November is Long-Term Care Awareness Month, making it a good time to think about one of the more difficult retirement planning questions: What happens financially if you or your spouse eventually need long-term care?

 

For Southern California Edison employees and retirees, the financial impact can be significant because long-term care expenses may come at a time when retirement income is already fixed and investment assets are being used to support everyday living.

 

Long-term care can include assistance at home, care in an assisted living community, memory care, or skilled nursing services. The cost and duration of care can vary widely, but the broader planning issue is the same: if a significant care need occurs, where will the money come from?

 

For some families, the answer may be personal savings and investments. Others may consider traditional long-term care insurance, life insurance or annuity-based strategies with long-term care benefits, or a combination of approaches.

 

The objective is not to predict whether you will need care. It is to understand how your retirement plan would respond if you did.

 

What Is Long-Term Care?

 

Long-term care generally refers to assistance needed when someone can no longer independently perform certain activities of daily living or experiences a qualifying cognitive impairment.

 

Care may be provided in several different settings, including:

 

• At home
• In an assisted living community
• In memory care
• In a skilled nursing facility

 

This is different from routine medical care.

 

Health insurance and Medicare may help with certain medical services, but they are not generally designed to cover all forms of extended custodial care over a long period.

 

That distinction is important because many retirees assume healthcare coverage will take care of most of these expenses. In reality, a long-term care event can create a very different financial challenge.

 

Key Question

If you or your spouse needed several years of care, how would those expenses be funded?

 

Long-Term Care Can Change a Retirement Plan Quickly

 

Retirement planning usually begins with expected expenses.

 

You estimate housing, food, travel, healthcare, taxes, and other lifestyle costs, then determine whether pension income, Social Security, retirement accounts, and investments can reasonably support those needs.

 

A long-term care event can disrupt that plan.

 

The financial impact may include:

 

• Additional monthly care expenses
• Larger withdrawals from retirement accounts
• Greater pressure on investment assets
• Increased taxable distributions
• Reduced assets available for a spouse
• Less money available for future goals or heirs

 

The issue is not simply the cost of care itself.

 

It is the ripple effect that those costs can have on the rest of the retirement plan.

 

The Financial Risk Is Often a Household Risk

 

Long-term care is rarely only about the person receiving care.

 

For married couples, one of the biggest concerns is what happens to the spouse who remains financially independent.

 

Imagine a household that has carefully structured retirement around pension income, Social Security, and investment withdrawals. If one spouse suddenly requires expensive care, a much larger portion of household assets may be redirected toward that need.

 

The surviving or healthy spouse still has normal living expenses.

 

That can include:

 

• Housing
• Utilities
• Food
• Transportation
• Insurance
• Healthcare
• Taxes

 

The challenge becomes supporting two different financial needs at the same time.

 

This is why long-term care planning often becomes a spouse-protection issue as much as a healthcare issue.

 

Key Question

If a significant portion of your assets had to be used for care, would your spouse still have enough resources to maintain his or her lifestyle?

 

What Assets Would You Use First?

 

If long-term care is needed, the money generally has to come from somewhere.

 

Potential sources may include:

 

• Cash reserves
• Taxable investment accounts
• 401(k) or IRA withdrawals
• Pension income
• Social Security
• Home equity
• Long-term care insurance benefits
• Life insurance or annuity benefits designed for qualifying care
• Other personal assets

 

Each source may have different consequences.

 

For example, taking larger withdrawals from traditional retirement accounts can increase taxable income.

 

Selling investments may create capital gains or reduce the amount of money remaining invested for future growth.

 

Using cash reserves may provide immediate flexibility, but those reserves may then be unavailable for other needs.

 

Home equity may represent a significant asset, but accessing it can involve separate financial and housing considerations.

 

The key is not simply knowing that assets exist. It is knowing which assets would be used and how that decision could affect the rest of the plan.

 

Can You Self-Fund Long-Term Care?

 

Some retirees choose to self-fund potential long-term care expenses.

 

That means relying primarily on personal savings and investments rather than transferring part of the risk to an insurance company.

 

For households with substantial financial resources, self-funding may be a reasonable strategy.

 

However, the analysis should go beyond asking whether you can technically afford care.

 

It may also be useful to ask:

 

• What would several years of care do to the investment portfolio?
• Would the surviving spouse remain financially secure?
• Would larger withdrawals create additional taxes?
• Would funding care affect legacy goals?
• Would you be comfortable using a significant portion of your assets for this purpose?

 

Having enough assets to pay for care does not automatically mean self-funding is the preferred strategy.

 

It simply means the household may have more options.

 

How Does Long-Term Care Insurance Fit In?

 

Traditional long-term care insurance is designed to help pay for qualifying care expenses, subject to the policy's terms, conditions, benefit limits, and eligibility requirements.

