How to Model Long Term Care in ProjectionLab: Probabilities, Costs and the Three Scenarios You Need to Run

Most ProjectionLab users have stress tested their portfolio against market crashes, optimized their Roth conversions and feel good about their probability of success. Then they skip the one scenario most likely to blow it up. Long term care is the largest uninsured financial risk most households carry into retirement and the odds are higher than you think, the costs are more nuanced than the headlines suggest and almost nobody is modeling it correctly. This article explains how to go about modeling long term care in ProjectionLab.

What Are the Odds?

The probability of needing long term care is higher than most people expect and varies significantly depending on whether you are single or married.

For a Single Person

According to the American Association for Long Term Care Insurance 2024 report:

Demographic	Probability	Average Duration
Women	51%	3.2 years
Men	39%	2.3 years

For a Couple

Being married actually reduces your probability of needing paid care. Married people have a 43% probability of needing paid long term care compared to 51% for single women. The reason is straightforward. Spouses take care of each other first.

But here is the number that matters most for couple's planning. The probability that at least one spouse in a married couple will need paid long term care is almost 70%.

The math: 1 - (1 - 0.43) x (1 - 0.43) = 67.5%

How Long Does Care Actually Last?

Duration is where most people get LTC planning wrong in both directions. The distinction between average and median matters enormously here.

The Overall Picture

According to the AALTCI 2024 report:

Duration	Percentage of People
No paid care needed	52.7%
Less than 1 year	19.7%
1 to 2 years	8.3%
2 to 5 years	12.4%
5 years or longer	6.8%

Roughly half of people never need paid care at all. Of those who do the majority need it for less than two years. Planning for a decade of nursing home costs for everyone is as much a mistake as planning for nothing.

By Type of Care

Care Type	Median Stay
Nursing home	5 months median / 13.7 months average
Assisted living	21 months median
Home care	Varies widely

The gap between median and average in nursing home stays is significant. More than half of nursing home residents pass away within six months of admission. A smaller number stay for years and pull the average up. That is the long tail worth stress testing even if it is not the most likely outcome.

For Women Specifically

The share of women needing at least five years of paid care is 26%. Over 70% of nursing home residents are women. And women outlive men by an average of five to seven years meaning they face their care journey alone more often than not. A woman who outlives her husband by five years and then needs three to four years of paid care is not an edge case. It is statistically one of the most likely outcomes for a married couple.

The Long Tail

According to JRC Insurance Group the longest recorded period of paid long term care for a male was 18 years and 8 months. For a female it was 22 years and 8 months. The largest single claim paid for a male was $2,647,545 and for a female $5,316,215. These are outliers. But they illustrate why the long tail matters.

Duration Assumptions for Your Three Scenarios

Scenario	Single Person	First Spouse	Surviving Spouse
Base case	2 years	1 year paid	2 to 3 years
Moderate case	3 to 4 years	2 years paid	3 to 4 years
Worst case	7 to 10 years	3 years paid	5 to 7 years

What Does It Actually Cost?

National averages are a useful starting point but dangerously misleading for retirement planning. A nursing home in Texas costs roughly $79,000 per year. The same care in Alaska costs over $333,000. Planning with a national average when you intend to retire in a specific city is like using the average US temperature to decide what to wear in Phoenix in July.

Use CareScout for Your Local Market

CareScout publishes annual median cost of care data by metropolitan area. It is the most reliable and current source available and it is free. Before building your ProjectionLab model go to carescout.com and pull the data for your specific market.

The National Median as a Fallback

If you are not yet sure where you will retire here are the 2025 national median costs:

Care Type	Annual National Median
Adult Day Care	$26,000
Home Health Aide	$80,080
Assisted Living	$74,400
Nursing Home Semi-Private	$114,975
Nursing Home Private Room	$129,575

What Inflation Rate Should You Use?

ProjectionLab allows you to inflate specific expense categories above or below your base plan inflation rate. The question is what premium to use for long term care.

The Case for +0.7%

According to the Bureau of Labor Statistics the Nursing Homes and Adult Day Services component of the Consumer Price Index grew at 3.4% per year from 2014 to 2024 compared to 2.7% for general consumer inflation — a premium of approximately 0.7% per year. If you believe the recent acceleration in care costs was largely pandemic driven and will normalize then +0.7% over your base plan inflation is the most historically defensible assumption.

