Planning Insights
Self-funding Long term care: A Planning Risk, Not A Strategy
Long-term care planning is increasingly central to comprehensive financial planning—not because clients lack resources, but because extended care events can challenge even substantial wealth. What is often viewed as a manageable future expense is actually an unpredictable risk shaped by longevity, care-cost inflation, and the possibility of multi-year care needs. In this context, relying on self-funding is not a strategy- it is an assumption that can quietly undermine an otherwise well-constructed financial plan.
When care is actually needed, the gap between assumption and reality becomes clear. Care needs can arrive unexpectedly, last longer than anticipated, and require rapid decisions at a moment when health, time, and family capacity are already under strain. Clients who default to “we’ll self-fund if we ever need it,” often underestimate the practical realities of liquidity, timing, the impact on retirement income and portfolios, and the emotional and logistical burden placed on spouses and adult children.
This newsletter equips you with a clear framework, relevant data points, and a real-world case study to help your clients understand why self-funding long-term care is often an open-ended liability—and how proactive planning can protect lifestyle, legacy, and flexibility.
WHY SELF-FUNDING MAY NOT MAKE SENSE
1. It’s not just about the money: Self-insuring assumes that not only does the client have enough assets to cover long-term care, but they’re also emotionally and mentally prepared to liquidate those assets when the time comes. When a spouse or adult child is trying to navigate care decisions, financial uncertainty only adds stress.
2. Care costs are rising faster than most portfolios: Long-term care costs are increasing at rates that often outpace inflation. Even clients with substantial retirement savings could find themselves draining accounts faster than expected, especially if they need care for several years. You can explore the current cost of long-term care and see where prices are projected to go in the future using Genworth’s interactive tool. It even lets you drill down by specific locations across the country. Calculate the cost of long-term care near you.
3. It puts families in a difficult spot: Without insurance, the responsibility of managing care and finances often falls to family members. In addition to providing financial support, long-term care insurance offers a clear structure and removes ambiguity during a crisis.
4. It turns a known risk into an open-ended liability: With long-term care insurance, clients know their costs upfront: a set premium for a defined benefit. Without it, they’re gambling on how much care they’ll need, when, and how long they’ll need it.
5. Liquidity isn’t always simple: Many “self-insurers” plan to tap into IRAs, investment portfolios, or real estate, but those assets aren’t always liquid, especially during a market downturn or in an emergency. Long-term care insurance provides immediate access to care dollars without needing to sell assets at the wrong time.
WEALTH DOESN’T ELIMINATE LONG-TERM CARE RISK – IT MAGNIFIES THE COST
High-Net-Worth clients are likely to spend significantly more on long-term care than the average client. In most cases, they do not expect their children to leave successful careers to provide care and instead prefer 24/7 professional care at home, regardless of cost.
The current national average cost for around-the-clock home care exceeds $260,000 per year. In wealthier communities and major metropolitan areas, annual costs often range from $350,000 to $400,000 or more.1
When High Net Worth clients transition to a facility, they often choose luxury residences with premium amenities, where costs can exceed $35,000 per month,2 totaling more than $400,000 annually in today’s dollars.
Whether care is received at home or in a high-end facility, it does not take long for long-term care expenses to exceed $1 million.
CASE STUDY: PRESERVING A HIGH NET WORTH CLIENT’S CHARITABLE LEGACY
This case involves a father and his adult daughter, each with a net worth exceeding $50 million. Years earlier, the father had explored long-term care coverage with his advisor but was advised that his wealth made it unnecessary. As a result, long-term care planning was set aside.
Years later, the father had been receiving 24/7 care at home for more than three years, with total care costs exceeding $1 million. During a visit, he expressed regret to his daughter: “I’ve spent over $1 million that could have gone to the charities we support. The cost of a long-term care policy would have been a fraction of that.” He urged his daughter not to repeat his mistake and to secure long-term care coverage for herself.
The following day, the daughter contacted her advisor, shared the promise she had made to her father, and applied for coverage. At age 55, single and non-tobacco, she secured a hybrid long-term care policy with a $115,000 single premium and a six year benefit period. The policy provides an initial total long-term care benefit of $478,055 with a maximum monthly benefit of approximately $6,159, both growing at 3% compound inflation. By age 80, the total available long-term care benefit is projected to increase to approximately $1,000,941, with a maximum monthly benefit of $12,895.
As a result, the daughter established a dedicated pool of funds for future care, allowing her broader portfolio to remain intact, her charitable intentions protected, and a tax-free death benefit if care is never needed. Both father and daughter felt reassured knowing her coverage was in place—helping protect her assets and preserve future charitable giving.
Key Takeaway: Never assume a high-net-worth client is uninterested in long-term care planning. Long-term care coverage isn’t just about affordability, it’s about preservation. Use this as an opportunity to explore what matters most to your clients—whether it’s supporting charities, building generational wealth, protecting liquidity, or safeguarding other financial goals.
INDUSTRY Insight
Milliman, Inc., a premier global consulting and actuarial firm, released its first Long-Term Care Index (LTC Index), which estimates the expected lifetime costs of formal paid long-term care services and how these costs can vary by factors such as geography and length of claim. According to the Milliman LTC Index, the projected long-term care costs over the remaining lifetime of a 65-year-old in 2025:
The LTC Index is approximately 75% higher for females than for males. Because women generally live longer than men, they are more likely to require long-term care for longer periods. Long-term care costs can vary significantly depending on how long care is needed. Shorter durations of need are associated with much lower costs, with average total costs estimated at around $30,000, while individuals requiring care for five years or more experience costs exceeding $665,000 on average. Extended care needs place significant financial strain on individuals, caregivers, and programs that provide coverage for long-term care.
With over 4.1 million Americans turning 65 each year through 2027, understanding the potential costs of long-term care is critical. The LTC index is designed to be a starting point to help anticipate these expenses and make informed decisions about coverage, savings strategies, and risk management.
Source: CLTC Digest, 2025 Milliman LTC Index
1A Place for Mom; “How Much Does 24/7 Home Care Cost in 2024? An In-Depth Guide;” May 9, 2024.
2Evelyn Battaglia; Brick Underground: “Where seniors can find luxury independent living residences with resort-like amenities plus 24/7 personal care;” August 22, 2023.