 

Policies may differ based on:

 

• Monthly or daily benefit amounts
• Benefit periods
• Elimination periods
• Inflation protection
• Types of covered care
• Premium structure
• Underwriting requirements

 

For some retirees, insurance may help protect a portion of retirement assets from a large care expense.

 

For others, premiums or underwriting requirements may make traditional coverage less attractive or unavailable.

 

The decision is not simply whether long-term care insurance is "worth it."

 

The better question is whether transferring some of the financial risk makes sense within the broader retirement plan.

 

Hybrid Life Insurance and Long-Term Care Strategies

 

Long-term care planning has evolved beyond traditional insurance.

 

Some life insurance policies may provide benefits for qualifying long-term care or chronic illness needs.

 

These products may allow the policyholder to access benefits during life under certain conditions while also potentially providing a death benefit if care is not needed or if benefits remain.

 

The structure, costs, guarantees, and limitations can vary substantially by product.

 

These strategies may appeal to individuals who want to address both long-term care risk and legacy planning, but they should be evaluated carefully and compared with other alternatives.

 

Annuities May Also Offer Long-Term Care Benefits

 

Certain annuity contracts may also offer enhanced benefits when qualifying long-term care is needed.

 

This can sometimes be relevant for retirees who already own an annuity and are considering whether that asset still serves its original purpose.

 

Depending on the circumstances, some individuals may evaluate whether an existing annuity could be repositioned into another annuity with long-term care features through an appropriate tax-qualified exchange.

 

This does not mean an annuity with long-term care benefits is automatically better than an existing contract.

 

Surrender charges, guarantees, income benefits, tax consequences, liquidity, carrier strength, and other factors should all be reviewed before making a change.

 

The broader point is that long-term care planning may involve more options than simply buying traditional long-term care insurance.

 

Taxes Can Make the Financial Impact Larger

 

The source used to pay for care can also influence taxes.

 

If a retiree needs to withdraw significantly more from a traditional IRA or 401(k), taxable income may increase.

 

That can potentially affect:

 

• Federal income taxes
• State income taxes
• Social Security taxation
• Medicare income-related premiums
• Other income-based tax calculations

 

This means the cost of care may not be limited to the amount paid to the care provider.

 

The method used to generate the money may have additional financial consequences.

 

That is another reason long-term care planning should be integrated with retirement income and tax planning.

 

Your Home May Be Part of the Conversation

 

For many retirees, the home is one of the largest assets on the household balance sheet.

 

If a long-term care event occurs, housing decisions may change.

 

A couple may no longer need the same home if one spouse enters a care facility. Someone receiving care may also prefer to remain at home, potentially requiring modifications or paid assistance.

 

Potential planning questions include:

 

• Is the home suitable for aging?
• Would renovations be needed?
• Could home equity become part of the funding strategy?
• Would downsizing eventually make sense?
• Is remaining close to family important?

 

Long-term care planning is therefore not only about insurance and investments.

 

Housing can become an important part of the conversation.

 

Family Members Often Become Part of the Plan

 

Long-term care can affect children and other family members even when the financial resources are available.

 

Family members may help with:

 

• Coordinating care
• Transportation
• Medical appointments
• Financial management
• Housing decisions
• Selecting care providers
• Managing insurance claims

 

In some families, adult children become caregivers themselves.

 

That can affect their work, income, family responsibilities, and emotional well-being.

 

Having conversations before a crisis occurs can help clarify expectations.

 

It may be useful for family members to understand:

 

• Your preferences for care
• Who should make healthcare decisions
• Who has financial power of attorney
• What resources are available
• Where important documents are located

 

The goal is not to predict exactly what will happen. It is to reduce uncertainty if help is eventually needed.

 

Long-Term Care Planning Is Also Estate Planning

 

Long-term care and estate planning are closely connected.

 

If care expenses significantly reduce retirement assets, the amount ultimately available to heirs may also change.

 

More importantly, incapacity planning becomes critical.

 

Estate planning documents may include:

 

• Durable financial powers of attorney
• Advance healthcare directives
• Trust provisions
• Instructions regarding financial management

 

These documents can help determine who has authority to act if someone is unable to manage his or her own financial or healthcare affairs.

 

For retirees, that can be just as important as determining who receives assets after death.

 

When Should You Start Thinking About Long-Term Care?

 

Waiting until care is needed may limit the available options.

 

Insurance products often involve health underwriting, and eligibility can change as health changes.

 

Planning earlier can provide more time to evaluate:

 

• Whether self-funding is reasonable
• Whether insurance deserves consideration
• Whether existing assets could be repositioned
• How much financial risk the household can absorb
• What type of care you would prefer
• How family members might be involved

 

There is no specific age when everyone should purchase long-term care insurance.

 

However, long-term care should generally become part of the retirement planning conversation before a crisis occurs.

 

Key Question

Do you have a plan for long-term care, or are you simply assuming you will deal with it if the need arises?

