An original editorial illustration showing how long-term care can connect retirement income, portfolio assets, and future care needs.
What would happen to your retirement plan if your household suddenly needed an additional $6,000, $10,000, or more each month for care?
Long-term care is often discussed as a healthcare expense. That description is incomplete. The need for ongoing assistance with bathing, dressing, eating, transportation, medication management, or other daily activities can affect nearly every part of a retirement plan.
It can increase monthly cash-flow needs, require assets to be sold during an unfavorable market, reduce liquidity, and change how long a portfolio may support two people instead of one. For retirees and long-term investors, long-term care deserves to be evaluated as a portfolio risk.
Long-term care is different from short-term medical treatment
Long-term care, sometimes called custodial care or long-term services and supports, is generally associated with ongoing assistance rather than a temporary medical procedure or recovery period.
Care may be provided:
- In the home
- At an assisted living community
- In an adult day health setting
- In a nursing home
- Through a combination of paid caregivers and unpaid family support
The care may begin with a few hours of help each week and become more intensive over time. That variability makes the financial risk difficult to estimate. A household may need modest support for a limited period, or it may face years of substantial expenses.
The Administration for Community Living has reported that approximately seven out of 10 people who reach age 65 may need some form of long-term care during their lifetime. That figure describes the possibility of needing care, not the amount any particular person will spend.
The Center for Retirement Research at Boston College summarized the 2025 Milliman Long-Term Care Index in March 2026. The analysis estimated that a 65-year-old would need approximately $135,000, on average, for future high-intensity long-term care needs under specific assumptions. The same analysis emphasized substantial differences based on health, location, gender, duration of care, and investment returns.
That average is a reference point, not a personal funding target.
Why the expense can be larger than expected
The latest national figures displayed by CareScout as of September 2, 2026, are based on its Cost of Care Survey conducted from July through November 2025. The national median costs include:
- Non-medical in-home caregiver: $35 per hour, or approximately $80,080 annually based on 44 hours per week
- Assisted living community: $6,200 per month, or approximately $74,400 annually
- Nursing home, semi-private room: $9,581 per month, or approximately $114,975 annually
- Nursing home, private room: $10,798 per month, or approximately $129,575 annually
These are national medians, not quotes for a particular facility or region. Actual costs can vary significantly based on location, staffing, care intensity, room type, and the number of hours of assistance required.
Home care also deserves careful attention. Part-time assistance may initially cost less than a nursing home, but the expense can rise quickly if a person needs extensive daily help. A household requiring near-continuous care at home may face costs that approach or exceed facility-based care.
Long-term care costs may also rise over time. If care begins 10 or 20 years from now, using only today’s price may understate the amount that future income and assets will need to support.
Medicare does not generally cover ongoing custodial care
A common planning assumption is that Medicare will pay for a future nursing home stay. According to Medicare’s official long-term care guidance, Medicare does not pay for long-term care and beneficiaries generally pay the costs of non-covered services.
Medicare distinguishes long-term custodial care from short-term skilled nursing care. Medicare Part A may cover limited skilled nursing facility care after a qualifying hospitalization and when specific medical requirements are met. That coverage is not the same as paying for an extended stay primarily involving assistance with daily activities.
Medicare’s nursing home care guidance states that it generally does not cover custodial care when that is the only care a person needs.
Medicaid may help people who meet applicable income and asset requirements, but eligibility rules vary by state and program. Questions about Medicaid eligibility, asset transfers, or legal authority should be discussed with qualified legal and tax professionals. These issues are complex and should not be treated as simple portfolio-management decisions.
The portfolio risks created by long-term care
Long-term care can affect a portfolio in several different ways.
1. Higher withdrawals
Suppose a retired household normally withdraws $60,000 per year from its portfolio for living expenses. If one spouse later requires in-home care costing $80,080 per year at the CareScout national median, the household’s combined annual outflow could rise to approximately $140,080 before accounting for housing, travel, healthcare, and other expenses.
The actual increase may be lower if some household expenses change. It may be higher if care is more intensive or both spouses need assistance. The important point is that care costs can materially change the withdrawal rate.
2. Reduced liquidity
Liquidity means how quickly an asset can be converted to cash without a significant delay or pricing difficulty.
A retiree may have substantial net worth but limited accessible cash. Wealth concentrated in a home, a business, or other less-liquid assets may not be immediately available when a care bill arrives. Selling an asset under pressure can reduce flexibility and may produce a less favorable outcome than making a planned decision.
A retirement plan should therefore consider not only total assets, but also where spending money would come from during a period of increased care needs.
