Contributed by: Sandra Adams, CFP®
Senility is what they used to call it and it only happened to the very elderly like our great grandparents. Surely, not us. We are healthy, educated, and financially well off, so we don’t need to talk about senility or plan for it. THINK AGAIN!
Senility is now known as Alzheimer’s, a disease that accounts for 60-80% of dementia. The statistics are alarming! According to the Alzheimer’s Association, more than 1 in 9 people over age 65 have Alzheimer’s disease. The chances of an Alzheimer’s diagnosis doubles every five years after age 65 (beginning at approximately 5.3% at age 65 and going from there). If the disease runs in your family, a head injury, hypertension, diabetes, stress, excess weight, depression, and many other conditions increase your risk of diagnosis.
Risks of Not Planning
I don’t need to tell you that losing your memory is a scary proposition. The fact that you could live for years (if you are otherwise healthy) without knowing who you are, where you are, who any of your loved ones are, and not recall your short nor most of your long-term past is frightening. Even more disturbing is that you also forget how to care for yourself, and your body begins to forget how to function. Family may be able to assist you at first, but as time goes on professional care is usually needed. A few thousand per month for at-home caregivers is not out of the question. As more care is required, the few thousand dollars per month can quickly become five thousand to ten or twelve thousand dollars a month, depending on the level of care needed and where you live. The impact on your financials, if you haven’t planned, can be detrimental.
In addition to the care risks, there are capacity risks. Those who develop Alzheimer’s or related dementia go through a period (sometimes before their diagnosis or possibly early in their diagnosis) when their capacity is considered “diminished.” They are not yet considered fully incapable of making their own decisions. In other words, the right to make decisions has not yet been taken from them, but their ability to make decisions is compromised. In this stage of the game, we are generally watching for behavioral changes in clients:
Missing Appointments
Getting confused about instructions/having difficulty following instructions
Making more frequent calls to the office to ask the same questions
Trouble handling paperwork
Difficulty recalling decisions or actions
Changes to mood or personality
Poor judgment
Memory Loss (generally)
Difficulty with basic financial concepts
Concerns that are more significant can be financial fraud and exploitation. Clients with diminished capacity are incredibly vulnerable to others who try to take advantage of their inability to understand what is or is not real. Unfortunately, 1 in 10 seniors over age 65 are victims of financial exploitation, according to the Government Accountability Office, with losses totaling over $3 billion annually. While most of this exploitation is at the hands of strangers, sometimes family, friends, and caregivers exploit the vulnerable.
Proactive Solutions
Now that I have completely frightened you about dementia and diminished capacity, let’s take a step back and look at what we can and should be doing to plan and protect your plan proactively against these risks.
From a personal health perspective, the Alzheimer’s Association suggests:
Combined physical and mental exercise
Continuous Learning
Social Engagement
Get good sleep
Eat a healthy diet (Mediterranean Diet recommended)
From a financial planning perspective, it makes sense to put together a proactive aging strategy as part of your retirement planning to address the potential risks of dementia/Alzheimer’s/diminished capacity on your comprehensive financial plan. What should this aging strategy address?
Legal Documents
Care
Finances
Legacy
Dementia and diminished capacity are scary. We don’t want to think about a time when we might not remember our names, remember our loved ones, or even recognize our reflections in the mirror. Dementia and diminished capacity can wreak havoc on our families and our financial security if we don’t plan. Take steps today to put together an aging strategy so that you and your loved ones are prepared. Preparation is the best defense! If you or anyone you know need assistance with this topic, please let us know. We are always happy to help!
Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.