There is no way to stop the aging process. But when it comes to long-term care planning, most people take a wait-and-see approach. They don't want to think about needing extended care, and they definitely don't want to think about how they'd pay for it. Some assume they can't afford insurance, so they leave it to chance or their children. Others believe Medicare will cover the bill, which is one of the most expensive misconceptions in retirement planning.
By the time reality sets in, it's often too late to act. Health issues make qualifying for coverage difficult. Savings that took decades to build get spent down faster than anyone expected.
The good news: planning before you need care is still very much possible, and knowing what care actually costs is the best place to start.
Key Takeaways
The national median cost of assisted living reached $6,200/month ($74,400/year) in 2025, up 5% from the prior year.
56% of Americans turning 65 today will need some form of long-term care.
Family caregivers in the U.S. now provide $1 trillion in unpaid care annually, more than total Medicaid LTSS spending.
Medicaid is the primary payer for long-term care, but qualifying requires spending down most of your assets first.
Long-term care insurance paid $14 billion in claims in 2023, and now pays over $18 million in benefits every business day.
What's Driving Long-Term Care Costs Up
The cost of long-term care has risen steadily for years, and several structural forces make that unlikely to change:
The baby boomer generation is now fully in its care-needing years, with peak demand expected through the 2030s
A persistent shortage of home health aides and direct care workers keeps wages, and therefore care rates, elevated
Inflation across housing, food, and medical supplies has hit care facilities especially hard
The long-term effects of COVID-19 (long COVID, staffing disruptions, accelerated cognitive decline in some populations) continue to add demand pressure
The U.S. population 65 and older is projected to reach 95 million by 2060, up from about 58 million today
None of these factors are short-term. Planning at any age is better than planning at 80.
Who Pays for Care?
Unpaid Family Caregivers
The largest single source of long-term care in America isn't insurance or Medicaid. It's family.
According to AARP's 2026 Valuing the Invaluable report, 63 million Americans now provide unpaid care, a nearly 50% increase since 2015. In 2024, those caregivers provided an estimated 49.5 billion hours of care to adults, with an economic value of $1.01 trillion. That figure exceeds total federal and state Medicaid LTSS spending that year. One in four adults in the U.S. is currently a caregiver.
Source: AARP, Valuing the Invaluable: 2026 Update
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Medicaid
Medicaid is the primary payer for institutional and community-based long-term care services. In 2023, total Medicaid LTSS spending (federal and state combined) reached $257 billion, representing about 45.6% of all long-term care expenditures nationally.
The catch: qualifying for Medicaid requires spending down most of what you've saved. An individual applicant is generally permitted to keep countable assets of only around $2,000 (varies by state). For married couples, the most the healthy spouse can typically keep is $157,920 (the 2025 federal maximum; varies by state). Everything else must be spent first.
Assets count regardless of which spouse they belong to. A prenuptial agreement doesn't change this. Many families are blindsided by this reality when care becomes necessary.
Source: KFF Medicaid LTSS Spending Data
Self-Funding
Self-funding care means you are prepared to absorb all the risk for your long-term care costs yourself, paying full price without drawing on a risk pool. There are no premiums, and you maintain complete control over those dollars. However, you will use savings left over after taxes and investment fees to fund your care, with no leverage and no protection against a longer-than-expected need.
People who do not choose to self-fund the entire risk generally do so for three reasons:
Insurance products leverage self-funding dollars and make them last significantly longer through risk pooling
Tax incentives may be associated with some insurance products
The desire to have an earmarked LTC fund makes access easier for family members when care is needed
Long-Term Care Insurance
Approximately 5.8 million Americans currently hold stand-alone long-term care insurance policies. In 2023, the LTC insurance industry paid out $14 billion in claims, and as of early 2025, more than $18 million in benefits is paid out every single business day.
When you purchase long-term care insurance, you benefit from a risk pool that makes it advantageous when you compare premium paid to total benefits available. The premium you pay leverages significantly more total benefit than the same dollars set aside in savings, especially once you account for taxes and investment fees on self-funded assets.
