Family Wealth Is Evaporating As the Cost of Aging Soars: Proactive Planning Options

Economists have long described the coming transfer of wealth from baby boomers to younger generations as the greatest in history. Estimates have ranged from $68 trillion to $84 trillion expected to change hands over the next two decades. A closer look at the data, however, tells a sobering story. A July 2026 Washington Post analysis of Health and Retirement Study data found that the costs of aging are quietly eroding, and in a growing share of cases, obliterating, the very wealth families hoped to pass on.  Worse, adult children, rather than being the beneficiaries of generational wealth, are in some cases spending down their own savings to pay for their parents’ care. 

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A Large and Growing Problem

The Health and Retirement Study is a federally funded survey following thousands of Americans from their early 50s until death, recording their finances every two years.  The Washington Post examination focused on the spending of seniors in the final decade of life, and revealed that:

• The median out-of-pocket care spending per person was $19,179.
• One in six spent more than $50,000.
• One in twenty spent more than $100,000.
• The share of people left with essentially nothing after care costs rose from 6% (those who died 2006–2010) to nearly 11% (those who died 2017–2022).
• Among the poorest fifth of Americans, 41% were left with nothing, having spent nearly one-third of their wealth on care.
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These figures understate the full burden because they often exclude room-and-board costs in assisted living or nursing facilities. Median assisted-living costs reached roughly $74,400 per year in 2025, while a private nursing-home room averaged about $129,575 annually. Multi-year care for dementia at that cost can approach or exceed $1 million. 

Medicare generally does not cover custodial long-term care. Only about 3% of adults overall, and roughly 15% of those 65 and older, carry long-term care insurance. The result is that families, particularly middle- and lower-wealth households, absorb the cost.

The popular narrative of a massive, relatively automatic wealth transfer therefore requires significant qualification. For many families, the cost of aging is not merely reducing inheritances; it is eliminating them.

Planning Responses: A Structured Approach

The good news is that families are not without planning tools. Effective responses generally fall into several complementary categories. The order below reflects a practical sequence many elder law and aging-in-place professionals recommend:

• Aging-in-Place Planning- Keeping Care at Home Whenever Possible:  The single most powerful way to reduce the financial and human cost of aging is to prevent unnecessary and avoidable institutional care.  To reduce the cost of extended hospitalization, Medicare encourages skilled nursing or institutional rehabilitation care on a limited, temporary basis after a qualifying hospital stay. This care is intended to make it possible for a patient to return home.  In practice, these short-term stays frequently become long-term placements. This is the case for those patients who have nowhere suitable to go after their Medicare days are exhausted.  Planning ahead, though, and making a  home a suitable alternative can avoid prolonged or permanent institutional care for these patients.  

But the more sobering story is for those who select institutional care for temporary rehabilitation and find that the choice of institutional care transformed a temporary need for rehab into a permanent need for on-going care. Whether that permanent need results from the high incidence of medical mistakes that occur in nursing homes, acts of other patients, security risks, transport risks, or merely the higher risk of infectious diseases which exists even in nursing homes that maintain a high quality of care, the harsh reality is that institutional care has risks that simply do not exist at home.  These risks can cause permanent, physical, psychological, or emotional injury or impairment.  Simply, once a person is in a nursing facility, returning home becomes significantly more difficult. 

  

Deliberate aging-in-place planning focuses on:  

• A trust, durable powers of attorney, and advanced directives specifically planning for and directing: (1) aging in place; (2) competency and physical capability determination and management; (3) family caregiving; and (4) guardianship protection, each separately protecting the right and ability to stay home, the trusted decision-makers, the maker's advanced decision-making, and the necessary assets; 

• Home modifications that improve safety and accessibility;

• Early arrangement of home-care services and supports;
• Technology that enables remote monitoring and daily check-ins; and
• Clear family agreements about caregiving roles and limitations.  

Keeping care at home whenever possible does more than support independence. It preserves familiar routines, reduces the risk of the disorientation and decline that often accompany institutional placement, and gives families greater control over the quality and continuity of care. For many older adults, remaining in a known environment is itself a form of protection — one that no facility can fully replicate.

• Traditional Financial Planning Tools:  Keeping someone safely at home is almost always less expensive than institutional care and preserves dignity, autonomy, and family wealth far more effectively.  Even with strong aging-in-place efforts, though, some paid care is often required. It is important to remember that care expenses are monthly recurring expenses.  Predictable, guaranteed sufficient income may provide better protection than simply a seemingly large sum of cash or investments.  Discuss both strategies with your advisor.  Traditional financial planning tools can help create both liquidity and income streams. Common options include:

• Long-term Care Insurance;
• Home Health Care Insurance. 
• Catastrophic Health and/or Disability Insurance
• Annuities (including bonus or income annuities designed to generate predictable, guaranteed cash flow).
• Indexed universal life or other permanent life insurance structures that can provide living benefits or cash-value access.
• Professionally managed brokerage accounts designed for systematic withdrawals.
• Reverse or traditional mortgages (particularly for homeowners who wish to age in place and unlock home equity without a monthly repayment obligation, reverse mortgages may be an acceptable last resort).

Traditional long-term care insurance can shift a substantial portion of the risk of high care costs. Hybrid products (life insurance or annuities with long-term care riders) have become more popular because they address the common concern of “use it or lose it.” Coverage is most affordable and attainable when purchased before significant health issues arise. Families should review existing policies carefully for benefit triggers, inflation protection, elimination periods, and the financial strength of the carrier. 

 

These, and other tools involve trade-offs among and between liquidity, risk, fees, tax treatment, and longevity protection. Any financial product decision should be made with a qualified professional who can evaluate the full picture of risk and reward in light of the individual’s health, other assets, and goals. Product illustrations and marketing materials alone are insufficient.

• Medicaid Planning, Including Medicaid Asset Protection Trusts (MAPTs): For many low- or middle-income families, Medicaid remains the only realistic way to cover extended long-term care without complete spend-down. Properly structured Medicaid Asset Protection Trusts, when funded outside the applicable look-back period, can protect assets while still allowing eligibility for benefits. Other Medicaid planning techniques, careful use of spousal protections, exempt resources, qualifying caregiver exemptions for asset transfers, caregiver agreements, and spending strategies, also play important roles. This area is highly technical and state-specific; do-it-yourself approaches frequently fail.  These are best left to elder law attorneys. 

A Coordinated Strategy Works Best

No single tool solves the problem. The most resilient plans typically include:

• Aggressive efforts to support aging in place;
• Thoughtful use of financial products for liquidity and income;
• Appropriate long-term care insurance where available and suitable;
• Timely Medicaid planning for those who may eventually need means-tested benefits; and
• A collaborative approach among and between professionals.

Early conversations and early action matter. Once a care crisis arrives, options narrow dramatically and costs escalate.

A Final Word

The Washington Post analysis provides a valuable public service by documenting how the costs of aging are quietly consuming family wealth. The projected multi-trillion-dollar wealth transfer will still occur for many higher-wealth households. For a large share of middle- and lower-wealth families, however, the transfer is being substantially reduced or eliminated by care expenses.

Proactive planning cannot remove every risk, but it can meaningfully change the trajectory. Families who treat the cost of aging as a predictable planning issue rather than an unpredictable crisis are far more likely to preserve both independence and a portion of the legacy they hoped to leave.

This article as inspired by: Federica Cocco and Shannon Najmabadi, “As the cost of aging soars, families’ wealth is evaporating,” The Washington Post, July 22/23, 2026.