Long-term care’s ‘brutal math’ threatens retirees. Secure 2.0 can help

For most financial advisors and estate planning attorneys, the long-term care conversation with clients is put off until a crisis: a fall, a diagnosis, a sudden health shift. By then, the options are few, the premiums are punishing, and coverage is often out of reach.

Processing Content

When it comes to long-term care, the math is brutal. About 80% of those 65 and older will need some form of it, with roughly 40% requiring high‑intensity care for more than a year, according to the Center for Retirement Research at Boston College.

Yet only 3% of Americans over the age of 50 hold private LTC insurance, estimates LIMRA, an insurance trade association and research group. Meanwhile, a 2025 Nationwide Retirement Institute survey found 58% of adults mistakenly believe Medicare will cover these costs — a misconception that can leave families financially devastated when reality sets in.

Beyond the patient, the burden cascades. Approximately 53% of full‑time employees juggle caregiving responsibilities, leading to missed work, financial strain and decreased productivity, according to a Care.com’s 2026 Future of Benefits Report. This affects not only families but employers through lost workdays and employee caregiving stress that undermines productivity. 

READ MORE: Long-term care costs outpacing retirement income: AARP

Section 334: The provision nobody’s talking about

But a little‑known provision in Secure 2.0 offers a rare opening to start the dialogue before a health crisis.

Effective for distributions after Dec. 29, 2025, Section 334 permits defined contribution plan participants to withdraw funds for qualified LTC insurance premiums without the 10% early‑withdrawal penalty under IRC §72(t). Annual distributions are capped at the lesser of: actual premiums paid, 10% of the participant’s vested benefit or $2,600 for 2026 (indexed for inflation).

Here’s what advisors need to know: It’s penalty‑free, not tax‑free — distributions remain taxable income. It’s optional for plan sponsors; employers must affirmatively adopt it. Finally, the IRS recently extended the plan amendment deadline to Dec. 31, 2027 for most plans.

READ MORE: Why advisors should see life settlements as a planning option

A benefits check, not a hard sell

Use this provision as a conversation starter with clients. Frame it as a benefits check prompted by new legislation and not a hard sell. 

First, conduct plan eligibility checks directly with administrators. Despite the utility of this provision, it has landed with a silent thud. Only 3% of plans have adopted it, while 82% haven’t, according to a recent Plan Sponsor Council of America survey. Many respondents in the survey were unaware of the provision; others cited recordkeeper limitations. But even a negative response — “my plan doesn’t offer this” — may prompt clients to check with their company’s HR department, keeping long-term care top of mind. 

In a couple where both are aged 55, the average annual premium for a long-term care policy is about $2,080, according to the National Council on Aging. Waiting until age 65 can more than double those costs. Section 344 incentivizes purchases during the optimal underwriting window, locking in better pricing before health changes complicate insurability. 

Illustrate the premium differential between purchasing long-term care insurance now versus later. If necessary, consider alternative funding sources: HSA distributions, asset‑based LTC policies or life insurance with LTC riders. 

For high net worth clients, LTC insurance can intersect with irrevocable life insurance trusts, charitable remainder trusts, Medicaid asset protection trusts and HSAs — all of which require coordination with tax advisors. 

READ MORE: Tips for using a ‘medical IRA’ that offers triple the tax savings

IRA-funded LTC plan considerations

A critical note for IRA-funded long-term care: Any distribution from a traditional IRA is taxable as ordinary income — that never changes. Secure 2.0 only waives the 10% early withdrawal penalty. 

For clients using IRA dollars to purchase a LTC policy, some carriers will accept IRA rollover dollars and split the 1099 taxable distribution over 10 years — spreading the tax hit and keeping clients in lower brackets. Others will not. When structured properly, the benefit pool inside a tax‑qualified LTC policy can generate two to three times more in available benefits than if that same money remained in an investment account. And the ultimate payoff: LTC benefit payments are entirely tax‑free under IRC §7702B.

When a health care crisis strikes, wealth is often depleted, financial plans crumble, families are disrupted and control is lost. The $2,600 provision alone won’t transform LTC planning. But as a catalyst for timely conversations — when health and options remain on the client’s side — its value is considerable. 

Advisors who leverage the Secure 2.0 provision to encourage earlier, more informed planning will deliver stronger outcomes for clients navigating retirement security, health care costs and generational wealth transfer.