If you think you’ve saved enough for retirement, you may not be thinking about long-term care. 

The long-term care industry serves people who cannot perform everyday activities, like dressing or eating, without help. More than 80% of Americans will need that help at some point, according to a new study from the Center for Retirement Research at Boston College.  

The costs of long-term care can be staggering. Hire a home health aide for 40 hours a week, and you’ll pay $5,720 a month, on average, according to a new report from T. Rowe Price, the investment firm. An assisted living facility charges $5,350 a month. A nursing home will run you $9,733. 

Many Americans have watched long-term care play out for a parent or grandparent. But many of us seem to be in denial about whether we might need long-term care ourselves, and about what it costs. 

“People tend to underestimate how much long-term care they’re going to need, and when they’re going to need it,” said Gal Wettstein, a senior research economist at Boston College.  

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In one 2024 survey of affluent older Americans, Boston College researchers found, long-term care ranked fifth among financial worries in retirement, behind stock market turbulence, Social Security cuts and other concerns. 

Many older Americans are badly misinformed about the finances of long-term care. In another survey, Boston College reports, 45% of seniors said they believed Medicare covers long-term care. That’s mostly untrue. 

Long-term care costs range from zero to millions

It’s hard to plan for long-term care, because the costs can range from nothing to millions of dollars. 

“Long-term care represents one of the most significant and unpredictable risks we face,” said Laura Mattia, a certified financial planner in Sarasota, Florida.   

If you are 65 today, there is a nearly 40% chance that you will need “high-intensity” long-term care, such as a nursing-home stay, for at least a year, according to Boston College research. There’s an 18% chance you’ll need high-intensity care for three or more years. That could easily be a six-figure expense.

But at least half of all seniors have no retirement account, according to federal data.  

In fact, roughly two-thirds of all long-term care in America is “informal and unpaid,” T. Rowe Price reports, delivered by spouses, children and other relatives.  

“Family caregivers are really the backbone of our long-term care system,” said Debra Whitman, chief public policy officer at AARP.  

And therein lies some good news. Because of family care and other factors, most Americans spend very little from their own pockets on long-term care.  

Long-term care spending totaled $467 billion in 2021, the most recent data available in the T. Rowe Price report. Government programs covered 71% of those costs: chiefly, Medicaid and Medicare. Only 14% of long-term care spending was out of pocket. 

For long-term care, most of us have no plan

But counting on either Medicaid or loved ones to deliver long-term care is not ideal. Leaning on loved ones can pose an unfair burden. And Medicaid generally kicks in only when all of your assets run out, potentially leaving nothing for your heirs.  

“I don’t know anybody who wants [Medicaid] to be their first option,” said Justin Cleveland, a wealth management advisor at Northwestern Mutual’s Belvin, Cleveland & Associates in Dallas. 

Studies repeatedly show that most Americans don’t have a plan for long-term care. 

In a 2024 survey by Northwestern Mutual, 63% of Generation X and 50% of boomers acknowledged they would probably need long-term care. But well under half of respondents in each group said they had a financial plan to cover that care.  

Long-term care insurance is not cheap, and the industry has contracted in recent years. But many financial planners recommend it to their clients, especially those who want to pass wealth to their heirs. 

“The industry has come a long way,” said Catherine Valega, a certified financial planner in Winchester, Massachusetts.

Should you consider long-term care insurance? 

Many people never consider long-term care insurance. Only about 15% of seniors hold policies, according to AARP. 

But shopping for long-term care insurance could make sense, especially if you are between ages 55 and 65, according to T. Rowe Price. Buying a policy earlier than that could expose you to costly premium hikes. If you wait till you are older, there’s a higher chance your application will be denied over age or illness. 

Policies come in a dizzying variety. Costs vary according to the dollar amount or length of care covered, and other variables. Some policies refund money to your heirs if the benefits aren’t used. 

Another option is to buy a life insurance policy with a long-term care rider, which allows you to use the death benefit to pay for long-term care.  

“Depending on the insurer, this could be a more affordable way to have long-term care insurance,” said Andrew Herzog, a certified financial planner in Plano, Texas. 

Rather than buy insurance, you can “self-insure,” saving enough money to pay for long-term care. The problem is deciding how much to save.  

To cover the costs of long-term care, you might need to save anywhere from $300,000 to $2.5 million or more, depending on the expert source.  

“The numbers are so big, it’s more than most people have saved over the course of their entire life,” said Whitman of AARP. 

But those figures represent worst-case scenarios.  

T. Rowe Price found that most seniors spend little of their own money on health care in their last years of life. Even among people who live past 90, only about 10% spend more than $100,000 out of pocket in their final two years. 

“It is a small subset of people who are paying these massive expenses out of pocket,” said Lindsay Theodore, a certified financial planner at T. Rowe Price and co-author of the report. “The dollar amounts aren’t as crazy or unfathomable as people might think.”