How to Plan for Long-Term Care Without Breaking the Bank

Frequently Asked Questions

I’m in my late 60s and have some health issues. Is it too late to get long-term care insurance?

It can be more challenging, but it’s not always too late. While some health conditions may disqualify you from a traditional policy, insurance companies have different underwriting standards. This is also where hybrid life/LTC policies can be a great alternative. The health screening for life insurance can sometimes be less strict than for a pure long-term care policy, making it a viable option for those who might otherwise be denied.

My spouse and I are planning together. Are there shared policies?

Yes, and they are an excellent option for couples. Most insurers offer “shared benefit” riders. These create one large pool of benefits that either spouse can access. For example, if you each have a 3-year benefit period, a shared policy might give you a combined 6-year pool. If one spouse needs care for 4 years, they can use the extra year from their partner’s side. This flexibility is very valuable and often more cost-effective than two separate policies.

Can I use my 401(k) or IRA to pay for long-term care?

You absolutely can, but you must be aware of the tax consequences. Money withdrawn from a traditional 401(k) or IRA is treated as ordinary income and is taxable. While the IRS allows you to deduct medical expenses that exceed 7.5% of your adjusted gross income (AGI), the tax rules can be complex. Using these funds is a core part of a self-funding strategy, but it’s wise to coordinate withdrawals with a financial or tax advisor to do it in the most tax-efficient way.

What’s the difference between “assisted living” and a “nursing home”? Does long-term care insurance cover both?

Assisted living is for those who need help with daily activities but do not need 24/7 skilled medical care. Nursing homes provide a much higher level of care from licensed health professionals. The good news is that virtually all modern comprehensive long-term care insurance policies cover a wide range of care settings, including care in your own home, in an assisted living facility, in an adult day care center, or in a nursing home. Just be sure to confirm the details of any policy you consider.

What if I pay for a policy for 20 years and then the insurance company goes out of business?

This is a legitimate concern, but there are strong protections in place. Insurance companies are regulated at the state level. Every state has an insurance “guaranty association” which acts as a safety net for policyholders if an insurer fails. This association will step in to continue coverage and pay claims, up to a certain limit set by the state. To minimize this risk from the start, always choose a highly-rated insurance company with a long history of financial stability.

For expert guidance on senior health and finance, visit National Institute on Aging (NIA), Centers for Disease Control and Prevention (CDC), Medicare.gov and National Institute of Mental Health (NIMH).