Cognitive Decline Can be Financially Devastating: RBC Wealth Management
Robert Powell, CFP®
Cognitive decline can be financially devastating to individuals and families, according to new research from RBC Wealth Management.
In fact, the overall lifetime cost of care for dementia often exceed $750,000 in direct and indirect expenses, according to the RBC report, Preparing for the unexpected: The financial impact of cognitive decline.
According to Angie O’Leary, head of wealth planning for RBC Wealth Management, the price tag on the disease is further escalated by the propensity of individuals with dementia to make poor financial decisions that can further impair their finances. In fact, 80% of survey respondents reported some level of financial mismanagement by the individual they care for.
The study also found that most of the caregiving responsibility falls on female shoulders, and women tend to make financial sacrifices earlier than men, such as reducing work hours or leaving the workforce entirely, which can have a lasting impact on their own wealth.
Another key finding: Caregiving duties are impacting younger families, putting a further squeeze on the Sandwich Generation. With the rising costs, reduction in earnings, pressures of caregiving and risks for financial mismanagement, access to a financial adviser ranked as a top resource among those surveyed – especially for those in the “sandwich” generation, according to RBC's press release.
An estimated 5.8 million Americans are now living with Alzheimer’s, dementia or other memory disorders, and that figure is expected to double by 2040 with the aging population, according to the Alzheimer’s Association.
Understand the early warning signs
“Mismanaging daily finances is often the first place you see signs of cognitive decline, which is just the beginning of the financial journey with this progressive disease,” said O’Leary.
Protect your loved ones through planning
The RBC Wealth Management Wealth Insight report also listed nine action steps families can take to deal with the challenge of a family member showing signs of mental decline:
1. Plan ahead, especially when there is increased risk (age, injury, gender or hereditary factors). Understand the costs and the care journey. Incorporate a long-term event scenario into your wealth plan to better understand the implications.
2. Consider supplemental insurance, including long-term care options. There are a range of protection strategies to better prepare for unexpected health care expenses.
3. Ensure your key legal documents (power of attorney, health care directive and will) are in order, your assets are properly titled and your beneficiary designations are current.
4. Understand the early warning signs. If you have concerns about your own or a family member’s mental capacity, contact the appropriate financial and legal professionals.
5. Consider the benefits of establishing a trust and using a professional trustee service, especially in the absence of a competent personal executor or family member.
6. After a diagnosis, act swiftly to protect the family from financial missteps, abuse and liability. A plan for transitioning financial and legal capacity should be put into motion.
7. Plan for the long haul and the various stages of the disease and related levels of care.
8. For caregivers still in their career years, explore your employer benefits, including family leave benefits and flexible working arrangements.
9. Make sure you and your caregivers have access to valuable resources that can ease the burden of your care journey.