Subscribe
Share
Share
Embed
Freedom for Retirement™ is the podcast designed to help you move beyond the fear of the complexity of finances so you can be financially free to achieve personal significance. Tune in with Josh Duncan each week to turn fear into fuel that drives you into Freedom & Significance.
Welcome to the Freedom for Retirement Podcast.
If you're a high-earning professional, business owner, or someone approaching retirement
and wondering whether you are truly on track, you are in the right place.
This podcast is all about helping you make smart, confident financial decisions without
the fear, confusion, or sales pressure that so often comes with money advice.
Each episode is designed to break down complex topics like retirement planning, investing,
taxes, and cash flow in plain English.
So you can understand what really matters and avoid the most common and costly financial
mistakes.
Everything you hear here is educational, fiduciary focused, and grounded in real-world
planning experience working with clients just like you.
I'm your host, Josh Duncan, partner at F5 Financial Planning.
Let's get started.
Many people believe that if they ever need long-term care, Medicare will step in and cover
it.
And a lot of people assume that planning for long-term care means just one thing: buying a
long-term care insurance policy.
Both of those beliefs are incomplete, and both can leave a real hole in an otherwise sound
retirement plan.
Here's what actually happens: Medicare will not pay for most long-term care, and insurance
is only one of three ways to cover it.
You can pay for your care yourself, you can insure part of the risk, or you can rely on
Medicaid.
I'm Josh Duncan.
Partner at F5 Financial Planning, where we take a fiduciary approach to maximizing our
clients' wealth.
Today I will walk you through what long-term care really is, why Medicare leaves such a
big gap, what care actually costs, and then the three paths people use to pay for it.
So you can choose the one that fits your plan.
Let's start with the question some folks get wrong.
Will Medicare pay for a nursing home?
For long-term care,
The answer is mostly no.
And the reason comes down to two different kinds of care.
The first kind is skilled care, that is nursing, physical therapy, or rehab after
something like a surgery or stroke.
It is medical and it is usually temporary.
The second kind is custodial care.
That is help with the ordinary activities of daily living, bathing, dressing, eating,
getting around.
It is not medical treatment.
It is support and it can go on for years.
Long-term care is mostly the latter.
And that is exactly the kind uh Medicare was not built to pay for.
Think about someone who has a stroke.
Medicare will help pay for the hospital stay and the rehab that follows, because that is
skilled care and the goal is recovery.
But once that person is stable and simply needs help getting dressed, moving around, and
getting through the day, the care becomes custodial.
That person may be in the same facility the whole time, but once the care is no longer
skilled,
Medicare's payments stop.
Here's what Medicare actually covers.
After a qualifying three-day hospital stay, Medicare will pay for up to 100 days in a
skilled nursing facility.
The first 20 days are covered in full.
For days 21 through 100, you pay a daily share of the cost, a little over $200 a day in
2026.
After 100 days, Medicare stops paying.
So the mistake is assuming that the program covering your doctor visits and hospital stays
will also cover years of daily support.
It will not.
The gap is the whole reason long-term care planning exists.
The next fair question is whether this will even happen to you.
And what does it cost if it does?
Someone turning 65 today has about a 70% chance of needing some form of long-term care
during the remaining years.
On average, people who need care need it for around three years.
But the average hides the part that matters for your plan.
Many people need care for only a short time, and about one in five will need it for five
years or longer.
It is that long, expensive tail, not the average, that can change the outcome of an
otherwise well-built plan.
It is also worth clearing up one more assumption.
Long-term care does not mostly happen in nursing homes.
Most of it happens at home, and a good deal happens in assisted living.
A nursing home is often the last and most expensive stage, not the starting point.
Now the numbers.
Based on the most recent national cost of care data, bringing paid help into your home
runs about $80,000 a year.
Assisted living runs about $74,400 a year.
And a private room in a nursing home now runs roughly $130,000 a year.
These costs have climbed every year faster than general inflation.
Put those facts together.
A five year stay in a nursing home at today's prices can approach $600,000.
And that is before you account for years of rising costs.
I want to be clear about the framing here, because this is not about being scared.
Most retirement expenses are predictable.
Long-term care is one of the few that can arrive suddenly, last for years, and land right
at the end, often when only one spouse is left to manage the money.
That is why we plan for it.
Not because it's frightening, but because it is one of the few risks large enough to
change the outcome for the person you leave behind.
So the goal is not to guess perfectly, it's to decide ahead of time how you would pay for
it.
And there are three ways.
So, can you just pay for it yourself?
The first path is exactly that: paying for care out of your own assets.
For many people, this is a completely legitimate choice, not a fallback.
Self-funding simply means.
You keep your money, keep control of it, and plan to cover care costs directly if they
come.
You're choosing to carry a risk yourself instead of paying someone else to carry it.
The question is whether your plan can absorb it.
Take two households with similar savings.
For the first, a three-year care event is painful but survivable.
The plan bends and recovers, and the surviving spouse is still secure.
