Preparing for the Expected: Navigating Cognitive Decline with Financial Confidence

Preparing for the Expected: Navigating Cognitive Decline with Financial Confidence

Life expectancy is increasing, and with it, the risks associated with cognitive decline. As highlighted in the Wealth Insights report, the financial impact of dementia and other cognitive disorders can be staggering. The average cost of care often exceeds $750,000, and caregivers—especially women—bear a significant portion of that burden. Yet, despite these alarming figures, few families include the potential costs of cognitive decline in their wealth planning.

I’ve spent over 30 years advising high-net-worth individuals and business owners, and I can tell you firsthand—proper planning can mean the difference between financial security and crisis. If you’re not preparing for the potential impact of cognitive decline, you’re leaving a massive gap in your financial strategy.

Why Cognitive Decline is a Critical Financial Concern

Many families assume their savings or insurance will cover long-term care costs, but reality often proves otherwise. Here’s what the research tells us:

80% of caregivers report some level of financial mismanagement by the person they care for.
83% of caregivers contribute financially to their loved one’s care, averaging $17,780 per year.
Women disproportionately bear the burden, often reducing work hours or leaving their jobs entirely to provide care.
The Sandwich Generation—those simultaneously caring for children and aging parents—are being hit the hardest, with 31% higher expenses than other caregivers.

Financial Mismanagement: A Warning Sign

Before a formal diagnosis, financial missteps can be one of the earliest red flags of cognitive decline. Sudden shifts in investment strategies, missed bill payments, and unusual spending patterns are all potential indicators.

A client once came to me confused about why their parent had emptied a significant portion of their retirement savings. It turned out the parent had been making impulsive investment decisions under the influence of phone scammers. We were able to step in, secure their accounts, and put safeguards in place—but had we been involved earlier, the financial damage could have been minimized.

This is why planning ahead is crucial. Families must address these issues before a crisis forces them to act.

How I Help Clients Prepare for Cognitive Decline Risks

1. Proactive Financial Planning

As I mentioned in my interview with Patricia Baranowski Schneider, the biggest financial mistake people make is not planning ahead. My job is to work with clients to:

Identify realistic financial needs for long-term care.
Establish a risk budget to determine safe yet effective investment strategies.
Ensure financial decisions align with long-term goals, not just short-term market trends.

A financial plan should be adaptive. We don’t just create a roadmap and leave it untouched for decades. I continually monitor, adjust, and stress-test your financial strategy to ensure it holds up under changing conditions.

2. Protecting Against Financial Exploitation

Dementia-related financial mismanagement isn’t just about personal mistakes—scammers actively target vulnerable individuals. Families should consider:

Assigning trusted contacts to financial accounts.
Establishing power of attorney before a cognitive decline diagnosis.
Implementing fraud monitoring tools to detect unusual transactions.

I recently helped a client put a financial firewall in place for an aging parent, preventing unauthorized withdrawals while still giving them financial independence. These small, proactive steps can prevent catastrophic losses.

3. Estate and Wealth Transfer Strategies

Estate planning is often overlooked until it’s too late. Without proper structures in place, cognitive decline can make financial transitions chaotic. I guide clients through:

✅ Setting up trusts to manage wealth efficiently and protect against financial mismanagement.

✅ Ensuring up-to-date legal documents like wills, health directives, and power of attorney.

✅ Strategic gifting and wealth transfers to minimize estate tax burdens.

When I meet with business owners, I emphasize exit planning as part of their estate strategy. As I discussed with Patricia, many business owners fail to prepare for their business transition, much like individuals fail to prepare for cognitive decline. Planning early ensures wealth is protected and transferred smoothly.

Empowering Caregivers and Families

Caregiving is both a financial and emotional burden. If you’re currently a caregiver—or expect to be one in the future—your financial plan should reflect that reality.

How I Help Caregivers:

✔️ Creating a long-term care fund to offset personal financial contributions.

✔️ Structuring investments for liquidity, so they have access to cash when needed.

✔️ Evaluating employer benefits, including family leave options and flexible work arrangements.

I recently worked with a client who was part of the Sandwich Generation—raising young children while caring for an aging parent. Through strategic planning, we:

Reallocated assets to ensure cash flow for caregiving expenses.
Optimized their investment strategy to maintain long-term growth despite caregiving costs.
Planned tax-efficient withdrawals from retirement accounts to avoid penalties.

This allowed them to provide care without sacrificing their own financial security.

Don’t Wait for a Crisis—Start Planning Today

It’s easy to put off discussions about aging and cognitive decline, but delaying only reduces your options. The Wealth Insights report makes it clear—those who plan ahead fare better financially and emotionally.

How You Can Take Action Now:

📌 Have a conversation with your family about long-term care preferences.

📌 Schedule a financial review to ensure your plan includes potential cognitive decline costs.

📌 Establish safeguards to protect against financial mismanagement.

I tell my clients all the time: Financial security is not just about wealth—it’s about having the freedom to make choices that support your future and your family’s well-being.

If you’d like to discuss how to integrate long-term care planning into your financial strategy, I’d be happy to help. Let’s start the conversation today.