Long‑Term Care Insurance: Protect Your Nest Egg — Should You Buy It?

Posted on by David Ott

You spend your entire working career putting aside money to have a sufficient nest egg in retirement so that you can do the activities you enjoy with the people you care about most. One of the risks to that goal is the possibility that you or your spouse will become ill and need some type of long‑term care (LTC) for an extended period of time. Long‑term care can be extremely expensive and, unlike other healthcare costs, traditional health insurance and Medicare typically do not pay for custodial care — the everyday assistance many people need as they age.

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The Financial Risk of Long‑Term Care Needs

For example, in Missouri, the average cost for assisted living care is now about $63,960 per year (roughly $5,500 per month). A three‑year stay could cost nearly $190,000, potentially eroding a significant portion of your retirement savings. Nationally, the median cost for assisted living is roughly $74,400 per year, and the average cost of a nursing home stay can exceed $115,000 to $130,000 per year for a semi‑private or private room. Even in‑home care adds up quickly, with non‑medical caregiving often costing $75,000+ per year.

Long‑term care includes help with routine personal tasks such as bathing, dressing, eating, toileting, and transferring — services not covered by Medicare and generally only covered by Medicaid after you’ve spent down almost all your assets. That means most people must pay out‑of‑pocket for this care or rely on savings, family support, or insurance.

What Long‑Term Care Insurance Is

A Long‑Term Care Insurance (LTCI) policy can cover a range of long‑term care services, including home health care, assisted living, memory care, and nursing home care. These policies typically pay a daily or monthly benefit once you meet eligibility requirements, helping protect your assets and preserve your retirement funds for your lifetime and for loved ones.

Purchasing a policy can help offset the financial burden should you need care and help ensure your spouse or partner isn’t shouldering all of the expense alone.

Should You Buy Long‑Term Care Insurance?

Deciding whether to purchase LTC insurance is a personal choice and depends on your financial situation:

  • Historically, some advisors used a simple rule of thumb — such as buying LTCI only if your net worth was between certain thresholds — but views have evolved.

  • Recent studies show nearly 70% of Americans over age 65 will need some form of long‑term care in their lifetime.

  • Many LTC stays are shorter than once thought, with some averaging less than a year, meaning traditional Medicare might cover limited skilled care — but custodial care remains a large out‑of‑pocket expense.

Because LTC needs and costs vary widely, there is no one‑size‑fits‑all answer. Insurance can mitigate financial and emotional strain, but policies can be costly, and premiums may increase over time.

Timing and Cost Considerations

The younger and healthier you are when you purchase LTCI, the lower your premiums tend to be. Many experts suggest considering coverage in your 50s or early 60s when you may still qualify for favorable underwriting and have flexibility in your budget.

Policy features that affect cost include:

  • Benefit amount (daily/monthly payout)

  • Benefit period (length of time benefits are paid)

  • Elimination period (waiting period before benefits begin)

  • Inflation protection (annual increases to keep pace with rising costs)

Final Thoughts

You can work your entire life to accumulate a retirement nest egg, only to see it significantly reduced by long‑term care expenses. While some people may self‑insure if their wealth is substantial, many will benefit from at least considering a long‑term care plan. Insurance is not a pleasant topic, but preparation can help protect what you’ve worked for and provide peace of mind for you and your family.

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