How much does long long-term care cost?: Options, insurance, & planning tips

The need for long-term care with age can be something physically, emotionally, and, above all, financially taxing. Considering that approximately 70% of people in the U.S. turning 65 are expected to require some form of long-term care during their lives,¹ it may be wise to plan ahead and factor long-term care into your retirement plan. The costs of long-term care are significant — and may be something many retirees will face — so it is important to consider the price of different options as well as how you will fund them.

The cost of long-term care has increased in recent years, with the national average in a semi-private room in a nursing home at $9,277 per month as of 2024.² However, factors such as type of care and what state you reside in may also influence average long-term care costs. Let’s consider the different costs of long-term care types.

Most people are familiar with nursing homes; however, there are other options for where you can receive long-term care. The three most common types include: 

In-home care: 

• In-home care includes two options. Home care, which is help provided in the person’s home, including with daily activities, such as bathing, dressing, meal prep, cleaning, nursing care, or physical therapy. These services cost an average of $6,292 per month, or $75,504 annually.² 

• Home health aides provide assistance to those living at home instead of care facilities, and offer help to those who require more extensive personal care than family or friends can provide. These services cost an average of $6,483 per month, or $77,792 annually.²

Community and assisted living: 

• Adult day health care is a community-based form of assistance for adults who require help or supervision during the day, but do not necessarily require round-the-clock assistance. This type of service averages at $2,167 per month, or $26,000 annually. 

• Assisted living communities provide less extensive care than a nursing home, but they still provide personal care and health services for those who require assistance with day-to-day activities. This long-term care option costs an average of $5,900 monthly, or $70,800 annually.²

Nursing home care 

• Nursing home care are live-in facilities that provide medical and personal care, with 24-hour medical supervision, rehabilitation services, and full-time personal care. Nursing homes are generally for those who require a higher level of care and supervision than those in assisted living communities. 

• A semi-private room in a nursing home is an average of $9,277 per month, or $111,325 annually.² A private room in a nursing home costs $10,646 monthly, or $127,750 annually.²

The state you live in, or choose to retire in, can also influence the cost of long-term care. The most recent 2024 data shows that Alaska tops the charts with the highest cost of long-term care at $19,267 monthly for a semi-private room in a nursing home facility, or $35,622 for a private room.³ The least expensive state was Texas, which costs $5,483 monthly for a semi-private room and $6,893 monthly for a private room.

The five most expensive states for long-term care are:

• Alaska 

• Connecticut

• Hawaii

• Massachusetts 

• Minnesota

The five least expensive states for long-term care are: 

• Alabama

• Arkansas

• Louisiana

• Mississippi

• Missouri

While some people look for the best states to retire for tax purposes, others may want to keep long-term care in mind to see if they will be able to afford the cost of the care they need in the state they are living in.

Many people are under the impression that government programs like Medicare and Medicaid will fully cover the costs of long-term care; however, this is not the case. While these programs can offer some help, long-term care expenses may add up and use a significant part of monthly income, even for those who thought they were well-prepared.  

How someone pays for long-term care depends on their unique financial situation and the type of services they use. It is important to understand different methods of paying for these services, such as personal funds, long-term care insurance, or government programs, to understand what options are available and to know what to expect.

Many seniors use their own personal funds to pay for long-term care out of pocket. While this option may provide greater flexibility, it may be wise to first review your retirement plan to ensure it can withstand average long-term care costs. You may also want to ensure that you have enough time to continue saving for these expenses, given that it is unpredictable when you might need to begin long-term care services or for how long you may need them. 

You can also consider using tax-efficient saving strategies to potentially reduce your out-of-pocket costs while still maintaining flexibility. Some options may include:

• Health Savings Accounts (HSAs): An HSA is a tax-advantaged account available to those who are enrolled in a high-deductible health plan. HSAs offer triple tax advantages, including tax-deductible contributions, tax-free growth, and tax-free withdrawals when used for qualified medical expenses (including many long-term care costs). They can be used for home care, nursing services, long-term care insurance premiums (with age-based limits), and other long-term care expenses.

