Healthcare

For many Americans approaching retirement, the focus is often on investment balances, Social Security timing, and creating reliable income streams. And those things are important! But there is a financial retirement risk that can often go underestimated or forgotten that deserves closer attention: healthcare and long-term care costs.

As unpleasant as the topic may be, avoiding this conversation doesn’t make the risk disappear. In fact, delaying healthcare and long-term care planning could increase financial strain later in life, potentially disrupting an otherwise well-constructed retirement plan.

Long-Term Care Is More Common Than Many People Think

Many pre-retirees assume long-term care is something that only affects a small percentage of older adults and assume they won’t be a part of that group. However, statistics suggest otherwise. According to the Urban Institute, the average 65-year-old has a nearly 70% chance of needing some type of long-term care during their lifetime. Furthermore, approximately 20% of adults will require that care for more than five years.

According to the U.S. Department of Health and Human Services, nearly 70% of today’s 65-year-olds will need some form of long-term care during retirement, and roughly 20% will require care for more than five years. Long-term care can include assistance with everyday activities such as bathing, dressing, mobility, meal preparation, or memory support.

Care may come in several forms, including:

• In-home care
• Adult day services
• Assisted living facilities
• Skilled nursing or nursing homes
• Informal caregiving from family members

While many people hope to age independently at home, the cost of even moderate assistance can be substantial, so it’s something worth paying attention to.

The Rising Cost of Care

Long-term care costs have climbed dramatically in recent years. According to AARP’s Public Policy Institute, median long-term care expenses increased sharply between 2019 and 2024, with home care and assisted living costs rising nearly 50%, adult day services rising 33%, and nursing home costs jumping 25%.

Current annual averages nationwide include:

• Around $26,000 annually for adult day services
• Approximately $60,000+ for moderate in-home care
• Nearly $128,000 annually for a private nursing home room
• Roughly $115,000 annually for a semi-private nursing home room

These figures stand in stark contrast to the typical American’s preparation. The median household income for adults 65 and older is roughly $60,000. This means even moderate home care (30 hours per week) can cost as much as an older adult’s entire annual income, while assisted living or nursing home care far exceeds it.

The Medicare Misconception

One of the most common retirement planning mistakes is assuming Medicare will cover long-term care expenses.

Medicare is a federal health insurance program that provides important healthcare coverage for those 65+ or with specific disabilities, including hospital care, physician visits, preventive care, and limited home health services. However, Medicare generally does not pay for ongoing custodial long-term care or assisted living expenses.

Many retirees are surprised to learn that Medicare only covers short-term skilled nursing rehabilitation under limited conditions, and only for up to 100 days following a qualifying hospital stay. Even then, daily copayments ($217 for 2026) apply after the first 20 days.

As a result, retirees often find themselves paying out of pocket much sooner than expected.

Medicaid and the Middle-Income Squeeze

If Medicare won’t pay, many assume Medicaid will. While Medicaid is the largest payer of long-term care services in the United States, qualifying is far from simple.

Eligibility rules are strict and vary by state. In many cases, individuals must “spend down” much of their assets before becoming eligible. This process can be complex, often requiring specialized legal guidance to navigate. Even then, choices around facilities and living arrangements may become limited, and you may be placed in a facility you would otherwise not choose or have to share a room with others.

Middle-income retirees may be affected the most by this as they earn too much for Medicaid but not enough to easily absorb six-figure annual care costs.

Why Early Planning Matters

The good news is that the earlier you plan, the more options you have. Starting earlier may lessen the savings burden through long-term growth and compounding.

Early planning also expands available options, including:

• Long-term care insurance
• Hybrid life insurance policies with long-term care benefits
• Annuities designed to supplement future care costs
• Health Savings Accounts (HSAs)

Long-term care insurance remains one of the more common planning tools. According to the American Association for Long-Term Care Insurance, a healthy 55-year-old man may pay around $1,750 annually for coverage, while women and couples often pay more due to longer life expectancies.

Importantly, premiums generally increase with age, making early evaluation beneficial.

Healthcare Planning Is Retirement Planning

Healthcare and long-term care costs are an important part of retirement planning and should be included in your holistic plan.

Retirement isn’t only about accumulating wealth. It’s also about protecting it from the risks that can quietly erode your financial confidence over time.

The sooner healthcare and long-term care planning become part of the retirement conversation, the more choices retirees are likely to have later in life.

