Almost every retirement plan I review has a gap in the same place. Investments are allocated. Social Security timing has been considered. The estate documents are signed. And then there is long-term care, which almost nobody has planned for, because it is the one expense people would rather not picture.
Long-term care planning is not about predicting whether you will need help someday. It is about deciding, while you still have every option available, who pays for that help and how. Made early, that decision is a line item. Made during a crisis, it becomes the single largest threat to a family’s balance sheet and the reason adult children end up making financial decisions in a hospital hallway.
Here is what care actually costs, what Medicare does and does not cover, the four ways families pay, and how to think about the timing.
The Short Version
The numbers that shape the decision
National median costs from the 2025 CareScout Cost of Care Survey, plus the lifetime odds published by the federal Administration for Community Living. Your local market may run higher or lower.
- Assisted living$6,200 / month
- Nursing home, private room$129,575 / year
- In-home caregiver$35 / hour
- Odds of needing care at 65About 70%
Not sure where your plan stands on this?
A single conversation is usually enough to size the exposure and tell you whether you need coverage or simply a clearer decision about self-funding.
Talk With an AdvisorOr call (602) 922-3556Key takeaways
- Long-term care is custodial help with daily living, not medical treatment. That single distinction determines who pays the bill.
- Medicare covers up to 100 days of skilled care after a qualifying hospital stay. It does not cover ongoing custodial care.[3]
- The national median assisted living cost was $6,200 a month in 2025, and a private nursing home room ran $129,575 a year.[1]
- There are four funding paths: self-funding, traditional long-term care insurance, hybrid life or annuity policies with care benefits, and Medicaid (ALTCS in Arizona).
- Premiums on tax-qualified policies count as medical expenses up to age-based IRS caps, which reach $6,200 per person over age 70 in 2026.[5]
What long-term care actually is (and what it is not)
Long-term care is help with the ordinary activities of daily life, not medical treatment. It covers assistance with bathing, dressing, eating, toileting, continence, and transferring from a bed to a chair. In insurance language these are the six activities of daily living, or ADLs. Care can also be triggered by severe cognitive impairment, where a person is physically capable but no longer safe alone.
This is the distinction the entire system turns on. Skilled care means a licensed professional treating a condition: wound care, IV antibiotics, physical therapy after a hip replacement. Custodial care means someone helping your mother get out of the shower safely. Health insurance is built for the first. It was never built for the second.
Where care happens matters less than people expect. Most care starts at home, delivered informally by a spouse or an adult child. It typically escalates in stages: unpaid family help, then paid in-home caregivers a few hours a day, then assisted living, and for some, a skilled nursing facility. Planning that assumes a single nursing home bill misses most of what families actually spend.
How long-term care typically escalates
What long-term care costs right now
According to the 2025 CareScout Cost of Care Survey, which collected more than 25,000 provider rates nationwide, cost growth slowed after several years of steep increases, but the baseline remains high.[1] The national median for a non-medical in-home caregiver rose 3% to $35 an hour, which works out to $80,080 a year at 44 hours a week. Assisted living rose 5% to $6,200 a month, or $74,400 a year. A semi-private nursing home room ran $315 a day, or $114,975 annually, and a private room $355 a day, or $129,575 annually.
National median annual cost of care, by setting (2025)
Duration is where families underestimate. The federal Administration for Community Living reports that someone turning 65 today has almost a 70% chance of needing some form of long-term care in their remaining years. Women need it longer than men, averaging 3.7 years compared with 2.2 years. Roughly one-third will never need it at all, while about 20% will need care for longer than five years.[2]
How long care lasts: averages, and the tail that matters
Put those together and the planning range becomes clear. A moderate scenario, two years of assisted living, is roughly $150,000 in today’s dollars. A severe scenario, five years with a nursing home stay at the end, can exceed $500,000 for one person. For a married couple, the risk is doubled and the sequencing matters, because the first spouse to need care often consumes the assets the second spouse was counting on.
What Medicare covers, and where the myth breaks
Medicare does not pay for long-term custodial care. This is the most expensive misunderstanding in retirement planning. Medicare Part A may cover up to 100 days in a Medicare-certified skilled nursing facility following a qualifying inpatient hospital stay, and only when skilled nursing care is medically necessary.[3] The first 20 days are covered in full. Days 21 through 100 carry a daily coinsurance amount, which some Medigap policies pick up. After day 100, coverage ends.
What Medicare Part A covers in a skilled nursing facility
Coverage can also end well before day 100. If your condition stabilizes and the care you need becomes custodial rather than skilled, the benefit stops even if your need has not. Families frequently discover this in week three, by phone, with no plan in place.
