to be fine on Social Security and Medicare."

He was not. Neither, as it turned out, were the people who loved him.

The numbers most people don't know

Eight in 10 people aged 65 and older will need some form of long-term care. About 40% will require intensive help – bathing, dressing, eating, managing cognitive decline – for a year or longer. The median monthly cost: $6,673 for non-medical home care, $6,200 for assisted living, $9,581 for a semi-private nursing home room.

Fewer than half of people have savings set aside for any of it. Only 15% have long-term-care insurance. "Procrastination usually results in relying on family members, morphing a one-generation problem into a two-generation problem," says CFP Melissa Brennan.

The Trombino family paid $80,000 and cut back on their own holidays and retirement savings. For other families, the impact is harder: more than half managing long-term care for a loved one have cut back on basic spending, four in ten have drained savings, a third have gone into debt, and one in three have delayed their own retirement.

The Medicare mistake

Forty-five percent of Americans aged 65 and older believe Medicare will pay for a nursing home stay. It won't. Medicare covers up to 100 days in a skilled nursing facility after hospitalisation, and limited home health care if you're homebound. Ongoing long-term care is not covered.

Medicaid does cover some long-term care, but eligibility typically requires monthly income below $2,982 and assets below $2,000 in 2026. If you have meaningful retirement savings, Medicaid is not a realistic backup plan – despite what six in ten households with $100,000 or more in investments believe.

Option 1: Traditional long-term-care insurance

Pay premiums; receive a daily or monthly benefit when you can no longer perform two or more activities of daily living, or become cognitively impaired.

The market is expensive and thinner than it was, after many insurers left following decades of underpricing. The average approved premium increase for existing policies in 2024 was 28%. New policies are more accurately priced but still costly.

Timing is the critical variable. A 55-year-old woman buying $165,000 of coverage paid $1,500 annually in 2025; the same coverage at 65 costs $2,700. At 70, half of applicants are denied for health reasons. "The number-one mistake people make is waiting too long," says Jesse Slome of the AALTCI.

To control costs: buy before 65, skip or minimise inflation protection, and choose a set benefit period rather than unlimited coverage. Women need long-term care for an average of 3.6 years; men, 2.5 years.

Option 2: Short-term care insurance

Less well-known but worth considering, particularly for those who have health conditions that make traditional long-term-care insurance hard to obtain.

Short-term care policies typically cover up to a year of care, often with no waiting period, and use unisex pricing – which helps women, who normally pay more. They accept applicants up to age 85 and have simpler medical underwriting. Forty-three percent of long-term-care claims actually end within a year, which means short-term policies cover more ground than their name suggests.

The downside: several states have banned them, including California, Florida, Massachusetts and New York. Where available, they're a useful option for people who can't qualify for traditional insurance but want some coverage rather than none.

Option 3: Hybrid policies

The fastest-growing part of the market combines life insurance or annuities with a long-term-care benefit. The key distinction: unlike traditional long-term-care insurance, which is use-it-or-lose-it, hybrid policies provide a return on your premiums regardless of whether you ever need care.

A life insurance hybrid pays a death benefit to heirs if you don't access care. If you do, the death benefit reduces or eliminates as care costs are drawn down. An annuity hybrid provides income as usual, then increases payments if you need long-term care. Both types tend to have simpler underwriting than traditional policies and offer premium certainty – no ongoing monthly payments, typically a lump sum or fixed schedule.

The trade-off is higher overall cost: a 55-year-old male would pay approximately $53,000 lump sum for a hybrid providing $180,000 in long-term-care benefits and $120,000 in minimum death benefit. And the daily or monthly care payouts tend to be lower than comparably priced traditional policies.

Hybrids suit people who may not qualify for traditional coverage, dislike the idea of paying for something they might never use, or want certainty about future premiums.

Option 4: Self-funding

For higher earners with substantial savings, paying for care from assets is a legitimate option – but requires honest arithmetic. Milliman estimates the average 65-year-old needs $135,000 set aside for expected long-term-care costs. That rises for high-cost states, family history of dementia, or limited family support.

One overlooked factor: self-funding is tax-inefficient. "To get that one dollar of care you need, you're going to burn through $1.50 or more," says Dick Weber of the Life Insurance Consumer Advocacy Center. Insurance benefits, by contrast, generally aren't taxed. Home equity is a common contingency – many households treat property as a care reserve to be accessed via downsizing or a reverse mortgage line of credit.

The family conversation you're probably not having

Whatever strategy you choose, tell your family specifically: here is what I have, here is where it is, here is how to access it, here is what I want if the decision isn't mine to make. "The ultimate goal is to prevent long-term care from overwhelming your family," says CFP Joon Um. Planning is how you give them that gift.

Actionable Takeaways for L-Plate Retirees

• Correct the Medicare assumption before it costs your family. Medicare does not cover ongoing long-term care. If you or anyone in your household believes it does, fix that misunderstanding now. The families who are most blindsided by long-term care costs are those who assumed a government programme would handle it.

• Price care in your local market, not national averages. Use carescout.com/cost-of-care to look up actual costs for home care, assisted living, and nursing home care in your area. The numbers vary significantly by location. Assume 3–5% annual cost increases until your mid-eighties, which is the most common time people begin needing paid care.

• If you're in your 50s, long-term care insurance is cheapest now. The premium difference between buying at 55 and buying at 65 is roughly 80% for women. At 70, half of applicants are denied for health reasons. If traditional insurance is on your radar, the decision needs to be made in the next five years, not eventually.

• For those who can't qualify, short-term or hybrid policies provide partial coverage. Some coverage is better than none. Hybrid policies are particularly useful if you're concerned about paying for insurance you might never use, or if premium certainty matters more than maximum benefit.

• If self-funding, build the reserve explicitly and account for tax. A general savings balance is not a long-term care reserve. Name it, size it for your local market, and remember that withdrawals to fund care will be taxed. The net cost of self-funding is consistently higher than people estimate.

• Have the explicit family conversation. Who is your plan? Where is the documentation? What are your preferences if you can't direct your own care? This conversation is a gift to the people who love you. The Trombino family spent $80,000 and cut back on their own retirement savings to fill a planning gap that could have been addressed years earlier.

Your Turn:
Before reading today's issue, did you have a clear sense of what long-term care actually costs in your area – and how much of that you'd be able to fund from existing savings and assets?
The article describes how the one-generation problem of not planning becomes a two-generation problem for the family. Has anyone in your own family experienced this – either as the person needing care or the person providing it?
Of the four options – traditional insurance, short-term insurance, hybrid policies, or self-funding – which feels most relevant to your situation right now, and what would you need to know to take the next step?

👉 Hit reply and share your thoughts – your answers could inspire fellow readers in future issues.

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