Sources:

https://health.usnews.com/best-senior-living/articles/types-and-costs-long-term-care-facilities

https://www.nia.nih.gov/health/long-term-care/paying-long-term-care

https://www.aarp.org/caregiving/financial-legal/long-term-care-affordability-report/

https://crr.bc.edu/how-much-will-your-long-term-care-needs-cost-it-depends-on-how-average-you-are/

https://health.usnews.com/best-nursing-homes/articles/how-to-pay-for-nursing-home-costs

https://aspe.hhs.gov/reports/what-lifetime-risk-needing-receiving-long-term-services-supports-0

This material is provided as general information and is not intended to be specific financial or tax guidance. Long-term care insurance and life insurance riders contain fees, exclusions, policy charges, and terms for keeping them in force. Product guarantees are backed entirely by the financial strength and claims-paying ability of the issuing insurance company. Before making any decisions regarding your personal financial strategy, you should consult a qualified financial, legal, or tax professional to discuss your individual circumstances and objectives. The source(s) used to prepare this material is/are believed to be true, accurate and reliable, but is/are not guaranteed.

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In modern America, the “traditional” household has undergone a significant transformation. Gone are the days when a single breadwinner was the norm; today, the dual-income household is the engine of the American economy. Families now rely on two paychecks to maintain their lifestyle, balance the mortgage, fund a child’s education, or build a retirement nest egg. Yet a sizeable gap remains in many financial plans: protection against the loss of one or both incomes due to an unexpected illness or injury.

With more than one in four adults in America having some type of disability, the potential for lost income could affect millions of families. So, take a moment to ponder a hard question: “What happens if I suddenly lose my paycheck?” And since adults with disabilities are more likely to experience heart disease, obesity, diabetes, and other health complications, it becomes an even more prudent question to consider as you approach retirement.

As we observe Disability Insurance Awareness Month every May, it is the perfect time to assess whether your family is protected against the loss of income and cover some use cases that might surprise you.

The Dual-Income Paradox: Double the Risk

For two-income households, there is a common misconception that if one partner becomes unable to work, the other’s income will provide a sufficient safety net. In reality, the loss of one income often triggers a “dual-income paradox.” When both partners work, expenses are often scaled to that combined total. A disability can potentially reduce household income and increase expenses through medical bills, specialized care, and the need for domestic help that the disabled partner can no longer provide. And in some cases, the healthy partner may need to take time off work to act as a caregiver, leading to a further reduction in the household’s total earning power.

Even if you’re currently young and healthy, statistics from the Social Security Administration highlight the urgency of a potential need for coverage, showing that one in four of today’s 20-year-olds will experience a disability before reaching age 67.

Pregnancy and Disability: Planning for Life’s Milestones

Another common misconception about disability insurance is that it’s only for the sick or the elderly, but short-term disability insurance can also be used for expectant mothers as part of a comprehensive birth plan. You’re probably already familiar with paid maternity leave—which provides income for mothers after childbirth—but not every employer or state offers that to employees. While federal laws like the Family and Medical Leave Act (FMLA) provide job security, they generally do not provide income, which is where disability insurance becomes relevant. Disability insurance benefits can help replace a portion of your earned income during a medical leave, depending on the specific coverage and eligibility requirements of your policy.

1. Routine Childbirth: Most short-term policies cover a standard six-to-eight week recovery period, depending on the method of delivery, providing critical income replacement while a mother heals and bonds with her new child. This short-term disability coverage is often used concurrently with FMLA leave, providing pay while FMLA provides job protection.
2. Pregnancy Complications: If complications or the need for physician-ordered bedrest arise before delivery, disability insurance can help provide a financial bridge. Because the history of U.S. leave policies has often struggled to balance gender equality and labor protections, disability insurance remains a useful tool for the “medical” side of the leave. While it typically only applies to the person giving birth (due to the medical necessity requirement), it is designed to help protect the household’s income stream during the recovery window.
3. Postpartum Health: Just as important as physical recovery, the mental health angle is also addressed within short-term disability insurance. Serious postpartum conditions, including postpartum depression or anxiety, can qualify an individual for extended disability benefits. These extended benefits are meant to help provide the mother with time and financial assistance during the recovery process.

Important Note: To use disability insurance for pregnancy, you generally must have the policy in place before becoming pregnant, as pregnancy is often considered a “pre-existing condition” if the policy is purchased after conception.

