Summary
- Addresses dementia as an uncertainty in retirement planning.
- Stresses the importance of early planning and understanding financial impacts.
- Outlines practical steps, including research, financial considerations, and family discussions.
Unlike death and taxes, dementia is not a given. It is an uncertainty, just like all other uncertainties addressed by investment counsel when they prepare to set a retirement portfolio strategy. Just about everything considered is an unknown: how long retirement will last (time horizon), inflation (loss of purchasing power), sources of income (will Social Security survive?), investment returns (what can we expect?), taxes (probably higher, not lower), the financial markets (where are we headed considering COVID, supply disruptions, Ukraine and Russia, Taiwan and China...?)
Somewhat easier to assess is the expense side of the household budget for daily living expenses, as long as there are no surprises. These are assumptions about costs to maintain a healthy lifestyle; an idea of discretionary expenses for vacations and indulgences. But what about how you would pay for a major incapacity such as dementia, which could last a lifetime and require round-the-clock care? (According to the Alzheimer’s Association, the average lifespan for people 65 and older, after diagnosis, is 4 to 8 years, or as long as 20 years if the individual is otherwise healthy.) https://tinyurl.com/45uyb248
How does one even begin to think of how to tackle that calculus? There is a way.
Before you retire, you want to increase your wealth. After you retire, your first and foremost objective is to replace your paycheck (and qualify for pay increases), and perhaps leave a legacy. Incorporated within the analysis would be an assessment of uncertainties that can include contingencies, such as incapacity. The key is anticipating this contingency like all others so that you can understand your options given your financial situation.
With that backdrop, let me ask you this: Will your retirement portfolio serve as your constant friend and benefactor even in uncertain times? If you are not sure, bring in an expert to help you. Dementia is not inevitable, but that doesn’t mean that resource management should be left to chance.