As a CPA, you’re used to helping your clients navigate complex financial decisions while planning for future expenses. However, one major cost that many financial professionals overlook in their own planning is long-term care expenses. With the average nursing home stay costing more than $125,000 a year, and in-home care costs following suit, long-term care is one of the greatest potential threats to your retirement security and your accumulated wealth.
This guide will take a deep dive into current long-term care costs across different care settings, explore the avenues available to cover the costs of long-term care, and help choose long-term care insurance (LTCI) that provides additional protection for your personal assets.
How Much Does Long-Term Care Really Cost?
The cost of long-term care services can vary quite a bit depending on the type of care needed, your geographic location, and the level of care required. According to a recent Cost of Care survey, expenses for LTC are on the rise, even outpacing recent inflation. Understanding these costs is crucial for CPAs planning their own financial futures.
2023 National Median Long-Term Care Costs
| Care Setting |
Monthly Cost |
Annual Cost |
Notes |
| Nursing Home Care (semi-private room) |
$9,277 |
$111,325 |
24-hour skilled nursing care and supervision |
| Nursing Home Care (private room) |
$10,646 |
$127,750 |
Private accommodations with skilled nursing |
| Assisted Living Facility |
$5,900 |
$70,800 |
Personal care assistance, meals, activities |
| Adult Day Care |
$2,167 |
$26,000 |
Daytime supervision and activities (5 days/week) |
| In-Home Care (Homemaker Services) |
$6,292 |
$75,504 |
Non-medical assistance with daily activities |
| In-Home Care (Home Health Aide) |
$6,483 |
$77,792 |
Medical and personal care assistance |
Source: Genworth 2024 Cost of Care Survey
These figures represent current costs, but CPAs must also factor in inflation to better plan ahead. Typically, costs rise at a rate of 3-4% annually, but from 2023 to 2024, the adjustment was actually 9-10%. For CPAs in their 50s planning for possible care needs in their 70s and 80s, costs for today are only a baseline.
6 Proven Ways to Pay for Long-Term Care
For CPAs facing potential long-term care needs, understanding payment options is critical to preserving wealth and making informed decisions. Unlike many healthcare expenses, long-term care costs aren’t usually covered by standard health insurance or by Medicare. This may leave family members to navigate complex funding strategies. The right approach depends on your assets, family situation, and personal preferences about care setting. Below are six primary methods for funding long-term care:
Out-of-Pocket or Private Pay
Many families self-fund long-term care. There are several options, with pros and cons, for coming up with the necessary money on your own. One common option is to have an elderly parent move in with an adult child, but being a family caregiver comes with financial, physical, and emotional challenges. At the end of the day, what is right for your family will be different from what is right for your neighbor’s family.
Self-funding can work for high-net-worth individuals who can absorb the annual costs listed above without major disruptions to their lifestyle. However, even affluent families should calculate whether depleting their assets to pay insurance premiums makes financial sense.
Long-Term Care Insurance
Similar to life insurance or disability insurance, long-term care insurance can be purchased to guard against the costs of assistance with activities of daily living, whether it’s at home, in an assisted living facility, or in a nursing home. There are many different types of long-term care policies and options you can put into place that help mitigate the cost associated with LTC.
As with most insurance, age and health matter when determining rates, premiums, and eligibility. You can also look into the benefits of purchasing a standalone policy versus a hybrid policy. Hybrid policies are usually bundled with life insurance policies or annuities, and while the premiums may be higher, the benefit is that they offer a death benefit if you don’t use the coverage. Standalone or traditional long-term care insurance policies are “use-it-or-lose-it,” so there is no return if they aren’t needed. It’s often advisable to explore options and begin preparing when you are in your 40s and 50s, while you are still in good health.
Medicaid
Many are surprised to learn that Medicare does not cover long-term care. As a federal health insurance program, Medicare primarily serves people over 65 years old and does not cover everyday activities. Medicaid, however, may be able to cover some of the costs. This public assistance program for low-income families and individuals is funded by both the state and the federal government, and it can cover some services if you meet your state’s eligibility requirements. Federal guidelines are loose, so there can be significant differences in eligibility requirements from state to state, but individuals are often required to have limited income and assets.
Veterans’ Benefits
Veterans and their surviving spouses may qualify for support through the VA, either via the Aid & Assistance pension or the standard VA pension. A&A can cover the costs of activities of daily living assistance, while the VA pension covers room and board costs for care, though only for low-income veterans.
