Caring for Parents: What to Know About Social Security, Medicare and Long-Term Care

Adult daughter helping elderly mother with her finances.

In late summer of 2018, my 87-year-old mother began experiencing anxiety that dramatically affected her sleep patterns and caused associated chronic pain. 

She lived in a senior community in an apartment she loved. But it was clear something needed to change and that she needed more help.

Watching your parents age can be complex and emotional. Doing this while trying to understand their finances can feel overwhelming.

That’s why we’ve created this beginner’s guide for understanding your aging parents’ finances. We’ll be exploring three essential areas you’ll need to know about: 

  • Social Security
  • Medicare
  • Long-Term Care

Before embarking on the relevant financial questions, a brief but important word about the human side of getting older.

The Emotional Impacts of Aging

If you’re considering financial or lifestyle support for your parents, odds are it’s likely due to their declining health. This can be extremely challenging and it’s genuinely common to experience many difficult emotions. It can also be disorienting for you and your parents in real time to process a shift about your relationship roles, switching from them taking care of you to being their caregiver. 

In my case, my husband and I both had mothers who needed care. One was open and eager to be helped, but the other was the complete opposite. Even before showing signs of dementia, my mother-in-law was suspicious of any kind of assistance my husband tried to offer, putting great strain on what had been a lovely and supportive relationship. 

Transitioning into new roles takes time, patience, and the ability to really listen. Reflect back what you hear from your loved ones. Ask clarifying questions to make sure everyone understands what’s important. Be kind, empathetic, and respectful – to yourself and your loved ones – and above all, give you and your family grace during these pivotal discussions.

Focus on what matters most.

Simplify your life with a financial plan so you can enjoy every moment.

Assessing Your Parents’ Finances

A solid place to start is by getting an idea of what type of insurance coverage, benefits, and other funding your parents have available to them:

  • Does your parent collect Social Security, or do they have a plan for when they will begin collecting?
  • Does your parent qualify for Medicare or Medicaid?
  • Do your parents have Long-Term Care Insurance?
  • Does your parent have a health savings account (HSA)?
  • Does your parent have accessible funds for items not covered by insurance (prescription medications, visits with specialists, etc.)?

Once you know where your parents stand on these fronts, it can help you to understand the nuances of the following three different types of care.

Social Security

Typically, the age to start discussing social security benefits is 62. This is the earliest age a person can start to collect. Alternatively, some retirees opt to delay taking Social Security to increase their benefits. You can delay taking benefits until age 70.

The age you’re at when you start collecting will directly impact the monthly payment you will receive. The difference between taking Social Security at 62 versus 67 is quite large and can make or break a retirement. So, if your parent hasn’t started collecting yet, familiarize yourself with the pros and cons of delaying benefits collection: 

Pros to Delaying Collecting Benefits

  • Increased Benefit Amount. This is due to delayed retirement credits.
  • Potential Tax Benefits. Your benefits may or may not be taxed based on your amount of income at the time you collect.

Cons to Delaying Collecting Benefits

  • Could Be Expensive. You’ll have to cover your retirement costs until you begin collecting. 
  • Life Expectancy Considerations. Your life expectancy impacts your planning decisions. For example, if you or a spouse outlive a pension or annuities, you may need to utilize your benefits more fully earlier in life.

There are other considerations when deciding whether to delay Social Security benefits collection. The IRS provides more guidance for different niche situations here.

Medicare and Medicaid

While these terms are often used interchangeably, there are two different federal programs designed to provide equitable access to healthcare.

Medicare is designed for people 65 and over to receive health care via hospital visits, medical equipment, preventative care, prescription drugs, and more. It has two main parts, A and B.

  • Medicare Part A. Designed to cover hospital expenses and includes coverage for all medically necessary procedures. For example, it will cover hospital expenses but likely not a private room or private nursing care. Or, it will cover a knee replacement but not long-term care during recovery. If you sign up for Medicare, Part A is provided at no cost.
  • Medicare Part B. Medical insurance that covers medically necessary doctor’s office visits, medical supplies, routine care (like flu shots), or medical equipment (like a wheelchair or walker). Part B has a monthly cost which varies depending on your income.

The costs of Medicare are released annually. Many people opt to expand their Medicare coverage by adding drug, vision, and dental insurance. This can be done in two primary ways. 

The first, a Medigap plan, is designed specifically to cover medical and drug expenses that Medicare does not cover, including Medicare co-pays and deductibles. Some Medigap plans also provide international medical insurance, which Medicare does not. Medigap plan holders usually buy separate coverage for dental and vision. 

The other type of plan is a Medicare Advantage Plan, also known as Medicare Part C. Medicare Advantage plans “wrap” Medicare coverage into their PPO programs. Advantage plans often offer drug, dental, and vision plans under one umbrella.

In my mom’s case, she was fortunate to have a great Medigap policy through Tricare, which is the retirement health care plan for military members and their spouses (thanks to my father’s long participation in the Army Reserves). Yes, she had to buy separate vision and dental plans, but the Tricare coverage has been incredibly comprehensive, covering all aspects of her medical care, including ambulance rides and short-term rehabilitation expenses.

On the other hand, Medicaid is designed for those with low income. Medicaid provides a broad range of medical care, supportive services, and long-term care that Medicare doesn’t offer. More than one-fifth of Medicare beneficiaries also have Medicaid coverage. Medicaid can cover transportation to the doctor and vision care. Seniors can also get services through Medicaid that Medicare covers to a lesser extent, such as home health care, durable medical equipment, mental health and therapy services, and some dental services.

Remember, your parents aren’t eligible for Medicare until they reach the age of 65 (unless they meet certain disability definitions). By age 64, your parents should be examining their available medical options and choosing which type of plan works best for them. Not signing up for Medicare on time can result in expensive penalties and less access to the best types of plans. 

Your parents can only access Medicaid if their income is below the income thresholds defined by the Federal Government, which differ by state

Long-Term Care

Your loved ones will likely need long-term care (LTC). As much as 70% of people 65 and older require it at some point in their lifetime. But why is planning for long-term care so important? 

The bottom line is that it’s expensive. And, as we learned earlier, Medicare doesn’t cover it. In 2023, you can expect to pay the following monthly costs for LTC (although expenses in some states and localities will be much higher): 

  • Home Health Aide – $5,148
  • Adult Day Care – $1,690
  • Assisted Living – $4,500
  • Semi-Private Nursing Home Room – $7,908
  • Private Nursing Home Room – $9,034

Thankfully, there is insurance to help cover the costs of long-term care. However, this can also be expensive. Premiums are largely based on age, health history, gender, and coverage goals. According to the 2022 Long-Term Care Insurance Price Index, a traditional policy valued at $165,000 can cost $950 annually for a 55-year-old male and $1,500 for a 55-year-old woman. 

My mom and dad made many financial decisions that didn’t work out so well, but one of them that did was purchasing Long Term Care insurance. Although my mom had to wait until late in life to get much benefit out of her expensive $3,000/year policy, once she did need it, the coverage was generous.

The Power of Proactive Planning

Preparing for healthcare costs can be complex, so planning is essential. Healthcare costs in America have risen for decades and don’t appear to be changing anytime soon. Creating a strong savings plan can help you and your parents be prepared so everyone can focus on living their lives instead of worrying about their finances. 

Whether it’s for your parents or for yourself, Abacus is here to help answer any questions about preparing for the future. Schedule a 15-minute call today and find out how Abacus can help your family build a sense of security and protection.


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