The Case for +2%

According to AARP median long term care costs increased nearly 50% from 2019 to 2024 for home care and assisted living while household income for those 65 and older grew only 22%. The single biggest driver is labor. Staffing consumes more than half of provider operating budgets and the demographic math — more aging Americans, fewer working age caregivers — makes this structural rather than temporary. If you believe workforce shortages in care will persist over the next 20 to 30 years a +2% premium is the more prudent planning assumption.

Our Recommendation

Use +2% as your base case. The difference over a long care duration is material and there is data to support the more conservative assumption. Make sure, when you input your LT care costs into ProjectionLab, you select Grow from Today under starting amount to account for LTC inflation until the expense starts!

The Expense Offset: Why the Gross Cost Overstates Your Real Exposure

Every LTC article leads with the gross cost of care. Those numbers are real. But they ignore two things that meaningfully reduce the actual financial impact:

the natural decline in retirement spending as people age, and
the household expenses that disappear when someone enters a care facility.

Step 1 — The Spending Smile Adjustment

Michael Kitces (planning guru) and others have documented the retirement spending smile, a pattern where real spending declines through the middle years of retirement before rising again due to care costs in the final years. The Bureau of Labor Statistics Consumer Expenditure Survey consistently confirms this. The research supports a real spending decline of approximately 1.5% per year starting at age 75. What drives this decline? By the mid 70s most retirees are naturally spending less on:

Category	Why It Declines
Travel and vacations	Energy and mobility reduce long distance travel
Dining out	Less frequent as social activity slows
Entertainment and hobbies	Physical limitations reduce activity
Clothing and personal shopping	Lifestyle simplifies naturally
Second vehicle costs	One spouse may stop driving
Home projects and improvements	Less interest and physical capacity

How to Model This in ProjectionLab

Find your baseline living expense line and change the inflation rate to your general plan inflation rate minus 1.5% starting at age 75. This single adjustment runs automatically through the rest of the plan.

What This Looks Like in Real Numbers

If your household spending at age 75 is $80,000 per year:

Age	Spending at 1.5% Real Decline	Cumulative Reduction
75	$80,000	Baseline
78	$76,542	-$3,458
80	$74,276	-$5,724
83	$70,600	-$9,400
85	$68,538	-$11,462

By age 83 when a care event commonly begins the household is already spending $9,400 less per year than at 75. That happens before any facility costs enter the picture.

Step 2 — The Facility Specific Offset

When someone enters assisted living or a nursing home the facility takes over a specific set of daily living costs. The spending smile has already captured the natural decline in discretionary spending. Step 2 captures the household costs the facility replaces.

Before building your scenarios go through your retirement budget line by line and ask: if one or both of us were in a facility would we still be paying this?

For a couple the fixed costs of running the household continue almost unchanged for the remaining spouse. Only the personal costs specifically attributable to the spouse in the facility fall off:

Personal Cost That Falls Off — One Spouse in Facility	Annual Amount
Groceries and personal food	$3,000 to $4,000
Clothing and personal care	$500 to $1,000
Transportation and gas	$2,000 to $3,000
Phone	$600 to $900
Personal subscriptions	$300 to $600
Out of pocket medical at home	$500 to $1,500
Total realistic offset	$7,000 to $11,000

Do not reduce fixed household costs like mortgage, utilities, home maintenance or property taxes. These continue unchanged for the remaining spouse.

For a single person the story is very different. The entire household infrastructure disappears:

Personal Cost That Falls Off — Single Person in Facility	Annual Amount
Groceries and personal food	$6,000 to $8,000
Clothing and personal care	$1,000 to $2,000
Transportation and gas	$3,000 to $5,000
Phone	$600 to $1,200
Personal subscriptions	$600 to $1,200
Out of pocket medical at home	$1,000 to $2,500
Home utilities	$3,600 to $5,400
Home maintenance and repairs	$2,000 to $4,000
Lawn care and housekeeping	$1,200 to $3,000
Total realistic offset	$19,000 to $32,300

If the home is sold the offset grows even larger as housing costs disappear entirely.

A Couples Example — Phoenix 2025 CareScout Data

Baseline household spending at age 75: $80,000. After spending smile adjustment to age 83: $80,000 x (1.5% real decline for 8 years) = approximately $70,600.

After one spouse enters assisted living at age 83:

Line Item	Amount (Real Dollars)
Household spending at age 83	$70,600
Add: Phoenix Assisted Living gross cost	$72,000
Less: Husband personal costs offset	($10,000)
Total Household Spending	$132,000
Net increase over age 75 baseline of $80,000	$52,000 per year

The actual financial impact to the plan is $52,000 per year. Not the headline $72,000. The spending smile reduced baseline spending by $9,400 and the facility specific offset removes another $10,000 in costs the facility now covers.

