Paying for the cost of care
A plan made in advance decides where care is received, how it is paid for, and which assets are protected.
Why planning matters
Someone turning age 65 has almost a 70% chance of needing some form of long-term care services and supports during the remainder of life. The duration and intensity vary widely, and about one in five will need care for more than five years.
Medicare generally does not pay for long-term custodial care. Most non-medical help with bathing, dressing, transferring, toileting, supervision, and other daily needs must be paid privately, covered by qualifying insurance, or funded through Medi-Cal after eligibility requirements are met.
What long-term care may cost
Costs vary by location, setting, hours of assistance, and the level of medical or cognitive support required. These are 2025 medians — a starting point for planning, not a quote. Note how far California runs above the national figures.
| Care setting | 2025 U.S. median | 2025 California median |
|---|---|---|
| Non-medical caregiver at home, 44 hrs/week | $80,080 | $91,520 |
| Adult day health care | $24,700 | $24,440 |
| Assisted living / residential care | $74,400 | $82,800 |
| Nursing home, semi-private room | $114,975 | $146,000 |
| Nursing home, private room | $129,575 | $182,135 |
The five-step planning process
Define care preferences
Where would you prefer to receive care? Who is available to help? How important is remaining at home, protecting a spouse, or preserving an inheritance? Every later decision depends on these answers, and they are the ones families most often skip.
Estimate the financial exposure
Model part-time home care, full-time home care, assisted living, memory care, and nursing care. Include inflation, and include the possibility that one spouse needs care while the other still has normal living expenses.
Inventory available resources
Retirement income, Social Security, pensions, annuities, brokerage assets, retirement accounts, home equity, insurance, HSA balances, family support, and public benefits.
Select a funding strategy
Determine which costs will be paid from income, which risks will be insured, which assets will be reserved for care, and what financial floor must remain for the healthy spouse.
Coordinate the plan
Align beneficiary designations, powers of attorney, trusts, tax planning, insurance ownership, care instructions, and the family communication plan. A plan that is not coordinated is a collection of documents that contradict each other.
Funding options compared
These are presented neutrally. Most families will use a combination rather than a single solution.
| Approach | How it works | Potential strength | Important limitation |
|---|---|---|---|
| Current income and self-funding | Use retirement income, cash, investments, or dedicated reserves. | Maximum flexibility and no underwriting. | Care may require selling assets during poor markets or creating large taxable withdrawals. |
| Traditional stand-alone LTC insurance | Pay ongoing premiums for a defined pool of care benefits. | Can provide substantial coverage for each premium dollar. | Premiums may rise, underwriting applies, and unused benefits may not create a legacy. |
| Life insurance with LTC benefits | A life policy allows qualifying care benefits to be accelerated or extended. | Can provide care benefits, a death benefit, or both depending on use. | Costs, guarantees, benefit triggers, loan treatment, and policy structure vary. |
| Annuity with LTC benefits | An annuity value may be multiplied or enhanced for qualifying care expenses. | May reposition an existing asset and provide value even if care is not needed. | Liquidity, surrender charges, tax treatment, and benefit duration require review. |
| California Partnership policy | A qualifying policy provides insurance benefits and Medi-Cal asset protection. | Can protect assets equal to qualifying benefits paid, subject to program rules. | Only specifically approved policies qualify; availability and suitability must be verified. |
| Medi-Cal or Medicaid | Public programs may pay for eligible long-term services and supports. | A major source of long-term care funding for eligible individuals. | Financial and functional eligibility rules apply, and care choices may be constrained. |
| Home equity | Sale proceeds, downsizing, a home-equity strategy, or a reverse mortgage when appropriate. | May unlock a large household resource. | Can affect housing security, heirs, interest costs, and spouse planning. |
| Family caregiving | Relatives provide unpaid or partially paid support. | May preserve familiar care and reduce cash cost. | Creates time, income, health, and relationship costs for caregivers. |
Illustrative case studies
Converting existing retirement assets into lifetime care protection
- Situation
A married couple, approximately ages 62 and 64, wanted meaningful protection for both spouses. They were concerned about open-ended care costs and did not want an ongoing premium that might increase later.
- Illustrative approach
An asset-based life/LTC illustration repositioned roughly $211,000 of IRA assets under the carrier’s permitted structure. The illustration included a benefit enhancement and showed maximum long-term care benefits of roughly $8,300 per month for each spouse — close to $100,000 per person per year — with a lifetime-benefit option.
