Think Medicare Covers LTC? Here Are 7 Ways to Really Pay for It.

For many Americans approaching retirement, there's a crucial detail often overlooked in their planning: Medicare doesn't cover most long-term care needs. This gap in coverage can lead to significant financial strain, as the average nursing home care costs approximately $7,000 per month. With about 70% of people over 65 needing some form of long-term care during their lives, having a solid financial strategy is essential.

Let me share a story about Lisa, whose mother's unexpected fall changed everything. As an only child juggling her career and family, Lisa found herself unprepared for the overwhelming task of arranging and funding her mother's sudden long-term care need. Her experience highlights why planning ahead is crucial.

The Reality of Long-Term Care Costs

Before we explore funding solutions, let's understand some key statistics:

- 15% of people 65 and older will spend over two years in a nursing facility

- 5% will require care for more than five years

- The average private nursing home room costs $116,800 annually (2023 figures)

- Assisted living facilities average $64,200 per year

7 Ways to Fund Long-Term Care

1. Health Savings Account (HSA)

HSAs offer a triple tax advantage for long-term care planning:

• Tax-deductible contributions

• Tax-free growth

• Tax-free withdrawals for qualified medical expenses

• Can be used for long-term care insurance premiums

• Contribution limits increase with age

2. Long-Term Care Insurance

Traditional long-term care insurance provides specific coverage when you can't perform two or more activities of daily living (ADLs). Consider:

• Best secured while healthy

• Premiums may increase over time

• Coverage begins after qualifying events

• May be expensive but provides dedicated protection

3. Long-Term Care Annuity

These specialized annuities offer:

• Flexibility in care coverage

• Death benefits for unused portions

• Options for those who may not qualify for traditional insurance

• Immediate or deferred benefits

4. Self-Funding

For those with substantial assets, self-funding provides:

• Maximum flexibility in care choices

• No premium payments

• Control over assets

• Requires significant savings

• May impact legacy planning

5. Roth IRA

Roth IRAs can serve as a backup funding source:

• Tax-free withdrawals after 59½ (if held 5+ years)

• No required minimum distributions

• Flexible withdrawal options

• Maintains tax efficiency during care

6. Reverse Mortgage

For homeowners, reverse mortgages offer:

• Access to home equity without monthly payments

• Ability to stay in your home

• No impact on Social Security or Medicare benefits

• Loan repayment deferred until moving out or passing

7. Home Equity Line of Credit (HELOC)

HELOCs provide:

• Flexible borrowing against home equity

• Regular payment requirements

• Good for short-term or intermittent care needs

• Clear repayment strategy needed

The Impact of Not Planning

Failing to plan for long-term care can have severe consequences:

• Family members becoming unpaid caregivers

• Potential career disruption for adult children

• Significant financial strain on family resources

• Limited care options if relying on Medicaid

• Depleted inheritance for heirs

• Strained family relationships

Getting Started with Long-Term Care Planning

The best time to plan for long-term care is well before you need it. If you're in your:

• 30s-50s: Start building dedicated savings and explore HSAs

• Late 50s-Early 60s: Consider long-term care insurance while rates are lower

• Early Retirement: Review and update plans, discuss preferences with family

Take Action Today

Don't wait for a crisis to start planning for long-term care. Schedule a consultation to discuss which funding strategy aligns best with your retirement goals and financial situation.

About the Author: Melissa Moss is a Certified Financial Planner® professional specializing in retirement planning. She helps clients develop comprehensive strategies for a confident retirement through her practice at Main Street Advisors.

Disclaimer: Melissa Moss is a registered representative with and securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult with an appropriate qualified professional prior to making a decision.