How it works
Long-term care is the largest uninsured risk in most retirement plans, and the reason is a misunderstanding: health insurance and Medicare cover medical treatment, not custodial care. Help with bathing, dressing, eating and mobility — the assistance most people actually need in their eighties — is paid privately until assets are exhausted and Medicaid takes over. This calculator sizes that exposure. It takes today's daily cost of care in your area, inflates it to the year care might begin, then keeps inflating through the care period year by year, because prices do not stop rising once a claim starts. The gap between today's price and the projected total is usually startling, and it is driven almost entirely by care inflation running ahead of general inflation for decades. Subtracting the assets you have earmarked gives the shortfall a policy would need to fill. The premium estimate here is deliberately rough, because long-term care underwriting is medical and issue age dominates pricing — the same coverage bought at 65 can cost nearly double what it costs at 55, and a declined application at 70 cannot be fixed at any price. Traditional policies face the use-it-or-lose-it objection, which hybrid life-and-care products answer by returning a death benefit if care is never needed. Self-funding is a legitimate third answer for larger portfolios, provided the money is genuinely ring-fenced.
Formula
Future annual = daily x 365 x (1 + inflation)^years until care | Total = sum of each care year, inflated | Shortfall = total - assets
Tips
- Use local costs, not national averages — care prices vary more than twofold between metro areas.
- Buy in your mid-fifties if you are going to buy; premiums and the risk of medical decline both rise steeply after 60.
- Consider a shorter benefit period with a larger daily benefit — most claims are about three years, not fifteen.
- Compound inflation protection is the rider that matters most on a policy bought decades before it pays.
- Hybrid life-and-care policies answer the use-it-or-lose-it objection by paying a death benefit if care is never needed.
Frequently asked questions
- How much does long-term care cost?
- A semi-private nursing home room averages roughly $110,000 a year nationally, a private room more, and assisted living around $65,000. Home health aides run about $33 an hour. Costs vary more than twofold between regions, so a local figure beats any national average for planning.
- Does Medicare cover long-term care?
- Barely. Medicare pays for short skilled-nursing stays after a qualifying hospital admission, generally up to 100 days with cost-sharing, and for some home health care. It does not pay for custodial long-term care, which is the help with daily activities most people actually need.
- When should I buy long-term care insurance?
- Most buyers are best served in their mid-fifties to early sixties. Earlier means more years of premiums but a much lower rate and a far better chance of passing medical underwriting. Waiting past 65 raises the premium sharply and raises the odds of being declined outright.
- Is long-term care insurance worth it?
- It is strongest in the middle: households with enough assets to lose but not enough to absorb a three-year claim. Very large portfolios can self-fund, and households with few assets will reach Medicaid quickly. Hybrid policies broaden the case by returning value if care is never needed.
- How long does the average person need long-term care?
- About three years on average, though the distribution is wide and skewed — many people need no care at all, while roughly one in seven needs it for more than five years. Women average longer than men, largely because they live longer and more often outlive a spouse who would have provided care.