EXECUTIVE SUMMARY
The years preceding a dementia diagnosis come with the risk of significant financial losses. Researchers are working to better understand this stage of life and the hidden financial hazards it holds for older adults and their families. What is driving these losses, and what can be done to mitigate them?
To address these questions, MIT AgeLab and AARP convened a one-day symposium on April 10, 2024, at the Massachusetts Institute of Technology. This report reflects the insights, strategies, levers for change, and barriers to overcome that surfaced during the symposium.
The impact of dementia is broad, affecting nearly 1 in 10 adults in the United States over age 65. More than 2 in 10 have mild cognitive impairment (MCI)—a symptomatic condition often preceding dementia, characterized by memory or cognitive decline, and experienced by those who do not yet meet the full diagnostic criteria for dementia. Anecdotal evidence indicates that serious personal financial losses can occur not only following a dementia diagnosis but beforehand as well.
Recently, researchers have created a clearer picture of the scale of these early, harmful financial effects, which can begin years before a diagnosis. A 2020 study of single Medicare beneficiaries found that the financial impacts associated with dementia, such as missed payments and declining credit scores, can prefigure diagnosis by as much as six years. A 2023 study reaffirmed these results, finding that the median household net worth of older adults drops by more than half in the eight years leading up to a dementia diagnosis, from a median level of $217,000 to around $104,000.
The symposium brought together families affected by dementia and experts across relevant sectors and industries, including representatives of health care and financial services industries, non-profits, and academia, as well as policymakers. Among the key points that arose during the day’s discussion were:
Complex causality
Lost income and reduced financial judgment are the primary drivers of pre-dementia-diagnosis financial losses, according to recent research. Although financial losses may be triggered by cognitive issues, they may also make such issues worse. Another vein of research suggests that severe “financial shocks,” especially those causing the loss of housing, may lead to cognitive impairment. Taken together, these research threads point to a vicious cycle that may exist between financial and cognitive losses.
Exploitation and extreme unforeseen risks
Fraud and exploitation may lead to small standalone or recurring financial losses, but they may also prove cataclysmic, claiming most or all of an individual’s or household’s assets. Such cases, though rare, constitute an extreme and unforeseen driver of major financial stress.
The role of non-household family members
The adult children or grandchildren of individuals who develop dementia often take on significant financial responsibilities and incur personal losses starting in the pre-diagnosis period. These non-household family members may find it difficult to access assets if the person who controls accounts is experiencing cognitive decline.
Systemic problems, systemic solutions
Pre-dementia financial losses have roots in both health and financial sectors, and so finding ways to bring those sectors together along with other stakeholders is critical to addressing this issue.
Brain health and protective factors
The many factors that promote brain health and help protect against dementia can also protect against dementia-associated financial losses. These include social engagement, cognitive engagement, stress management, exercise, quality sleep, and dietary considerations. Pre-dementia financial losses were also more prevalent in geographic areas with less education, highlighting the salience of social determinants of health.
Legal remedies and drawbacks
Fighting financial exploitation via the legal system requires determining who can act for themselves and whose interests are better represented by others. This delicate balance sometimes errs on the side of paternalism, while at other times on the side of permitting exploitation to continue unchecked. Several states have experimented with laws that approach this dichotomy in a new way: presenting exploitation not in terms of someone’s dementia status but rather whether positions of trust are being abused.
Artificial intelligence (AI) threats and remedies
AI is making online and phone scams more convincing than ever; however, automated tools empowered by AI and other algorithms may also flag fraudulent transactions and other concerning financial patterns.
Empowering professionals
Financial advisors are often well positioned to notice behavioral and financial changes that hint at the presence of cognitive issues. They may benefit from resources to help them decide when and how to encourage clients to see a doctor. Physicians, meanwhile, may benefit from added outreach and training on earlier dementia and MCI diagnosis.
Raising awareness
New research suggests that an earlier diagnosis of dementia may make a significant difference in preventing household wealth losses. Should evidence of this effect continue to mount, it may elevate the importance of early screening for MCI and dementia.
link