For in-home care, a facility offset is going to be much less. Probably only $3,000 to $5,000 per year, but run your numbers! The spending smile adjustment still applies regardless of care type.

The Three Scenarios

Now that you have the framework, probabilities, durations, costs, inflation and the expense offset, it is time to build the actual scenarios. Run all three. The value of ProjectionLab is seeing the full range of outcomes and understanding what your plan can and cannot survive.

Scenario 1 — The Common Path

One spouse develops care needs in their early 80s. The other steps in as primary caregiver before professional care becomes necessary. The care journey is relatively contained and neither spouse requires nursing home level care.

The husband begins needing help at age 82. His wife manages his care at home for about a year. At age 83 his needs exceed what she can manage and he transitions to assisted living. He spends two years there before passing at age 85. His wife continues independently until age 88 when she moves into assisted living and spends three years there before passing at age 91. She never requires a nursing home.

Total net LTC cost in today's dollars: approximately $267,000.

Event	Care Type	Ages	Who
Husband early needs	Unpaid spousal care	82 to 83	Husband
Husband paid care	Assisted Living	83 to 85	Husband
Husband passes	Income reduction	Age 85	Reduce SS to wife only
Wife paid care	Assisted Living	88 to 91	Wife

What success looks like: your probability of success should not drop more than 5 to 10 percentage points from your baseline plan. If it drops more than that your plan needs attention even in the most likely scenario.

Scenario 2 — The Moderate Path

One spouse requires a full progression through care levels. The surviving spouse faces her own extended journey and the two events overlap for a period creating simultaneous care costs.

The husband begins needing meaningful help at age 80. His wife provides primary care at home for two years before he moves into assisted living at age 82. Two years later he transitions to a nursing home at age 84 and passes at age 87. Meanwhile his wife begins needing assisted living herself at age 85 — two years before her husband passes. For two years both spouses are in paid care simultaneously at a combined net cost of approximately $126,000 per year. After her husband passes she continues in assisted living for three more years before moving to a nursing home at age 90 where she spends four years before passing at age 94.

Total net LTC cost in today's dollars: approximately $850,000.

Event	Care Type	Ages	Who
Husband early needs	Unpaid spousal care	80 to 82	Husband
Husband paid care	Assisted Living	82 to 84	Husband
Husband nursing home	Nursing Home	84 to 87	Husband
Wife paid care begins	Assisted Living	85 to 90	Wife
Overlap period	Both in paid care	85 to 87	Both
Husband passes	Income reduction	Age 87	Reduce SS to wife only
Wife nursing home	Nursing Home	90 to 94	Wife

What success looks like: your probability of success will drop more noticeably here — perhaps 10 to 20 percentage points from baseline. Most planners consider 70% to 80% an acceptable floor. If the moderate case drops you below that you have a gap that needs to be addressed.

Scenario 3 — The Long Tail

Extended care needs driven by cognitive decline push both spouses through the full spectrum of care over many years. This is not the most likely outcome but it is the scenario that can most decisively derail a retirement plan. The average lifetime cost of care for an individual with dementia is $405,262 according to JRC Insurance Group.

The husband is diagnosed with early stage dementia at age 76. His wife provides care at home for three years before he moves to a memory care assisted living facility at age 79 where he spends three years. He transitions to a nursing home at age 82 and passes at age 87 after five years of nursing home care. His wife — exhausted by over a decade of caregiving — begins needing care herself within a year of his passing. She spends two years in assisted living before transitioning to a nursing home at age 90 where she lives four years before passing at age 94.

Total net LTC cost in today's dollars: approximately $1,400,000.

Event	Care Type	Ages	Who
Husband early dementia	Unpaid spousal care	76 to 79	Husband
Husband memory care	Assisted Living	79 to 82	Husband
Husband nursing home	Nursing Home	82 to 87	Husband
Husband passes	Income reduction	Age 87	Reduce SS to wife only
Wife paid care begins	Assisted Living	88 to 90	Wife
Wife nursing home	Nursing Home	90 to 94	Wife

What success looks like: your plan will show significant stress here. A probability of success in the 50% to 65% range is not necessarily cause for alarm — this is the tail risk scenario not the expected outcome. What you are looking for is whether the plan survives at all and how quickly the portfolio depletes. If the worst case scenario wipes out the portfolio by age 82 you have a meaningful gap. If it depletes by age 92 or 93 that is a very different and more manageable planning problem.

