Can I self fund long-term care?


Editorial team Published on

Yes, you can self-fund (or self-insure) long-term care by using your personal savings, investments, home equity, or a Health Savings Account (HSA) rather than buying a private long-term care insurance policy.

What Self-Funding Involves

  • Financial capacity: Financial planners often suggest that self-funding works best for households with $3 million or more in liquid assets or a dedicated, stable pool of non-volatile cash and investments.
  • Potential costs: Average annual care costs can run high—exceeding $75,000 per year for a full-time at-home caregiver and well over six figures annually for a private room in a nursing facility. A typical 3-year stay can easily cost $300,000 or more.
  • Control and flexibility: You avoid paying monthly insurance premiums, dealing with policy restrictions, or risking a "use-it-or-lose-it" traditional policy if you never need care.

Key Risks to Consider

  • Market timing: Needing care during a market downturn forces you to liquidate investments when values are low, which can severely damage your overall retirement plan.
  • Tax impacts: Pulling large sums from tax-deferred accounts (like traditional IRAs or 401(k)s) triggers income taxes and can raise your Medicare Part B premiums.
  • Estate and legacy goals: A prolonged illness can drain wealth that you intended to leave to your children or charity.