Your Retirement Plan Has a Blind Spot - Here's the Expense Most People Forget to Budget For

There's no shortage of scary numbers when you sit down to research your retirement plan. For example, Fidelity estimates that a 65-year-old retiring in 2026 could spend an average of $185,500 on health care and medical expenses during retirement. While tempting to include, this figure may not be the one most likely to destroy your budget.

Medicare premiums, deductibles, prescriptions, and routine medical care deserve a place in your plan. Yet another expense may never become an issue, or it could create costs that dwarf what you spend on routine health care.

That uncertainty is exactly what makes it one of retirement's biggest blind spots.

Long-term care is the blind spot

According to a 2025 survey by CareScout, the national median cost of care in 2025 was $35 an hour for a nonmedical caregiver, or about $80,080 a year for someone receiving 44 hours of care per week. Assisted living had a median cost of $6,200 per month, while a private room cost $129,575 per year.

Those numbers are pretty hefty. Still, you must separate the cost of care from the amount one household is likely to pay. Not everyone needs round-the-clock care. Some people need help temporarily. Others live at home and use a few hours of paid assistance a week. Some rely on spouses or other family members.

A Health and Retirement Study found that nursing home use and spending are highly uneven. While 56% of people in the studied cohort spent at least one night in a nursing home during their lifetime, only 32% paid anything out of pocket.

That is the real challenge. Long-term care is not necessarily an expense everyone should budget for as though they are guaranteed to spend $130,000 a year for several years.

Medicare doesn't cover the kind of care people imagine

Long-term care may create a blind spot because the word "care" is misleading.

Medicare covers medically skilled nursing or rehabilitation for a limited time. For example, Medicare Part A may cover up to 100 days in a skilled nursing facility after a hospital stay.

That doesn't mean someone helps you bathe, get dressed, or eat because you aren't able to perform these activities independently. Medicare doesn't pay for long-term custodial care, whether at home, in the community, or in a nursing home. Neither does Medicare Supplement Insurance.

Retirees shouldn't assume Medicare eligibility fixes everything.

Families often become part of the care plan

Family members provide an enormous amount of care.

According to AARP and the National Alliance for Caregiving, 51 million Americans care for someone age 50 or older. The average caregiver for an older adult has been providing care for five years and spends 26 hours per week doing so. Forty-four percent provide high-intensity care.

Family caregiving isn't free. Your loved ones may reduce work hours, use vacation time, or spend their own money on transportation or home modifications.

That's why you need to think things through. Even if family members are willing to help, do they live nearby? Do they have jobs or health limitations of their own, and how much care could they realistically provide?

The real risk is concentrated in a smaller group

The study above found that average lifetime out-of-pocket nursing home spending was modest across the entire population because many people had covered spending or only short stays. But spending at the high end was dramatically larger.

That's why long-term care deserves more than being folded into a generic "health care" estimate.

One retiree might spend a predictable amount each year on Medicare premiums and routine out-of-pocket medical expenses, then experience no long-term care spending. Another retiree could face years of expensive care after developing dementia.

Don't assume the worst-case scenario, but don't ignore it either.

How to add long-term care to your retirement plan

To avoid ending up with a scary, out-of-context number, focus on these three questions.

Where would you prefer to receive care?

Whether at home with paid help or in assisted living, your preferred setting provides a more useful starting point than automatically budgeting for a private nursing home room.

How much of the cost could you absorb?

Look at your expected Social Security, pension, and other income. If you needed $3,000 or $5,000 per month for care, how much of that could your regular income cover before you had to tap savings?

How long could your assets cover the gap?

Earmarking the full cost of several years of care today is nearly impossible. Instead, calculate how much of a monthly shortfall your portfolio could handle and for how long.

Let's say your retirement income could cover most of your normal expenses, but needing paid help at home would create a $3,000 monthly gap. Yearly, that is $36,000, or a much more concrete planning figure than assuming you need to save $130,000 every year.

Then run a second, more expensive scenario using the cost of assisted living in your area.

Consider how you would fund the gap

There are several ways to address a long-term care shortfall.

Options include using your own assets, exploring long-term care insurance, or a hybrid life insurance policy with long-term care benefits.

Medicaid may cover long-term care for eligible seniors, although it is generally a safety net rather than the centerpiece of a retirement strategy.

Bottom line

Long-term care is one of the biggest holes in retirement planning because it's outside the expenses people may easily estimate.

You probably know what you spend on groceries, utilities, or entertainment. Medicare also makes many routine medical costs more predictable. Yet, long-term care could change a household's spending overnight, and Medicare doesn't cover it.

Not every retiree will need a nursing home. To lower your financial stress, add realistic scenarios to your retirement plan, calculate the monthly gap they would create, and decide where the money would come from. That turns long-term care from a terrifying hypothetical number into a risk you have actually planned for.

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