Source: AALTCI 2025 Long-Term Care Insurance Statistics
2025 Cost of Care: What Are People Paying Right Now?
The following figures are from the CareScout/Genworth 2025 Cost of Care Survey, the most widely cited national benchmark for long-term care costs. These are national medians, actual costs vary significantly by state and city. Half of facilities cost more than these figures and half cost less.
| Care Type | Monthly Median | Annual Median | YoY Change |
|---|---|---|---|
| Assisted Living (private room) | $6,200 | $74,400 | +5% |
| Nursing Home (semi-private room) | $9,581 | $114,975 | +2% |
| Nursing Home (private room) | $10,798 | $129,575 | +1% |
| Adult Day Health Care (5 days/wk) | $2,058 | $24,700 | -5% |
| Home Health (private duty nursing) | ~$90/hour | Varies by hours | — |
Source: CareScout 2025 Cost of Care Survey. National medians. Upscale and urban markets run higher. Costs vary significantly by state.
How Long Does Long-Term Care Actually Last?
Duration is where most families underestimate their exposure. The average care need is often quoted as 2-3 years, but that figure includes short rehab-type claims that resolve quickly.
For people who need care for longer than a year, the average extends to 3.9 years. And for the 22% of people 65 and older who require care for more than five years, which includes most Alzheimer's and dementia cases, total costs can reach seven figures.
Alzheimer's deserves special attention. An estimated 7.2 million Americans 65 and older currently live with Alzheimer's. After diagnosis, people typically survive 4 to 8 years, though some live 20 years or more. In 2024, family caregivers provided an estimated 19.2 billion hours of Alzheimer's-specific care, valued at $446 billion.
Sources: AALTCI 2025 | Alzheimer's Association 2025 Facts and Figures
Projected Total Cost
Since most people's care blends home care, assisted living, and sometimes a nursing facility, the table below models total costs using a blended rate of $7,200/month projected at 5% annual inflation, consistent with recent trends.
| Time Until Care Needed | Est. Monthly at Start | 2.5-Year Total | 4-Year Total |
|---|---|---|---|
| Today | $7,200 | ~$216,000 | ~$360,000 |
| In 10 years | ~$11,730 | ~$352,000 | ~$586,000 |
| In 20 years | ~$19,110 | ~$573,000 | ~$955,000 |
Projections at 5% annual inflation. Alzheimer's or dementia cases lasting 8+ years could easily exceed $1.5M in current dollars. Estimates vary by care type, location, and intensity.
A Short Story About Planning
Maria knew the call would come eventually. Her mother, Helen, had been managing early-stage dementia at home for two years with help from the family. But Helen had declined faster than anyone expected, and it was now clear she needed around-the-clock care.
What made this moment different from so many families Maria had watched struggle was simple: Helen had planned.
Twenty years earlier, Helen had purchased a long-term care insurance policy with inflation protection when she was healthy enough to qualify and young enough for the premiums to be manageable. The policy had grown with inflation. What started as a $150/day benefit was now covering a meaningful portion of the cost of the memory care facility.
Maria didn't have to choose between her job and her mother. She didn't have to spend down Helen's savings to near zero before any help arrived. And Helen got the quality of care she had hoped for, in a facility that felt like a home rather than a last resort.
The decision Helen made two decades ago, when a long-term care need felt abstract and far away, was the one that gave her family options when it mattered most.
The Human Toll
The financial cost of long-term care is only part of the story. There's also a significant human cost, in time, stress, lost income, and career disruption, that falls almost entirely on family members.
According to AARP's 2025 Caregiving in the U.S. report:
63 million Americans are currently providing unpaid care
Over 40% of caregivers now provide high-intensity care, including complex medical tasks
Nearly 70% of family caregivers report difficulty balancing work and caregiving responsibilities
Many caregivers reduce hours, turn down promotions, or leave the workforce entirely, with lasting effects on their own retirement savings and Social Security benefits
A plan that reduces the caregiving burden on your family isn't just about money. It's about what you're asking the people who love you to give up.
