How to Pay for Long-Term Care: Options, Costs & Planning Strategies

You can pay for long-term care through six primary sources: personal savings and investments, current income (Social Security, pensions, annuities), Medicaid, long-term care insurance, life insurance with LTC riders, and family caregiving supplemented by paid services. Most Americans use a combination.

Medicare does not pay for custodial long-term care (help with bathing, dressing, eating). It covers only skilled nursing or therapy up to 100 days following a qualifying hospital stay, and only if you need daily skilled care.

Duration matters as much as daily cost. The average stay in a nursing home is roughly 2.5 years, but one in seven people will need care for more than five years.

Long-term care insurance pays a daily or monthly benefit (typically $100 to $200 per day or $3,000 to $6,000 per month) once you meet the policy's benefit trigger—usually inability to perform two or more activities of daily living (bathing, dressing, toileting, transferring, continence, eating) or severe cognitive impairment. Policies have an elimination period (30, 60, 90 or 180 days) during which you pay out-of-pocket before coverage starts, much like a deductible.

Buying LTC insurance is worth it if you have assets between roughly $200,000 and $2 million—enough to protect but not enough to self-insure. Below that threshold, Medicaid planning may be more practical; above it, you can afford to pay privately and preserve liquidity.

Medicaid covers nursing home care and, in many states through Home and Community Based Services waivers, assisted living and home care—but only after you meet strict income and asset limits. In 2024, most states cap countable assets at $2,000 for a single person; income limits vary but are often tied to 300 percent of the Supplemental Security Income federal benefit rate, around $2,829 per month.

If you are married and one spouse needs nursing home care, special rules protect the community spouse (the one still at home). The community spouse can keep roughly half the couple's countable assets up to $154,140 in 2024 (the Community Spouse Resource Allowance) and a minimum monthly income (around $2,465 to $3,853 depending on state and housing costs).

Life insurance with accelerated death benefit riders or chronic illness riders lets you access a portion of the death benefit while alive if you meet long-term care triggers. Some permanent life policies allow you to convert death benefit into LTC coverage.

Reverse mortgages (Home Equity Conversion Mortgages) can generate monthly income or a line of credit to pay for in-home care or assisted living, allowing you to stay in your home longer. You must be 62 or older, own your home outright or have a small mortgage balance, and live in the home as your primary residence.

Start planning in your fifties, ideally earlier. Assess your family health history (Alzheimer's, stroke, diabetes, Parkinson's) to estimate risk.

Document your preferences in advance. A durable power of attorney for finances and healthcare, a living will, and a healthcare proxy ensure someone you trust can access funds and make care decisions if you become incapacitated.

Review your plan every three to five years or after major life events—inheritance, sale of a home, diagnosis of a chronic condition. Long-term care costs and Medicaid rules change, and your health and family circumstances will evolve.

How much should I save to pay for long-term care out of pocket?

Plan for at least $200,000 to $300,000 in dedicated assets if you intend to self-insure, enough to cover three to four years of assisted living or two to three years of nursing home care at today's median national rates, adjusted for inflation. Higher-cost regions or longer care needs require more.

Does Medicare cover any long-term care costs?

What is the best age to buy long-term care insurance?

Most experts recommend purchasing between ages 50 and 65. Premiums are lower the younger you buy, but waiting until your late fifties or early sixties balances affordability with the likelihood of qualifying medically, since health conditions that disqualify you become more common after 60.

Can I protect my home from long-term care costs?

Your primary residence is usually exempt from Medicaid asset limits up to a certain equity value (around $688,000 in 2024), but some states may place a lien or seek estate recovery after your death. Transferring your home into an irrevocable trust at least five years before needing Medicaid can protect it, but you lose direct control.

What happens if I run out of money paying for long-term care?

How do I find help planning for long-term care expenses?

Start with a fee-only certified financial planner who specialises in retirement and elder care, or a certified elder law attorney (search the National Academy of Elder Law Attorneys). Your state's Area Agency on Aging (find yours at Eldercare.acl.gov) offers free counseling on Medicaid, veterans benefits, and community resources.