You’ll Need To Save An Average of $135,000 For Long-Term Care. But Many Will Pay Much More

On average, 65- year-olds need to put aside $135,000 to pay for long-term care in their old age, according to a new report by the actuarial firm Milliman Inc. But beware of the average: About 43% of older adults will need no paid personal care at all. But about one of every five will need paid care for at least three years, at a cost of $300,000 and up.  And 10% will require support for five years or more. They’ll need to set aside an average of $665,000 to pay their long-term care bills.

Here is the planning challenge: You probably won’t need long-term supports and services until you reach your 70s or 80s. But there is no way to predict in, say, your 40s how much care you’ll need three or four decades down the road.

What If You Bet Wrong?

What if you bet wrong? If you are poor enough and sick enough, you could enroll in Medicaid, the primary government program that provides long-term care. But due to big federal funding cuts Congress enacted last summer, the already frayed Medicaid safety net will be even more tattered in the coming years. As I recently told Tom West for his Substack column Age Against the Machine, when it comes to long-term care, you increasingly are on your own.

Many of those who need very long durations of care will be people with conditions such as dementia or Parkinson’s disease, which often persist for many years and require increasing amounts of care. Often more than a family caregiver can manage without paid assistance.

An important technical note: Milliman’s Long-Term Care Index does not project the total cost of care. Rather, it estimates how much typical 65-year-olds need to have saved to pay for care over their lifetimes, assuming they earn an annual return of 4.35% on their savings.

If you put away enough money before you are 65 or earn a higher investment return than Milliman assumes, you’d need to save less. On the other hand, if you wait longer to start saving or earn a lower return on your investments, you’ll be even less likely to have the resources to pay for personal care and other supports in old age.

How many will have enough?

Half of older adults have financial assets of roughly $200,000 or less (about two-thirds of seniors also have some home equity). When you consider other costs in old age, including health care, transportation, food, housing, and utilities, it is easy to imagine burning through your money. And if you need long-term care as well….

Indeed, a 2025 report by the Morningstar Center for Retirement and Policy Studies estimated that about 40 percent of older adults will run short of funds if they need long-term care. By contrast, about one-quarter will outlive their assets if they do not need paid personal assistance or other forms of long-term care,

There is a lot of variation inside the Milliman report. Women are more likely to need paid care, and for a longer time, than men. For example, women are more than twice as likely than men to need care for five years or more. Overall, Milliman estimates the required savings for women at age 65 is about $171,000, compared to $98,000 for men.

Where you live also matters. For instance, people in Florida or Louisiana are more likely to need paid care than those in Colorado or Montana. At the same time, paid care is more costly in states such as Alaska, Connecticut, and Maryland than in Texas or Mississippi.

If You Run Out of Money

Those who do run out of money while needing assistance have limited options.

They could sell their house, if they have one. An average, that would generate another $200,000 or so. But then where would they live? And what happens if one spouse requires paid care and the other does not? What would the healthy spouse live on if all their resources go to pay for long-term care for the spouse with costly needs?

They could turn to Medicaid.

It cannot be said enough, but Medicare does not pay for long-term care except in a handful of programs. While Medicaid does pay, its benefits often are insufficient to provide quality care.

To be eligible for Medicaid, you need a very high level of care. While financial eligibility varies from state-to-state, enrollees generally must have financial assets of $2,000 or less ($3,000 for a couple) and monthly income of roughly $1,000 or less.

States are required to provide Medicaid long-term care in nursing homes but facilities are not required to accept Medicaid enrollees. In many of those that do, Medicaid residents must share rooms with strangers.

States also may provide home-based care, but benefits are limited and waiting lists often last for years.

To add to these limitations, last summer’s big budget bill cut Medicaid funding by about $1 trillion over the next decade. The inevitable result is that states will reduce benefits, especially for optional home-care programs; cut payments to providers such as nursing homes and home care agencies; or limit eligibility for older adults and younger people with disabilities.

That is yet another reason why people in their working years need to put aside money for long-term care in old age. Increasingly, you can’t count on government. You’ll need to help yourself. The Milliman report gives an idea of what that will cost.