The Three Scenarios — Complete Model

Assumptions: both spouses currently age 65. Plan runs to age 95. National median 2025 CareScout costs used — replace with your local market data. All LTC expenses inflate at Base + 2%. Spending smile adjustment: Base - 1.5% on primary living expenses from age 75.

Scenario	Line Item	Start Age	End Age	Years Before LE	Gross Annual Cost	Expense Offset	Net Annual Cost	Inflation	Note
1	Living Expenses	75	End of plan	—	Existing	—	Base - 1.5%	Spending smile	Set once
1	Assisted Living Husband	83	85	2 to 0	$72,000	$9,000	$63,000	Base + 2%
1	⚠️ Husband passes	85	—	0	—	—	—	—	Stop AL. Reduce SS to wife only
1	Assisted Living Wife	88	91	3 to 0	$72,000	$25,000	$47,000	Base + 2%	Wife now single
1	⚠️ Wife passes	91	—	0	—	—	—	—	Stop AL. End of plan
2	Living Expenses	75	End of plan	—	Existing	—	Base - 1.5%	Spending smile	Set once
2	Assisted Living Husband	82	84	5 to 3	$72,000	$9,000	$63,000	Base + 2%
2	⚠️ Transition to nursing home	84	—	3	—	—	—	—	Stop AL. Start NH
2	Nursing Home Husband	84	87	3 to 0	$129,575	$9,000	$120,575	Base + 2%
2	⚠️ Husband passes	87	—	0	—	—	—	—	Stop NH. Reduce SS to wife only
2	Assisted Living Wife — couples phase	85	87	9 to 7	$72,000	$9,000	$63,000	Base + 2%	Husband still alive
2	⚠️ Husband passes — wife now single	87	—	7	—	—	—	—	Offset increases to single rate
2	Assisted Living Wife — single phase	87	90	7 to 4	$72,000	$25,000	$47,000	Base + 2%	Wife now single
2	⚠️ Transition to nursing home	90	—	4	—	—	—	—	Stop AL. Start NH
2	Nursing Home Wife	90	94	4 to 0	$129,575	$25,000	$104,575	Base + 2%
2	⚠️ Wife passes	94	—	0	—	—	—	—	Stop NH. End of plan
3	Living Expenses	75	End of plan	—	Existing	—	Base - 1.5%	Spending smile	Set once
3	Assisted Living Husband	79	82	8 to 5	$72,000	$9,000	$63,000	Base + 2%
3	⚠️ Transition to nursing home	82	—	5	—	—	—	—	Stop AL. Start NH
3	Nursing Home Husband	82	87	5 to 0	$129,575	$9,000	$120,575	Base + 2%
3	⚠️ Husband passes	87	—	0	—	—	—	—	Stop NH. Reduce SS to wife only
3	Assisted Living Wife — couples phase	85	87	9 to 7	$72,000	$9,000	$63,000	Base + 2%	Husband still alive
3	⚠️ Husband passes — wife now single	87	—	7	—	—	—	—	Offset increases to single rate
3	Assisted Living Wife — single phase	87	90	7 to 4	$72,000	$25,000	$47,000	Base + 2%	Wife now single
3	⚠️ Transition to nursing home	90	—	4	—	—	—	—	Stop AL. Start NH
3	Nursing Home Wife	90	94	4 to 0	$129,575	$25,000	$104,575	Base + 2%
3	⚠️ Wife passes	94	—	0	—	—	—	—	Stop NH. End of plan

Key Differences Between Scenarios

	Scenario 1	Scenario 2	Scenario 3
Husband first paid care age	83	82	79
Husband care types	AL	AL + NH	AL + NH
Wife first paid care age	88	85	85
Wife care types	AL	AL + NH	AL + NH
Overlap period	None	2 years	2 years
Total net LTC cost today's dollars (inflate at 2% for your time horizon)	~$267,000	~$850,000	~$1,400,000
Inflation rate	Base + 2%	Base + 2%	Base + 2%
Expected probability impact	-5 to -10%	-10 to -20%	-20 to -35%

What Probability of Success Should You Accept?

Most people assume higher is always better. But a 100% probability of success is not a planning triumph, it means you are significantly underspending and will die with far more money than you ever needed! Expect a future article on evaluating your probability of success from a Monte Carlo simulation.

The right threshold depends on your flexibility to adjust spending, whether you review your plan regularly and the nature of the scenario. A baseline plan should be held to a higher standard than a tail risk scenario.

