Your runway is the number of months of private-pay care your liquid assets can cover, and the arithmetic is brutally simple: divide available assets by the facility’s monthly rate minus whatever income already flows in. A family with $180,000 liquid, a $10,500 monthly bill, and $3,500 a month of combined Social Security and pension income is burning $7,000 a month — about 25 months of runway. Knowing that number changes every other decision, because it converts a vague dread into a date on a calendar.
Most families compute this too late. They discover the runway in month eighteen, when there is no longer time to sell a house properly, apply for veterans benefits, or explore what an unneeded life insurance policy might be worth. Runway math done in month one leaves room for choices; done in month twenty it leaves room for one choice.
This page shows how to build the calculation, what each funding source realistically adds, and where a life settlement does and does not belong in the stack. Pine Lake Life Solutions offers a free, no-obligation policy review; nothing here is legal, tax, or financial advice.
In This Article
Building the Runway Calculation
Three inputs. First, the monthly cost: use the facility’s actual quoted rate, including the level-of-care surcharges that show up in month two, not a national average. For reference, Genworth’s long-running Cost of Care Survey has put the national median for a private nursing home room in the neighborhood of $10,000 per month in recent years — confirm the current figure and, more importantly, get your facility’s own rate sheet in writing.
Second, recurring income: Social Security, pensions, annuity payments, rental income, required minimum distributions. Third, liquid assets: bank accounts, brokerage accounts, CDs, retirement accounts net of the tax that will be due on withdrawal.
Runway equals liquid assets divided by (monthly cost minus monthly income). Then subtract a buffer, because rates rise, hospital stays interrupt billing cycles, and the first month usually carries a deposit and a community fee.
Why the Runway Number Drives Everything Else
Medicaid is the backstop for most long-stay residents, and the application takes time — gathering five years of financial records for the 60-month look-back established by the Deficit Reduction Act of 2005 is not a two-week project. Families generally want the application filed well before the runway ends, not after.
A runway of 30-plus months means there is room to sell real estate at a fair price rather than a fire-sale price, to complete a veterans Aid and Attendance application, and to run a life settlement review to completion. A runway under 6 months means the toolkit shrinks to whatever converts to cash in weeks. The single most useful thing a family can do in the first month is calculate this and share it with the elder law attorney.
Sources That Extend the Runway
Home equity. A sale is the clean version; a reverse mortgage generally is not available once the borrower has permanently left the home, which surprises families. A HELOC requires the borrower to qualify on income.
Veterans benefits. Aid and Attendance can add a meaningful monthly amount for a wartime veteran or surviving spouse who meets service, medical, and financial tests. Confirm current maximum annual pension rates with the VA for 2026; they change annually.
Long-term care insurance. If a policy exists, read the elimination period and daily benefit maximum before assuming it covers the bill. Many older policies pay far less than today’s rates.
Life insurance living benefits. An accelerated death benefit or chronic illness rider already in the contract can produce cash without any sale. Check the policy first.
Life settlement. For a policy with a death benefit of roughly $100,000 or more on a senior or health-impaired insured, the secondary market can pay materially more than surrender. GAO-10-775 found sellers typically received about 10% to 35% of face value, roughly four to eight times cash surrender value.
| Funding Source | Typical Speed | What It Adds | Main Limitation |
|---|---|---|---|
| Liquid savings and brokerage | Days | Full balance, less tax on withdrawals | Finite; retirement withdrawals may be taxable |
| Home sale | 2-6 months | Net equity | Slow; affects Medicaid and spousal planning |
| VA Aid and Attendance | Months | Monthly benefit for qualifying veterans or surviving spouses | Strict service, medical and financial tests |
| Long-term care insurance | Weeks after elimination period | Daily or monthly benefit up to policy maximum | Older policies often pay well below current rates |
| Accelerated death benefit rider | Weeks | Portion of face value, discounted | Requires the rider and a qualifying illness trigger |
| Life settlement | 60-120 days | Lump sum, often 10-35% of face (GAO-10-775) | Needs roughly $100,000+ face; death benefit is gone |
Translating a Policy Into Months of Care
The useful way to evaluate any lump sum is to convert it to months. At a $7,000 monthly net burn, $70,000 of proceeds is ten months. Ten months is often the difference between an orderly Medicaid application and a crisis application, or between selling the family home in spring and dumping it in December.
Run the same conversion on the surrender value. If the carrier would pay $18,000 and the market would pay $70,000, the gap is roughly seven and a half months of care. If the carrier would pay $60,000 and the market $70,000, the gap is under a month and a half and probably not worth a 60-to-120-day process. That comparison — months, not dollars — is what makes the decision obvious in either direction.
The Options Side by Side
Keep the policy. Correct when the premium is small relative to the burn rate, when a surviving spouse or disabled child depends on the death benefit, or when the insured’s health suggests the policy will pay soon. Paying $3,000 a year to preserve $250,000 for a spouse is usually good math.
