Last week, I defaulted to Google Gemini to start our discussion about self-funding. I simply shared the results of the query – “what is the best strategy to fund a long-term care event”.
The results were focused on asset depletion (self-funding) and only mentioned the leverage of insurance at the end under the premise that it (insurance) should be used as a backstop for a long claim such as Alzheimer’s.
Now, when I asked ChatGPT the same question, it came back with something different. Check this out … according to ChatGPT,
“The best strategy depends on three key variables:
- How much wealth you have available
- How important it is to leave an inheritance
- How much risk you’re willing to retain
For many people, the most effective approach is not to rely on a single strategy, but to combine several.
Here’s how the main approaches compare.
| Strategy | Best for | Pros | Cons |
| Self-fund entirely | High-net-worth households | Maximum flexibility, no insurance premiums | Large, unpredictable costs |
| Traditional long-term care insurance | Healthy people in their 50s–60s | Transfers catastrophic risk | Premiums may increase |
| Hybrid life insurance/LTC policy | People who dislike “use it or lose it” insurance | Death benefit if care isn’t needed | Higher upfront cost |
| Annuity with LTC rider | Conservative investors | Leverages assets for care | Less liquidity |
| Partial self-funding + insurance | Many upper-middle-income retirees | Balances flexibility and protection | More planning required |
If you choose to self-fund
A successful self-funding strategy typically involves setting aside a dedicated pool of assets specifically for future care.
Many planners recommend:
- Keeping 2–5 years of expected care costs in relatively conservative investments.
- Investing remaining retirement assets according to your long-term plan.
- Maintaining enough liquid assets so you aren’t forced to sell stocks during a market downturn.
Estimate the potential cost
Long-term care can include:
Depending on where you live and the type of care, costs can range from tens of thousands to well over $150,000 per year, and they tend to rise faster than general inflation.
Build a “care fund”
Instead of thinking of your entire retirement portfolio as available for everything, some people earmark:
- Cash reserves
- Short-term bonds
- CDs
- Treasury securities
This dedicated bucket can provide several years of care without disrupting the rest of the investment portfolio.
Consider the tax implications
If you’re self-funding:
- Use taxable accounts strategically before tapping tax-deferred retirement accounts if doing so helps manage your tax bracket.
- Take required minimum distributions into account if applicable.
- If eligible, a Health Savings Account (HSA) can be a tax-efficient way to pay qualified long-term care expenses.
Protect the healthy spouse
One of the biggest risks of self-funding is that one spouse’s care can significantly reduce the assets available for the other. Planning for survivor income and housing needs is an important part of the strategy.
A hybrid approach is often the most efficient
Many financial planners recommend:
- Self-fund the first 2–3 years of care.
- Purchase insurance to cover very long or catastrophic care events.
- Maintain an emergency reserve separate from the care fund.
This approach reduces insurance costs while limiting the financial impact of an extended care need.
When self-funding makes the most sense
It may be a good fit if you:
- Have substantial retirement assets relative to your expected spending.
- Can absorb several hundred thousand dollars of unexpected expenses without jeopardizing your retirement.
- Prefer flexibility over paying ongoing insurance premiums.
- Have other sources of retirement income, such as pensions or guaranteed annuities.
If you’re comfortable sharing a few details, I can help estimate whether self-funding is realistic for your situation. Specifically:
- Your age (and spouse’s age, if applicable)
- Approximate investable assets
- Annual retirement spending
- State where you expect to retire
- Whether leaving an inheritance is an important goal”
Well, that is a different spin than what the other AI source provided. And, frankly, it is more comprehensive providing some decent foundational elements for a discussion. But, the same thing applies – it’s not the same as an in-person face-to-face planning conversation.
And, despite the information, it does not really provide suggestions or solutions.
Which leads me to this statement … YOU need to take charge of your clients (and other people’s clients) and lead a conversation toward planning for a long-term care event. Use your planning tools and if you don’t have them, reach out to my internal Kelley Hilliard and ask for the Planning for Care worksheet. She can be reached at (844) 623-4521or via email at kelleyhilliard.isp@oneamerica.com
Fridays with Fisher 
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