Planning Ahead: The cost of care most people aren't planning for
Long-term care is one of the most significant financial risks in retirement — and one of the least discussed. Here's what you need to know before it becomes urgent.
Most people spend decades building wealth and relatively little time thinking about what happens when they need help with the basics of daily life. Yet for a significant share of us, long-term care isn't a distant hypothetical — it could be probable.
According to Milliman, a leading actuarial firm, about half of men and 60% of women will use some form of paid long-term care services after age 65. And the costs involved are substantial. In 2025, the typical annual cost of nonmedical home care runs around $80,000. Assisted living averages just over $74,000 per year. A private room in a nursing home costs roughly $130,000 annually.
$80,000 - Average annual cost of in-home care (2025)
$74,000 - Average annual cost of assisted living
$130,000 - Average annual cost of a private nursing home room
Why most people aren't prepared
Researchers at the Center for Retirement Research at Boston College found that a relatively small share of older adults rank long-term care affordability as a top concern — likely because many assume their health insurance will cover it. It largely won't. Medicare covers long-term care only in very limited circumstances. Medicaid does cover it, but qualifying requires people to exhaust most of their own financial resources first.
Long-term care insurance can help bridge the gap, but it remains underutilized. Only 15% of Americans 65 and older currently carry coverage, according to the same research center.
"Most people try to avoid it." — Chris Chen, CFP®, on the reality of long-term care planning conversations
How much should you set aside?
Milliman's new Long-Term Care Index offers a helpful benchmark: a 65-year-old today would need approximately $135,000 set aside now to cover their expected lifetime long-term care costs. But that number varies significantly depending on your circumstances. Someone who needs less than a year of care may need as little as $30,000 in today's dollars. Someone who requires five or more years of care could face costs approaching $665,000.
Geography, health history, family support, and the duration of care all play a role. A good starting point is that $135,000 figure — then adjust up or down based on your health profile, where you live, and whether family members are likely to provide informal support.
Tools that can help you plan more precisely
One of the most interesting developments of the many tools available in this space is Waterlily, a financial technology platform that uses data analytics and AI to estimate an individual's likelihood of needing long-term care, when it's likely to begin, and for how long. The tool draws on government data and information from approximately 50,000 families to personalize its projections.
Waterlily is available through financial advisers and insurance agents. In some cases, individuals who complete a planning process indicate greater interest in learning about long-term care considerations afterward, suggesting that reviewing personalized figures may help inform further discussions.
What about public programs?
A handful of states are beginning to address long-term care funding more directly. Washington State launched a program in 2023 funded by a payroll tax, providing residents with a benefit of up to $36,500 (indexed for inflation) through its WA Cares Fund. While that amount won't cover extended care on its own, it can relieve pressure and give families more time to plan. California, Massachusetts, and New York are exploring similar programs.
At the federal level, an earlier attempt to create a national long-term care program — the CLASS Act, part of the Affordable Care Act — was repealed in 2013 after being deemed financially unworkable.
The planning conversation worth having now
Long-term care planning is not about preparing for the worst. It's about preserving choices — for yourself and for the people who love you. The families who navigate this well are typically the ones who had the conversation early, while options were still available and affordable.
If you haven't thought through what care could look like for you, or how you would fund it, this is worth putting on your planning agenda. The earlier the conversation, the more options you have.
Sources
Source: Center for Retirement Research at Boston College — Long-Term Care Research
Source: Milliman Long-Term Care Index 2025
Source: Waterlily — Long-Term Care Planning Tool
Source: WA Cares Fund — Washington State Long-Term Care Program
Source: Genworth Cost of Care Survey 2025
Source: KFF — Medicare and Long-Term Care Coverage Overview
Disclosure
Waterlily is not affiliated with MML Investors Services, LLC and is solely responsible for the products and services it offers.
Representatives do not provide tax and/or legal advice. Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate. Some health insurance products offered by unaffiliated insurers.
This material is for general educational and informational purposes only and is not intended as individualized investment, insurance, financial planning, legal, or tax advice. The information provided is based on sources believed to be reliable but is not guaranteed as to accuracy or completeness. Long‑term care costs, coverage options, and eligibility vary based on individual circumstances. Solutions discussed may not be suitable for all individuals. Registered representatives do not provide legal or tax advice. Clients should consult with their own qualified legal, tax, and financial professionals before making any decisions. CRN202904-11047346