Long-term care is one of those financial risks many people know they should think about.
But it’s easy to put off.
The coverage can feel expensive. The rules can be confusing. And many families aren’t sure where long-term care insurance fits into a retirement plan that already includes Social Security decisions, Medicare choices, tax planning, and ongoing portfolio management.
Beginning in 2026, a provision of SECURE 2.0 may give some workers another option: certain employer retirement plans may allow distributions that can be used to help pay premiums for qualifying long-term care insurance. (Source: SECURE 2.0 Act of 2022, enacted Dec. 29, 2022, Section 334.)
That may sound like a tax-free way to pay for long-term care coverage.
It’s not.
Even so, this new rule can be a useful planning tool for the right person—especially if they’re under age 59½ and would otherwise face an early-withdrawal penalty.
What changed under SECURE 2.0?
Section 334 of SECURE 2.0 created what’s known as a Qualified Long-Term Care Distribution (QLTCD). (Source: SECURE 2.0 Act of 2022, enacted Dec. 29, 2022, Section 334.)
Here’s the key takeaway:
- The distribution used for qualifying long-term care premiums is generally still subject to ordinary income tax. (Source: SECURE 2.0 Act of 2022, enacted Dec. 29, 2022, Section 334; tax treatment may vary based on individual circumstances—consult a tax professional.)
- However, the usual 10% early-withdrawal penalty (for distributions before age 59½) may be waived when the requirements are met. (Source: SECURE 2.0 Act of 2022, enacted Dec. 29, 2022, Section 334.)
So the “benefit” isn’t that taxes go away—it’s that the penalty may not apply, which can change the math for some households.
Which retirement plans qualify?
This is where the rule becomes more limited than many headlines suggest.
SECURE 2.0 allows the provision for certain employer-sponsored retirement plans, including:
- 401(k) plans
- 403(b) plans
- 457(b) plans
Importantly, this special distribution treatment generally does not apply to:
- Traditional IRAs
- Roth IRAs
- SEP IRAs
- SIMPLE IRAs
In other words, “having retirement savings” isn’t the same as “having access to this rule.” It depends on the type of account.
There’s also a dollar limit (and it may be smaller than you expect)
For 2026, the qualified distribution is limited to the lesser of:
- the amount of qualifying long-term care premium,
- 10% of the participant’s vested retirement-plan balance, or
- $2,600 (scheduled to be indexed for inflation in future years).
(Source: SECURE 2.0 Act of 2022, enacted Dec. 29, 2022, Section 334.)
Example (simplified): Suppose someone is 52 and wants to pay $4,000 toward qualifying long-term care coverage. Even if everything else lines up, the maximum qualified distribution in 2026 may still be $2,600.
That $2,600 would generally be included as taxable income, but the additional 10% early-distribution penalty may not apply. (Source: SECURE 2.0 Act of 2022, enacted Dec. 29, 2022, Section 334.)
Your employer plan has to allow it
This is the most overlooked detail.
Employers are not required to adopt this provision. It’s optional. So before assuming you can use your 401(k), 403(b), or 457(b), you’ll likely need to confirm whether your plan permits a QLTCD.
A practical first question:
“Does my employer retirement plan allow qualified long-term care distributions?”
If the answer is “no,” this rule may not help—regardless of how appealing it looks.
Not every long-term care policy qualifies either
The insurance coverage must meet specific requirements. The SECURE 2.0 language refers to “certified long-term care insurance.”(Source: SECURE 2.0 Act of 2022, enacted Dec. 29, 2022, Section 334.)
Depending on the policy structure, requirements can involve consumer protections and other features that help define what counts as qualified long-term care coverage.
- Some traditional long-term care policies and certain linked-benefit policies may qualify if they meet the standards.
- Some chronic-illness riders or life-insurance riders may not qualify.
Bottom line: it’s important to confirm policy eligibility rather than assuming all “long-term care” solutions are treated the same.
So… is this strategy worth it?
For many families, this SECURE 2.0 provision probably won’t completely change how they fund long-term care insurance.
Because the distribution is still generally taxable, the benefit can be more limited than it first appears.
But it may be worth examining if you:
- are younger than 59½,
- have money in a 401(k), 403(b), or 457(b),
- are considering long-term care insurance,
- have sufficient retirement assets,
- and would prefer not to fund the entire premium from current cash flow.
The question isn’t only “Can I do this?”
A better question is:
“Does doing this improve my overall financial plan?”
That’s where a small tax rule becomes a bigger planning conversation—because the “right” answer depends on tradeoffs.
What’s in it for you? Planning is about choices
Financial planning is often about building options.
- One person may be comfortable paying long-term care premiums from monthly income.
- Another may prefer using taxable savings.
- Someone else may have substantial employer-plan assets and decide that a qualified distribution (even though taxable) is a reasonable tool—particularly if it avoids an early-withdrawal penalty.
None of these approaches is automatically right or wrong.
What matters is how the decision affects:
- your taxes (this year and in future years),
- your retirement assets and projected income,
- your insurance protection,
- your spouse or family plan,
- and other goals your money needs to support.
This is where Project Clarity comes in
At George Wealth Management, we developed Project Clarity around a simple idea:
Understand the decision before choosing the strategy.
Long-term care planning is a perfect example. Before buying insurance—or taking money from a retirement plan—it can help to step back and answer questions such as:
- What financial risk am I trying to protect against?
- What resources would we already have if care is needed?
- How much coverage is appropriate for our situation?
- How should premiums be funded?
- What would using retirement-plan dollars do to future retirement income?
- What are the tax consequences?
- How does this decision impact a spouse, adult children, or an estate plan?
The product comes later.
Clarity comes first.
Five questions to ask before using this SECURE 2.0 option
If you’re considering long-term care insurance and you have an employer retirement plan, start here:
- Does my employer plan permit qualified long-term care distributions?
- Does the policy I’m considering meet the “certified” requirements?
- How much of the premium could actually qualify under the annual limits?
- What income tax would I owe on the distribution?
- Is using retirement money better than paying premiums from another source?
If you’re not sure which financial issue deserves attention first, our Planning Assessment Center can help you identify areas that may deserve a closer look.
The bigger question
The most important part of this rule may not be the $2,600 distribution.
It may be the conversation it creates.
Long-term care planning can impact retirement income, taxes, family responsibilities, and legacy goals. So even if this particular SECURE 2.0 provision doesn’t apply to you, it may still be worth asking:
“If I eventually need long-term care, is my financial plan prepared?”
If you know the answer, great.
If you don’t, that may be a decision worth exploring. You can Start a Conversation with George Wealth Management to talk through retirement resources, protection strategies, and the financial decisions that may deserve attention.
Because greater clarity can lead to greater confidence—and confidence can make it easier to take thoughtful action.
Sources: SECURE 2.0 Act of 2022 (enacted Dec. 29, 2022), Section 334; Nationwide, Secure Act 2.0 and Section 334: How it Applies to the Purchase of Long-Term Care Insurance (web article, accessed Aug. 28, 2026). Federal tax laws are complex and subject to change; tax and legal advice should be obtained from appropriate professionals.
This material is provided for educational purposes only and is not intended as individualized investment, insurance, tax, or legal advice. Tax laws and retirement-plan provisions can change. Availability of qualified long-term care distributions depends on the terms of the employer’s plan, and insurance-policy eligibility should be confirmed before taking action. Please consult appropriate financial, tax, legal, and insurance professionals regarding your individual circumstances.