Eligibility requires wartime service, honorable discharge, meeting income and asset thresholds, and medical necessity for care. Unlike Medicaid, VA benefits may have more generous coverage limits and don’t require spending down your assets. These benefits can be combined with personal savings or insurance, though the application process may be lengthy and complicated.
Home Equity and Reverse Mortgages
A reverse mortgage converts home value into cash for care expenses without selling the property or making monthly payments. Borrowers over the age of 62 can receive reverse mortgage funds as a lump sum, a line of credit, or in monthly installments while living in the home. In this scenario, the loan is repaid when the home is sold. This can preserve other retirement accounts, but it comes with significant costs, including upfront fees, accruing interest, reduced inheritance, and ongoing requirements to pay property taxes and home insurance.
Family Caregiver Contracts
For older adults with willing and eligible family members, a family caregiver contract may be an option. These personal care agreements are formal, written arrangements that detail how loved ones will be paid fair market rates for providing care services. There are some advantages, like deductible medical expenses, taxable income for the family member, having the money stay within the family, or spending down assets legitimately for future Medicaid planning. The contract must be properly structured with reasonable compensation, defined services, and appropriate tax reporting.
How Many Hours and Days of Care Your Money Buys
Understanding the purchasing power of your savings can help clarify whether self-funding is realistic or if insurance protection makes more financial sense. Consider this breakdown of average costs:
- In-home care at $33/hour: At this rate, $100,000 will cover just over 3,000 hours, or around 18 months of full-time care (40 hours a week).
- Adult daycare at $100/day: $100,000 would cover a little less than three years of daily care, or just under four years of weekday care.
- Nursing home care at $350/day: $100,000 would cover less than a year of facility care in a private room.
- Assisted living care at $194/day: $100,000 would cover a little less than a year and a half of daily care.
Government Help: What Medicare and Medicaid Actually Cover
Medicare won’t be of much help when it comes to long-term care. Regarding skilled care limits, keep these considerations in mind:
- Medicare covers only short-term skilled nursing facility care following a 3-day minimum hospital stay.
- It only offers 100 days of coverage. Days 1-20 are covered in full, while the remaining days up to 100 require a co-pay of around $200/day.
- It does not cover custodial care, assisted living, or long-term nursing home stays.
- Home health services are covered only if the patient is homebound and requires skilled nursing or therapy. Assistance with activities of daily living is not eligible for coverage.
Medicaid can help more when it comes to long-term care, but there are factors you need to know first:
- Medicaid covers comprehensive long-term care, including nursing homes, assisted living facilities, and in-home care services if the patient is eligible.
- There is strict financial eligibility to qualify. Typically, applicants can only have $2,000 or less in countable assets for individuals and income under $2,800/month. These thresholds vary by state.
- Home and Community-Based Services (HCBS) waivers may allow people to receive care at home rather than inside nursing facilities.
- You may not be able to gift your assets in order to qualify. There are penalty periods for doing so.
- States may seek reimbursement from your estate for death benefits paid out.
VA Aid & Attendance benefits can supplement your long-term care costs, but there are details you need to know:
- A&A benefits provide additional monthly pension payments for eligible wartime veterans and surviving spouses who need assistance with activities of daily living.
- There is a maximum monthly benefit of around $2,200 for veterans, $1,400 for surviving spouses, and $2,600 for veterans with spouses.
- The coverage limits are more generous than Medicaid, and your primary residence remains exempt.
- The benefits can be used for nursing homes, assisted living, or in-home care.
- Wartime service is required, as is honorable discharge, medical need, and income thresholds.
You can find additional resources on paying for long-term care through a number of assistance programs, including:
Should You Consider Long-Term Care Insurance?
As a CPA, you’ve built your career helping others make sound financial decisions based on risk assessment, tax efficiency, and long-term planning. But what about when it comes to your own finances? Not everyone needs LTCI. Those on a fixed income may qualify for enough Medicaid coverage to fulfill their needs, while the very wealthy are likely able to self-pay. CPAs, however, often fall into the middle ground: too wealthy for government assistance, but not wealthy enough to fund care themselves.
For your own planning purposes, consider LTCI if you’ve accumulated assets above $500,000 and want to protect your retirement accounts from premature depletion. You should also look at long-term care insurance policies if you want to preserve an inheritance for your family members, take advantage of tax benefits, or value the peace of mind that comes with proper health coverage.
The key is starting the conversation early, before you develop an increased risk of chronic illnesses or other potentially disqualifying health conditions. This way, your premiums will likely be more affordable, and you’ll be more likely to meet any health qualifications. Waiting until care is needed could mean facing higher costs.
To learn more about LTCI plans in your state, download the free guide and get started!
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