Medicaid is the backstop, not the strategy
Medicaid pays for a large share of the nation’s long-term care, but it is a means-tested program of last resort. In Arizona, that program is the Arizona Long Term Care System, or ALTCS, administered through AHCCCS.[4] Qualifying requires meeting a medical standard (needing a nursing-facility level of care) and a financial standard. Arizona is an income-cap state, with the cap set at 300% of the federal SSI benefit rate, and countable resources for a single applicant are limited to $2,000. Certain assets, including a primary residence within an equity limit and one vehicle, may be excluded.
ALTCS eligibility: two standards, both required
The medical standard
- Needing a nursing-facility level of care, as assessed by the state.
- Services may be delivered at home or in a community setting, not only in a facility.
Assessed independently of your finances
The financial standard
- Arizona is an income-cap state, with the cap set at 300% of the federal SSI benefit rate.
- Countable resources for a single applicant are limited to $2,000.
- Certain assets — a primary residence within an equity limit, and one vehicle — may be excluded.
Means-tested, and a program of last resort
AHCCCS reviews all asset transfers made in the 60 months before the application date. Gifts or below-market sales in that window can create a penalty period during which no benefits are paid, and the state can pursue estate recovery afterward.
Two features deserve attention well before anyone applies. First, AHCCCS reviews all asset transfers made in the 60 months before the application date, and gifts or below-market sales in that window can create a penalty period during which no benefits are paid. Second, the state can pursue estate recovery afterward. Moving assets in a panic the month before applying does not work, and often makes things worse.
The four ways families pay for care
Every long-term care plan resolves into one of four funding sources, or a deliberate blend of them. The right answer depends on net worth, health, and how much of the risk you actually want to carry yourself.
Self-funding
You earmark a portion of the portfolio to absorb care costs directly. This is the cleanest option for families with substantial assets, and it preserves total flexibility. The tradeoff is concentration: a five-year event drawn from an unplanned bucket can force liquidations at bad times, disrupt a surviving spouse’s income, and shrink the estate the plan was built to pass on. Self-funding works when it is a decision, with a defined dollar amount behind it, rather than a default. Sizing that number is part of retirement planning.
Traditional long-term care insurance
A dedicated policy pays a daily or monthly benefit once you cannot perform two of the six ADLs or have severe cognitive impairment, typically after an elimination period of about 90 days. Coverage is defined by benefit amount, benefit period, elimination period, and whether you add inflation protection. Premiums are lower the younger and healthier you are, and this is the only structure where premiums can be tax-advantaged in a meaningful way for many households. The historical objection is that premiums are not guaranteed and carriers have raised them on older blocks of business.
Hybrid life insurance or annuities with care benefits
These policies combine a death benefit or annuity value with a long-term care or chronic illness rider. If you need care, you accelerate the benefit to pay for it. If you never need care, your heirs receive the death benefit. Premiums are generally guaranteed and often paid in a lump sum or over a set number of years. The tradeoff is cost and complexity: you are paying for two features, the underwriting and tax treatment differ from a standalone policy, and riders vary widely between contracts. Read the trigger language, not the brochure. This overlaps directly with risk management and insurance planning.
Medicaid and ALTCS
For families without the assets to self-fund or the health to qualify for coverage, ALTCS is the safety net, and it is a legitimate one. The planning work here is done years in advance and belongs with a qualified elder law attorney, coordinated with your financial and tax professionals so the strategies do not work against each other.
| Approach | How it works | Best fit for | Main tradeoff |
|---|---|---|---|
| Self-funding | Care costs are paid from portfolio assets earmarked for the purpose. | Higher-net-worth families comfortable retaining the risk. | A long event can force poorly timed liquidations and shrink the estate. |
| Traditional LTC insurance | Pays a set benefit once ADL or cognitive triggers are met. | Healthy buyers in their 50s and early 60s. | Premiums are not guaranteed and can be raised on the block. |
| Hybrid life or annuity | Death benefit or annuity value that can be accelerated to fund care. | Those who dislike paying for coverage they may never use. | Higher cost and rider terms that vary widely by contract. |
| Medicaid / ALTCS | State pays after medical and financial standards are met. | Families without assets to self-fund or health to insure. | Strict asset limits, a 60-month lookback, and estate recovery. |
Structures are illustrative and vary by carrier and contract. Arizona’s Medicaid long-term care program is administered by AHCCCS.[4]
The tax rules worth knowing
Premiums on a tax-qualified long-term care policy count as medical expenses, up to an age-based cap that rises every year. Under IRC Section 213(d)(10), the 2026 limits per insured person are $500 at age 40 or under, $930 for ages 41 to 50, $1,860 for 51 to 60, $4,960 for 61 to 70, and $6,200 above 70.[5] Your age is measured at the close of the tax year, and each spouse applies their own limit, so a couple can stack two caps.