- Planning objective
Transform an existing asset into a larger pool of care benefits while preserving contract value or a death benefit if care is not fully used.
- Why it may be useful
The structure can provide fixed premiums, benefits for both spouses, and protection against a very long claim. It may appeal to families comfortable repositioning assets who still want value if care is never needed.
- What to review before acting
The carrier illustration itself, underwriting, benefit triggers, inflation option, claim method, IRA distribution and tax treatment, required minimum distributions, surrender provisions, death benefit, and whether the lifetime extension is guaranteed under the selected contract.
Traditional stand-alone coverage for a healthy couple
- Situation
A California husband age 64 and wife age 62, both in standard health, wanted to insure a defined portion of future care costs while keeping most assets invested.
- Illustrative approach
Compare traditional policies with a meaningful monthly benefit, a three-year benefit period, a 90-day elimination period, and 3% compound inflation protection. A preliminary planning estimate is roughly $7,500 to $10,000 per year combined, subject to carrier, health class, benefits, and underwriting.
- Why it may be useful
Traditional coverage can provide substantial insurance leverage per premium dollar, and may suit people who prefer to keep investment and estate assets separate from insurance.
- What to review before acting
Premium affordability across the full retirement period, carrier rate-increase history, shared-care options, inflation protection, home-care coverage, nonforfeiture benefits, and the possibility that no benefit is ever paid.
| Illustrative traditional design | Combined annual premium | Interpretation |
|---|---|---|
| Couple both age 60, level benefits | $2,600 | Lower initial cost, but no automatic benefit growth |
| Couple both age 60, 3% compound growth | $5,800 | Benefit pool grows annually |
| Couple both age 65, 3% compound growth | $7,150 | Later purchase age materially increases cost |
| Age-65 couple, similar designs across three carriers | $7,137 – $12,250 | Carrier selection can change cost substantially |
Repositioning an existing annuity or conservative asset
- Situation
A retiree had an existing annuity, certificate of deposit, or conservative reserve not needed for near-term spending, and wanted to pay for future care without buying life insurance.
- Illustrative approach
Evaluate an annuity with long-term care benefits. The annuity value may remain available under contract terms and may provide an enhanced or extended pool for qualifying care expenses.
- What to review before acting
Eligibility for a tax-free exchange, surrender charges, benefit multiplier, elimination period, reimbursement versus cash benefit, inflation protection, liquidity, beneficiary value, and tax treatment of withdrawals and care benefits.
A blended plan for a family that can partly self-fund
- Situation
A financially secure couple could pay for several years of care but worried that a long claim might reduce the healthy spouse’s lifestyle or force the sale of investments during a poor market.
- Illustrative approach
Create a dedicated care reserve for the first years of care, add insurance or an asset-based policy for catastrophic duration, and preserve a separate income and housing floor for the healthy spouse.
- Why it may be useful
The family avoids over-insuring smaller costs while transferring the risk that could cause the most financial damage. It also coordinates investment liquidity, taxes, insurance, and spouse protection.
- What to review before acting
Size and location of the reserve, market risk, taxable retirement-account withdrawals, home equity, inflation, expected family caregiving, estate goals, and the surviving spouse’s minimum income.
Questions to work through
Answer these before you compare any product. If several are unanswered, that is the work to do first.
Long-term care financial readiness
A short readiness check. Ticks stay in this browser; print the result and bring it to a conversation with an adviser, an attorney, or your family.
- Could your retirement plan absorb $75,000 to $180,000 or more per year of care costs?
- Would paying for care require large taxable IRA withdrawals, or selling investments during a market decline?
- How would one spouse’s care costs affect the other spouse’s housing and lifestyle?
- Do existing life, annuity, or long-term care policies provide benefits nobody has reviewed recently?
- Are adult children expected to contribute money, time, or housing — and do they know it?
How this program can help
We provide education, planning tools, and referrals so families can make informed decisions and coordinate the financial plan with care needs and care-setting choices. We do not sell insurance, and we are not paid by anyone whose products are described on this page.
- Estimating future care-cost exposure
- Reviewing retirement income and available assets
- Identifying risks to the healthy spouse
- Explaining general funding strategies
- Reviewing existing insurance and annuity documents
- Helping families prepare questions for licensed professionals
- Coordinating referrals to tax advisers, estate-planning attorneys, insurance professionals, and care managers
Want a second set of eyes on the numbers?
Tell us what you are trying to work out — whether you can self-fund, how to protect a spouse, or what an existing policy is actually worth — and we will help you find the right licensed professional.