How Fixed Index Annuities Can Offset Healthcare Expenses

Fixed index annuities can offer valuable support when it comes to managing healthcare expenses in retirement—especially for potential long-term care needs. Many modern annuities now include a “wellness benefit,” which can provide increased income during periods of qualifying care.

If you require long-term care, your annuity payments may increase for a set period—sometimes even doubling your payouts. This additional income can help offset significant care expenses and provide a greater sense of financial stability.

These enhanced payments are typically available for a limited timeframe, such as five years (60 months), but the specifics will depend on your annuity contract. It’s important to review contract details and ask questions about the benefit structure.

How does this compare to traditional long-term care insurance? The table below summarizes some of the key differences between fixed index annuities with wellness benefits and standalone long-term care insurance policies:

Comparing Fixed Index Annuities and Long-Term Care Insurance

While both solutions can help manage long-term care costs, it’s important to know the potential pitfalls when selecting a wellness rider on an annuity:

Long-term care costs continue to rise. For perspective, here are the latest national averages:

2025 Long-Term Care Cost Snapshot

The table below outlines average 2025 long-term care costs nationwide. Your personal expenses may differ by region and provider, but these figures offer a useful benchmark for planning.

Source: Genworth Cost of Care Survey, 2025 estimates.

Long-Term Care Insurance vs. Rising Costs

Traditional long-term care insurance was designed to help cover these significant expenses. However, care costs have risen much faster than overall inflation, making these policies expensive for many people.

As premiums increased, more retirees let their policies lapse, and many are unable to qualify for new coverage due to health or underwriting restrictions.

Alternative Ways to Pay for Long-Term Care

Fortunately, there are other strategies to fund long-term care during retirement. Fixed index annuities with wellness riders, life insurance with accelerated benefits, and asset-based long-term care policies are all insurance-backed alternatives. Here, we focus on how fixed index annuities work in this role.

Understanding Wellness Benefits

A fixed index annuity with a wellness benefit can increase your income—sometimes doubling or tripling your regular payments—if you meet qualifying care requirements. Compared to traditional long-term care insurance, this benefit may be more affordable and accessible for some retirees.

Importantly, if you never use the wellness feature, your annuity’s other benefits—such as guaranteed lifetime income or a death benefit for your heirs—remain available. This flexibility helps protect your retirement dollars, whether or not long-term care is needed.

Using Wellness Benefits for Care Needs

Wellness benefits are not the same as traditional long-term care insurance. They enhance income when you qualify under specific contract terms, often requiring certain levels of care or facility stays. Some contracts allow increased payments for in-home care, while others are limited to nursing facilities.

It’s important to compare products and review contract language carefully. Not all wellness benefits work the same way, and eligibility criteria or payout terms can vary widely between insurers.

When the Wellness Benefit Ends

Enhanced income from a wellness benefit usually ends when either the contract value is fully paid out or a maximum time period (commonly two to five years) is reached. Afterward, payments revert to your original income level.

For example, if you purchase a $100,000 annuity paying $500 per month, qualifying for care could increase your payments to $1,000–$1,500 monthly for up to five years or until the value is exhausted. After that, your base monthly payout resumes for the rest of your life.

Planning for Future Care Expenses

While these annuities may not fully cover every long-term care scenario, they can help reduce your personal expenses and protect other assets.

Each contract has unique features and trade-offs—review wellness benefit details, payout options, and exclusions to ensure the annuity fits your overall retirement goals.

Along with support for care costs, fixed index annuities may offer guaranteed income, protection from market risk, and legacy benefits for your family. The right solution should be tailored to your specific needs and retirement strategy.

For additional clarity, here are answers to some of the most common questions about using annuities for long-term care:

One Final Thought

One significant advantage of fixed index annuities with wellness benefits is flexibility. If you never require long-term care, your annuity funds remain available to you, unlike traditional insurance where unused premiums are lost. This flexible approach helps many retirees manage uncertainty as their needs evolve.