Question: Should I pay for potential long-term care expenses out of my own assets, or should I transfer that risk to an insurance carrier?

Planning for late-life care is a critical yet often deferred decision. Many individuals face this question, and the answer depends on your financial resources, health profile, family circumstances, and your desire to maintain control or reduce future burdens.

Self-Funding Long-Term Care: Flexibility with Risk

Self-funding, or self-insuring, refers to using your personal assets—such as investment accounts, real estate equity, or cash reserves—to cover care costs when they arise. This approach offers a high degree of autonomy. You are not limited by the constraints of an insurance policy, and if you never require care, your assets remain intact for heirs or other priorities.

However, self-funding comes with significant risks. The cost of care is rising sharply and outpacing inflation. National averages as of 2025 suggest the following:

• Home health aide: ~$80,000 annually
• Assisted living: ~$65,000 annually
• Nursing home: $130,000 nationally, and up to $184,000 in high-cost states such as California, Oregon, and Washington

Extended care can erode savings rapidly. Furthermore, market volatility, rising tax rates, or future legislation could erode the purchasing power of assets. For married couples, the impact can be compounded if one spouse requires care while the other continues to manage day-to-day expenses independently.

This strategy is generally appropriate for individuals or households with more than $7 million in investable assets, those who can sustain an unexpected cost of $130,000 to $180,000 per year over multiple years without jeopardizing retirement security.

Purchasing Long-Term Care Insurance: Predictable and Protective

Long-term care insurance offers an alternative. By transferring risk to an insurer, you gain a layer of financial protection and predictability. Premiums are typically fixed, and benefits—if structured properly—can be guaranteed. Modern long-term care policies often provide a combination of care coordination, tax advantages, and either long-term care or a death benefit.

From a financial perspective, this approach protects against catastrophic expenses and preserves wealth for future goals or inheritance. Many contemporary policies guarantee a return of premium via tax-free benefits during life, or a tax-free payout to beneficiaries upon death, reducing the net lifetime cost if the coverage is never used.

This strategy might be best suited for individuals or couples with investable assets between $300,000 and $7 million. It is particularly relevant for those who expect to live a long life, have chronic conditions in the family, or who want to ensure financial stability for a surviving spouse.

It is important to note that long-term care insurance involves medical underwriting. Those with existing health issues or those in their mid-60s or beyond may find it more difficult or costly to obtain coverage.

Bridging the Gap: Hybrid Strategies

Some individuals opt for a blended approach, combining partial self-funding with insurance. Hybrid solutions include:

1. Life insurance with long-term care riders: If care is not needed, a death benefit remains for heirs.
2. Annuities with care riders: These provide a guaranteed income stream with additional protection for care needs.
3. Limited insurance plus reserves: Purchasing a modest policy to reduce catastrophic risk while retaining liquidity.

A Structured Decision Framework

Before deciding, consider the following:

1. What is my net worth and how stable is my income?
2. Can I absorb several years of care expenses without compromising my retirement or my spouse’s quality of life?
3. What is my family’s medical history and longevity outlook?
4. Do I want to leave a financial legacy or focus primarily on funding my own care?
5. Am I more comfortable managing future care needs myself or paying an insurer for predictability?

These are personal decisions with long-term consequences, both financial and emotional. At Empirical Wealth Management, we help clients understand the potential costs, evaluate available options, and align long-term care strategies with their broader financial goals. Through our coordinated, in-house team of advisors and insurance professionals, we provide the data, analysis, and perspective needed to navigate this complex topic with confidence.

Whether you are seeking protection, flexibility, or peace of mind, Empirical can help you make an informed decision that supports your values and long-term vision

*See Disclosures