Long-term care covers a range of services people may need as they age or face chronic illness. That includes skilled medical attention when required, but more commonly it refers to assistance with daily self-care tasks, known as activities of daily living (ADLs). These are basic needs such as bathing, dressing, eating and using the toilet. A broader view of long-term care also includes instrumental activities of daily living (IADLs) — tasks like housework, paying bills, grocery shopping and meal preparation that support independent living.
Government and survey data show how common the need for long-term care is and where people prefer to receive it. The U.S. Department of Health and Human Services estimates that roughly 70 percent of people who reach age 65 will require some form of long-term assistance. Surveys indicate that most older adults would rather remain at home than move into an assisted living community. However, home-based care often carries a higher price than many expect, and depending on the level of care and location, it can be costlier than community-based options.
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The cost of long-term care at home
Costs for in-home long-term care vary widely based on geography and the number of hours of care needed. National surveys provide a useful snapshot: for example, the median national cost for roughly 44 hours per week (about six hours per day) of homemaker services is approximately $4,000 per month, or $48,000 per year. Home health aides working similar hours typically command comparable rates.
Increasing the number of daily care hours or living in an expensive region will raise the total substantially; in high-cost areas, annual expenses can reach six figures. Importantly, these costs are in addition to ongoing household expenses like mortgage or rent, utilities, home maintenance and groceries.
By comparison, the median monthly cost for a private room in an assisted living facility can be slightly lower in some areas, though that amount also varies by region and amenities. The U.S. Department of Health and Human Services provides a state-level cost estimator that helps project expected long-term care expenses based on the level of care needed.
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What about Medicare and Medicaid?
It is important to know what public programs do and do not cover. Medicare generally does not pay for assistance that is solely for ADLs. It will, however, cover medically necessary skilled nursing care and some home health services when provided by Medicare-certified providers and when specific eligibility criteria are met, such as a qualifying hospital stay in certain situations.
Medicaid typically covers long-term care services, including assisted living and skilled nursing, for those who meet the program’s financial eligibility requirements and when services are provided by Medicaid-approved providers. Because Medicaid eligibility depends on income and asset limits that vary by state, many people will need to cover long-term care costs privately unless they qualify for Medicaid.
>> Related: Long Term Care: How Much Does Medicare Actually Cover?
Can you afford the care you need?
When planning for retirement, it’s essential to compare likely income with expected expenses. The average Social Security benefit today is roughly $1,400 per month per recipient, or about $17,000 per year. Even a couple receiving two average benefits would only see roughly $34,000 annually. Many retirees expect they will need far more — surveys show a significant portion of Baby Boomers anticipate needing $45,000 to $75,000 per year to maintain their desired standard of living.
Typical out-of-pocket medical expenses for senior couples can add several thousand dollars more each year. When you add the median cost of in-home long-term care — around $48,000 annually for part-time daily care — the gap between expected income and actual costs can become substantial. Relying solely on Social Security is unlikely to cover both everyday living and significant long-term care expenses.
Data suggest that while many retirees are confident they could live entirely on Social Security if savings run out, that benefit typically replaces only a fraction of pre-retirement income. Most people need additional sources of income or assets to cover health needs and long-term care without eroding their standard of living.
Options for paying for long-term care services
If you worry about covering long-term care costs, several options can help supplement retirement savings:
- Long-term care insurance (LTCi): Traditional LTC policies can be costly, but they often pay for themselves quickly if benefits are used. Hybrid policies that combine long-term care coverage with life insurance or annuities have grown in popularity because they provide benefits even if long-term care is never needed.
- Life insurance cash value: Some permanent life insurance policies build cash value that can be accessed or converted to help fund long-term care, depending on the policy terms.
- Home equity: A reverse mortgage can provide untaxed monthly advances against home equity for homeowners who qualify. It’s important to understand fees, interest and repayment conditions before choosing this route.
- Selling or downsizing your home: Selling a larger home and buying a less expensive property can free up funds. Some families also explore selling to an adult child and arranging a rental or family financial arrangement, but such moves should be made with careful legal and tax advice.
Before making major financial decisions, consult a trusted financial planner and a tax advisor to understand the implications and choose strategies that match your situation. There are creative and traditional ways to help fund long-term care when the need arises.
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Calculating the cost of your care
To plan effectively, gather input from family, financial advisers and trusted professionals. Tools such as online financial calculators can help model different scenarios based on your income, assets, expected care needs and local costs. Running the numbers will give you a clearer view of whether in-home care or community-based options are more affordable for your circumstances and will help you prepare for potential financial strains related to long-term care.
This information aims to help you understand typical expenses and options so you can make more informed decisions about financing long-term care while preserving your quality of life.