 

Common Long-Term Care Planning Mistakes

 

Assuming Medicare Will Pay for Everything

Medicare may help cover certain medical and skilled care services under specific circumstances, but it is not generally designed to fund extended custodial long-term care.

 

Waiting Until a Health Problem Occurs

Changes in health can affect insurance eligibility and available planning options.

 

Looking Only at Insurance Premiums

The cost of coverage matters, but it should be compared with the potential financial impact of self-funding care.

 

Assuming a Large Portfolio Solves the Problem

Even households with significant assets should understand how a prolonged care event could affect a spouse, taxes, and legacy goals.

 

Ignoring the Family Impact

Long-term care can create emotional, logistical, and financial responsibilities for spouses and adult children.

 

Treating Long-Term Care as a Separate Issue

Care planning should generally be coordinated with retirement income, taxes, investments, insurance, estate planning, and housing.

 

A Long-Term Care Planning Checklist for SCE Employees and Retirees

 

As you review your retirement plan, consider whether you have discussed:

 

• Where you would prefer to receive care
• How care would be funded
• Whether self-funding is realistic
• Whether long-term care insurance should be evaluated
• Whether life insurance or annuity-based strategies are relevant
• How a care event could affect your spouse
• Which assets would be used first
• Potential tax consequences of larger withdrawals
• Whether your home is appropriate for aging
• Who would make healthcare decisions
• Who would manage finances if you became incapacitated
• Whether family members understand your wishes
• Whether estate planning documents are current

 

You may not need every strategy.

 

The important step is having a plan.

 

Key Takeaways

November's Long-Term Care Awareness Month provides a useful reminder that long-term care is both a healthcare issue and a financial planning issue.

 

For Southern California Edison employees and retirees, an extended care event could increase retirement expenses, accelerate withdrawals from investment accounts, increase taxes, reduce assets available to a spouse, and change estate planning objectives.

 

Potential funding strategies may include self-funding, traditional long-term care insurance, certain life insurance or annuity-based approaches, or a combination of resources.

There is no universal answer.

 

The appropriate strategy depends on health, age, available assets, income needs, family circumstances, risk tolerance, and personal preferences.

 

The most important question is whether your retirement plan has considered what would happen financially if care is eventually needed.

 

Frequently Asked Questions

 

What happens financially if I need long-term care?

Long-term care expenses may require additional withdrawals from savings, investments, retirement accounts, home equity, insurance benefits, or other resources. Those decisions can affect taxes, retirement income, a spouse's financial security, and estate planning.

 

Does Medicare cover long-term care?

Medicare may cover certain skilled care under specific circumstances, but it generally does not provide comprehensive coverage for extended custodial long-term care.

 

Should I buy long-term care insurance?

Long-term care insurance may be appropriate for some individuals, but not everyone. The decision depends on health, age, financial resources, family circumstances, coverage terms, and planning objectives.

 

Can I self-fund long-term care?

Some retirees choose to self-fund care using personal assets. The analysis should consider not only whether enough money is available, but also how a prolonged care event could affect a spouse, taxes, investments, and legacy goals.

 

Can life insurance help pay for long-term care?

Certain life insurance policies may include benefits that can be accessed for qualifying long-term care or chronic illness needs. Policy provisions and eligibility requirements vary.

 

Can an annuity provide long-term care benefits?

Certain annuities may offer enhanced benefits for qualifying long-term care expenses. Existing annuity owners may also have planning options depending on the contract and individual circumstances.

 

Final Thoughts

 

Long-term care is one of the more difficult retirement risks to plan for because no one knows whether care will be needed, how long it might last, or what it may ultimately cost.

That uncertainty does not mean it should be ignored.

 

At Guardian Financial Partners, we believe long-term care planning should be considered alongside retirement income, investments, taxes, insurance, housing, and estate planning.

 

For Southern California Edison employees and retirees, the goal is not simply to determine how care could be paid for. It is to understand how a long-term care event could affect the entire household and whether steps can be taken today to create greater flexibility later.

 

A thoughtful plan can help you prepare for the unexpected while working to preserve your assets and protect your lifestyle.

 

 

About the Author

 

Casey S. Bartels, CFP® is a Founding Partner of Guardian Financial Partners. Since 2007, Casey and his partners have worked with Southern California Edison employees and executives, helping them navigate retirement planning, pension decisions, long-term care considerations, and other important financial decisions.

 

Educating Edison is our educational series designed to help Southern California Edison employees better navigate their financial lives.

 

Guardian Financial Partners is not affiliated with, endorsed by, or sponsored by Southern California Edison. The content presented in the Educating Edison series is for educational purposes only and is not intended as individualized investment, tax, legal, insurance, or retirement advice. Insurance and annuity products are subject to policy terms, eligibility requirements, limitations, exclusions, charges, and the claims-paying ability of the issuing insurance company. Individuals should consult appropriate financial, tax, legal, and insurance professionals regarding their specific circumstances.