As a lifelong planner, I’ve always believed that leaving your future to chance is a recipe for a stressful retirement. Over the years, I have written extensively about protecting what you’ve worked a lifetime to accumulate. One of the biggest threats to your retirement nest egg is the exorbitant cost of long-term care (LTC).
Unfortunately, many federal employees operate under a dangerous misconception: they assume their Federal Employees Health Benefits (FEHB) or Medicare will cover the costs of assisted living, full-time nursing support, or a home health aide. The hard truth is that traditional health insurance and Medicare generally do not pay for this type of care. If you don’t have a plan, long-term care expenses can quickly become the most catastrophic financial drain of your retirement.
To make matters more complicated, the government’s primary solution for this issue has fundamentally changed. Here is what federal employees need to know about the current state of long-term care insurance, whether you actually need it, and what your options are moving forward.
The Current Situation: FLTCIP is Frozen
For years, the Federal Long Term Care Insurance Program (FLTCIP) gave federal employees, retirees, and their eligible family members access to LTC insurance at group-negotiated rates. I personally applied for FLTCIP coverage when it was first offered back in 2002.
However, the Office of Personnel Management (OPM) suspended new applications for the FLTCIP program effective December 19, 2022, and recently announced that this suspension has been extended for an additional 24 months. This means that through at least the end of 2026, the program is completely closed to new applicants.
Furthermore, if you are currently enrolled in the program, you cannot apply to increase your existing coverage during this suspension period. OPM determined this freeze was necessary due to ongoing volatility in long-term care costs and a diminished insurance market.
Do You Really Need Long-Term Care Insurance?
The statistics are sobering. Someone turning age 65 today has an almost 70% chance of needing some type of long-term care services and support in their remaining years. On average, women need care longer (3.7 years) than men (2.2 years).
The costs are staggering. A private room in a nursing home can easily exceed $92,000 a year, while assisted living and home health aides average over $43,000 to $46,000 annually. Without coverage, these expenses can rapidly drain your Thrift Savings Plan (TSP), your savings, and your investments.
That being said, LTC insurance is not a perfect silver bullet, and it is historically plagued by massive premium hikes. I can attest to this firsthand. I was comfortable with my FLTCIP coverage until 2016, when I received a notice that my premiums were increasing by over 100 percent!. To keep my costs manageable, I had to reduce my coverage from 5 years to 3 years to drop my daily benefit amount and stabilize my premiums.
You have to weigh the high (and potentially rising) cost of insurance premiums against the desire to protect your estate and not become a financial or physical burden to your family.
Important Considerations and Choices Moving Forward
With the federal program suspended, federal employees and retirees must look at alternative strategies. Here is what you should consider:
- Self-Insuring by “Covering the Delta” Self-insuring sounds terrifying because you assume you have to pay the entire $10,000 or $12,000 monthly nursing home bill out of your savings. However, you only really need to cover the difference (the “delta”) between your fixed income and the cost of care. For example, if a facility costs $12,000 a month, but your FERS pension and Social Security provide $8,000 a month in fixed income, your gap is $4,000 a month. If you have a robust TSP balance or other investments, you may have plenty of assets to comfortably cover that $4,000 difference for the average 2 to 4 years that care is needed without ever buying an insurance policy.
- Explore the Private Market and Hybrid Policies If you cannot self-insure, or if you simply want the peace of mind that insurance brings, you will need to explore the private market. Be aware that traditional private LTC policies also suffer from strict medical underwriting and potential premium increases. However, many private sector providers now offer “hybrid” life insurance policies that include a long-term care rider. These hybrid policies often feature guaranteed premiums that will never increase, and if you end up never needing long-term care, the policy pays out a death benefit to your heirs.
- Utilizing Your Home Equity If you or your spouse eventually need to transition into a facility full-time, your home becomes a massive financial asset. Many retirees plan to simply sell their home if long-term care is required, using the tax-free equity they’ve built up over decades to fund their facility costs.
The Bottom Line
Long-term care is an essential piece of your retirement puzzle. You don’t want to leave your spouse impoverished or your children scrambling to figure out how to pay for your care. Because the FLTCIP is frozen, I highly recommend sitting down with a CERTIFIED FINANCIAL PLANNER™ professional to run the numbers on your specific situation. Figure out your “delta,” evaluate your TSP balances, and look into hybrid private policies so that you have a concrete plan in place for whatever the future holds.
Last 5 posts by Dennis Damp
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- Survivor Benefit: How to Protect Your Spouse’s Income - July 25th, 2026
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Dennis V. Damp is an author, retired federal manager, business owner, career counselor and veteran. Damp is the author of 28 books, a recognized benefits expert, and a retired federal manager with 35 years’ service. Dennis has been a guest on hundreds of radio talk shows, CNN’s YOUR MONEY and the Lou Dobbs Cable TV shows, lectured at universities and colleges, produced Internet web sites and training videos, and has written hundreds of articles for national magazines and newspapers. His books have been featured in the Wall Street Journal, Washington Post, New York Times and U.S. News & World Report.
Dennis joined the Air Force in 1968 and spent over three years on active duty and an additional seven years with the Air National Guard. He was hired by the Department of Defense (DOD) after leaving active duty and transferred to the Federal Aviation Administration (FAA) in 1975. He spent the remainder of his career in various positions with the FAA. His last position was technical operations manager at the Pittsburgh International Airport’s air traffic control tower.