Source: AARP Caregiving in the U.S. 2025
Planning Can Impact Future Costs and Options
A healthy 65-year-old has a 56% probability of developing a condition requiring long-term care. For women, the odds of needing paid care specifically are 51%. For men, 39%.
The earlier you plan, the more options you have:
Younger and healthier means you're more likely to qualify for coverage at a reasonable rate
More time means inflation protection riders have longer to compound
Premium savings are significant: a policy purchased at 55 typically costs less than half what the same coverage costs at 65
Partnership policies (available in many states) allow you to protect assets dollar-for-dollar equal to the benefits paid, giving you more flexibility if you later need Medicaid
Waiting until a health event forces the decision often means no options are left.
Source: AALTCI Long-Term Care Need Statistics
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Questions to Consider
Where do you plan to retire?
Are you planning to move out of state? Is family nearby who could realistically provide some care? Cost of care varies dramatically by state, some markets run 30-40% higher or lower than the national median.
What impact will needing extended chronic care have on your income?
What will happen to your income should you or your spouse require extended care while one or both of you are still working? Relying on Medicaid means you and your spouse will be subject to asset thresholds that can wipe out most of your retirement savings.
What impact will needing extended chronic care have on your assets?
Retirees typically use assets for income. What would spending a significant amount of your assets on long-term care do to your income?
What type of care do you prefer?
Do you want the option for home health care? Would you prefer less costly informal caregivers at times? Do you want access to a higher-end assisted living facility? Medicaid typically does not cover these preferences. Insurance does.
What can you comfortably afford over the long term?
If you're considering long-term care insurance, make sure whatever plan you choose is one you can sustain for years. A nice feature of many plans is that the premium is waived when you start receiving benefits. Some plans have guaranteed premiums, so you never have to worry about a rate increase.
Frequently Asked Questions About Long-Term Care Costs
What does long-term care cost in 2026?
The national median cost of assisted living is $6,200 per month ($74,400 per year) as of 2025, per the CareScout Cost of Care Survey. Nursing home care runs higher: $9,581 per month for a semi-private room and $10,798 for a private room. Home care costs vary by hours needed, but private duty nursing runs approximately $90 per hour at the national median.
Does Medicare pay for long-term care?
No. Medicare covers short-term skilled nursing care following a qualifying hospital stay, typically up to 100 days. It does not cover custodial care, help with daily activities like bathing, dressing, and eating, which is what most long-term care actually involves. This is one of the most common and costly misconceptions in retirement planning.
What does Medicaid pay for long-term care?
Medicaid is the primary payer for long-term care in the U.S., covering $257 billion in 2023. However, you must spend down most of your assets to qualify. An individual is typically permitted to keep only about $2,000 in countable assets. For married couples, the healthy spouse can typically keep up to $157,920 (the 2025 federal maximum; varies by state).
What is the average length of a long-term care need?
For people who need care for more than a year, the average claim lasts 3.9 years. About 22% of people age 65 and older need care for more than five years. Alzheimer's and dementia cases can extend care needs to 8 years or longer.
How likely am I to need long-term care?
56% of Americans turning 65 today will develop a condition requiring long-term care. 51% of women and 39% of men age 65 and older will need paid care at some point. The risk is higher than most people assume.
When is the best time to buy long-term care insurance?
Most financial planners recommend looking at coverage in your mid-50s to early 60s, when you're still healthy enough to qualify and premiums are more affordable. A policy purchased at 55 typically costs less than half what the same coverage costs at 65. Waiting too long often means health changes make qualifying difficult or impossible.
Understanding the cost of care is the first step. Turning that into a plan is the next one.
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Sources: CareScout 2025 Cost of Care Survey | AARP Valuing the Invaluable 2026 | AARP Caregiving in the U.S. 2025 | AALTCI 2025 LTC Insurance Statistics | KFF Medicaid LTSS Data | Alzheimer's Association 2025 Facts and Figures