Long-term care can create a late-life cash-flow shock that makes liquidity especially important.
3. Selling investments during a market decline
If care expenses begin during a market downturn, a household may need to sell investments while prices are temporarily lower. This can create sequence-of-returns risk.
Sequence-of-returns risk is the possibility that poor investment returns early in retirement, combined with withdrawals, can do more damage than the same returns occurring later. Adding a large care expense to regular withdrawals can increase that pressure.
This does not mean a retiree should avoid investing. It means the portfolio’s risk level, withdrawal plan, and liquidity structure should be evaluated together.
4. A longer planning horizon for the healthy spouse
When one spouse needs care, the other spouse may continue to need housing, transportation, healthcare, and regular income. A plan that focuses only on the cost of the person receiving care may overlook the financial needs of the spouse who remains at home.
This is especially important when the couple shares income sources, accounts, and household responsibilities. A major care expense can affect the survivor’s financial security even if the care need belongs primarily to one person.
A practical example
Consider a hypothetical couple with a $1.2 million investment portfolio and $60,000 in annual portfolio withdrawals. Their plan appears sustainable under normal spending assumptions, but one spouse later requires substantial home care.
If the care expense adds approximately $80,000 per year, the household may need to withdraw roughly $140,000 annually from the portfolio. If the portfolio also declines during that period, the couple may be selling a larger percentage of a smaller asset base.
Several questions now become relevant:
- Can the household maintain its essential lifestyle?
- How much cash is available without selling long-term investments?
- What happens if care lasts two years, five years, or longer?
- What if the healthy spouse lives for many years after the care period?
- Which expenses are essential, and which could be adjusted?
- Does the portfolio still reflect the household’s objectives and tolerance for volatility?
This example is not a forecast or an individualized recommendation. It illustrates why long-term care should be included in retirement stress testing rather than treated as an afterthought.
How to evaluate long-term care within a retirement plan
A useful review can begin with four scenarios:
- No significant paid care: The household experiences only ordinary retirement spending.
- Moderate home assistance: One person needs part-time help for a limited period.
- Extended care: A household faces several years of assisted living or nursing care.
- Two-person risk: Both spouses experience care needs at different times.
For each scenario, review:
- Annual spending and potential withdrawal rates
- Available cash and other liquid assets
- Portfolio allocation and downside exposure
- The timing of investment sales
- Income needs for the healthy spouse
- Housing and relocation flexibility
- The role of family caregiving, if applicable
- How assumptions change when care costs increase faster than general inflation
A 2023 KFF survey on the affordability of long-term care found that 90% of adults said paying $100,000 for one year of nursing home care would be impossible or very difficult. The survey was conducted in 2022, so it should not be treated as current pricing. It does, however, demonstrate how a large care expense can exceed the practical liquidity of many households.
Among people who had provided or paid for long-term care, 39% said they used up all or most of their savings, according to the same survey. That finding reinforces the need to examine not only the probability of care, but also how a household would fund it if it occurred.
The key takeaway
Long-term care is not simply another line item in a medical budget. It can change retirement income needs, portfolio withdrawals, liquidity requirements, investment timing, and the financial security of the surviving spouse.
A thoughtful retirement plan should test how the portfolio responds to different care costs and durations without assuming that Medicare will cover ongoing custodial assistance. The objective is not to predict exactly what will happen. It is to identify vulnerabilities early enough to make informed decisions.
Portafolio Capital Management helps clients connect portfolio construction, risk management, and retirement objectives through ongoing planning and portfolio oversight. To discuss how long-term care assumptions may fit into a broader retirement conversation, schedule a call with a fiduciary financial adviser, learn more about our approach, or call (512) 593-8380.
Sources
- Medicare: Long-term care, accessed September 2, 2026
- Medicare: Nursing home care, accessed September 2, 2026
- CareScout: Cost of Care Survey, latest national median data based on surveys conducted July through November 2025
- Center for Retirement Research at Boston College: How Much Will Your Long-Term Care Needs Cost?, March 5, 2026
- KFF: The Affordability of Long-Term Care and Support Services, published November 14, 2023, based on a survey conducted May 5-14, 2022
- Administration for Community Living: How Much Care Will You Need?, accessed through current long-term-care planning resources
Portafolio Capital Management LLC dba Mau Sanchez Capital is a Texas-registered investment adviser. This content is provided for informational and educational purposes only and does not constitute personalized investment advice, tax advice, legal advice, or a solicitation to buy or sell any security. Investing involves risk, including the possible loss of principal. Advisory services are provided only pursuant to a written advisory agreement. Past performance is not indicative of future results.
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