Long-Term Care Savings Have Lost Purchasing Power
Rising care costs mean that a $250,000 savings cushion now funds 2.8 years of care, down from 3.8 years in 2020.
Updated on Sept. 22, 2026 in Financial Planning
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Rising costs for in-home care, assisted living, and nursing home facilities have significantly eroded the longevity of retirement savings. For the approximately 70% of individuals who will require long-term care after turning 65, this shift shortens the duration a $250,000 nest egg can last.
Why it matters
Because Medicare does not cover long-term care, households are forced to rely on personal savings or insurance to bridge the gap. Increasing annual expenses for care services have reduced the timeframe that a fixed savings benchmark can sustain a household, complicating long-term financial planning.
A $250,000 benchmark covers an average of 2.8 years of long-term care nationwide, down from 3.8 years in 2020. This coverage varies by state, ranging from a high of 3.9 years in Arkansas to just 1.9 years in Alaska and Hawaii.
The players
Medicare
The federal health insurance program that does not cover long-term care costs for seniors.
The details
The duration of care is calculated by applying a $250,000 benchmark against the median cost of in-home caregiving, assisted living, and nursing home facilities. As annual costs surge—reaching $333,975 for nursing home care in Alaska or $145,155 for assisted living in Hawaii—the purchasing power of those savings is depleted much faster. Households must account for these regional disparities and rising service prices when determining if their current assets meet their projected care needs.
Timeline
2020: A $250,000 savings benchmark funded 3.8 years of long-term care.
2026: The same $250,000 savings amount covers only 2.8 years of care.
Money Landscape
This development follows the documented trend of rising median annual long-term care costs, which highlights the diminishing effectiveness of static retirement savings benchmarks. It underscores the difficulty of maintaining consistent purchasing power in a high-inflation environment for personal services.
Households should review their retirement plans to account for the increasing cost of care and the fact that Medicare does not provide coverage for these services. Consider speaking with a qualified financial professional to determine if your current savings are sufficient to cover potential care needs in your specific region.
The takeaway
The rapid rise in care costs requires a proactive reassessment of how long your assets might actually last. Schedule a conversation with a qualified financial professional to stress-test your retirement budget against current regional care pricing.
Further reading
For more on managing your nest egg, visit Financial Planning.
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