A daughter calls her mother’s accountant in April. Her mother moved into assisted living in November after a fall. The family pulled the deposit and the first six months of care from the mother’s checking and savings, which felt responsible… they didn’t want to touch the IRA, didn’t want the tax hit.
The accountant is quiet for a moment and then says, you had close to a two-hundred-thousand-dollar medical deduction sitting on the table and we used almost none of it.
That’s the story I think about most when families ask me how to pay for care. Not the cost. Not the options. The order, and the way the order that feels safest is usually the one that quietly costs the most.
The Belief I Want You to Carry Out of This Post
If you remember nothing else, remember this: the intuitive order of paying for long-term care is usually the most expensive order.
The intuition is to pay from cash first, brokerage accounts second, IRAs last. It keeps current-year taxes low. It feels responsible. It’s also often wrong by up to six figures in a high-care year.
Here’s why. Long-term care expenses are largely deductible as medical expenses against ordinary income. The deduction is real and it’s significant. Once medical spending crosses the 7.5% AGI floor, every additional dollar reduces taxable income dollar for dollar.
A traditional IRA distribution is ordinary income. Pull $200,000 from the IRA to pay for care, and that $200,000 lands on the return. But if you also paid $200,000 in deductible care expenses that year, the deduction can erase most or all of the tax on the distribution. The IRA effectively comes out tax-free in a year when you would otherwise have paid tax on a Roth conversion to access the same dollars.
Most families never see this. They protect the IRA because it has tax baked into it, and they spend the cash and the brokerage account first because those feel like the “free” money. And then the deduction expires unused, because medical deductions don’t carry forward.
The order matters. In some years, it is the single most valuable piece of planning you can do.
What This Actually Looks Like in Oregon
I want to ground this in real numbers, because abstractions about deductions don’t feel like anything.
Assisted living in Oregon runs roughly $4,200 to $11,000 per month. Memory care: $7,000 to $30,000. Skilled nursing climbs to $8,000 to $16,000. The entrance fee for a life plan community, the kind of community where you move in independent and stay through skilled nursing on the same campus, often runs into the high six figures.
Here’s what the math can look like. Imagine a couple in their late sixties weighing a life plan community with a $650,000 entrance fee. The instinct is to fund the entrance fee from a brokerage account with substantial gains, because the IRA “has tax baked into it.” But a meaningful portion of that entrance fee, often somewhere between 30% and 50%, depending on the community’s actuarial allocation, is treated as a prepaid medical expense and generates a deduction in the year it’s paid. On a $650,000 entrance fee, that’s a deduction in the range of $195,000 to $325,000.
If you pull the $650,000 from the IRA instead, the distribution lands as ordinary income. The medical deduction can absorb most of the tax on that distribution. The IRA effectively comes out tax-free in that year. The same withdrawal made in any other year would cost six figures in federal and state tax.
Same dollars. Same community. Different sequence. Different outcome by more than $200,000.
That single sequencing question of what to draw from, and in what year is often worth more to a plan than any single investment decision made over the same period.
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Why This Matters in Retirement Planning for Women
This is the part of retirement planning for women that almost never gets discussed at the kitchen table. Women live longer. Women are more often the surviving spouse. Women statistically make up the vast majority of residents in long-term care settings. Not because they choose it, but because they outlive the spouse who would have been caring for them at home.
The same plan that works through age 80 can come apart in the years that follow if the care funding isn’t sequenced thoughtfully. A 100% probability of success in the base case routinely drops into the 40s once a multi-year care event is layered in. That’s not a portfolio problem. It’s a sequencing problem.
The women I work with are usually the family CFOs already. They’re tracking the parents’ accounts and the kids’ college funds and the home equity line and the rental property. They don’t need another spreadsheet. They need someone who can look at the whole board and answer one question: when this happens, and the math says it probably will, what do we do, in what order, and why?
That’s the planning that’s hard to do in the moment. It’s significantly easier when the sequence has been mapped out years in advance, before any health event has forced anyone’s hand.
A Short Note on Everything Else
I’m leaving out a lot in this post on purpose.
The full landscape of senior living options matters including independent living, assisted living, memory care, skilled nursing, adult care homes, life plan communities versus rental communities… Medicare versus Medicaid. The five-year look-back. Long-term care insurance and what it actually covers. Each of these is worth its own conversation.
But if you read this post and walk away with one thing, I’d rather it be the belief about sequencing than a summary of options you can find on any senior living website. The options are a service question. The sequencing is the planning question. And the planning question is what changes the outcome.
What This Looks Like at Thistle Wealth
When a client and I work through care planning together, we’re usually doing it long before any move is on the horizon. We map out the scenarios you might face including a short, intensive event and a longer progressive one, and stress-test the plan against each. We model the difference between funding care reactively versus building a life plan contract into the plan now. We coordinate with your CPA so the tax efficiency of every distribution actually gets captured on the return, not lost in April.
The work isn’t dramatic. There’s no market call, no clever product, no urgency. There’s just a plan that’s been thought through carefully enough that when the call from your daughter comes, or the call you make to your daughter, the next move is already on the page.
If you’re 5–8 years from retirement and the senior living conversation has started to show up in your thinking for yourself, a spouse, or a parent, I’d like to talk. Schedule a conversation here. Thistle Wealth builds this kind of planning in from the beginning, before any of it is urgent. The first conversation isn’t a sales call. It’s a half hour of looking at your full picture together and figuring out whether what we do is a fit for what you need.
This article is for general educational purposes only and is not personalized financial, tax, legal, or investment advice. Your situation is unique and may call for different strategies than those described here. Please consult with a qualified professional who can provide guidance tailored to your specific circumstances. All investing involves risk, including potential loss of principal.
