Why estimating long-term care costs matters
Long-term care (LTC) expenses can rapidly erode retirement savings if you aren’t prepared. Many standard health plans and Medicare do not cover ongoing custodial care, so families that plan ahead typically preserve more assets and have better care choices. In my practice working with retirees and their families, clients who run local cost projections early face fewer surprises and make clearer decisions about insurance, self-funding, or public benefits.
Sources to consult: the U.S. Department of Health and Human Services (HHS) and the National Institute on Aging discuss the prevalence of LTC needs (HHS estimates about 70% of people turning 65 will need some LTC), and Genworth’s Cost of Care survey publishes state- and metro-level prices for common services (Genworth Cost of Care Survey).
Step-by-step process to estimate costs
- Define the types and level of care you want to estimate
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Home-based personal care (aide for activities of daily living: bathing, dressing, toileting).
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Home health care (licensed nurse or therapy; typically billed hourly).
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Assisted living (private or shared apartment with personal care services included).
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Memory care (specialized assisted living for dementia).
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Skilled nursing facility (nursing home with 24/7 medical and personal care).
Be explicit about intensity: occasional respite help, part-time daily aid, or full-time 24-hour care. The level dramatically changes cost.
- Gather local price data
- Use the Genworth Cost of Care Survey for state/metro medians (https://www.genworth.com). Genworth updates annually and gives median hourly and monthly rates for home care, assisted living, and nursing homes.
- Check state health department or long-term care ombudsman data; some states publish regional price lists.
- Call local providers and ask for current rate sheets (hourly home care, studio vs. one-bedroom assisted living, semiprivate vs. private nursing room). Provider websites often list base rates but ask about entry fees, deposits, and waivable fees.
- Use price-comparison tools, local Facebook groups, or caregiver forums to verify real-world billing practices.
- Project length of need and probability
- Use realistic ranges: a short stay (3–12 months), medium (1–3 years), long (3–7+ years). HHS research suggests many needs are intermittent and vary in duration.
- For financial planning, build at least three scenarios: best case (short), expected (median), and worst case (long).
- Account for inflation and regional trend adjustments
- LTC cost inflation has historically outpaced general inflation in some periods. For planning, run sensitivity tests at 2.5%, 4%, and 6% annual cost inflation to see the range of outcomes.
- If your area is growing fast (urban centers), add a local premium (1%–2% extra).
- Convert to present-value or lifetime-cost estimates
- Simple projection: Current monthly cost × (1 + inflation)^years × months of care.
- Example (illustrative): If assisted living in your city is $5,000/month today, and you plan for 3 years with 3% inflation:
- Year 1 average monthly cost ≈ $5,000 × 1.03 = $5,150
- Approximate 3-year total ≈ $5,000 × (1.03^0 + 1.03^1 + 1.03^2) × 12 ≈ $185,000 (rounded)
- For more precise financial planning, discount future costs to present value using a discount rate (after-tax expected portfolio return) and probability weightings of each scenario.
- Add one-time and recurring extras
- Move-in fees, refundable deposits, medication management fees, therapy copays, transportation, home modifications, durable medical equipment, and higher staffing charges for 24-hour care.
- Don’t forget family caregiver replacement cost (what you’d pay if family members were compensated).
Practical tools and data sources (authoritative)
- Genworth Cost of Care Survey — state-by-state and metro-level medians for home health aide, assisted living, and nursing home costs (https://www.genworth.com).
- U.S. Department of Health and Human Services — statistics on likelihood of needing LTC and planning resources (https://www.hhs.gov).
- National Institute on Aging — guidance about types of LTC and caregiving (https://www.nia.nih.gov).
- Medicaid & Medicare basics — Medicare generally does not pay for long-term custodial care; Medicaid can, but eligibility rules vary by state (https://www.medicaid.gov and https://www.medicare.gov).
I recommend saving copies (PDFs/screenshots) of the price quotes you collect so you can re-run estimates as prices change.
Example scenarios (illustrative numbers)
Scenario A — Home care, part-time
- Service: non-medical aide, 25 hours/week at $30/hour = $750/week ≈ $3,250/month
- Duration: expected 18 months
- With 3% inflation, total ≈ $61,000
Scenario B — Assisted living
- Service: private apartment with personal care, $4,500/month today
- Duration: expected 3 years
- With 4% inflation (urban pressure), total ≈ $150,000
Scenario C — Nursing home (skilled)
- Service: private room in nursing facility, $11,000/month today (metro median varies)
- Duration: expected 2 years
- With 3% inflation, total ≈ $278,000
Note: these examples are illustrative. Local medians from Genworth or your state’s data likely show different numbers.
Funding options to match your estimates
- Self-funding from savings and retirement accounts — use conservative withdrawal rates and run Monte Carlo stress tests for longevity and market risk.
- Long-term care insurance — traditional LTC policies, hybrid life/LTC policies, and linked-benefit products. See our overview of [Long-Term Care Options: Insurance and Alternatives Explained](
