Financial caregiving burden on women is
particularly high, causing current and future loss of income,
retirement savings
MINNEAPOLIS, Oct. 5, 2020 /PRNewswire/ - With an estimated 5.8
million Americans living with Alzheimer's, dementia or other memory
disorders, a figure that is expected to double by 2040 with the
aging population, new research from RBC Wealth Management – U.S.
and Aon uncovers just how financially devastating cognitive decline
can be on both individuals and families – even those with higher
net worth.
The survey of 1,000 mass affluent and high-net-worth cognitive
decline caregivers in the United
States revealed that the overall lifetime cost of care for
dementia can be financially devastating, often exceeding
$750,000 in direct and indirect
expenses. The price tag on the disease is further escalated by the
propensity of individuals with dementia to make poor financial
decisions that can further impair their finances. In fact, 80% of
survey respondents reported some level of financial mismanagement
by the individual they care for. The study also found that most of
the caregiving responsibility falls on female shoulders, and women
tend to make financial sacrifices earlier than men, such as
reducing work hours or leaving the workforce entirely, which can
have a lasting impact on their own wealth.
"Mismanaging daily finances is often the first place you see
signs of cognitive decline, which is just the beginning of the
financial journey with this progressive disease," said Angie O'Leary, Head of Wealth Planning for RBC
Wealth Management. "One of the key reasons we commissioned this
research was to identify additional ways financial advisors can
support clients and caregivers who are confronting cognitive
decline. We're all good at planning for things like college and
vacations, but most investors aren't planning for something like a
dementia diagnosis. Advisors and clients need to understand the
total impact."
Key findings from the research are outlined in a new RBC Wealth
Insight report and in a new content series on cognitive decline,
available here. Additional insights from the report include:
Expenses accumulate, and increase with time
Depending
on when someone with cognitive decline is diagnosed, caring for
that person can last from five to 15 years, on average, and can
cumulatively cost families hundreds of thousands of dollars,
according to the study.
There are also progressive expenses for caregivers. According to
RBC and Aon's research, caregivers make a financial contribution of
nearly $750 per month, on average, to
support daily expenses or other needs. By the time someone reaches
a severe decline, monthly expenses are estimated at $1,200 per month.
"A dementia diagnosis can be financially devastating, as
Medicare and traditional insurance do not cover daily care costs,"
O'Leary said. "And most families don't realize you need to
completely drawdown your personal wealth before there is any
government aid."
Financial mismanagement a top risk
Another key risk
and concern for a majority of caregiver respondents is financial
mismanagement. According to the research, 80% of people affected by
dementia have at some point experienced financial mismanagement.
Unpaid bills, unusual spending, unopened statements, and repeat
calls to advisors over the same concern can all be early warning
signs and even signs of financial fraud or abuse.
"Advisors play an important role in helping to identify those
early warning signs of dementia," said Tara
Ambrose, Manager of Senior & Vulnerable Client
Initiatives at RBC Wealth Management. "They can work with families
to take early steps to protect finances and help prevent fraud and
financial abuse."
Caregiving and financial burden primarily impacts
women
The study also found that the responsibility of
caregiving tends to fall on women, who are more likely to feel the
impact of caregiving on their work at an earlier point than men.
Female caregivers typically begin caregiving at an earlier stage in
the diagnosis than men and spend more time on average caring for
someone suffering cognitive decline.
The sacrifices female caregivers make to care for loved ones
suffering cognitive decline often impact career trajectories more
than their male counterparts, with 44% adjusting their work
patterns, including withdrawing from the labor force or by taking
early retirement. And for one in eight female caregivers, the time
commitment is 160 hours a month or more, which is equivalent to a
full-time job, unpaid. These reduced hours and job leaves are
costing women caregivers approximately $35,000 in annual income.
"A big obstacle for women to continue in the workforce is this
balance on the home front," O'Leary added. "Often women are
'sandwiched' between child and elder care and have to take a gap in
their career. Not only is there a financial loss, but the sacrifice
is also keeping them from reaching parity in the workplace."
That loss of income has a multiplier effect, O'Leary said.
Reducing hours or leaving the workforce to care for a loved one
doesn't only impact a caregiver's current income, but it can also
reduce future Social Security benefits, 401(k) contributions and
employer retirement fund matches.
Financial guidance biggest need for caregivers
With
the rising costs, reduction in earnings, pressures of caregiving
and risks for financial mismanagement, access to a financial
advisor ranked as a top resource among those surveyed – especially
for those in the "sandwich" generation.
"There are clear opportunities to better support these
caregivers, not just through more comprehensive financial guidance
but also by facilitating access to tools and resources that reduce
the financial risks to family wealth," O'Leary added. "This
research will help fortify the importance of having planning
conversations between our advisors and clients that will help
families better navigate this terrible disease – one with
incredible financial impact and risk."
More information on the research and a full report is available
here.
Click here for additional information on the financial
impact of cognitive decline.
About the research
Commissioned by RBC Wealth
Management – U.S. and managed by Aon, the study was conducted
between November and December 2019
via online survey and focused on 1,000 mass affluent and
high-net-worth individuals (HNWIs) in the
United States. It included current and former caregivers of
family members and non-family members experiencing cognitive
decline or dementia, but excluded professional caregivers. The
study also included qualitative in-depth interviews with financial
advisors and executives who have clients and/or family members who
have dealt with, or are currently dealing with, cognitive decline
or dementia.
About RBC
Royal Bank of Canada is a global financial institution with
a purpose-driven, principles-led approach to delivering leading
performance. Our success comes from the 86,000+ employees who bring
our vision, values and strategy to life so we can help our clients
thrive and communities prosper. As Canada's biggest bank, and one of the largest
in the world based on market capitalization, we have a diversified
business model with a focus on innovation and providing exceptional
experiences to our 17 million clients in Canada, the U.S. and 34 other countries. Learn
more at rbc.com.
We are proud to support a broad range of community initiatives
through donations, community investments and employee volunteer
activities. See how at rbc.com/community-social-impact.
About RBC Wealth Management – U.S.
In the United States, RBC Wealth Management
operates as a division of RBC Capital Markets, LLC. Founded in
1909, RBC Capital Markets, LLC. is a member of the New York Stock
Exchange, the Financial Industry Regulatory Authority, the
Securities Investor Protection Corporation, and other major
securities exchanges. RBC Wealth Management has $414 billion in total client assets with more
than 2,000 financial advisors operating in 179 locations in 42
states.
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SOURCE RBC Wealth Management - U.S.
