Most middle-class Americans are planning to use Medicare to pay for long-term care in retirement, but there’s a serious problem with that strategy: Medicare explicitly does not cover those costs.
According to new survey data by the American Council of Life Insurers (ACLI) conducted by YouGov, 39% of middle-class Americans plan to rely on Medicare to cover their long-term care expenses in retirement and an additional 23% say they have not thought about how they will pay for long-term care at all.
That means roughly six in 10 middle-income households are heading toward retirement without a viable plan, despite the research suggesting long-term care will be required.
The ACLI notes that 70% of U.S. adults who turn 65 will need some form of long-term care during their lifetimes, and that an unexpected need for this care can wipe out retirement savings and undermine the financial security of middle-class households.
The confusion around Medicare and long-term care, which covers custodial services such as nursing home stays, assisted living, and in-home personal care, is one of the most persistent and consequential misconceptions around retirement provisions.
Medicare is federal health insurance designed to cover medically necessary services; it is not a long-term care program. Medicaid, the joint federal-state program for low-income Americans, covers a significant share of nursing home costs but typically requires recipients to spend down most of their assets before they qualify.
As InvestmentNews has reported, with health care costs dramatically outpacing inflation, advisors are helping clients (and often clients' parents) prepare for the financial and personal challenges of long-term care, even if it is a topic most clients would rather avoid.
Tracy Byrnes, vice president of women and investing at Lebenthal Global Advisors, told InvestmentNews that "the average cost of a semi-private nursing home room now tops $100,000 a year and in the tri-state area, it can be much higher."
The ACLI data lands against a backdrop of deteriorating financial resilience for middle-class Americans.
The ACLI's Financial Resilience Index fell 10 points between the first and second quarters of 2026. While the Headline Index remains at a modestly positive score of +10 (indicating that middle-class financial resilience is still reasonably strong relative to historical norms) the pace of improvement is slowing.
The primary driver of the Q2 2026 decline is slowing wage growth and persistent inflation, which has outpaced wages since April 2026. The Cost Resilience Index, which tracks cost pressures across categories including housing, gas, and childcare, declined two points to a score of -4, with higher energy prices in Q2 creating acute pressure for middle-class households.
The survey also found that 46% of middle-class Americans are concerned about being able to afford daily essentials, while 40% are worried about affording healthcare services over the next year and 36% cite transportation as a top concern, up sharply from 26% the previous year.
Those daily pressures matter for advisors because financial stress in the near term tends to crowd out longer-range planning. Clients who are stretched on monthly bills are less likely to proactively engage with a long-term care conversation.
David Chavern, President and CEO of ACLI, said: "Long-term care is an essential part of sound retirement planning to protect retirement savings from unexpected costs. It's critical that Americans understand their long-term care insurance options, which can help them maintain financial independence and dignity of choice by covering the costs of a nursing home, assisted living, or at-home care."
Long-term care insurance (LTCi) is a policy designed to cover the custodial care expenses Medicare won't and remains one of the more underleveraged tools in the advisor toolkit, in part because of its cost and the health underwriting required for applicants.
Hybrid products, including life insurance policies with long-term care riders and linked-benefit annuities, have gained traction as alternatives for clients who are concerned about paying premiums for coverage they may never use.
In 2024, life insurers paid out $10 billion in long-term care claims, along with $110 billion in annuity benefits and $89 billion in life insurance benefits, according to ACLI. Those figures underscore the scale of the industry's role in retirement income protection and the size of the exposure that goes uncovered for clients without a plan.
The ACLI survey was conducted online by YouGov from August 6 to August 11, 2026, among 3,582 U.S. adults, with a core sample of 1,404 middle-class respondents defined as those earning between $50,000 and $150,000 in annual household income. The Financial Resilience Index itself tracks 26 variables representing cost pressures and financial resources for middle-class households and is released quarterly. The September 2026 edition reflects Q2 2026 data.
For more on how advisors are approaching retirement income gaps, see advisors see long-term care as a critical piece of retirement planning and InvestmentNews coverage on life insurance and annuities and retirement planning.
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