5 Ways Dementia Can Impact Financial Health
Recent studies have found that the cognitive challenges of dementia can result in significant — and potentially irreversible — financial difficulties. Individuals often make regrettable financial decisions even prior to receiving a dementia diagnosis.1 Following are five financial risks associated with dementia and tips to help you avoid them.
#1 – Missed bill payments
A study conducted by Johns Hopkins found that Medicare beneficiaries who are later diagnosed with dementia are more likely to miss making bill payments up to six years before their diagnosis. After being diagnosed, dementia patients have even more missed bill payments.2
#2 – Lower credit scores
Research has found that individuals with dementia have lower-than-average credit scores beginning two-and-a-half years before they received a diagnosis and continuing for at least three-and-a-half years following a diagnosis.3
#3 – More susceptible to financial fraud
Older adults with dementia and other cognitive impairments are more likely to fall victim to financial fraud.4 In fact, older fraud victims were more than twice as likely to be diagnosed with Alzheimer’s or mild cognitive impairment over the next six years.5
#4 – Increased healthcare costs
In 2022, the total lifetime cost of care for a patient with dementia was approximately $412,936, which is more than double the cost of care for patients without dementia. 70% of these costs are paid for by family members serving as caregivers.
#5 – Impact on caregivers
Dementia patients’ caregivers are more than twice as likely as non-dementia patients’ caregivers to provide 40 hours of care each week. This time commitment can have a direct impact to a caregiver’s personal employment and finances. Many have to leave the workforce, have to cut back on hours, or experience disruptions with their work schedules. Considering that family members bear 70% of the costs related to the care of dementia patients, this places a significant financial burden on caregivers.6
In addition to the financial obligations of caring for a loved one with dementia, caregivers are increasingly vulnerable to the impact of chronic stress and are at higher risk for cardiovascular disease, obesity, depression, diabetes and cancer.
Financial Planning for Dementia
Fortunately, there are measures you can take to help protect your loved one’s finances. Here are several steps that can help you avoid the financial risks associated with dementia and plan for the cost of care.
Set up automatic bill payments
Assist your family member in setting up automatic payments for credit card bills, mortgage payments, utilities, etc. This can help avoid the confusion and stress of making payments each month.
Establish a durable power of attorney
A durable power of attorney is the legal document that allows an individual to authorize an attorney-in-fact to make financial decisions on his or her behalf. It’s important that the document be written so that it’s “durable,” which means it remains valid even after your loved one is considered incapacitated and unable to make financial decisions on his/her own.
Plan for long-term care expenses
Many dementia patients eventually require some form of long-term care, which can be expensive. In 2023, the national average cost of a private room in a nursing home was $9,733 per month, while the national average cost of a home health aide was $6,292 per month.7
If you have a loved one with dementia, it’s important to have a plan in place to help pay for these expenses. It may make sense to set aside funds in a health savings account (HSA) or help your family member purchase long-term care insurance (LTCI). Your wealth manager can help you determine an appropriate course of action based on your financial situation and your loved one’s specific care needs.
Cancel unnecessary credit and debit cards
The risk of financial fraud rises when an individual maintains unused and/or unmonitored credit and debit accounts, which is why it’s important to help your loved one cancel any unnecessary cards. It may also make sense to reduce the spending limit on active cards to minimize the risk of fraudulent activity.
You may also want to consider implementing a credit freeze with the three major credit bureaus, Equifax, Experian and TransUnion. Doing so can prevent fraudsters from establishing unauthorized credit in your loved one’s name.