Navigating Your Options: From Government Support to Private Plans

Understanding the types of disability insurance and where your protection comes from can help you determine which type of coverage suits your family’s needs. Here’s an overview of some of the options:

• Short-term disability insurance (STD) is for temporary disabilities and is designed to replace up to 60%-80% of your income for a short period of time, typically three to six months or until you can return to work, whichever is shorter. STD is often provided through your workplace, either as a mandatory or voluntary benefit.<br>
• Employer-Sponsored (Group) Plans: While these are a solid foundation, they often have limits that may not fully replace the income of a high-earner and are generally not portable—meaning if you leave your job, you leave your coverage.

• Long-term disability insurance (LTD) is for more severe and even permanent disabilities. It’s sometimes offered as a workplace benefit, but is more commonly purchased as an individual policy. The benefit is designed to last for many years—through retirement if needed—replacing up to 60%-80% of your income if something were to happen and you could no longer work.

• Individual Disability Insurance (IDI): For those seeking comprehensive protection, an individual policy offers the most flexibility. Unlike employer-sponsored group plans, these policies stay with you regardless of your employer and can be tailored to your specific needs, such as adding riders for retirement protection or cost-of-living adjustments.

• Social Security Disability Insurance (SSDI): Provided through the Social Security Administration, this federal program is intended as an additional layer of protection for those with severe, long-term disabilities. However, the criteria are strict as the disability must be expected to last at least a year or result in death, and the application process can be lengthy.<br>

A waiting period, often a week or two in length, typically applies before benefits start paying. Premiums, benefits, taxability, and other features of disability insurance vary from policy to policy, and because of the wide range of disabilities that many Americans face, there’s no one-size-fits-all solution. Thorough assessments of your health and your family’s income needs can help you determine which type of coverage can provide the most benefit for your situation.

Why Waiting Carries Risk

The Department of Labor notes that disability insurance is a key component of a comprehensive benefits package, yet many workers remain underinsured. Waiting until a crisis hits is too late—you may be denied coverage for pre-existing conditions and left to find alternative ways of replacing your household income. Whether you are a dual-income couple building your future or an expectant mother preparing to welcome a new family member, the best time to help secure your income is while you are healthy.

Remember, disability insurance can be for anyone, not just those who are older or already ailing. This Disability Insurance Awareness Month, take the time to review your income protection gap. Your ability to earn an income is a valuable asset—it’s time to protect it with the same diligence you built it with. Schedule an appointment so we can discuss protection strategies that help build confidence in your financial independence.

Sources:

https://www.ssa.gov/disability

https://www.schwab.com/learn/story/disability-insurance

https://www.investopedia.com/terms/d/diinsurance.asp

https://www.dol.gov/general/topic/benefits-leave/fmla

https://www.oah.org/tah/november-3/the-history-of-family-leave-policies-in-the-united-states/

https://www.cdc.gov/disability-and-health/articles-documents/disability-impacts-all-of-us-infographic.html

This presentation is not endorsed or approved by the Social Security Office or any other Government Agency. The source(s) used to prepare this material is/are believed to be true, accurate and reliable, but is/are not guaranteed. This material is designed to provide general information on the subjects covered. It is not intended to provide specific legal or tax advice and cannot be used to avoid penalties or to promote, market, or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney. Disability Insurance is issued as a non-cancelable, guaranteed-renewable, individual disability income insurance policy. It is not a pension or retirement program. Disability Insurance may not be available to anyone who is considered over-insured. Additional underwriting guidelines may apply. SWG 5332039-0326

Every May, the Administration for Community Living (ACL) celebrates Older Americans Month (OAM) to recognize older Americans’ contributions, examine aging trends, and demonstrate the commitment to serving older adults. In step with that cause, we’re taking this time to honor older Americans by demonstrating our commitment to helping our clients fulfill their vision of retirement.

In 2026, the ACL’s theme for Older Americans Month is “Champion Your Health.” This theme is an invitation to take charge of your physical, mental, and financial well-being—whether that’s getting your daily steps in, spending more time with loved ones, or leaving a legacy. But to truly champion your health as an older American, look beyond physical fitness and consider a strategy that goes a step further and includes thoughtful healthcare preparation as well.

But you can’t champion your overall health if your financial health may be challenged. Let’s look at how planning for healthcare costs in retirement can help empower you to embody OAM’s core message: to live with dignity, independence, and vitality.

Navigating the Landscape of Long-Term Care

One component of championing your health is learning to balance the desire for a comfortable retirement with the need to manage potential healthcare costs and unforeseen expenses. Understanding the actual costs associated with medical care in your later years is an all-too-common challenge, as many retirees underestimate these expenses. However, misunderstanding them can make retirement virtually unaffordable. For instance, an average 65-year-old retiring in 2026 may require approximately $165,000 to cover healthcare expenses throughout their retirement—and this estimate excludes long-term care (LTC) costs, which can vary considerably based on individual needs.

