We often avoid difficult financial conversations until they become unavoidable, which is always too late. This also tends to hold true for discussions about our health and the health of our loved ones, particularly when it comes to diseases like Alzheimer’s and other types of dementia.
Unfortunately, putting off this process can have dire consequences. If discussions are held in time, there is a greater chance that the person living with dementia will be able to participate in the discussions. Without this, it’s more challenging for caregivers to make accommodations, which is why helping retirees plan for the financial impact of Alzheimer’s and dementia starts with early communication.
Alzheimer’s and finances: Getting the conversation started
In 2022, the lifetime cost of care for an individual living with dementia was nearly $400,000, with 70% of those costs falling on caregivers. Out-of-pocket costs for healthcare, unpaid caregiving, and long-term care services (those costs not covered by Medicare, Medicaid, or private insurance) take a financial toll on caregivers and individuals with Alzheimer’s and other dementias. Most of us cannot face this burden alone.
We recommend having these conversations as early as possible to ensure caregivers fully understand their loved ones’ preferences and can put plans in place for current and future care needs.
Whether we are presented with a diagnosis or suspect a loved one is showing signs of dementia, we must understand that initiating conversations about the financial burden of the illness as early as possible is crucial. While approaching the topic is uncomfortable, delaying such discussions can lead to increased financial and emotional strain on both patients and caregivers.
To make these conversations less challenging, initiate them slowly and deliberately, beginning with discussions as short as 10 to 15 minutes. Focusing on one topic per conversation, such as a plan to gather banking information or estimating the cost of care, helps avoid emotional overwhelm and unhealthy conflict. When bringing up the need to plan for dementia-related care, it is essential to keep the focus on the patient’s desires for the future, providing a foundation for productive financial discussions and ensuring a secure financial future.
Creating a financial plan for living with Alzheimer’s
Creating a plan for care aids in avoiding serious consequences down the road. Here are the key steps to establishing a financial plan that considers the unique demands of Alzheimer’s:
· Create a financial inventory: Compile a written record of available resources. Document all financial assets, including savings, investments, real estate, and retirement accounts. This is a time to be detailed – your inventory will serve as a reference point for making informed decisions about funding long-term care. You could either do this on your own or seek the help of a professional financial adviser to ensure you have all the materials and information you need. Make sure to communicate with a trusted accountant who can help serve as an additional financial planning partner.
· Identify current and potential future costs of care: Develop a detailed understanding of the continuing and potential future expenses related to Alzheimer’s care. This includes medical treatments, prescription medications, personal care assistance, adult day services, and potential residential care. Understanding coverage amounts and limits under health insurance plans and estimating care costs is essential in forming a plan to pay for current and future care needs.
· Exploring benefits and programs: Many people incorrectly assume that Medicare will cover the costs associated with nursing-home care. Educate yourself about Medicare limitations and explore alternative programs that may assist, such as Medicaid waivers and other senior assistance initiatives that can help with food and housing. Many of these programs have wait lists, so once again, getting started early is crucial.
· Establish a power of attorney: Designate a trusted individual to make financial decisions on your behalf or the behalf of the person with Alzheimer’s. The power of attorney should be completed while the person is still mentally capable of making decisions. Choosing someone to represent your financial matters requires careful consideration, including backup planning in case the original designated individual is unable to fulfill their responsibilities. Consulting with an attorney can help you draft a power-of-attorney and understand the implications of signing the documents. The Alzheimer’s Association can provide a list of elder law attorneys near you.
· Address the heightened risk of financial abuse: Recognize the susceptibility of individuals with dementia to financial exploitation. There are legal plans that can be created to help protect the assets of a loved one with cognitive issues, implementing safeguards in the power of attorney arrangement to protect against potentially fraudulent activities or unsound financial decisions.
Creating a caregiver’s financial plan
Alzheimer’s does not solely impact the person with the disease. Those who assume caregiving responsibilities put their own careers and financial well-being at risk. Careful, timely planning can help caregivers find the support they will need as they support their loved ones. Here are some planning tips that caregivers and their loved ones should consider:
· Recognize the need for expense and lifestyle adjustments: Nearly half of caregivers may need to cut back on their own expenses to afford dementia-related care. This may impact necessities such as food, transportation, and medical affairs. Acknowledging the need for these adjustments is a difficult and ongoing process but ignoring it will only make planning more difficult down the road.
· Understand the impact on careers: Caregivers often find it challenging to balance their careers with caregiving responsibilities. Some may need to seek different employment situations, leading to changes in income and benefits. Early discussions about these potential changes are vital for financial planning.
· Inventory personal assets and establish limits: Just like the person with the disease, caregivers should conduct a thorough inventory of their own assets, understanding their financial limits and boundaries. This includes assessing savings, investments, and retirement funds. Establishing clear boundaries helps caregivers make informed decisions about the level of financial support they can provide.
Start planning now
There’s no need to wait for retirement to start planning for healthcare issues. The Alzheimer’s Association offers free care consultations and educational programs to help families understand and address care planning and other financial and legal issues that can arise with Alzheimer’s or other forms of dementia.
Planning for retirement should include considerations for potential long-term care needs, especially given the unpredictability of diseases like Alzheimer’s. Contributions to retirement accounts should be complemented by life insurance policies and long-term-care insurance. But the most important step is engaging in open and honest conversations with your family and your support network to ensure alignment between your plans and the expectations of potential caregivers. Finally, write your plan down. A written plan that includes disability contingencies can serve as a valuable resource when navigating responsibilities and future wishes.
The financial challenges associated with Alzheimer’s and dementia are considerable, affecting not only the individuals diagnosed but also their caregivers and families. By initiating open and early conversations and creating comprehensive financial plans, we can reduce some of the financial stress and put more effort into our physical and emotional health while enjoying our time with our loved ones.
Glenn Friedman, CPA, is chief executive of Prager Metis, an accounting and advisory firm. Prager Metis helped to create the Alzheimer’s Association Accounting Industry Leadership Council, which has raised more than $3 million for the cause. The council is made up of 25 firms who challenge the industry to join in the fight against Alzheimer’s.
