When you think about retirement planning, the idea is to build a nest egg to draw from during your senior years. You can devote time to hobbies as you cross things off your bucket list and spend quality time with family and friends. This is well and good, but from an elder law perspective, you should certainly consider long-term care costs when you are looking toward the future.
Let’s examine the relevant facts before we share some eye-opening projections about 2025 long-term care costs.
Putting Longevity in Perspective
When you see the 78-year life expectancy for all people, the calculations include people that pass away at all ages, including children and very young adults. This is going to impact the overall average in a way that is somewhat deceiving.
If you confine the data to people that have already reached an advanced age, the longevity expectation increases. A 67-year-old woman has a life expectancy of 87 years, and it is 85 years for a man of the same age.
Putting this into perspective, if you think you will live long enough to collect your full Social Security benefit, you are likely to live into your mid-eighties.
Long-Term Care
United States Department of Health and Human Services tells us that over half of senior citizens will need paid long-term care eventually. About 35 percent of these folks will spend times in nursing homes.
Even if you have been relatively healthy throughout your life, once you hit your 80s, things can change considerably. There is a very good chance that you will need help with your activities of daily living according to the statistics.
Medicare Coverage
A lot of people read the above and have no concerns about the costs because they will qualify for Medicare. Since most senior citizens will need long-term care, and Medicare is designed to meet the healthcare needs of seniors, this is a logical assumption.
Unfortunately, logic does not hold sway here. Medicare does not pay for assistance that is deemed to be “custodial care” rather than medical care. If you need help with your everyday activities, you would be receiving custodial care.
So, a stay in a nursing home is not covered by Medicare. The same dynamic applies to the costs associated with an in-home health aide.
Projected 2025 Long-Term Care Costs in Warren, New Jersey
Genworth Financial is a company that sells financial products for senior citizens. Since this is their demographic, they compile statistics concerning the state of long-term care costs around the country.
Traditionally, they released figures on a year-by-year basis. Now, they are making projections into the future based on the data they have compiled.
We practice in Warren, New Jersey, so we’ll focus on the figures for our community. They are estimating a median cost of $172,317 for a year at a private room in a nursing home next year. Ten years down the road in 2035, you’re looking at about $230,000.
The estimated 2025 median annual charge for an in-home health aide is $82,530. Just over half of people that need paid long-term care receive assistance for more than a year, and 13 percent incur the expenses for five years or more.
Nursing Home Asset Protection
If you had to pay long-term care costs out of pocket, they could consume your legacy. Fortunately, there is a solution that an elder law attorney can help you implement if you act in advance.
Medicaid Eligibility
Medicaid is another government run health insurance program that does pay for long-term care. Since this is a need-based benefit, you cannot qualify if you have more than $2,000 in countable assets.
These are the assets that are not countable in a Medicaid eligibility context:
- Your home
- One motor vehicle used for transportation
- Wedding and engagement rings and heirloom jewelry
- Household items
- Personal effects
- $1,500 saved for final expenses
- $1,500 of whole life insurance
- Unlimited term life insurance
With regard to your place of residence, you can potentially qualify as a homeowner, but there is a $1.017 million equity limit in New Jersey in 2024.
That’s the good news, and here’s the bad news: there is a Medicaid estate recovery mandate. If a home is in your direct possession at the time of your passing, the program can place a lien on the property.
Irrevocable-Income Only Medicaid Trust
How do you qualify for Medicaid if you have assets? You could convey resources into an irrevocable, income only Medicaid trust.
Many seniors rely on income that is generated by their savings. They have no intention of spending the money that is generating the income. When you create this type of trust, you can continue to receive the same income, though you would not be able to touch the principal.
You could also convey your home into the trust. Everything would remain the same with regard to your ability to live in the home as usual. After your passing, the home would be protected from Medicaid estate recovery because you would not be the owner. It would belong to the trust.
Advance planning is the key to the successful execution of this strategy. There is a five-year Medicaid look-back period. If you transfer assets out of your name for less than fair market value, you are ineligible for a period of five years.
Schedule a Consultation Today!
When you work with our firm, we can help you create a plan that will protect your assets from potentially devastating long-term care costs. It will culminate in the effective passing of your legacy to your heirs.
To set the wheels in motion, call our Warren, NJ elder law office at 908-222-8803 or send us a message through our contact page.
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