Planning for Long-Term Care Without Insurance

Ask most advisors how to handle long-term care, and you’ll get a one-word answer: insurance. Buy a policy, pay the premiums, move on. It’s clean advice. It’s also increasingly out of step with the product people are actually being sold.

The traditional long-term care insurance market has been shrinking for over a decade. Premiums on existing policies have been raised repeatedly, sometimes by 50% or more, with state regulator approval. Most of the carriers that dominated the market in the 2000s have stopped selling new policies entirely. And the core design of a traditional policy — pay for years, get nothing back if you never need care — is a hard sell for people who’ve watched their premiums climb while the benefit sat unused.

So here’s a question I get from pre-retirees more than almost any other: can you plan for long-term care without buying a long-term care insurance policy? The answer is yes. But “without insurance” is not the same as “without a plan,” and the households that confuse the two are the ones who get hurt.

What long-term care actually costs

Start with the numbers, because most people are working from a guess that’s a decade out of date. According to the 2025 CareScout (Genworth) Cost of Care Survey, the national median cost of a private room in a nursing home is about $129,575 a year. Assisted living runs roughly $74,400 a year. A home health aide — the option most people actually want — costs around $77,800 a year for full-time help. These costs have been rising faster than general inflation, year after year.

Now the part that changes how you plan. The U.S. Department of Health and Human Services estimates that someone turning 65 today has nearly a 70% chance of needing some form of long-term care in their remaining years. But the headline number hides the shape of the risk. Roughly a third of 65-year-olds will need no paid care at all. About 20% will need it for longer than five years. Women average about 3.2 years of care; men about 2.2.

That distribution is the whole game. Long-term care is not an “average” problem you can budget for at $100,000 and forget. It’s a tail-risk problem — most people spend little or nothing, and a meaningful minority face a $500,000-plus event. Any plan that ignores the tail isn’t a plan.

Why “just buy insurance” stopped being a clean answer

I’m not against insurance. I’m against reflexes. And for a long time the reflex has been a traditional, use-it-or-lose-it long-term care policy, which carries three problems worth naming plainly.

First, the premiums aren’t guaranteed. Carriers can — and routinely do — request rate increases, which means the $3,000 premium you signed up for at 60 can become a $5,000 premium at 72, exactly when you’re least able to absorb it. Second, the carriers themselves have proven unstable; many stopped writing new business and some struggled to honor the policies they’d sold. Third, the use-it-or-lose-it structure means that if you die without needing care, every dollar of premium is gone. For a lot of disciplined savers, that last point is the dealbreaker — and it’s a fair objection, not an irrational one.

None of this means insurance is wrong. It means it’s one tool, with real tradeoffs, that should be chosen on purpose rather than by default.

What Medicare and Medicaid actually cover

Before you can self-fund intelligently, you have to understand what the government does and doesn’t do — because this is where the most expensive misunderstandings live.

Medicare does not pay for long-term care. This is the single most common misconception I encounter. Medicare covers short-term skilled care — up to 100 days in a skilled nursing facility after a qualifying hospital stay, and even then it’s fully covered only for the first 20 days, with a daily coinsurance after that. It does not cover custodial care: the help with bathing, dressing, eating, and getting around that makes up the vast majority of actual long-term care. If your plan is “Medicare will handle it,” you don’t have a plan. (This is the same coverage gap I wrote about in bridging healthcare costs between 60 and 65, one layer further down the road.)

Medicaid does pay for long-term care — it’s the largest payer of nursing home care in the country. But you qualify by being financially exhausted. In most states, an individual has to spend down to roughly $2,000 in countable assets, and there’s a five-year look-back period that penalizes transferring money to family to qualify. Leaning on Medicaid by default means accepting limited facility choices and spending a lifetime of savings first. It’s a genuine safety net, not a strategy.

How to self-fund inside the bucket framework

If you’ve read much of what I write, you know I organize retirement money into three buckets: a Now bucket for current spending, a Soon bucket for the guaranteed income floor, and a Later bucket for growth. Self-funding long-term care fits cleanly into that structure, and the cleanest way to do it is to treat the care reserve as an earmarked carve-out sitting behind the Later bucket — money you’ve structurally separated from your spendable retirement assets.

Think of it as a fourth bucket you hope to never spend. It’s growth-oriented, because the time horizon is long and the money isn’t needed for monthly income. It’s not part of the assets you draw on for living expenses. And if a care event never comes, it simply passes to your heirs. The discipline is in keeping it separate — earmarked, not just “somewhere in the portfolio” — so a market downturn or a generous spending year doesn’t quietly consume the reserve you were counting on.

Sizing it is a math exercise, not a guess. Pick a realistic target — say two to three years of care at today’s cost in your area, indexed upward for inflation — and earmark assets to cover it, the same way you’d size your Soon bucket income floor. Then name your backstop for the catastrophic, longer-than-expected event. For most households, that backstop is home equity. The house is frequently the largest long-term care reserve a family has, accessible through a sale, a downsize, or in some cases a line of credit — and it’s an asset you’re already going to leave behind anyway.