2026 eligible long-term care premium limits, per insured person
Two conditions matter. The policy must be tax-qualified under Section 7702B, which most policies sold today are designed to be. And for an itemizer, medical expenses are deductible only to the extent they exceed 7.5% of adjusted gross income.[6] For many retirees the deduction only bites in a year with heavy medical spending, which is often the same year care begins.
On the benefit side, payments from a qualified policy are generally excludable from income. For a per diem or indemnity contract, the exclusion runs to the greater of actual qualified care costs or the statutory per diem limit, which is $430 a day for 2026.[5] Business owners and self-employed filers have additional avenues worth reviewing, since the treatment of premiums differs by entity type. That analysis belongs with your CPA, and the answer often changes the number that makes sense to insure.
When to start, and in what order
The practical window is the mid-50s through the mid-60s. Earlier means paying premiums longer. Later means paying more, and risking that a diagnosis makes you uninsurable at any price. Underwriting is the real deadline here, and it does not send a warning.
The sequence I use with clients looks like this:
- Quantify the exposure. Model two years and five years of care at local costs, inflated forward to your mid-80s, for each spouse.
- Decide how much you are willing to self-fund. Almost nobody insures the whole number. The goal is to cap the damage, not eliminate it.
- Test the funding options against that gap. Compare premium cost against the portfolio drawdown you are avoiding, not against zero.
- Align the legal documents. Powers of attorney, health care directives, and any trust language need to work when someone else is making decisions — work your estate planning coordination should already cover.
- Tell your family. A plan nobody knows about is not a plan. Adult children should know where the documents are and what the intent is.
Four mistakes that cost families the most
Mistake 01
Assuming Medicare covers it
Medicare pays for short-term skilled care, capped at 100 days per benefit period. Custodial care, which is what most people need, is not covered at all.
Mistake 02
Waiting for a health event
Coverage is medically underwritten. A diagnosis that arrives before the application does can close the door permanently, regardless of assets.
Mistake 03
Skipping inflation protection
A benefit that looks generous today may cover a fraction of the daily cost 25 years from now. Care costs have historically outpaced general inflation.
Mistake 04
Gifting assets at the last minute
Arizona reviews transfers made in the 60 months before an ALTCS application. Late gifting can trigger a penalty period with no coverage and no assets.
Not sure where your plan stands on this?
A single conversation is usually enough to size the exposure and tell you whether you need coverage or simply a clearer decision about self-funding.
Talk With an Advisor- CFP® & CEPA® led
- Fee-based fiduciary
- Serving Goodyear & the West Valley, AZ
How we approach long-term care planning at Dominion
We treat long-term care as a design question before it is a product question. The first meeting is not about policies. It is about establishing the number: what care would realistically cost in your area, for how long, and what happens to the surviving spouse’s income if it happens to the first spouse at 78.
Once that number exists, the decision usually gets simpler. Some families discover the exposure is already absorbed by the portfolio and the right answer is a written self-funding decision, not a premium. Others find a modest policy converts an open-ended risk into a fixed annual cost, which frees them to spend more confidently in the years when they are still healthy enough to enjoy it.
From there it is execution and maintenance: coordinating the strategy with your CPA and estate attorney so the tax treatment, the legal documents, and the beneficiary structure all point the same direction, then revisiting it as costs and health change. Design, build, steward. Long-term care is one of the places where that sequence matters most, because the plan has to work on the worst day, not the average one.
From the advisor’s desk
What I tell clients in their fifties
- Insure the catastrophe, not the inconvenience. A short care event will not break a well-built plan. A five-year event might. Structure coverage around the tail risk.
- Health is the currency, not money. You can always find the premium. You cannot always find an insurer willing to underwrite you. That asymmetry is why timing matters more than pricing.
- Have the conversation while it is theoretical. Every family I have watched handle this well made the decisions years before they were needed, at a kitchen table rather than in a waiting room.
— Justin Kauffman, CFP®, CEPA®
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Frequently asked questions
Does Medicare pay for long-term care?
No. Medicare does not pay for long-term custodial care, which is help with daily activities like bathing, dressing, and eating. Medicare Part A may cover up to 100 days in a Medicare-certified skilled nursing facility after a qualifying inpatient hospital stay, but only while skilled nursing care is medically necessary. Once care becomes custodial, or once the 100 days run out, Medicare coverage ends and the cost shifts to you, a private policy, or Medicaid.
How much does long-term care cost per year?
In 2025, national median costs were $74,400 a year for assisted living, $114,975 for a semi-private nursing home room, and $129,575 for a private room. In-home care ran a median of $35 an hour, or about $80,080 a year at 44 hours a week. These are medians, meaning half of providers charge more, and costs vary meaningfully by metropolitan area, so check rates for your specific market before building a plan around a national number.
