How Nursing Home Costs in New Jersey and New York Can Drain Retirement Savings

In New Jersey and New York, long-term care costs can be high enough to drain retirement savings faster than families expect.

Planning for retirement often focuses on investment returns, Social Security timing, and lifestyle goals.

What receives far less attention is long-term care.

Research from the Center for Retirement Research at Boston College shows that the plans many households believe will protect them from long-term care costs often do not match what actually happens in retirement.

The gap between expectation and reality can have serious financial consequences.

The Long-Term Care Risk Most People Underestimate

Long-term care includes assistance with everyday activities such as bathing, dressing, mobility, and supervision.

These services may be provided in the home, in assisted living communities, or in nursing homes. When care becomes necessary, it can last for years.

Yet surveys consistently show that households underestimate both the likelihood of needing care and the cost associated with it.

For example, recent estimates show median annual costs around:

• $116,800 for a private nursing home room
• $75,500 for home health aides
• $64,200 for assisted living

When care continues over multiple years, these costs can reshape retirement finances quickly.

Why Many Retirement Plans Assume Medicaid Will Help

One of the most common backup plans households cite is Medicaid.

In a survey of adults approaching retirement, about 60 percent said they would rely on spending down assets to qualify for Medicaid if long-term care costs became unaffordable.

However, Medicaid eligibility rules are strict.

Typical limits allow only very small amounts of assets and income. Many households with moderate savings or retirement income simply do not qualify without first exhausting most of their financial resources.

In reality, the Boston College research estimates that only about 15 percent of households with more than $100,000 in assets actually end up qualifying for Medicaid.

This means the strategy many households expect to rely on may not work as imagined.

The Backup Plan People Avoid: Home Equity

Another finding from the research is that households often overlook the role of their home.

In surveys, fewer than one-third of respondents say they would consider tapping home equity to pay for care.

Yet the real data tells a different story.

Over time, more than 40 percent of households end up drawing on home equity through downsizing, home equity loans, or other borrowing to cover healthcare or care expenses.

For many families, the home effectively becomes the largest financial safety net.

The Medicare Misunderstanding

Another reason households underestimate long-term care risk is confusion about Medicare.

Medicare covers medical treatment and short-term rehabilitation after hospitalization. It does not cover extended custodial care in nursing homes or assisted living facilities.

Surveys show that a large portion of older adults mistakenly believe Medicare will pay for long-term care.

This misunderstanding often leads households to underprepare financially.

What Actually Happens When Long-Term Care Costs Rise

When long-term care costs arrive, households typically adjust in several ways:

• Drawing down retirement savings
• Selling or borrowing against the home
• Reducing expected inheritances for heirs
• Eventually qualifying for Medicaid after assets decline

Research tracking retirees over time shows that long-term care shocks often lead to home equity drawdowns and greater reliance on Medicaid later in life.

In other words, long-term care becomes one of the largest financial risks in retirement.

Why Realistic Planning Matters

The problem is not that households fail to plan.

It is that the plans they expect to rely on often do not match how long-term care costs actually unfold.

Understanding the financial realities of aging allows families to consider options earlier, including:

• • reviewing long-term care insurance
  • coordinating estate planning documents
  • evaluating asset protection strategies
  • planning for housing transitions
  • clarifying decision-making authority for care

Planning early provides flexibility that may not exist once care is already needed.

Conclusion

Retirement planning often focuses on investments and income.

Long-term care planning focuses on something different: uncertainty.

The research shows that households frequently underestimate both the likelihood and cost of needing care, and many rely on contingency plans that may not be realistic.

Understanding those risks in advance allows families to make more informed decisions and protect the financial stability they spent decades building.

This information is general education and is not legal advice. You may need to speak with an attorney to understand how long-term care planning applies to your specific situation.