Many Americans planning for retirement focus on quality of life factors like climate and family proximity, along with practical concerns such as living costs and healthcare access. However, a significant oversight remains in retirement planning: the expense of long-term care.
Fidelity data indicates one in five Americans fails to account for this major cost. Research from the Center for Retirement Research at Boston College shows 80% of 65-year-olds will eventually require some form of long-term care. About 40% of these individuals will need high-intensity care lasting over a year.
Despite these statistics, only 3% of Americans have long-term care insurance, according to the study. This low coverage may stem from misconceptions; over half of Americans believe Medicare covers assisted living and nursing home costs. In reality, Medicare offers limited, typically short-term coverage restricted to skilled care. Medicaid provides some long-term care support but only for eligible low-income individuals.
A new Caring.com report examines which states offer the best value for long-term care and which are becoming unaffordable for retirees. The analysis reveals substantial cost variations across states.
States with higher living costs, labor expenses, and real estate prices—such as California and New York—tend to have higher long-term care costs. Senior care in Mississippi and Texas costs approximately half as much as in California and New York, according to the Caring.com report and CareScout.
Mississippi emerges as the most affordable state for senior care, featuring low living costs, reputable home care services, and one of the lowest annual assisted living expenses.
Care costs also depend on the type of care received. Assisted living, with a national median price of $5,900 monthly, offers personal care and health-related services for those needing daily living assistance. The most expensive states for assisted living are Hawaii, Alaska, and Washington, D.C. South Dakota provides the most affordable assisted living at $52,200 annually, well below the national median of $70,800.
Nursing homes, offering higher medical care and 24/7 supervision, have median prices of $9,277 monthly for semi-private rooms and $10,648 for private rooms. Semi-private rooms are most expensive in Alaska, Oregon, and Hawaii. Private rooms cost most in Alaska, Oregon, and Washington, D.C.
Texas is the most affordable state for private nursing home rooms, with a median annual cost of $85,045 compared to the national median of $127,750. Neighboring Oklahoma and Louisiana have median annual costs of $91,250.
Memory care for dementia patients typically falls between assisted living and nursing home care in cost—more expensive than assisted living but usually less than round-the-clock nursing home care.
Fidelity Investment's 2025 Retiree Health Care Cost Estimate indicates a 65-year-old retiring today needs an average of $172,500 for healthcare needs in retirement. This represents a 4% increase from 2024's $165,000 and is 115% higher than two decades ago.
Options for managing these expenses include explicitly accounting for them in retirement plans. Long-term care insurance offers traditional coverage paying benefits when specific criteria are met, or hybrid coverage combining long-term care benefits with life insurance or an annuity. Hybrid coverage is more expensive but guarantees premiums and can pass unused benefits to heirs as death benefits.
Tax-advantaged Health Savings Accounts (HSAs) allow savings for future long-term care costs if enrolled in a high-deductible health plan. HSAs feature pre-tax contributions, tax-free investment growth, and tax-free withdrawals for qualified healthcare expenses, though penalties apply for overcontributions or non-qualified use. For 2026, contribution limits are $4,400 for self-only coverage or $8,750 for family coverage, plus a $1,000 catch-up contribution for those 55 or older.
Other planning options include delaying Social Security, setting aside money in dedicated high-yield savings accounts, or leveraging home equity. Relocating to states with lower long-term care costs is another consideration.
"Opting to relocate for more affordable senior care is a big decision, but it can help extend retirement and long-term care funds," according to CareScout. Financial advisors can help evaluate these strategies and incorporate them into overall retirement plans.