The Complete Guide to Long-Term Care

Options, Costs, and How to Fund It

Nobody likes to think about a time when they might need help getting dressed, moving around their home, or managing the basics of daily life. But the reality is that 70% of Americans turning 65 today will need some form of long-term care before they die — and the cost of that care can be financially devastating if you haven’t planned for it.

At Jeung Agency, we’ve been helping families build comprehensive financial plans since 2011. Long-term care planning is one of the most overlooked — and most important — pieces of that puzzle. This guide breaks down exactly what long-term care is, the different care options available, and the funding strategies that can protect your assets and your family.

What Is Long-Term Care?

Long-term care (LTC) refers to a range of services that help people who have difficulty performing everyday activities on their own. These activities are measured by what insurance companies call Activities of Daily Living (ADLs):

• Bathing

• Dressing

• Eating

• Toileting

• Transferring (moving from bed to chair, for example)

• Continence

Most LTC policies require that a person be unable to perform at least two of these six ADLs — or have a cognitive impairment such as Alzheimer’s or dementia — before benefits kick in.

Long-term care is not the same as standard healthcare. Medicare generally does not cover it. That distinction matters enormously when you’re building a financial plan.

The Cost of Long-Term Care

Before we talk about solutions, let’s look at the numbers. According to recent industry data, the national median costs for long-term care are:

Care Type	National Median Cost
In-home aide (homemaker services)	~$27/hour
Home health aide	~$30/hour
Adult day services	~$80/day
Assisted living facility	~$5,000/month
Nursing home — semi-private room	~$8,000/month
Nursing home — private room	~$9,500/month

For context, a two-year stay in a private nursing home room — close to the national average duration of care — could cost $228,000 or more. In high cost-of-living areas like California, those figures are significantly higher.

If you haven’t built a strategy for this, it can wipe out decades of savings and leave your family carrying the weight.

Your Long-Term Care Options

Understanding the types of care available helps you make smarter decisions about planning — both for yourself and for aging parents.

1. In-Home Care

Many people prefer to age in place. In-home care can range from a part-time aide who helps with household tasks to full-time skilled nursing care delivered in your home. This is often the most desirable option for quality of life, and frequently the most cost-effective in the early stages of a care need.

Best for: Those with strong family support networks, early-stage needs, or a preference for staying at home.

2. Adult Day Programs

Adult day programs offer supervised care during daytime hours in a community setting. They provide medical care, social engagement, therapy, and meals. This option is often used alongside family caregiving — giving family members a break while keeping their loved one in a safe, stimulating environment.

Best for: Those with mild to moderate care needs who live with family.

3. Assisted Living Facilities

Assisted living bridges the gap between independent living and a nursing home. Residents live in their own apartments but have access to 24-hour staff, help with ADLs, meals, and social programming. Costs vary widely based on location and level of care.

Best for: Those who need daily support but don’t require skilled nursing care.

4. Memory Care

Memory care facilities are specialized communities for individuals with Alzheimer’s, dementia, or other cognitive impairments. They provide enhanced security, structured routines, and staff trained specifically in memory-related care. Costs typically run 20–30% higher than standard assisted living.

Best for: Those with cognitive decline requiring specialized supervision and support.

5. Skilled Nursing Facilities (Nursing Homes)

Nursing homes provide the highest level of care outside a hospital. They offer 24-hour skilled nursing, rehabilitation services, and medical monitoring. This is typically the most expensive option and is chosen when medical needs exceed what can be managed elsewhere.

Best for: Those recovering from hospitalization or requiring intensive ongoing medical care.

6. Continuing Care Retirement Communities (CCRCs)

CCRCs offer a full continuum of care — from independent living to memory care — on a single campus. You can move through levels of care as your needs change without relocating. Many CCRCs require a significant entrance fee ($100,000 to $1M+) plus monthly fees.

Best for: Those who want the security of a single “aging in place” community.

How to Fund Long-Term Care

Here’s where the financial strategy comes in. There are several ways to fund long-term care, and the right approach depends on your assets, health, age, and overall financial plan.

Option 1: Traditional Long-Term Care Insurance

Traditional LTC insurance was the gold standard for decades. You pay premiums, and if you need care, the policy pays a daily or monthly benefit to cover your costs. Key features to understand:

• Benefit amount: How much the policy pays per day or per month

• Benefit period: How long benefits last (2 years, 5 years, lifetime)

• Elimination period: The waiting period before benefits begin (typically 30, 60, or 90 days)

• Inflation protection: How the benefit grows over time — critical for policies purchased years before you need care

The challenge with traditional LTC insurance: premiums can increase significantly over time, and if you never need care, you’ve paid premiums with no return. That dynamic led to the rise of hybrid solutions.

Option 2: Hybrid Life Insurance with Long-Term Care Riders

Hybrid life insurance policies combine a death benefit with long-term care coverage. If you need care, the policy accelerates its death benefit to pay for it. If you never need care, your heirs receive the death benefit. Either way, the premium doesn’t feel “wasted.”

You typically fund these policies with a lump sum (single premium) or level premiums over a set period. The LTC benefit is often expressed as a multiple of the base death benefit — for example, a $200,000 death benefit might provide up to $600,000 in LTC coverage.

