Aging and Your Money in Retirement: Planning Ahead for Cognitive Decline and Long-Term Care

Nearly one-third of Americans over 65 experience some form of cognitive impairment, and over their lifetime, roughly two out of three will face this challenge. Yet most retirement plans focus exclusively on market returns and ignore the biggest threat to financial security: the ability to make sound decisions when it matters most.

In this episode of the Conquering Retirement podcast, Tom and Brian Hamlin discuss how cognitive decline can affect financial independence, and what steps you can take today to safeguard both your wealth and your well-being.

Why Proactive Planning Matters

Even mild cognitive decline can make everyday money management challenging. The key is to plan proactively rather than reactively. That means having open and honest conversations with trusted family members and establishing systems, like automated payments and clearly documented passwords, before there’s ever a problem.

Five Smart Moves to Protect Your Finances as You Age

Build a Trusted Financial Team: 

Identify one or two reliable individuals who can step in if needed, such as a family member, trusted advisor, or attorney. Make sure they know each other and can communicate easily. The goal isn’t to hand over control now; it’s to create a safety net for later.

If you don’t have close family: Consider a professional fiduciary, a trusted friend, or a faith community member. Many states have professional guardianship services designed for this situation.

Automate and Simplify: 

Complexity is your enemy as you age. Consolidate accounts where possible, set up automatic bill payments, and use direct deposit for all income sources. Store passwords in a secure password manager and keep a backup access method documented in a safe place.

The fewer manual decisions required to keep your finances running, the better.

Establish a Power of Attorney and Trust: 

A durable power of attorney allows someone you trust to manage financial decisions if you’re unable to do so. A revocable living trust ensures your assets transfer efficiently and privately without probate. A healthcare directive specifies your medical wishes.

These aren’t one-and-done documents. Review them every 3-5 years or after significant life changes, such as divorce, the death of a spouse, or relocation.

Face the Reality of Long-Term Care Costs: 

Nearly half of Americans over 65 will need some form of paid long-term care. Depending on your state and the type of facility, costs range from $40,000 annually for in-home care to well over $100,000 per year for memory care units.

Medicare doesn’t cover most long-term care. Medicaid does, but only after you’ve spent down most of your assets. Review your retirement income plan now to determine how you’d cover these expenses without depleting everything you’ve saved.

Consider Financial Products That Do Double Duty: 

Some insurance and annuity products combine guaranteed income with long-term care benefits, allowing a single asset to serve multiple purposes. These hybrid solutions can help you:

• Generate a reliable monthly income
• Access additional funds tax-free for qualified care expenses
• Avoid the “use it or lose it” problem of traditional long-term care insurance

One example: Fixed indexed annuities with long-term care riders can provide up to 2-3× your initial premium for care expenses while still offering penalty-free withdrawal options and death benefits for heirs. Products like the EquiTrust Bridge 10-Year FIA include features such as tax-free indemnity benefits, virtual qualification without medical exams, and 10% annual withdrawals starting in year one.

Important note: These products aren’t right for everyone. They are ideal for individuals seeking income guarantees and care coverage without the need to tie up funds in standalone long-term care policies. Always compare costs, restrictions, and alternatives before committing.

Beyond the Basics: Staying Ahead

• Schedule an annual financial review: Treat it like a physical. Verify that beneficiaries are up-to-date, documents accurately reflect your wishes, and your plan remains sensible.
• Have “the conversation” before it’s awkward: Talk openly with your spouse, adult children, or trusted contacts about your wishes and where vital documents live.
• Use technology wisely: Cloud-based document storage (with strong passwords) and family-sharing features can make information accessible without sacrificing security.
• Diversify your income sources: Relying on a single income stream creates risk. A blend of Social Security, pensions, annuities, and investment withdrawals provides flexibility and stability.
• Stay engaged: Cognitive decline isn’t inevitable. Regular mental stimulation, physical activity, social connection, and purpose are all known to preserve brain health.

Final Thoughts

Financial independence in retirement isn’t just about the size of your nest egg. It’s about building systems that work even when you can’t micromanage them. It’s about surrounding yourself with people and protections that have your back.

By organizing documents, selecting trusted partners, automating systems, and utilizing financial tools strategically, you’re not just safeguarding your wealth. You’re protecting your dignity, your choices, and your peace of mind.

Want more expert insights? Check out the full podcast playlist here. 

Resources: 

• AARP – 6 Steps to Protect Your Money from Cognitive Decline 
• Vanguard – Estate Planning Checklist 
• Morningstar – Your Guide to Long Term Care 
• Investopedia – Hybrid Annuities
• Columbia University – 1 in 10 Older Americans