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Should You Purchase Long-term Care Insurance?


Should You Purchase Long-term Care Insurance?

Like many affluent Americans, you probably contribute regularly to one or more retirement savings accounts in order to build a nest egg for a financially secure retirement. But there’s at least one thing that could derail your carefully constructed retirement plans: an inability to care for yourself later in life that results in the need for assisted or long-term care.

Scary Statistics

According to, if you’re turning 65 years old this year, there’s a 70 percent chance that you will need some type of long-term care services or support before you die. There’s a 20 percent chance that you’ll need long-term care for at least five years — and a 69 percent chance you’ll need long-term care for at least three years.

These statistics become more concerning when you realize how much long-term care may cost. According to Genworth Financial, the median monthly cost of a nursing home is currently $6,844, while the median monthly cost of an assisted living facility is $3,628 and the median monthly cost of receiving full-time care at home is $3,861. Keep in mind that these are the costs today — they will surely rise in the future.

Costs like these can quickly deplete even a healthy retirement account. To protect themselves, many people purchase long-term care (or LTC) insurance policies that pay a portion of the costs associated with long-term care.

Should You Buy LTC Insurance?

So is buying LTC insurance a good move for you and your spouse? It depends on several different factors. First, how big do you believe your retirement nest egg will be when you retire? If you think it will be very large, you may have enough money to pay for long-term care costs without purchasing LTC insurance.

If you’re not confident of this, then you should perform a cost-benefit analysis to help you determine if buying this type of insurance is a wise investment. The cost of LTC policies varies widely depending on the benefits a policy offers, such as an automatic inflation adjustment or a shorter waiting period before benefit payments begin.

A ballpark cost range for a 60-year-old married couple buying a typical LTC policy today is between $2,600 and $5,600 a year. If this couple paid a premium of $4,100 (the average of these amounts) for 20 years before needing to claim benefits for one of them at age 80, they’d pay a total of $82,000 in premiums.

But if they didn’t buy a policy and chose to contribute this money to their retirement account instead, they’d have at least $82,000 (not counting earnings) to put toward their LTC costs. This would cover one year of care in a nursing home or almost two years of care in an assisted living facility (at today’s cost).

Can You Afford the Premiums?

Another factor is the cost of LTC insurance itself. Premiums have been rising rapidly, soaring by 44.5 percent over the past decade, according to the American Association for Long-Term Care Insurance. As a result, sales are falling — by 60 percent over this same period of time.

Can you afford the cost of LTC insurance? Even if you can, would it be smarter to put the money in your retirement account instead of buying an LTC policy? Each individual and couple must answer this question for themselves.

Please contact us if you have any questions about long-term care insurance and whether buying it is the right move for you.


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC’s (“Frontier”) investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.