For the second, that same three-year event would force the sale of the home and leave the
other spouse short for the rest of their life.
The care would cost the same in both homes.
What differs is whether the plan can take the hit.
That is the real test for self-funding, not your net worth on paper, but whether a
multi-year care event, including that five-year case, would still leave you and your
spouse on track for your goals.
The mistake people make here is assuming they can self-fund without ever running the
number.
They look at a healthy balance sheet and feel comfortable without asking what two or three
or five years of care would actually do to it.
I encourage you to run the numbers and you will know whether self-funding is a plan or
just a hope.
The second path is insurance.
And this is where it helps to understand how much this market has changed.
Insurance makes sense when a long-term care event would genuinely hurt your plan, but you
would rather not carry the entire risk yourself.
You're transferring the part you do not want to shoulder.
There are two broad shapes this coverage takes today.
The first is traditional standalone long-term care insurance, a policy you pay premiums on
that pays benefits only if you need care.
You should know that this type of coverage has largely been discontinued.
At its peak in the early 2000s, more than 100 insurance companies sold these policies.
Today, fewer than 12 do, and some of the carriers you may not recognize.
Many insurers found that they had underpriced the coverage, and long-term policyholders
have seen steep.
Premium increases.
It still exists, but it's no longer the center of the market.
The second shape is what most new coverage looks like now: hybrid or asset-based policies.
These combine life insurance or sometimes an annuity with a long-term care benefit.
If you need care, the policy helps pay for it.
If you never do, it still pays a death benefit to your family.
That feature, you get something either way, is a big part of why these have taken over the
market.
Now, one feature worth asking about with either type is inflation protection, because a
benefit that looks generous today can fall well behind the cost of care 20 years from now.
There's also a tax angle worth knowing.
Premiums on a qualified long-term care policy can count as deductible medical expenses
within your limits, set by your age, up to about $6,200 a year once you are past 70.
Though that only helps if your medical expenses are large enough to itemize.
And the benefits you receive are generally tax-free, up to a daily limit of $430 in 2026,
or your actual cost of care if it's higher.
A few common mistakes to avoid.
The first is waiting too long.
Coverage is priced on your age and your health.
So waiting into your late 60s when health issues start to appear is when it gets expensive
or simply unavailable.
The second is trying to ensure the entire cost of care.
You usually do not need to cover every dollar, just the slice your own assets cannot
comfortably absorb.
And the third is buying a policy for the tax deduction alone.
The deduction is a nice feature, not a reason.
As a fee-only firm, we do not sell these products and therefore don't earn commissions.
So when we help someone weigh insurance, the only question on the table is whether it
serves their plan.
This video is education, not a recommendation.
Your own planner should help you decide what actually fits your situation.
Okay, so what about Medicaid?
This is the third path, and it is the one people understand the least.
Medicaid does pay for long-term care.
In fact, it is the largest pair of long-term care in the country.
But it is a needs-based program, which means you generally qualify only after spending
down most of your own assets first.
There are a few things to understand about it.
You have to meet strict limits on income and assets.
So for many people, Medicaid begins only after their savings are largely gone.
There is a five-year look back, which means the program reviews the gifts and asset
transfers you made in the five years before you apply.
So you cannot simply give your money away right before you need care and expect to
qualify.
And Medicaid limits which facilities accept it and what care you receive.
It is not all grim.
There are real protections so that when one spouse needs care, the other is not left with
nothing.
The healthy spouse can generally keep the home and a portion of the assets and income.
Those spousal protections matter and they're often overlooked.
But for many of the people watching this, Medicaid is a floor, not a plan.
It is what happens if you do not choose one of the first two paths.
The mistake is treating it as a strategy without planning for it, especially the idea of
gifting assets to qualify, without understanding the look back.
And the limits that come with it.
If Medicaid planning is genuinely part of your picture, that is a conversation for an
elder law attorney well before the crisis.
So let's bring this back to where we started.
Medicare will not cover most long-term care.
That leaves you with a decision.
And it is not really a decision about which product to buy.
It's a decision about which of the three paths fit your plan.
Paying for your care yourself, ensuring the part you do not want to carry, or relying on
Medicaid.
The right answer depends on your assets, your goals, and what would happen to the person
you love if care went on for years.
For some people, the answer is self-funding.
For others, it's transferring part of the risk.
What matters is choosing on purpose while you still have every option open.
Instead of finding out the hard way that Medicare was never gonna pay for it.
That is the kind of planning we do every day, looking at the whole picture and making
these decisions with intention.
As a fiduciary with only your interests in mind.
If you found this episode helpful, please consider subscribing to the podcast and leaving
a review.
It helps more people find the show and continue learning how to make smarter financial
decisions.
I'm Josh Duncan, partnered F5 Financial Planning.
If you would like to learn more about how we help our clients achieve financial freedom
for personal significance, please visit our website at www.f5fp.com.
Thanks for listening, and I'll see you in the next episode.