Because LTC costs aren’t covered by standard health insurance or Medicare, they can be considered a significant threat to a retirement nest egg. The truth of LTC is that it’s a “when,” not an “if,” for about 70% of people over 65. Sometimes it involves aging in place with home health aides, other times it involves transitioning to an assisted living facility. No matter the case, long-term care requires meticulous planning—and without proper planning, you could face higher premiums than if you had started early. Remember, premiums are based on your age and health at the time of application, so you may even be denied entirely.

So, how do you avoid that scenario?

Long-Term Care Insurance

Long-term care insurance covers costs for extended in-home care or facility stays (nursing homes, assisted living) for individuals with chronic illnesses, disabilities, or cognitive impairments like Alzheimer’s. It can be beneficial to apply for long-term care coverage while you might still qualify for preferred rates due to the relatively low risk of needing to use the coverage soon. Locking in lower rates while young and healthy can potentially empower you to facilitate a more dignified lifestyle in retirement.

LTC insurance is unique because of how customizable it can be, meaning you can tailor a policy to your specific financial goals and family situation. For example, some LTC policies include inflation protection features that can help your coverage benefits grow by the time you need to use them—another reason to start while you’re young. If you’re in your 20s, 30s, or 40s, you have a meaningful advantage: time. Unlike a 65-year-old who might invest conservatively, a 30-year-old can invest for long-term care decades before they might need to use it.

Self-Funding Your Long-Term Care

Choosing to self-fund healthcare involves implementing a strategy where you manage the financial risk yourself. If you retire before 65, you aren’t yet eligible for Medicare and thus may be looking to bridge the coverage gap until then. For example, if you required LTC later in life and had dedicated a bucket of your savings and/or investments for that expense during your working years, you could reduce the strain those expenses could have on your financial situation. A dedicated long-term care bucket in your portfolio that’s invested in a strategy aligned to your risk tolerance. This method could potentially turn a modest monthly contribution into a helpful self-insurance fund down the road. But how and where you put those savings or investments is key…

Health Savings Accounts

A powerful way to fund your own healthcare costs is through triple tax-advantaged health savings accounts (HSAs). These offer the ability for your money to go in tax-free, grow tax-free, and be withdrawn tax-free for medical and LTC expenses. You can contribute to an HSA while you’re still working, and, once you turn 65, you can use the HSA funds to pay for Medicare Part B and Part D premiums. In 2026, you can even use HSA funds to cover qualified LTC insurance premiums. But access to these accounts can be stricter as they’re often offered through employers, and you must have a specific kind of health coverage to qualify for opening one.

Going the Distance: Our Commitment to Your Empowerment

As we celebrate Older Americans Month, let’s reframe what it means to grow older. It isn’t just about adding years to life but adding life to years. It’s about vitality. It’s about developing a strategy for independence and self-determination. Successful aging begins long before you reach “senior” status. Retirement planning is a lifelong journey of financial management that requires both foresight and flexibility. If you don’t carefully plan for your healthcare in retirement now, you could end up with a greater financial burden than was necessary. That’s why it’s important to be proactive. Even the most health-conscious individuals might find themselves in need of expensive healthcare services later in life.

But regardless of where you are in your journey toward retirement, there may be more options than you think. So don’t wait. Call us so we can discuss ways to manage your financial strategy and help you pursue your goals in the later years.

Sources:

https://acl.gov/oam/older-americans-month

https://acl.gov/ltc/costs-and-who-pays/what-is-long-term-care-insurance

https://www.usbank.com/wealth-management/financial-perspectives/financial-planning/long-term-care-insurance-costs-and-benefits.html

https://www.consumerfinance.gov/about-us/blog/celebrating-older-adults-communities-strength-supporting-them/

https://www.fdic.gov/consumer-resource-center/2025-05/financial-education-every-stage-life

https://www.schwab.com/learn/story/health-care-costs-retirement-are-you-prepared

This information is designed to provide general information. Pursuant to IRS Circular 230, it is not intended to provide specific legal or tax advice. You are encouraged to consult your personal tax advisor. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. The source(s) used to prepare this material is/are believed to be true, accurate and reliable, but is/are not guaranteed. This hypothetical example is shown for illustrative purposes only and is not guaranteed. SWG 5299645-0326