A retiree who started with $3 million in savings and still holds $2 million at age 89 might appear to be in good financial shape. But according to MarketWatch, the remaining balance may not be enough to cover the costs of a serious long-term illness.
The scenario, addressed in a MarketWatch column, centers on a reader who has managed their retirement spending responsibly over decades but now faces the possibility of needing extended medical or custodial care. The core concern is not day-to-day expenses, which the retiree has handled well, but the potentially catastrophic cost of long-term care.
Long-term care refers to a range of services that people need when they can no longer perform basic daily activities on their own, such as bathing, dressing, eating, or moving around. These services can be provided at home by paid aides, in assisted living facilities, or in nursing homes, and the costs can be substantial. Nursing home care in many parts of the United States now runs well above $100,000 per year, and home health aide costs have also risen sharply in recent years.
For someone who is 89, the risk is not hypothetical. At that age, the likelihood of needing some form of extended care is significant, and the duration of that care is unpredictable. A person who lives into their mid-nineties or beyond could face five or more years of intensive care needs, a cost that even a $2 million portfolio might struggle to absorb without serious depletion.
The MarketWatch piece notes that even if normal spending is no longer a concern, a long-term care need is still a problem for any budget. That framing matters because it addresses a common assumption among retirees with substantial assets: that having enough money to cover regular expenses means having enough money, full stop. Long-term care is a category of expense that operates outside the normal retirement spending model.
Medicare, the federal health insurance program for people 65 and older, covers some short-term skilled nursing care after a hospitalization but does not pay for custodial care, which is the kind most associated with long-term needs. Medicaid does cover nursing home care, but to qualify, most people must spend down their assets to very low levels, a process that can take years and that many middle-class retirees find disorienting and difficult to plan for.
Long-term care insurance exists specifically to address this gap, but policies are expensive and many insurance companies have exited the market in recent years, making coverage harder to find and more costly to maintain. Hybrid life insurance products with long-term care riders have become more common as an alternative, though they come with their own tradeoffs.
For a person already at 89, purchasing new insurance is likely not a realistic option. The question at that stage becomes how to structure remaining assets to preserve as much flexibility as possible while preparing for the possibility of significant care costs. Financial planners who specialize in elder care often recommend setting aside a dedicated portion of a portfolio specifically for potential care needs, separate from normal living expenses, so that the two budgets do not compete with each other as the years go on.