Annuities and long-term care, honestly

The one annuity that solves a real problem

Every retirement plan has one risk no portfolio removes: living longer than the money. A single premium immediate annuity (SPIA) addresses it directly. FINRA describes an immediate annuity as a contract where “you pay a lump sum premium to an insurance company in exchange for an income stream that begins immediately or soon after.” With a fixed annuity, FINRA notes, the insurer “guarantees both the rate of return (the interest rate) and the payout to the investor.”

That is risk pooling pointed backward. Life insurance pools the risk of dying too soon; a lifetime income annuity pools the risk of living too long. A SPIA is simple enough to explain in one sentence, and its trade-offs are visible: you give up access to the principal, the payment is usually fixed unless you buy inflation adjustment (FINRA notes fixed payouts lack inflation adjustments), and the insurer’s own solvency now matters.

Where the complexity and the commissions live

Deferred, variable, and indexed annuities are a different category. FINRA calls variable annuities “a leading source of investor complaints” and describes indexed annuities as “complex financial instruments” whose features “may result in lower returns than an investor might expect.”

Two mechanisms explain most of that gap, and the SEC’s investor bulletin spells them out. A rate cap limits your credited return: with a 7% cap and a 12% index return, only 7% is credited. A participation rate credits only a share: at 75% participation, a 10% index return credits 7.5%. Both are typically adjustable by the insurer.

Then the exits. FINRA and the SEC both describe surrender periods of roughly six to ten years, or longer, during which withdrawing principal triggers surrender charges and can trigger tax penalties. And FINRA states directly that annuities “come with a variety of fees and expenses” (surrender charges, mortality and expense risk charges, administrative fees) “and can have high commissions.”

None of that makes these products fraudulent. It makes them sold. The practical rule: if the person explaining it earns a commission on the sale, get the contract reviewed by someone who does not. Proverbs 15:22’s multitude of counsellors is cheap insurance against a ten-year surrender period.

Long-term care: the numbers are public

CareScout (Genworth) publishes an annual cost-of-care survey. Its 2025 results, released March 2, 2026, put national medians at:

Costs vary widely by state; these are national medians as of that survey and will change.

The likelihood is not remote. The federal Administration for Community Living states that someone turning 65 today has almost a 70% chance of needing some form of long-term care services, with care used for about three years on average, with women using it longer (3.7 years) than men (2.2 years). This is precisely the case where Proverbs 22:3’s prudent person “foreseeth the evil”: not a rare catastrophe, but a probable one.

Insurance, and the Medicaid reality

LTC insurance reimburses a daily amount for help with daily activities at home or in a facility (ACL). Its trade-offs are real and should be named: premiums depend heavily on your age at purchase; most individual policies require medical underwriting, so ACL warns that if you are already in poor health or receiving care you may not qualify; and the insurer may raise the premium on your policy, and ACL recommends asking for the company’s history of rate increases before buying. Hybrid life-plus-LTC policies exist and carry their own costs. There is no clean answer here, only a decision made with the trade-offs visible.

Medicare is not the backstop most people assume. ACL notes Medicare may help in certain circumstances but that benefits for nursing home and home health services are limited. Medicaid is, in ACL’s words, the largest public payer of long-term care services, but it is a means-tested program with eligibility rules, application procedures, and estate recovery policies that differ by state. Planning to “just qualify for Medicaid” usually means spending down assets first and accepting a narrower set of facilities. Know that before it is the only option left.

The conversation nobody wants

1 Timothy 5:8 is usually quoted at young parents. Read the chapter around it and the frame widens: Paul is writing about the care of widows, and he expects grown children and grandchildren to repay their parents. The obligation runs both directions: you provide for the household coming up behind you, and you provide for the generation ahead of you.

Which makes this a family conversation, not a solo spreadsheet. Ask, before a crisis forces it: Where would you want to receive care? Who is the decision-maker if you cannot decide? What is actually set aside, and where are the documents (see beneficiaries and documents)? Adult children who have had that conversation once will make better decisions at 2 a.m. than the ones improvising.

General education, not personalized insurance or legal advice. An independent, fee-only adviser and your state’s insurance department can review your actual situation.