Scenario	Recommended Floor	Why
Baseline — no LTC	85% to 90%	Your starting point. You need room to absorb stress.
Scenario 1 Common Path	80% to 85%	This is a typical acceptable range for most financial planners.
Scenario 2 Moderate Path	75%	Acceptable for an above average LTC expense.
Scenario 3 Long Tail	65%	The stress test. See below.

A Closer Look at the Long Tail Number

65% probability of success on the long tail scenario sounds alarming. It should not be read that way in isolation. The long tail scenario itself has maybe a 10% to 15% probability of occurring. A 65% probability of success on a scenario that only happens 10% to 15% of the time means your combined probability of that scenario occurring and your plan failing is approximately 35% x 12.5% = approximately 4%. You have roughly a 4% chance of experiencing the long tail and having your plan fail. That is a far more reassuring number.

Kitces makes exactly this point. A 90% probability of success on a 30 year plan for a 65 year old couple is actually closer to 98% when you account for the low probability of both spouses living to the end of the plan period. The raw Monte Carlo number consistently overstates the risk.

According to Vanguard's 2024 How America Saves report 78% of retirees make at least one spending adjustment in the first five years of retirement. A plan at 65% probability is not a plan that fails. It is a plan that requires adjustment. And most retirees are already adjusting naturally.

But 65% Is Not Always Acceptable

A 65% probability of success where failures cluster at age 92 to 94 is very different from one where failures occur at age 78 to 82. If the plan is failing early, while the surviving spouse still has decades of life ahead, that is a serious problem regardless of the probability number. ProjectionLab's Monte Carlo output shows this distribution. Look at it carefully.

Before accepting any probability below your floor identify the spending adjustment that would bring it back up. If reducing discretionary spending by $10,000 to $15,000 per year moves Scenario 3 from 65% to 75% that is your guardrail. Know the number before you need it.

What a Gap Actually Means

If any scenario drops below your floor do not panic. A gap tells you one or more of the following: you need a larger portfolio before retiring, you need to reduce baseline spending to create more buffer, LTC insurance might make economic sense, a CCRC could convert open ended care risk into a predictable known cost, or you need a guardrails strategy with a pre-defined spending adjustment.

Scenario	Probability Floor	Acceptable If	Not Acceptable If
Baseline	85% to 90%	Failures late in plan	Failures in early retirement
Scenario 1	80% to 85%	Spending flexibility exists	Fixed expenses dominate
Scenario 2	70% to 80%	Guardrails in place	No adjustment capacity
Scenario 3	60% to 70%	Failures late in plan AND spending flexibility exists	Failures in 70s or 80s

The Shortcut — You Don't Have to Build the Perfect Model

Everything in this article represents the most complete way to model long term care in ProjectionLab. But a rough model built today is worth infinitely more than a perfect model you never get around to building. If you want to stress test your plan quickly simply add a single net expense line for each care event using a round number estimate over a fixed time period.

Situation	Net Annual Estimate
Single person — Assisted Living	$50,000
Single person — Nursing Home	$100,000
Couple — one spouse Assisted Living	$65,000
Couple — one spouse Nursing Home	$120,000
Couple — both in care simultaneously	$130,000

Run It Three Times

Scenario	Start Age	Duration	Net Annual Cost
Scenario 1 Common Path	Adjust for:	2 to 3 years	$65,000 couple / $50,000 single
Scenario 2 Moderate Path	Adjust for:	5 to 7 years	$90,000 couple / $75,000 single
Scenario 3 Long Tail	Adjust for:	10 to 12 years	$110,000 couple / $90,000 single

Start with the shortcut. If it reveals a meaningful gap build the full model to understand exactly where the stress is coming from.

The Bottom Line

Long term care is the largest uninsured financial risk most households carry into retirement. The data shows roughly a 70% chance that at least one spouse in a married couple will need paid long term care. The costs are real and they inflate faster than general prices. The surviving spouse faces her own full care journey alone with a reduced income base. That is where the real financial exposure lives for most couples.

But it is a manageable risk when you model it honestly. The expense offset reduces the net cost significantly. The spending smile has already reduced your baseline spending before care begins. Married people have shorter paid care durations because spouses provide care first. And the long tail scenario, while frightening, only has only a 10% to 15% probability of occurring with a combined probability of occurring and derailing your plan of around 4%.

ProjectionLab gives you the tools to see exactly what your plan can and cannot survive. Build the shortcut version today. Refine it over time. Review it annually as care costs and your own health picture evolve.