Care Costs Are Outrunning Retirement Income

Long-term care is one of the largest retirement costs that Medicare generally does not cover, and it is getting more expensive faster than the incomes meant to pay for it. A report from the AARP Public Policy Institute finds that median long-term care costs rose sharply from 2019 to 2024, while household income for adults 65 and older grew far more slowly. Newer price data shows the gap is still widening.

What Care Costs Now

AARP’s analysis shows how quickly prices moved over five years. Home care and assisted living led the increase at nearly 50%, adult day services rose 33%, and nursing home costs rose 25%. Household income for those 65 and older rose 22% over the same period.

Item	Change, 2019 to 2024
Home care and assisted living	Nearly 50%
Adult day services	33%
Nursing home care	25%
Household income, ages 65 and older	22%

The latest inflation figures from the Bureau of Labor Statistics point the same direction. Between May 2025 and May 2026, home care costs rose 7.9% and nursing home costs rose 4.6%. Since 2021, home care prices are up 39%, compared with 27% for services in general and 26% for day care and preschool. AARP points to two main drivers: rising hourly wages for care workers and more intensive care needs, which mean more hours of care.

What That Looks Like in Dollars

Drawing on the Genworth/CareScout Cost of Care Survey, AARP puts adult day services at about $26,000 a year and a private nursing home room at nearly $128,000 a year. The median hourly rate for home care in 2025 was about $35. At 30 hours a week, that works out to roughly $51,480 a year, more than twice the average annual Social Security benefit of roughly $23,700. A 7.9% rise in the hourly rate, to about $38, adds roughly $4,600 a year at that level of care. Assisted living and nursing home costs both exceed the typical older adult’s annual income, and nursing home care is expensive in nearly every state.

Set against income, the numbers are stark. AARP puts median household income for adults 65 and older at about $60,000 a year, and median financial assets for households 75 and older at about $50,000. About 60% of households headed by someone 65 or older include more than one person, so heavy care costs can leave less for a spouse or partner.

Location matters too. Home care tends to be pricier in wealthier states, though higher local incomes can offset that for some households. In the most expensive states, including Maine, West Virginia, and Oregon, care can cost twice as much as in the least expensive, such as Louisiana, Maryland, Utah, and Texas.

Who Pays and How

The need is common. An analysis by the Department of Health and Human Services, cited by AARP, expects 56% of adults who turned 65 between 2021 and 2025 to need long-term services and supports at some point. When costs climb, families fill the gap. Many rely on unpaid family caregivers, whose work was valued at more than $1 trillion in 2024. Those caregivers often reduce their work hours or leave jobs, which can cost them income, savings, and retirement security of their own.

Few households plan for long-term care costs ahead of time. Some sit in a difficult spot, earning too much to qualify for Medicaid but not enough to keep pace with the bills. Many also assume Medicare will cover long-term care, and it generally does not. As AARP’s Alan Weil put it, “long-term care costs have surged since 2019, outpacing typical incomes.”

Where an Optional Rider Fits

Because care costs arrive as a steady, ongoing expense, some retirees look at how their income could rise when care is needed. Certain annuities offer an optional add-on, called a rider, that increases income after a qualifying event. Insurer educational materials describe qualifying events such as an injury, a chronic or terminal illness diagnosis, or loss of cognitive ability, verified by a doctor. Once verified, payments rise for a specified period, and the size of the increase is set by a multiplier chosen at purchase. A multiplier of two, for example, means the income amount is doubled while the benefit is active.

Timing is part of the design. A rider is usually selected when the annuity is purchased, which makes care a decision to weigh early rather than after a health event.

Here is a hypothetical example with round numbers, not a rate or a product. Suppose an annuity pays $2,000 a month, and a verified qualifying event doubles that to $4,000 a month for a set period. Over a year, $4,000 a month is $48,000. For context, the median home care figure above is about $51,480 a year for 30 hours a week. The comparison shows how a higher monthly amount lines up against a typical cost of care.

Matching Income to a Recurring Cost

Care expenses behave like other recurring retirement costs. They arrive month after month, and they tend to rise with the years. That is why planning for them starts with income, not just savings: how much steady income arrives each month, how much of it is already committed to housing, food, and health premiums, and how much flexibility remains if care becomes part of the picture.

A few questions help frame it:

• How much steady income arrives each month, and which expenses does it already cover?
• Which of those expenses would change if one spouse needed daily help?
• Who would provide care first, and what would that cost in time, work hours, or savings?
• Does the income plan include a way to raise monthly income if care begins?

The AARP findings put numbers behind a question many households ask only after a health event. Care costs have outgrown incomes, Medicare does not close the gap, and families are paying through savings and personal time. Asking it earlier gives more options.

Source: AARP Public Policy Institute. Read the original report.

Annuity rider information: an insurer’s educational page on annuities and long-term care.