Financial Planning for Aging Parents: Affording Long Term Care

The sandwich generation is a group of Americans who are stuck between caring for both their young adult children and their aging parents. This can be an exhausting time of life under the best of circumstances. As your parents continue to age, they’ll likely require increasingly complex medical and financial assistance. Often, as memory slowly fades and the effects of getting older take their toll, they may be unable to navigate the maze of health care and financial planning alone. 

One common problem that sandwich-generation children run into is whether or not their parents can afford long term care. With several funding options available depending on your financial means, it’s hard to know what decision is right. Let’s walk through when long-term care is needed, different options for funding long-term care, and how to make the best choice for your parent. 

What is Long Term Care?

Long-term care can be challenging to define. At its most basic, it’s when an individual requires assistance with activities of daily living for an extended period of time. These activities can range from remembering to take medication, to bathing, to driving to run errands. Insurance defines long term care as:

  1. Nursing home care
  2. Home health care
  3. Assisted living facilities
  4. Adult daycare

Long Term Care Insurance

The first way to explore potential funding for the long term care of your parents is long term care (LTC) insurance. Keep in mind that LTC Insurance must be acquired well before there is a need.  Pre-existing illnesses such as diabetes, Parkinsons and Multiple Sclerosis can disqualify applicants from obtaining coverage. LTC insurance covers ongoing care when an adult can no longer perform their own daily activities. Typically, to qualify, you must not be able to do at least two of six common daily activities including:

  1. Eating
  2. Bathing
  3. Using the restroom
  4. Dressing
  5. Cleaning up after incontinence
  6. Transferring from a bed to a chair

Most traditional health care or Medicare only covers short term skilled medical care, and rarely covers the type of unskilled care required to manage daily living tasks. LTC insurance picks up where your standard insurance leaves off. 

Keep in mind that, while useful, LTC insurance can be costly. Some estimates say that the cost can range from approximately $2,000-$5,000 annually in premiums for individuals. In some cases, LTC insurance makes sense. For example, if your parents have a family history of longevity and could possibly have health problems in the future. However, there are also cases where LTC insurance may not make sense for your parents. If you don’t know for certain that your parents will require long term care, insurance premiums can eat away at their nest egg unnecessarily. In these cases, it’s wise to explore other options.


Some retirees choose to self-insure against the possibility of needing long term care. In these cases, your parent (or you, if you’re funding their medical expenses as they age) would take a portion of their portfolio and set it aside. 

These funds would be specifically earmarked for future medical and long-term care expenses. The funds can be invested in low-risk funds or an annuity so that they continue to grow until they’re needed, or they can sit as cash if you feel they’ll be needed sooner rather than later.

Planning Ahead

Over half of retirees are expected to require some kind of long-term care in their lifetime. It’s critical to plan ahead to cover these costs - especially when you’re caring for aging parents who may not be planning themselves. 

If you need assistance navigating the options for funding long-term care, whether it’s needed immediately or in the distant future for your parents, we’d love to chat with you. Managing your parents’ finances isn’t an easy task, and there’s no reason to face these challenges alone. Schedule a call with us today to learn more about how we can help.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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