By Sandra D. Adams, CFP
Senility is what they used to call it. And it only happened to the very elderly, like our great grandparents, and won’t happen to us. It is not something we need to think about. We’ve got everything planned for. We are healthy, educated (more so than our great grandparents were), more financially well-off, and senility isn’t going to happen to us, so we don’t need to talk about that or plan for that. THINK AGAIN!
Senility is now what is known as Alzheimer’s or a related dementia. The statistics are alarming! According to the Alzheimer’s Association, more than 1 in 9 people over age 65 has Alzheimer’s disease. And our chance of being diagnosed with Alzheimer’s or a related dementia doubles every 5 years after age 65 (beginning at approximately 5.3% at age 65 and going from there). If the disease runs in our family, we have had a head injury, we have certain health issues (hypertension, diabetes, etc.), too much stress, are overweight, have depression or a plethora of other conditions, we may be put at even more risk for contracting the disease.
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 the fact that you also forget how to care for yourself and your body begins to forget how to function, requiring more and more care as time goes on.
The cost to your financial plan can be astronomical. In the beginning, family may be able to assist. As more professional care is needed, a few thousand dollars a month for at home caregivers is not out of the question. And as more care is needed the few thousand a month can easily become $5,000 to $10,000 or $12,000 a month depending on the level of care needed and where you live.
In addition to the pure care risks, those who develop Alzheimer’s or related dementia go through a period of time, sometimes prior to their diagnosis or possibly early in their diagnosis, when they are considered having diminished capacity — they are not yet considered fully incapable of making their own decisions and that right has not yet been taken from them, but their ability to make decisions has been compromised. In this stage, we are generally watching for clients whose behavior has changed in some way from previous behavior:
· 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 judgement
· Memory loss (generally)
· Difficulty with basic financial concepts
Some of the bigger concerns during this time can be financial fraud and exploitation. Clients with diminished capacity are extremely vulnerable to others who may 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. Much of this exploitation is at the hands of strangers, but it is often at the hands of family, friends, and caregivers, as well.
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 health diet (Mediterranean Diet suggested)
From a proactive financial planning perspective, put together a proactive aging plan to address the potential risk of dementia/Alzheimer’s/diminished capacity to your overall financial and retirement plan.
What to include in an aging plan?
Legal Documents: Your legal documents should be up-to-date and name the right advocate(s) to act as your fiduciary should you no longer be able to make decisions for yourself. This includes your general/financial durable power of attorney, patient advocate, possible successor trustee on a trust, trusted contact for brokerage accounts, and the executor for your will. These don’t need to be the same person, but all need to be trusted people who will stand up for you, act in your best interest, and follow your wishes. You should name backups to your first choices in all of these roles. In addition, communicate with these folks to make sure they know they are named and that they understand what you expect from them.
Care: Plan for the kind of care you would like to receive, if you ever need it, who you would like to provide that care for you (paid caregivers, family, etc.), where you would like to receive that care and how you will pay for it. Communicate your wishes with all of those involved/impacted to make sure that their input is heard so that your plan can be modified, if needed. For instance, your ideal plan is for your oldest daughter to provide your care personally. But, while she loves spending time with you, hands-on-care is not something she feels she can do. And, her goal is to continue to develop in her career and she doesn’t feel she can take time out to be a caregiver. If this happens, your plan would not be a go. Or if you wished to stay at home, but your house could not be modified to be safe to live in, that might be a game changer.
Financials: Discussing and planning the financials to cover both your basic retirement needs and what might come up if you were ever to need long-term care for dementia is important. Evaluating long-term care insurance versus self-insuring with Medicaid as the fall back should be discussed and an intentional decision.
Legacy: Include legacy planning in your aging plan. What do you want to leave behind? Not just the money, but what values, family stories, important life lessons, etc., do you want to make sure your family receives from you after you’re are gone (either after you are incapacitated or deceased). These are important things to document sooner rather than later so that they are not lost or forgotten.
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 own reflections in the mirror. These “D’s” can cause a lot of havoc to our families and to our financial security, if we don’t plan ahead. Take steps today to put together your own aging plan so that you and your loved ones are prepared for the risks that your may face. Preparation is the best defense!
About the author: Sandra D. Adams, CFP®
Sandra D. Adams, CFP®, can be reached at 248-948-7900, Center for Financial Planning, Inc., 24800 Denso Drive, Ste. 300, Southfield, MI 48033. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc., is not a registered broker/dealer and is independent of Raymond James Financial Services. Any opinions are those of Sandra D. Adams, and not necessarily those of Raymond James.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
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