• Roth IRAs: Roth IRAs do not tax qualified withdrawals after age 59½ if the account has been open for five or more years. Tax-free withdrawals in retirement can be used for any purpose, including the costs of long-term care. This can be ideal for retirees who want flexibility and predictable income without triggering higher tax brackets.

• Reinvesting required minimum distributions (RMDs): While RMDs cannot be directly reinvested into another retirement account, you might consider reinvesting the distribution into a taxable brokerage account. This would allow you to continue growing your wealth for future costs, and you would only need to pay taxes on the earnings. 

Despite the flexibility and tax advantages self-funding can offer, it is important to be aware of potential risks you may face. For example, any assets invested in the market can fluctuate and possibly lose value, affecting your ability to pay for care as you intended or even causing you to sell assets at a lower value. 

You may also risk using most of your living expenses to cover long-term care costs. If costs are higher than expected for a longer period of time, this can leave you in a financially vulnerable situation. 

A less volatile self-funding option you can consider is a high-yield savings account. High-yield savings options, such as high-yield savings accounts or certificates of deposit, can help you maximize your savings by earning interest on your money. Saving for long-term care or emergency funds can help you prepare for unexpected expenses in the future. 

Explore savings options with competitive interest rates on the Raisin marketplace and start growing your savings today.

Some retirees may also be eligible for certain government healthcare benefits. The two most common programs include:

• Medicare: This federal health insurance program is designed for those 65 and older and helps cover medical costs including hospital stays, doctor visits, some home health care, hospice care, and vaccinations. Long-term care or assisted living services, however, are not covered.

• Medicaid: Medicaid is a joint federal and state program that provides health coverage for people with low income. This program does cover long-term care and is the primary payer across the nation for long-term care services.⁴ However, eligibility requirements and services covered may vary from state to state, and options for how and where you receive care may be limited.

Long-term care insurance is a type of insurance policy designed to help cover the cost of services for long-term care. This type of insurance can help pay for in-home care, assisted living facilities, nursing homes, adult day care centers, and memory care units, which are typically not covered by standard health insurance or Medicare. 

The three most common types of long-term care insurance include: 

• Traditional policies offering comprehensive coverage but with rising premiums and no refunds if unused.

• Hybrid policies combining long-term care and life insurance with guaranteed death benefits but higher upfront costs.

• Life insurance with a long-term care rider, which lets you use part of the death benefit for care, potentially reducing the final payout.

In general, it can be more cost-effective to purchase this type of insurance in your 50s or early 60s to lock in lower premiums and greater deductibility. The best policy for you is dependent on your needs and financial circumstances. If you would like more details on long-term care insurance, or are undecided if you need this type of insurance or not, you can head to our long-term care insurance article.

Understanding the variation in costs and options for long-term care is crucial for those planning their retirement, financial future, or how to care for their loved ones. While your state of residence can greatly impact the costs of long-term care, you may also want to look into which options would best suit your needs and fit your financial circumstances. 

Planning ahead can also help protect your assets if you plan to pass your wealth on to your family or other loved ones. This may also be a good time to review — or start — your estate plan to ensure your beneficiaries and power of attorneys are up-to-date, and that you have listed any wishes for medical treatment in the event that you are no longer able to make these decisions yourself.

Your long-term care plan should fit your personal situation; therefore, you may want to seek advice from a retirement financial advisor or long-term care insurance specialist to explore what options would best fit your needs.

While it's hard to predict if you will require long-term care in the future or not, it doesn’t have to be hard to stay prepared. With a high-yield savings account, you can help make the most of your savings and help finance unexpected costs. The Raisin marketplace gives you access to various high-yield savings products with competitive interest rates — all within one platform. Open an account today and stay on top of your financial future.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Sources

¹ https://www.hhs.gov/aging/long-term-care/index.html 

² https://www.carescout.com/cost-of-care 

³ https://worldpopulationreview.com/state-rankings/cost-of-long-term-care-by-state

⁴ https://www.medicaid.gov/medicaid/long-term-services-supports