Some people are wealthy enough to finance their own nursing home care. Others hope that Medicaid will pay. In the middle are millions of people who simply want to protect their life savings from the potential costs of long-term care.

Hume Davidson, 65, a philosophy professor, and his wife, Rae, 61, a professor of adult education, belong in that third group. (Their names have been changed.) Though hardly poor-they have $1.2 million in savings-they worry that illness and nursing home expenses could endanger their hard-won financial security.

"We needed impartial information about long-term care and long-term care insurance," said Mr. Davidson, who plans to retire in September.

For advice, he turned in 2004 to his investment manager at Vanguard® Asset Management Services, Deborah Rhoads. The Vanguard Group doesn't sell insurance, but Ms. Rhoads and her colleagues can help investors become smarter consumers of long-term care by forecasting how its cost could affect their portfolios.

For the Davidsons, Ms. Rhoads calculated the possible effects of two long-term care scenarios-buying long-term care insurance versus paying for the care out-of-pocket-on the couple's account balances from 2004 to 2034, the year in which Rae Davidson will turn 90. Ms. Rhoads also calculated results for a third, wished-for scenario: not buying insurance and never needing long-term care.

The cost depends on the intensity of care. Adult day care or at-home assistance might cost $1,000 a month. A private room in a nursing home averages $5,400 a month nationally.

Long-term care insurance is readily available, but premiums increase with the amount and length of coverage. They're also higher if you're older, have an existing health problem, or want policy options such as inflation protection or the guaranteed return of unused premiums. A healthy 65-year-old can buy five years of $150-a-day coverage (excluding the first 90 days of care) for $3,000 a year, on average. Group plans often cost less but are less flexible.

The two also found that nursing home care in their East Coast city would probably cost $180 a day each ($67,500 a year) in current dollars and much more with inflation. In a pinch they could move to Colorado, where their daughter lives and where long-term care costs 25% less on average.

Ms. Rhoads reviewed those numbers, along with the Davidsons' current assets, their anticipated retirement income, and their anticipated spending rate in retirement ($94,000 a year-the most they could spend without fear of running out of money). Then, based on their portfolio allocation of 65% stocks and 35% bonds, she projected the impact of the three scenarios on the Davidsons' investable assets over the next 30 years in 44 hypothetical investment-return patterns based on actual returns beginning in 1960.

The projections (all in 2004 dollars) defined the decision facing the Davidsons. If they played it safe and paid insurance premiums from now until age 85, they would end life with a positive portfolio balance in 40 of the 44 return patterns (91% of the time).

With average returns, their ending balance would be $1.55 million. (See the chart below.)

On the other hand, they could gamble and go without insurance. If they "won" and never needed long-term care, they would not run out of money in any of the 44 return patterns, and their projected ending balance (with average returns) would be $1.75 million.

But if they "lost" and had to pay about $400,000 for three years each of nursing home care starting at age 85, their ending portfolio with average returns would be only $1.09 million-more than $650,000 less-and they would have only a 70% chance (the minimum that Vanguard deems acceptable) that their money would last until they died. The stakes were suddenly clear. "Projecting the different scenarios gave us a better picture of our options," Mr. Davidson said.

Mr. Davidson isn't quite ready to act. His next step is to determine which would cost less: coverage that begins as soon as possible after admission to a nursing home but pays only part of the daily cost, or coverage that pays 100% of the cost but doesn't begin until after a full year of care. Then Mr. Davidson will begin analyzing specific insurance policies. Once the Davidsons purchase insurance, Ms. Rhoads will help them rebalance their Vanguard portfolio, if necessary, to reflect the new expense.