Long-term care is the topic most people want to avoid thinking about — and most financial plans do not address directly until it is already urgent. That combination of emotional avoidance and planning neglect produces two equally unhelpful outcomes: people who are completely unprepared for care costs that could devastate their retirement plan, and people who spend tens of thousands of dollars on insurance premiums for coverage they may never use or cannot afford to keep.
A well-designed approach to long-term care sits between those extremes. It starts by honestly assessing the real probability and cost of care, matching that exposure to appropriate risk-management tools, and building a strategy that protects the retirement plan without distorting it.
What Long-Term Care Actually Is
Long-term care refers to assistance with the activities of daily living — bathing, dressing, eating, transferring, continence, and toileting — when a person can no longer perform these independently due to chronic illness, disability, or cognitive impairment. It is not medical treatment in the traditional sense; it is custodial care, and that distinction matters enormously because Medicare covers medical treatment but does not meaningfully cover custodial care.
Long-term care can be provided in a variety of settings: at home by family members or professional caregivers, in adult day programs, in assisted living facilities, in memory care units, or in skilled nursing facilities. The cost varies substantially by setting and geography. In-home care by a professional caregiver runs roughly $25 to $35 per hour in many California markets. Assisted living facilities typically range from $4,000 to $8,000 per month or more depending on location and level of care. Memory care can be $5,000 to $12,000 per month. Skilled nursing facility costs exceed $10,000 per month in many California areas.
These costs are real, they are large, and they are generally not covered by Medicare or standard health insurance. The question is not whether long-term care risk is worth addressing — it is — but how to address it proportionately.
Understanding Your Actual Risk
The often-cited statistic is that approximately 70 percent of people who reach age 65 will need some form of long-term care. That figure is accurate but often misapplied in planning conversations, because it encompasses a wide range of care needs — from a few months of in-home assistance after a surgery to years of full-time memory care.
The more planning-relevant breakdown is the distribution of care duration and intensity. A significant share of long-term care needs are relatively short — less than two years — and often occur at the end of life when assets are already being spent down. A smaller share involves multi-year facility care, which is where the catastrophic cost risk lies. Roughly 15 to 20 percent of people will require three or more years of care, and a smaller fraction will require five or more.
For planning purposes, what matters most is the tail risk: the scenario where extended care costs interact with your retirement assets in a way that depletes them faster than anticipated. A couple with $2 million in assets has very different exposure to long-term care risk than a couple with $600,000 — even if their probability of needing care is similar. For higher-asset households, self-insuring a meaningful portion of the risk is often a rational choice. For households with less asset cushion, protecting against the tail risk through insurance makes more sense.
The Long-Term Care Insurance Landscape
Traditional long-term care insurance — the kind that pays a daily or monthly benefit if you need care — had a well-documented crisis in the 2000s and 2010s. Insurers underestimated utilization rates, overestimated lapse rates, and invested premiums into a low-interest-rate environment. The result was substantial premium increases that caught policyholders off guard, and the exit of many carriers from the market. The product has become less available, more expensive, and often less attractive than it once appeared.
That does not mean traditional LTC insurance is never the right answer. For people in their mid-50s to early 60s in good health, purchasing coverage while it is still available and relatively affordable can lock in meaningful protection against the tail risk at a manageable premium cost. The challenge is premium stability — policies that seem affordable at purchase can have significant rate increases over time.
Hybrid life/LTC products have grown to partially fill the gap left by traditional standalone policies. These products combine a life insurance or annuity chassis with a long-term care rider, so if the care benefit is never used, the death benefit passes to heirs or the annuity value is returned. The premium is typically a single lump sum or a limited payment period rather than ongoing annual premiums, which addresses some of the rate-increase risk. The tradeoff is that hybrid products are generally more expensive than traditional standalone policies on a pure cost-per-dollar-of-coverage basis.
Both product types have appropriate use cases, and both have situations where they are not the right answer. The decision is not “should I buy LTC insurance?” in the abstract — it is “given my assets, health, family situation, and risk tolerance, what is the most rational way to manage this specific risk?”