One funding source people forget: if you still have a Health Savings Account, qualified long-term care services are eligible expenses, and you can even pay a portion of tax-qualified long-term care insurance premiums from it, within IRS age-based limits. It’s a tax-free pool earmarked, in effect, for exactly this.

A hypothetical: Margaret, 64

Consider a hypothetical case. Margaret, 64, is widowed and recently retired from teaching in Raleigh. She has about $900,000 across an IRA and a brokerage account, a paid-off house worth roughly $450,000, and $2,800 a month from Social Security. A traditional long-term care policy quote came back at around $4,200 a year, with no guarantee the premium stays there.

Margaret’s plan instead: she earmarks $200,000 of her Later-bucket assets as a dedicated care reserve, keeps it invested for growth since she may not touch it for 20 years, and names her home equity as the backstop for a long, catastrophic care event. She’s effectively self-insuring the likely scenario — a couple of years of care — and reserving the house for the tail risk. If she never needs care, the reserve and the home pass to her two kids. That’s a defensible plan. What would not be defensible is Margaret simply deciding not to think about it and hoping the question never comes up.

When a policy still makes sense

Self-funding isn’t right for everyone, and I’d be doing you a disservice to pretend otherwise. The households squeezed in the middle are the ones for whom coverage often earns its keep — people with too much to qualify for Medicaid comfortably, but not enough to absorb a five-year care event without derailing a surviving spouse’s standard of living.

For those situations, a hybrid or asset-based product — life insurance or an annuity with a long-term care benefit attached, where the money isn’t simply lost if care is never needed — addresses the biggest objection to traditional coverage. A married person worried about impoverishing their spouse, or a single person determined to protect a legacy, are the classic fits. The point was never that insurance is the wrong answer. The point is that it’s one option among several, and the decision should be driven by your numbers, not by a reflex.

Thomas’ Take: I don’t start the long-term care conversation with a product. I start it with a number — what a realistic care event costs where you live, and where that money would actually come from. Once you can answer that, whether you fund it with assets, a policy, or a blend of both becomes a math question instead of a fear-driven one.

Key takeaways

• Long-term care is a tail-risk problem: most people spend little, a sizable minority face a $500,000-plus event. Plan for the tail, not the average.
• Medicare does not cover custodial long-term care, and Medicaid only pays after you’ve spent down to near-poverty. Neither is a plan on its own.
• You can self-fund by earmarking a dedicated care reserve — a “fourth bucket” — and naming home equity as the backstop for a catastrophic event.
• Traditional use-it-or-lose-it insurance has real drawbacks, but hybrid and asset-based coverage still fits households squeezed in the financial middle.
• Whatever route you choose, write the plan down where your family can find it. A reserve no one knows about isn’t a plan.

Frequently asked questions

Does Medicare cover a nursing home stay?
Only briefly, and only for skilled care after a qualifying hospital stay — up to 100 days, fully covered for the first 20. Custodial long-term care, which is most of what people need, isn’t covered at all.

How much should I earmark for long-term care?
A practical starting point is two to three years of care at the current cost in your area, indexed for inflation, with home equity reserved as the backstop for anything longer. Your local cost of care and your family health history move that number in both directions.

Is it irresponsible to skip long-term care insurance?
No — skipping the product is fine. Skipping the planning is the mistake. If you can name your reserve and your backstop and you’ve sized them honestly, you’ve made a responsible decision. If “skip the insurance” is the whole plan, you haven’t.

The bottom line

The mistake was never choosing to self-fund long-term care. The mistake is treating “I’ll skip the insurance” as a decision instead of the beginning of one. Long-term care is a low-probability, high-cost risk — exactly the kind of thing a deliberate plan handles well and wishful thinking handles terribly. Pick your number. Earmark the reserve. Name the backstop. Then make sure the people who’d actually be making decisions for you know where all of it lives. Do that, and you’ve solved the problem the insurance was only ever trying to solve in the first place.

This article is published by Confluence Media Group LLC, an independent publisher of educational financial content. Thomas Clark is a Series 65 Investment Advisor Representative. The information provided is for educational and informational purposes only and is not personalized financial, tax, or legal advice. Past performance does not guarantee future results. All investing involves risk, including potential loss of principal. Consult a qualified professional before making financial decisions.

Confluence Media Group LLC is a separate entity from Confluence Capital Management, the investment advisory practice through which Thomas Clark provides advisory services. Advisory services are not offered through this publishing platform.

About Thomas Clark

Thomas Clark is the founder of Confluence Media Group LLC and a Series 65 Investment Advisor Representative. He has spent nearly two decades working with families on retirement planning, with a focus on Social Security optimization, retirement income coordination, and the bucket planning approach to building a guaranteed income floor.

Thomas writes and publishes at thomasclarkadvisor.com and is the author of The Just in Case Binder — a 148-page printable family financial organizer for households who want to make sure the people they love know where everything is.

He lives in North Carolina with his family.

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Thomas Clark

Thomas Clark is a Series 65 licensed investment advisor and experienced trader. He specializes in investing, retirement planning, and market analysis, helping individuals build wealth and make informed financial decisions.