Long-Term Care Planning: The Retirement Risk You Can’t Afford to Ignore
The cost of long-term care is becoming harder for retirees to ignore. A 2026 AARP analysis found that the median cost of long-term care services rose sharply between 2019 and 2024, with in-home care and assisted living costs increasing by nearly 50%. At the same time, the report found that many older adults are already struggling to afford the care they need.
Yet long-term care is often an overlooked part of a retirement plan, and its costs don’t happen in a vacuum. If a client suddenly needs several years of care, those expenses can change the entire household’s financial trajectory, particularly on a fixed income. That client may need to redirect retirement income or liquidate investments. A surviving spouse may have to redraw a budget. Assets intended for children, grandchildren, or other legacy goals may ultimately be used to pay for care.
In other words, long-term care isn’t simply an insurance issue. It’s a retirement-planning issue.
The Blind Spot: What Happens When the Retirement Plan Meets a Care Event?
Most retirement plans account for some combination of market risk and longevity risk. But what about care-cost risk? That’s where a gap can emerge.
A retirement plan might be carefully constructed to provide income for 20, 30, or even 40 years, adhering to a certain withdrawal schedule. Maybe it’s designed to provide $100,000 of annual income. If that equation doesn’t factor in long-term care, one spouse may suddenly need $5,000, $7,000, or even $10,000 a month to pay for care. When that happens, they may need to draw down assets at an accelerated rate, which will have ripple effects for their retirement strategy.
As a result, long-term care costs can cause spillover effects for:
● Retirement income: Households may need to liquidate more assets to cover care expenses.
● Portfolio strategy: Households may need to sell investments at an unfavorable time.
● Taxes: Large withdrawals from tax-deferred accounts can create additional taxable income.
● Legacy goals: Money earmarked for children, grandchildren, charitable giving, or other purposes may instead be redirected toward care.
● Family members: When financial resources run short, adult children may become part of the funding or caregiving equation.
The American College of Financial Services makes a similar point: LTC costs can jeopardize an otherwise sound retirement plan. That is why long-term care planning belongs inside the retirement plan rather than outside it.
Why “Later” Doesn’t Always Work
One of the most important things for financial professionals to understand about LTC planning is that, from the client’s perspective, waiting isn’t simply an emotional decision. It’s also an underwriting decision.
A client can’t necessarily decide at 72 that they’re ready to assume coverage and expect a reasonable price. In reality, there’s an underwriting window when a client will have cheaper options and a broader range of them. As clients age, premiums generally increase because health conditions affect eligibility and pricing.
Industry research has consistently demonstrated this relationship. For example, a 2019 dataset from the American Association for Long-Term Care Insurance showed that insurance denials increased significantly with age: roughly 24% of applicants ages 60–64 were declined, while 32.5% of those ages 65–69 were declined.
Waiting to approach long-term care conversations can mean:
● Fewer available solutions
● Higher premiums
● Different benefit options
● More stringent underwriting
● Or, in some cases, no traditional LTC coverage at all
That is exactly where financial planning can add value.
Combining Long-Term Care and Retirement Planning
Once a client recognizes the risk, the next question isn’t, “Which LTC policy should I buy?” It’s: “What role should long-term care funding play in my overall financial plan?”
There are several ways to approach the risk, and each creates different trade-offs. Some of the primary considerations include:
✔️ Self-funding
A client may decide they have enough assets to absorb potential care costs themselves. That can provide flexibility, but it also means accepting the possibility that a significant portion of the portfolio could eventually be redirected toward care. For some clients, that’s perfectly acceptable. For others, it may conflict with their retirement-income or legacy goals.
✔️ Traditional long-term care insurance
Traditional LTC insurance is designed specifically to transfer a portion of the financial risk associated with qualifying long-term care needs. For the right client, this can create a dedicated source of funds for care rather than relying entirely on retirement assets. The trade-off is that premiums are paid whether or not the client ultimately needs care, and the policy’s benefits, inflation protection, elimination period, benefit period, and other features need careful evaluation.
✔️ Hybrid or linked-benefit solutions
For clients concerned about paying premiums for a benefit they may never use, hybrid or linked-benefit solutions can offer another approach. These products can combine long-term care benefits with life insurance, creating a death benefit if the LTC benefit is not fully used. That can make the conversation less about “use it or lose it” and more about how the client wants to allocate dollars among competing priorities.
✔️ Asset-based strategies
Some clients may prefer to earmark existing assets for future care rather than purchase traditional coverage. That can be done through a variety of strategies, including repositioning certain assets or incorporating other insurance and annuity solutions. Again, the right answer depends on the client.
These aren’t simply product decisions; they’re portfolio decisions. The American College of Financial Services describes the choice as either retaining the risk through income and asset-based funding or transferring some of that risk through LTC insurance.
The Financial Professional’s Role: Ask the Question Earlier
Long-term care can fit naturally into planning conversations you’re already having. Consider raising the topic when you’re discussing:
● Social Security
A client may spend significant time deciding when to claim Social Security to maximize lifetime income. That is also a natural opportunity to ask how a future care need could affect that income strategy.
● Roth conversions
Roth conversion planning already requires clients to think about future taxes and the interaction between different sources of retirement income. Discussing potential future care costs can add another dimension to that analysis.
● Annual retirement reviews
If you’re already reviewing spending, portfolio allocation, beneficiaries, and estate documents, add one more question: “If one of you needed significant care, where would the money come from?”
● Major life events
Marriage, divorce, retirement, inheritance, the sale of a business, or a change in health can all create a reason to revisit the conversation. And don’t overlook clients who have already been caregivers. Someone who has watched a parent, spouse, or sibling navigate long-term care may need very little explanation about why planning matters.
AIMCOR EIG’s 2025 discussion with Nationwide’s LTC experts emphasized a similar approach: start with the consequences of not planning rather than opening with an insurance product. The goal is to help clients understand the problem first, then explore potential solutions.
That distinction matters.
Case Study: The Cost of Waiting Isn’t Always What You Think
Consider a hypothetical couple, both aged 60, who have built a solid retirement portfolio. They have enough assets to retire comfortably under their current assumptions. Their financial professional has modeled Social Security, portfolio withdrawals, taxes, and their desired legacy.
Long-term care hasn’t been part of the conversation. They initially decide to wait. Then, five years later, one spouse develops a health condition that makes traditional LTC coverage more difficult to obtain. The couple hasn’t had a catastrophic care event, but their planning options have already narrowed.
That’s the part of LTC planning that is easy to miss: The cost of waiting isn’t necessarily just the additional premium. It’s the loss of options.
Now imagine if the same couple had raised the issue at age 60 instead. It’s possible they could have gone through a different approach, including:
● A comparison of traditional LTC insurance with hybrid solutions.
● Calculating the cost of self-funding.
● Determining how much of their portfolio they were comfortable putting at risk.
● Incorporating potential care costs into their retirement-income model.
● Coordinating the decision with their broader estate and legacy objectives.
They still might have chosen not to purchase coverage. A good planning process doesn’t begin with the assumption that every client needs an insurance policy. It begins by making sure the client understands the risk and has deliberately decided how they want to handle it.
The Bottom Line for Financial Professionals
Long-term care planning doesn’t have to be a difficult insurance conversation. It can be about protecting a spouse, a portfolio, or legacy.
The most valuable financial professionals aren’t necessarily the ones who try to become experts in every discipline. They’re the ones who recognize when another piece of the client’s financial life needs attention — and know when to bring the right specialist into the conversation. That includes LTC.