Reduced paid-up. Stops the premium, keeps a reduced guaranteed death benefit, adds zero to the runway today. A reasonable middle path when cash is not the constraint but cash flow is.
Policy loan. Adds cash quickly but accrues interest and reduces the death benefit; an unpaid loan that outgrows the cash value can lapse the policy and generate a taxable event.
Surrender. Fast, certain, lowest value. Often the right call for policies under about $100,000 of face.
Accelerated death benefit. Free money relative to a sale if the rider exists and the trigger is met, since there is no transaction and, under IRC section 101(g), payments to a terminally or chronically ill insured may be received income-tax-free.
Life settlement. The highest-value exit for a qualifying policy, at the cost of time and the loss of the entire death benefit.
When Selling the Policy Is the Wrong Move
Do not sell if the runway math shows the family reaches Medicaid eligibility comfortably without it. Extending private pay for its own sake buys nothing; Medicaid-covered care in the same facility costs the resident their income and little else, and it preserves the death benefit for heirs.
Do not sell to fund care for someone whose life expectancy is genuinely short. In that window a policy is close to its maximum value to the family, and living-benefit riders or a viatical evaluation under the terminal illness rules usually beat a standard settlement.
Do not sell a policy that is small. Below roughly $100,000 of death benefit the secondary market is thin, and the offer, if one comes, may not clear surrender value by enough to matter.
What to Do This Month
Write the runway number down. Get the facility’s full rate sheet including care-level tiers. Pull every life insurance policy in the household and lay out the face amounts, premiums, cash values, loan balances, and riders on one page. Book the elder law attorney before you think you need one — the look-back document gathering is the long pole.
If any policy carries a death benefit of roughly $100,000 or more, a free review will tell you within days whether the secondary market is interested, and that answer belongs in the runway plan either way. All that is needed to start is the policy cover page: the first page listing the insurer, policy number, face amount, and issue date. Pine Lake Life Solutions can be reached at (305) 209-7183. Pine Lake is not a law firm, insurer, or investment advisor.
Frequently Asked Questions
How do I calculate a nursing home private pay runway?
Divide liquid assets by the facility’s monthly rate minus the resident’s monthly income. Use the facility’s actual quoted rate including care-level surcharges, not a national average. Subtract a buffer for rate increases, deposits, and hospital interruptions.
What does nursing home care cost?
Genworth’s Cost of Care Survey has placed the national median for a private room in the neighborhood of $10,000 per month in recent years, with wide regional variation. Confirm the current published figure and get your specific facility’s rate sheet in writing. The quoted base rate often excludes higher care tiers.
How many months of runway should I aim for before applying for Medicaid?
Many elder law attorneys want the application prepared well before funds run out, because assembling five years of records for the 60-month look-back takes time. A runway under six months narrows the options to whatever converts to cash quickly. Ask an attorney licensed in the applicant’s state for a target specific to your facts.
Can a life insurance policy meaningfully extend the runway?
For a qualifying policy it can. The GAO market study found sellers typically received about 10% to 35% of face value, roughly four to eight times cash surrender value. Convert any offer into months of care at your burn rate to judge whether it is worth the 60-to-120-day process.
Is a reverse mortgage an option once someone enters a facility?
Generally no. Reverse mortgages require the borrower to occupy the home as a principal residence, and a permanent move to a facility typically triggers repayment. A HELOC requires income qualification. Confirm the specifics with the lender and an attorney before relying on either.
Should I use a policy loan instead of selling?
A loan is faster and keeps the policy, but interest accrues and the death benefit is reduced by the outstanding balance. If the loan grows past the cash value the policy can lapse, which may create taxable income. It suits a short-term gap, not a multi-year funding plan.
What if the insured is terminally ill?
That is generally the wrong time for a standard life settlement. Look first at any accelerated death benefit rider in the contract, and at viatical treatment, where payments to a terminally ill insured under IRC section 101(g) may be received income-tax-free. Have a CPA confirm the tax result.
What do I need to get a free policy review?
Only the policy cover page, showing the insurer, policy number, face amount, and issue date. No medical records are needed for the initial screen. Call (305) 209-7183; the review is free and carries no obligation either way.
Find out what your policy is worth — free, confidential, no obligation.
A 15-minute educational review covers your eligibility, every alternative, and a realistic view of what each path would net you.
Related Reading
- Entering Nursing Home Options
- Nursing Home Medicaid Spend Down
- No Ltc Insurance Pay For Care
- Va Aid Attendance Policy
- Life Settlement Vs Reverse Mortgage
- What Is An Accelerated Death Benefit Rider
- Spend Down Vs Selling Policy
- How Much Is My Policy Worth
- Memory Care Cost Planning
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.