Long-term care costs and how to plan for them in a retirement plan
Of all the costs a retirement plan has to face, long-term care is the one that most often gets left out. It is unlikely to be a surprise, because most people will need some, but it is expensive, it arrives late, and the health insurance most retirees rely on doesn't pay for it. Runway builds an illustrative long-term-care episode into several of its calculations. Here is what the numbers behind it are, where they come from, and how much the episode moves a plan.
How likely am I to need long-term care?
The U.S. Administration for Community Living's LongTermCare.gov puts it this way: "Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years." The average length of need differs by sex: women need care for 3.7 years on average and men for 2.2. One in five needs it for more than five years. And more people receive care at home than in a facility. Long-term care here means help with daily living, such as bathing, dressing and eating, not medical treatment. Averages hide a wide spread, which is why Runway tests a plan against a single concrete episode instead of a probability-weighted average.
What does long-term care cost?
Costs vary enormously by state, by setting (home, assisted living, nursing home) and by year. The benchmark Runway uses is the national median for a private nursing-home room in CareScout's 2025 Cost of Care Survey: $355 a day, or about $129,575 a year. That figure has climbed quickly. The same survey put the median at $127,750 in 2024, and Genworth's 2023 survey at $116,800 ($320 a day), which is the number Runway used until October 2026. A national median is also an average of very different places: the table below shows what a higher-cost area does to a plan.
What pays for it?
Not Medicare. Medicare.gov's long-term care page says plainly: "Medicare doesn't pay for long-term care" and that you pay all costs. Medicare does cover some skilled nursing care, but the page notes that long-term care is a different thing, and that most long-term care is non-medical help with daily life. The realistic sources are:
- Your savings. Self-insuring, which is what a retirement plan with a long-term-care line assumes.
- Long-term-care insurance, including hybrid policies that combine life insurance or an annuity with long-term-care benefits. Benefits from a qualified policy are largely tax-free, up to $430 a day in 2026, and some of the premiums count as medical expenses (details here).
- An HSA, which can pay qualified long-term-care costs and long-term-care insurance premiums (up to the age-based limit) tax-free. Runway uses an HSA balance for the episode before it touches other accounts (details here).
- Medicaid, which pays for long-term care for people with limited assets and income, under state-specific rules that Runway doesn't model.
How much does an episode move a plan?
Here is Runway's episode, $129,575 a year for three years starting at age 92, applied to the sample couple Runway loads (Pat 65, Alex 64, $1.46 million across five accounts). The success rate is the share of 2,000 simulated markets in which the money lasts through age 95.
| Spending | Lasts, no episode | Lasts, with episode | Median end, no episode | Median end, with |
|---|---|---|---|---|
| $95,000 | 99.5% | 95.8% | $1,574,254 | $1,216,656 |
| $110,000 | 87.0% | 74.6% | $1,201,345 | $697,430 |
| $125,000 | 55.0% | 40.9% | $147,326 | $0 |
The pattern is the useful part. The episode costs the plan 3.7 percentage points where there's plenty of margin and 12 to 14 points where there isn't. Spending and long-term care are not additive risks; they interact. A plan already running close to the edge has no cushion to absorb $388,725 in the final years. (In the deterministic year-by-year projection, the same episode takes the couple's ending balance at 95 from $1,829,763 to $1,535,592.)
What if care starts earlier, or costs more?
Runway puts the episode near the end of the plan because that is when most people need it. But "near the end" is an assumption. At $110,000 of annual spending, with the chance of lasting at 87.0% without any episode:
| Episode | Chance money lasts |
|---|---|
| $129,575 a year for 3 years starting at 92 (Runway's default) | 74.6% |
| The same, starting at 85 | 67.8% |
| The same, starting at 80 | 62.0% |
| $116,800 a year for 3 years starting at 92 (the 2023 figure Runway used before) | 76.0% |
| $155,000 a year for 3 years starting at 92 (a higher-cost area) | 71.5% |
| $129,575 a year for 5 years starting at 90 | 63.1% |
Starting earlier costs more because the money is spent before it has had decades to grow, and a longer episode costs more because the bills last longer. Each row is a single what-if, not a forecast: most people will need less than this, and some will need more.
See what a long-term-care episode does to your plan. Toggle it on and off and watch the chance your money lasts move.
Try the plannerWhere does Runway apply it?
- Long-Term Projection includes the episode by default, so the year-by-year table shows the extra spending at ages 92 to 94.
- Explore Your Plan has a Long-term care checkbox under Other options, on by default.
- Your Best Plan and the sustainable-spending search assume it, so the spending number they find leaves room for it.
- The Overview's headline chance your money lasts does not include it, so it can be a few points higher than the same plan in Explore Your Plan with the checkbox on.
What does this leave out?
- One episode, one person. The cost is for a single person; a household where both spouses need care at once isn't modeled.
- A stress test, not an expected value. About 70% of people need some care and the average duration is around three years, but the plan always faces the full episode.
- Setting and region. Home care, assisted living and nursing homes cost different amounts, and so do states. Runway uses one national benchmark, in today's dollars.
- Medicaid, insurance payouts and tax deductions are not built into the episode unless you enter an insurance payout yourself.
- The benchmark is a national median from a 2025 survey. Prices keep rising and vary by region; the table above shows the effect of a higher cost.
How were these numbers computed?
The probability, duration and "Medicare doesn't pay" statements are quoted from LongTermCare.gov and Medicare.gov. The cost figures are from Genworth's 2023 Cost of Care Survey ($116,800 median) and from the 2024 and 2025 CareScout releases; Runway's benchmark was updated from the 2023 figure to the 2025 one in October 2026. The Monte Carlo figures use Runway's engine on the sample couple (married filing jointly, plan through age 95, 60% stocks, default return assumptions), 2,000 simulated paths and seed 2026. The episode is applied as extra spending in each of its years, so it flows through the same tax-aware withdrawal plan as everything else. All amounts are in today's dollars.