When should I buy long-term care insurance?
Most people who buy coverage do so between their mid-50s and mid-60s, because premiums rise with age and medical underwriting gets harder. The binding constraint is health, not price: a diagnosis can make you uninsurable regardless of what you are willing to pay. If you are in your fifties and in good health, this is the window to at least get quotes and understand the numbers.
Are long-term care insurance premiums tax deductible?
Premiums on a tax-qualified policy count as deductible medical expenses, but only up to an age-based cap set annually by the IRS. For 2026 those caps are $500 at age 40 or under, $930 for 41 to 50, $1,860 for 51 to 60, $4,960 for 61 to 70, and $6,200 above 70, per insured person. As an itemized deduction, medical expenses are only deductible to the extent they exceed 7.5% of adjusted gross income, and business owners may have additional options worth reviewing with a CPA.
What is ALTCS, and how is it different from Medicare?
ALTCS is the Arizona Long Term Care System, the state’s Medicaid program for residents who need a nursing-facility level of care. Unlike Medicare, ALTCS does pay for ongoing long-term care, including services delivered at home or in assisted living, but it is means-tested with strict income and asset limits. Arizona also reviews asset transfers made in the 60 months before application, so any planning around eligibility needs to happen years in advance with an elder law attorney.
Sources
Every figure, rule, and statistic cited above comes from a primary source below. Links verified current as of August 23, 2026.
- Genworth Financial / CareScout — CareScout Releases 2025 Cost of Care Survey Results.
https://investor.genworth.com/news-events/press-releases/detail/1054/carescout-releases-2025-cost-of-care-survey-results Supports: national median costs for in-home care ($35/hour, $80,080/year), assisted living ($6,200/month, $74,400/year), and nursing home care ($315 and $355 per day; $114,975 and $129,575 per year), plus year-over-year rate changes and survey methodology. - U.S. Administration for Community Living — How Much Care Will You Need?
https://acl.gov/ltc/basic-needs/how-much-care-will-you-need Supports: the roughly 70% lifetime likelihood of needing long-term care at age 65, average duration of 3.7 years for women and 2.2 years for men, and the shares who never need care or need it beyond five years. - Medicare.gov — Nursing Home Care.
https://www.medicare.gov/coverage/nursing-home-care Supports: Medicare’s 100-day skilled nursing facility limit, the qualifying hospitalization requirement, and the exclusion of long-term custodial care. - Arizona Health Care Cost Containment System (AHCCCS) — ALTCS: Coverage for Individuals with Long-Term Care Needs.
https://www.azahcccs.gov/Members/GetCovered/Categories/ALTCS.html Supports: the description of ALTCS as Arizona’s Medicaid long-term care program, the nursing-facility level of care requirement, and the availability of home and community-based settings. - Internal Revenue Service — Internal Revenue Bulletin 2025-45, Rev. Proc. 2025-32, sections 4.27 and 4.62.
https://www.irs.gov/irb/2025-45_IRB Supports: the 2026 eligible long-term care premium limits under IRC 213(d)(10) ($500, $930, $1,860, $4,960, $6,200 by age band) and the $430 daily per diem limitation under IRC 7702B(d). - Internal Revenue Service — Publication 502, Medical and Dental Expenses.
https://www.irs.gov/publications/p502 Supports: the 7.5% of adjusted gross income threshold for deducting medical expenses and the treatment of qualified long-term care insurance premiums as medical care.
Justin Kauffman, CFP®, CEPA®
Founder & Financial Advisor, Dominion Private Wealth
Justin is a Certified Financial Planner™ and Certified Exit Planning Advisor® who helps families and business owners in Goodyear and across the West Valley coordinate investment, tax, estate, and legacy strategy into a single plan. Read Justin's full bio →
The bottom line
Long-term care is the largest unfunded liability in most retirement plans, and it is one of the few risks where waiting reduces your options rather than your cost. You do not have to insure it. You do have to decide about it, in writing, while you still have the health to choose among every path available. That decision, made calmly at 58, is what keeps a family from making it under pressure at 78.
Let’s put a number on it
We will model what care would cost in your area, show what it does to your plan, and help you decide how much of that risk is worth carrying yourself.
Schedule a ConsultationOr call (602) 922-3556This article is for educational purposes only and is not tax, legal, or investment advice. Rules referenced are governed by law and official guidance that may change; consult a qualified financial or tax professional about your specific situation before acting.
Cetera Advisors LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.
Securities offered through Cetera Advisors LLC (doing insurance business in CA as CFGA Insurance Agency LLC), member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC, a Registered Investment Adviser. Cetera is under separate ownership from any other named entity. Main Branch: 1616 N Litchfield Rd Suite A155 Goodyear, AZ 85395.
