Commentary · Retirement Planning

The Care Plan Most Families Skip.

Written by the William Allan team · Published 2026-10-19

How families can think about paying for care before anyone needs it.

Most retirement plans answer one question well: how much can we spend? Far fewer answer the question that tends to arrive later and with less warning. If one of us needs help with daily life for several years, who provides it, where, and how is it paid for?

That is long-term care planning. It is less about predicting the future than about deciding in advance, while there is time to choose.

What Long-Term Care Means

Long-term care is help with everyday activities when someone can no longer manage them alone: bathing, dressing, eating, moving around the house, taking medication. It can be provided at home, in an assisted living community, or in a nursing home. Much of it is not medical care at all, and a great deal of it is provided by family members without pay.

The need is common. The federal government's long-term care guidance, last updated in 2020, estimates that almost 70% of people turning 65 today will need some type of long-term care services in their remaining years. About one-third may never need it, while 20% will need it for more than five years. Women need care longer on average, about 3.7 years compared with 2.2 years for men. LongTermCare.gov, How Much Care Will You Need?

What It Costs

Costs depend heavily on where you live and the kind of care involved. CareScout's 2025 Cost of Care Survey put the national median costs at:

• $129,575 a year for a private room in a nursing home ($355 a day)
• $74,400 a year for assisted living ($6,200 a month)
• $80,080 a year for a non-medical caregiver at home, at $35 an hour for 44 hours a week

CareScout 2025 Cost of Care Survey results

These are medians, not quotes. Local prices can be much higher or lower, and care needs change over time.

What Medicare Does Not Pay

Many people assume Medicare covers this. It does not. Medicare and most health insurance, including Medicare Supplement (Medigap) policies, do not pay for long-term care services, whether in a nursing home or in the community. Medicare.gov, Long-Term Care

What Medicare does cover is short-term skilled care. Part A covers up to 100 days of skilled nursing facility care in each benefit period, but only after a qualifying inpatient hospital stay of at least three days in a row, and only while daily skilled care is needed. In 2026 the patient pays $217 a day for days 21 through 100 and all costs after day 100. Medicare.gov, Skilled Nursing Facility Care

Help with bathing and dressing after that skilled need ends is a different kind of care, and it is usually paid some other way.

The Main Ways Families Pay

Savings and Income

Some households can pay for care from their own assets. That can work, but it should be a decision, not a default. It means knowing which accounts would be drawn first, what that does to taxes, and what it leaves for a surviving spouse.

Traditional Long-Term Care Insurance

A policy pays a defined benefit, usually daily or monthly, when the insured person needs help with daily activities or has a cognitive impairment. Coverage requires health underwriting, so it is generally easier to obtain earlier. Premiums on many policies are not guaranteed, and insurers can seek rate increases from state regulators.

Hybrid Policies

These combine life insurance or an annuity with a long-term care benefit. If care is never needed, the policy can still pay a death benefit. They often require a larger premium up front, and the terms vary widely from one policy to the next.

Medicaid

Medicaid pays for long-term care for people who meet their state's eligibility requirements, which include income and asset limits. Under federal law, states generally look back five years at gifts and other transfers made before someone applies, and a transfer for less than fair value can delay coverage.

California's Medi-Cal works differently. It eliminated its asset test for 2024 and 2025, reinstated it on January 1, 2026, and reviews transfers over a shorter 30-month period that is phasing in. DHCS, Medi-Cal Asset Limit FAQ These rules have changed often and may change again, so any plan that depends on Medicaid needs to be made well in advance with an elder law attorney.

Most families end up using more than one of these. The useful work is deciding the mix before a crisis decides it for you.

Questions Worth Answering Now

These are worth discussing while everyone is healthy:

• Where would each of you prefer to receive care, at home or elsewhere?
• Who in the family would coordinate it, and have they agreed to?
• Which assets would pay first, and what would remain for the healthy spouse?
• Would insurance make sense for your situation, or is self-funding realistic?
• Are your durable power of attorney and health care directive current, and do the right people know where they are?

The documents matter as much as the money. A will does nothing while you are alive, and a trust covers only the assets titled to it. A durable power of attorney and a health care directive are what let someone act for you on everything else. Our piece on trusts and wills covers how those documents fit together, and an estate planning attorney can prepare them.

Where an Advisor Fits

Long-term care touches the retirement plan, the tax return, and the estate plan at once. Paying for care from an IRA creates taxable income. Selling a home to fund care changes the portfolio. A policy premium is a cash-flow decision for decades.

William Allan is fee-only and is paid directly by clients. The firm does not earn commissions for selling investments, insurance, or proprietary products. When coverage is worth considering, we can help you evaluate it alongside your retirement income and estate plans. For a broader look at that income picture, see our retirement planning approach.

Schedule a free introductory call with Ian, who handles first conversations for William Allan. The call is not advice; its purpose is to understand your situation and help arrange the right next step with the advisory team.

This commentary is for informational purposes only and is not investment, tax, insurance, or legal advice. All investing involves risk, including the possible loss of principal, and past performance does not guarantee future results. Cost figures are national medians from the CareScout 2025 Cost of Care Survey and do not predict the cost of care in any location. Medicare and Medi-Cal rules were checked October 19, 2026, against Medicare.gov and California Department of Health Care Services guidance and can change. Long-term care statistics are from LongTermCare.gov guidance last updated in 2020. Insurance products are subject to underwriting, policy terms, and the claims-paying ability of the issuing company. Medicaid eligibility rules vary by state; consult a qualified elder law attorney regarding your situation. William Allan does not provide tax or legal advice; tax preparation and tax advice, when provided, are through affiliated Crawshaw CPAs under a separate engagement. William Allan is an investment adviser registered with the SEC; registration does not imply any specific level of skill or training.