Why Wes Moss Thinks Many People Should Skip Long-term Care Insurance

How much of a nest egg should be held aside for potential long-term care, separate from retirement spending money? That was the question from Heather of South Carolina on a recent episode of The Clark Howard Podcast. “We’re comfortable with the amount of retirement savings we have worked hard and made sacrifices to be able to accumulate,” she said. But they still worry about not having long-term care insurance.

Wes Moss, the advisor fielding the question, pushed back on the premise. “Your income and retirement planning doubles as your long-term care planning as well,” he said. The stakes are real. A late-life health shock could drain the portfolio your spouse still needs to live on.

Moss explained that in late retirement, discretionary outflows often fall as health declines, freeing up the same dollars to cover essential care. A couple hits what Moss calls a “money green zone” with at least $1 million in investable assets plus multiple income streams: “Social Security 1, Social Security 2, maybe a pension, maybe some rental income, … your investment income.” At a 4% to 4.5% withdrawal rate, the portfolio kicks off $40,000 to $45,000 a year. Stack that on top of two Social Security checks, and the household retirement paycheck lands near $8,000 or $10,000 a month.

Now picture spending at age 82. Travel stops. Restaurant tabs shrink. Gifts to grandkids slow. As Moss put it, “your normal spending goes down, but your income should not go down. So then that income can now go towards healthcare.” The same $10,000 monthly paycheck simply re-routes from discretionary spending into assisted living or in-home care. The dollars don’t need pre-segregation because they were never going to be spent on cruises in that scenario anyway.

This is why Moss is skeptical of long-term care insurance for most households. “It’s too expensive for people who don’t have a lot of assets,” he said. “People with a huge amount of assets don’t need it. And those folks that find themselves in what’s called the upper middle that can maybe afford it, it also feels unaffordable,” he said. Premiums often rise, benefits have shrunk, and underwriting gets harder every year.

Where the Strategy Fits, and Where It Breaks

The self-insurance approach works for a specific profile: a couple in their mid-50s to early 60s, in good health, with at least $1 million in investable assets, two Social Security records, manageable debt, and a paid-off or near-paid-off home. Heather’s household qualifies.

The strategy breaks for other profiles:

1. A single retiree has no spouse to absorb spending cuts, since one person’s care often costs nearly what a couple was spending in total.
2. A household at $400,000 to $700,000 in savings is exposed because a five-year memory care stay can consume the entire portfolio.
3. And a couple where one spouse needs care while the other is still healthy and active faces a brutal split: the healthy spouse still wants to travel and live, while the care spouse’s costs run on top of the healthy spouse’s lifestyle.

Inflation is another variable to consider. The headline Consumer Price Index (CPI) is running over 3% annually. Care costs historically compound faster than that, so a $10,000 monthly paycheck today buys meaningfully less assisted living in 25 years.

Tips for Considering Long-term Care Insurance

1. Build the income stack on paper. Pull both Social Security estimates from SSA.gov at age 67 and age 70. Add any pension. Apply a 4% draw to your invested balance. If the total clears your current essential spending with room left over, the substitution math works.
2. Stress-test against a care event. Run a scenario where one spouse needs $7,000 to $9,000 a month of care starting at age 82 for four years. Subtract typical late-retirement discretionary spending. The gap is the only number you actually need to insure or earmark against.
3. Max a HSA while you still have wages. Christa DiBiase raised this on the podcast, and Moss agreed. “It would be wonderful if you can sock as much money as possible into the HSA.” For a couple five to 10 years from retirement, an HSA is the only account that goes in tax-free, grows tax-free, and comes out tax-free for medical bills, including Medicare premiums and most long-term care costs.