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As Americans live longer, the chance that they'll be impacted by cognitive decline increases. Already, 5.8 million people are affected, a number that's expected to double by 2040, according to the Alzheimer's Association. Chances are, family members will be their caregivers.
To get a better understanding of the situation, RBC Wealth Management surveyed 1,000 family caregivers in November and December 2019, as well as financial advisors who serve clients and family members with cognitive decline.
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Its report points out that to cover the average nursing home stay for someone with Alzheimer's, families will spend roughly twice the cost of a four-year degree at a private college, including tuition, room and board. Yet families are more likely to plan for college expenses.
The study found caregivers forfeit an average $38,000 in annual income by changing work patterns to support caregiving efforts, retiring early or taking time out of the workplace.
Although caregiving frequently falls to women, men's higher average earnings cost them $41,000 annually, compared to $35,000 for women.
Over half of women said their financial confidence has taken a hit as a result of their caregiving responsibilities, and 42% would like more help planning for the toll caregiving will take on their finances.
RBC created a checklist to help advisors plan for these issues with their clients.
1. Plan ahead. One in three people who reach age 85 are expected to die with some form of dementia. Understand the risk factors for the disease and help clients plan for a future where they are a caregiver or a patient. A thoughtfully designed plan should take patients and caregivers through various stages of the disease and their related levels of care.
2. Review insurance levels. Make sure clients have enough insurance to cover an unexpected, long-term event.
3. Get legal documents in order. This means health directives, powers of attorney and wills, as well as beneficiary information on insurance and other accounts. Some clients may benefit from establishing a trust to act as executor, especially if there isn't a clear choice for a family member to act on their behalf.
4. Develop a transition plan. In the event of a diagnosis, having a plan to quickly transition financial and legal responsibility to a capable person will help avoid financial missteps or abuse.
5. Understand the early warning signs. Leaving bills unpaid or asking questions about the same issue repeatedly are indications that an older client might have the beginnings of dementia.
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