Protecting Your Savings from a Long-Term Care Event

By Chris Gavrel, Licensed Agent · 4 min read

A long stretch of needing help with daily living can use up savings a family spent decades building. Here’s a general look at why it matters and the ways people plan ahead.

Why this matters for your savings

Long-term care means help with everyday things like bathing, dressing, eating, or getting around, when someone can’t do them on their own for an extended stretch. It may happen at home, in assisted living, or in a care facility. Read the basics in What Is Long-Term Care?

The money risk is simple. Care can be expensive, and it can last a long time. Without a plan, the cost often comes out of the savings meant for retirement income, or for a spouse who still has to live on it.

Who is most affected

Married couples, where one spouse needs care and the other still needs income for decades
People with moderate savings, who have enough to lose but may not have enough to pay for years of care
Families who want to leave something behind to children, grandchildren, or a church
Adult children who may end up providing care or helping pay

Ways people plan

Approach	How it works	Things to weigh
Self-funding	Set aside savings for possible care	Flexible, but the money may not be enough for a long need and isn’t available for other goals
Traditional long-term care insurance	Pays benefits for qualifying care under the policy terms	Premiums may rise over time; benefits may go unused if care isn’t needed
Life insurance with a long-term care or chronic illness rider	May allow part of the death benefit to be used for qualifying care	What’s used reduces what passes to beneficiaries; rider rules and costs vary
Annuities with care-related features	Some contracts offer increased income or waived surrender charges for qualifying care needs	Features, waiting periods, and qualifications vary by contract
Family support	Loved ones provide help	Meaningful, but can strain caregivers physically, emotionally, and financially

Coverage and pricing vary by age, health, state, and carrier. Many options require you to qualify based on health, so planning earlier generally gives you more choices.

How benefits are usually triggered

Most policies and riders pay when a licensed health care practitioner certifies that you need help with a certain number of activities of daily living, or that you have a severe cognitive impairment, as defined in the contract. There’s often a waiting (elimination) period before benefits start. Read the definitions carefully. They decide when benefits get paid.

Questions to ask about any option

What triggers benefits, and is there a waiting period?
How much is paid, and for how long?
Can premiums increase?
What happens if I never need care?
Does using the benefit reduce what my family receives later?
Is there any protection for rising costs over time?

Protecting a spouse

For married couples, the big worry is usually this: if one spouse needs years of care, will the other have enough to live on? Look at your plan from both sides. What would care cost for either of you, and what income would the healthy spouse still need? Our article How Guaranteed Income Fits Into a Financial Plan covers ways people protect a surviving spouse’s income.

Don’t forget the paperwork

Financial planning is only half of it. Make sure someone you trust can manage your finances and make decisions if you can’t. An attorney can help with the right legal documents for your state. Keep copies with your other important papers, and use my free Important Documents Checklist to stay organized.

Talk with your family

Ask the people closest to you: If I needed help someday, where would I want to be? Who could help? How would we pay for it? These conversations aren’t easy, but they make decisions much easier if the time ever comes.

A note about public programs

Some public programs may help pay for long-term care for people who meet strict financial and other requirements, and the rules vary by state. This article doesn’t cover those programs. An elder law attorney or your local Area Agency on Aging can explain your options.

A simple starting checklist

Have a conversation with family about care preferences
Estimate how much of your savings you’d be comfortable using for care
Learn what any existing life insurance or annuities offer for care needs
Get legal documents in place
Review options while you’re more likely to qualify

This article is general education only. If you’d like to know how life insurance or annuities with care features work, I’m glad to explain them plainly.

This article is for general educational purposes only and is not legal, tax, or financial advice. Coverage, pricing, and availability vary by age, health, state, and carrier.