Self-Insuring: When It Makes Sense and How to Do It
For households with significant assets — generally $2 million or more in investable assets, though the threshold varies — self-insuring all or part of the long-term care risk is a legitimate strategy. The logic: you have sufficient assets to absorb a meaningful care event without depleting the resources needed for the surviving spouse’s lifetime income, and the premium dollars saved are retained in the portfolio rather than paid to an insurer.
Self-insuring is not the same as ignoring the risk. A deliberate self-insurance strategy includes a specific long-term care reserve — a dedicated pool of assets set aside for potential care needs — and a plan for how those assets would be accessed if care were needed. It also includes clarity about what type of care you would prefer, where you would want to receive it, and who would coordinate it.
For couples, the key concern with self-insurance is protecting the healthy spouse’s assets and income if the other requires extended care. Even a large portfolio can be significantly depleted by two or three years of memory care, leaving the surviving spouse with substantially fewer resources. Some couples use a hybrid product or a limited standalone policy specifically as a guardrail against this scenario, while self-insuring the more moderate care scenarios.
Medicaid and the Asset Question
For households with modest assets, Medicaid can become relevant in long-term care planning — but this is a significantly more complicated conversation than most people realize. Medicaid does cover nursing home care for people who meet income and asset eligibility requirements, but qualifying requires spending down assets to Medicaid thresholds, which are relatively low. California has its own Medicaid program (Medi-Cal) with specific rules around asset limits, spousal protection amounts, and lookback periods for asset transfers.
As of January 2026, California reinstated asset limits for Medi-Cal long-term care eligibility along with a 30-month lookback period for asset transfers. These changes, after a period of more relaxed rules, mean that Medicaid/Medi-Cal planning for California retirees requires current and specific advice — general information from prior years may no longer be accurate.
For households in the $1 million to $5 million range that Slalom Wealth Management typically works with, Medicaid planning is usually not the primary strategy — but understanding the interaction between asset levels, insurance options, and potential Medi-Cal eligibility is part of a comprehensive long-term care analysis.
Integrating Long-Term Care Into the Retirement Plan
Long-term care planning does not exist in isolation. The right approach depends on your total asset picture, your income sources (especially guaranteed income from pensions or Social Security that continues regardless of care costs), your health and family longevity history, your preferences about care settings, and what you want to protect — your retirement lifestyle, your surviving spouse’s security, or a legacy to heirs.
A complete long-term care analysis answers four questions: What is your realistic exposure — in probability and cost — given your health and likely care preferences? What happens to your retirement plan and your spouse’s financial security if that exposure materializes? What risk management tools (insurance, hybrid products, self-insurance reserves) are available and appropriate for your situation? And how does the choice you make integrate with your tax strategy, estate plan, and overall retirement income structure?
These questions deserve explicit answers, built from your specific numbers — not from general statistics or fear-based selling, and not from avoidance.
FAQ: Do I Need Long-Term Care Insurance If I Have Significant Savings?
The answer depends on the size of your savings relative to the potential care costs, and on what you are trying to protect. A couple with $3 million or more in investable assets and a pension covering essential expenses may be able to self-insure the moderate care scenarios while purchasing a targeted hybrid product or limited policy to protect against the worst-case extended facility care scenario. A couple with $800,000 and no pension has much less margin to absorb large care costs, and insurance protection is likely more important. The decision is not binary — there is a spectrum between “fully insured” and “fully self-insured” that most people never explore, and the right position on that spectrum depends on your specific asset level, income structure, health, and what you are most trying to protect.
If you want to think through your long-term care exposure honestly — understanding the actual probabilities, the cost ranges, and what the right risk management approach looks like for your specific situation — this is a conversation worth having before you need it.
Schedule a complimentary retirement planning consultation with our office. We will review your asset picture, income sources, and care preferences to build a long-term care strategy that protects what matters most without over-insuring or leaving the risk unaddressed.