Key advantages:

• “Use it or lose it” concern is eliminated — there’s always a benefit

• Premiums are often guaranteed not to increase

• Provides estate planning value alongside care planning

Who it’s ideal for: People with assets they want to reposition — savings sitting in CDs, brokerage accounts, or cash — rather than ongoing premium commitments.

Option 3: Annuities with Long-Term Care Riders

This is an area where significant planning opportunity exists — and one that’s often underutilized.

A. Qualified Long-Term Care Riders on Annuities

Under the Pension Protection Act of 2006, annuities can include long-term care riders that provide tax-advantaged benefits. When you use annuity funds to pay for qualified long-term care expenses, those withdrawals — even from a non-qualified annuity — can be received income tax-free.

How it works:

• You purchase a deferred annuity (fixed, fixed-indexed, or variable) with an LTC rider attached

• The annuity accumulates value as normal

• If you need long-term care, the rider activates and the annuity pays out an enhanced benefit — often two to three times the annuity’s cash value

• These benefits are paid income tax-free when used for qualified LTC expenses

B. Medicaid-Compliant Annuities

For those doing Medicaid planning, annuities can play a specific role in protecting assets. A Medicaid-compliant annuity converts countable assets into an income stream, which may allow a healthy spouse to preserve more assets while the other qualifies for Medicaid. This strategy is complex and requires careful legal and financial coordination.

Key advantages of annuity-LTC strategies:

• Tax-free LTC benefits under the Pension Protection Act

• Asset protection potential

• Guaranteed income combined with care coverage

• Alternative to traditional LTC insurance for those with existing annuity assets

Option 4: Life Insurance with Accelerated Death Benefit Riders

Many life insurance policies — including term and permanent policies — include accelerated death benefit (ADB) riders that allow the policyholder to access a portion of the death benefit if they develop a chronic illness requiring long-term care. This is often included at no additional cost and should be evaluated in any comprehensive plan.

Option 5: Self-Insuring

High-net-worth individuals sometimes choose to self-insure — setting aside assets specifically earmarked for long-term care needs. This approach works when you have sufficient liquid assets to cover a worst-case scenario ($500,000+) without jeopardizing your retirement income or estate.

The risk: care needs can be longer and more expensive than anticipated, and a cognitive impairment can make managing those assets difficult. Self-insuring works best as part of a broader strategy, not as a standalone approach.

Option 6: Medicaid

Medicaid is a state and federal program that covers long-term care costs for those who qualify based on income and assets. Most people who rely on Medicaid do so because they’ve spent down their assets. Medicaid planning is a legitimate specialty, but it involves significant constraints on where you can receive care and requires careful advance planning — often years in advance due to look-back periods.

Using Qualified Plans to Fund Long-Term Care

One planning area that deserves special attention: using qualified retirement accounts (IRAs, 401(k)s) strategically in LTC planning.

The Pension Protection Act Advantage

If you own a non-qualified annuity, you can exchange it tax-free under Section 1035 for a hybrid annuity or life insurance policy with qualified LTC benefits. From that point forward, any withdrawals used to pay for qualified LTC services are received income tax-free — even if the underlying annuity had significant gain.

This can turn an otherwise ordinary taxable annuity into a tax-advantaged long-term care funding vehicle — one of the most overlooked planning opportunities available today.

IRAs and Long-Term Care

Traditional IRA funds used for LTC expenses are still subject to ordinary income tax on withdrawal. However, in high care-need years, the medical expense deduction may offset some of that tax burden. More sophisticated strategies involve Roth conversion planning in the years leading up to potential care needs, so that care funding comes from tax-free Roth assets rather than pre-tax IRAs.

The Planning Conversation You Need to Have

Long-term care planning isn’t just a financial conversation — it’s a family conversation. Decisions about care preferences, who will be involved in caregiving, where you want to live, and how expenses will be managed all need to happen before a crisis forces the issue.

The best time to put a plan in place is when you’re in your 50s or early 60s — old enough to be realistic about the need, young enough to qualify for coverage at favorable rates.

Here are the questions worth discussing with your advisor:

• What would happen to my spouse/family financially if I needed two or more years of care?

• Do I have existing life insurance or annuity assets that could be repositioned for LTC coverage?

• What level of care do I want — and where? Home, assisted living, or nursing care?

• What’s my risk tolerance for self-insuring versus transferring this risk to an insurance carrier?

Final Thoughts

Long-term care is one of those financial risks that feels distant until it isn’t. The families who handle it best are the ones who planned deliberately — not the ones who hoped they’d get lucky.

At Jeung Agency, we take an independent, client-first approach to financial planning. That means we look at the full picture — your retirement income, your estate plan, your insurance coverage, and your family’s needs — and build a strategy that actually fits your life.

If you’d like to talk through your long-term care options, we’d love to connect.

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Disclaimer: This article is for educational purposes only and does not constitute financial, legal, or tax advice. Long-term care insurance products and benefits vary by carrier and state. Consult with a licensed financial professional before making any decisions about long-term care planning. Stephen Jeung is the founder of Jeung Agency, an independent Financial service firm based in Culver City, LA.