With so many unknowns related to your health and potential care needs in the future, it can be easy to put planning for these “what-ifs” on the back burner. But it could be a costly mistake, as proactive choices you make now could help protect your finances in the future.

Understanding the progression and funding of care as you age is a crucial component of planning.

Prepare for the possibility of long-term care

While it may be disconcerting to consider a long-term care event like Alzheimer’s, dementia or other forms of cognitive decline, it’s increasingly a reality for many Americans. Failure to plan for future care needs can make matters exponentially worse, putting an unfair burden upon heirs and loved ones, as well as putting assets at risk.

To shine a spotlight on the importance of preparing for long-term care costs, RBC Wealth Management–U.S. commissioned a survey of those caring for people affected by cognitive decline. The study found that not only is there a significant financial impact to the person affected by the disease, but on their caregivers as well.

More than 80 percent of caregivers surveyed contribute financially through direct and/or indirect costs to support their loved one’s daily needs, totaling an average of $17,780 annually. And 54 percent have had to change their work arrangements to accommodate their caregiving duties, which often results in career disruptions and income loss. Women are disproportionately impacted, as two-thirds of the primary unpaid caregivers of those with cognitive decline are female.

There are also impacts on the care receiver. For many, the thought of becoming a burden on family in their later years is unsettling.

Look at funding options

Figuring out how you’d pay for any future long-term care is an important step to take now, before you need the funds. There are multiple ways to cover these potential expenses:

Self-funding: Individuals who do not have a plan to address long-term care costs default to self-funding, requiring them to liquidate assets to cover the costs. With this option it’s important to understand both the potential costs and potential risks to your financial goals, as well as the impact on your family.

Traditional or hybrid insurance: Another option may be to purchase insurance coverage. These policies can help fund your care and protect assets, but costs vary, and this may be an expensive choice depending on your age and health.

Medicaid: The federal government offers Medicaid as a safety net for those with fewer assets and few other options, making Medicaid a last resort for most individuals.

Delegate decision-making

Another proactive step is to determine your advanced care wishes, such as identifying who should make medical and financial decisions for you when you are no longer able to do so.

This requires legally establishing a health care directive and a power of attorney. These documents provide direction on who will make these decisions, in addition to when and under what circumstances decisions will be made.

Ensure these documents are reviewed on a regular basis and kept current. Keep in mind that you do not need to name the same individual to handle your personal medical decisions and your financial decisions.

Recognize changing needs

While one’s retirement journey often begins in their current home, where you spend your golden years is likely to change as you age, moving along a continuum of housing and care support.

Today’s seniors have a variety of options, from independent senior living, shared living and assisted living all the way to skilled nursing facilities.

Identifying the right option at each stage requires recognizing how your needs are changing and balancing considerations like level of care, personal preference and costs.

Aging in place

Even as independent and senior living facilities are booming, the majority of older Americans prefer to stay in their homes and “age in place” for as long as possible.

While costs are certainly a consideration for many, others who choose to age in place may simply be taking advantage of flexible care and service options.

In-home health care, dining and transportation services, along with innovations in technology and safety, have increased independence and offer options to keep seniors living active and healthy lives in their homes.

Staying in a single-family dwelling can be a fit for seniors in good health who are still independent and seek a cost-effective solution. However, even a plan to stay in a home or townhome may require some accommodations, such as:

• Singe-level living
• Safety amenities like a walk-in bathtub, handrails or larger doorways
• Home maintenance services such as lawn/snow service or meal service
• A shift in geography closer to family and friends or better health systems

Hybrid options: Independent or assisted-living community

As you age you may find that you prefer help with day-to-day tasks like preparing meals, laundry or housekeeping. Eventually, you may even require personal services like help with bathing and dressing.

Several planning alternatives have emerged, offering hybrid services that blur the lines between home care and nursing homes. These include a flexible array of offerings like skilled nursing visits, short-term nursing home stays for acute care, independent living and assisted living.

Today’s senior living communities offer options that can adapt as your needs change, as well as deliver social outlets and structure to keep you active and engaged.

Costs are largely impacted by location, community size and assistance required, but typical assisted living expenses are $3,800 to $9,500 per month, according to Genworth’s 2023 Cost of Care Survey, with dementia or Alzheimer’s care offered at a significant premium above these rates.

Long-term care facility or nursing home

A nursing home offers the highest level of care—and with it, the largest price tag.

Stays at a nursing home can involve short-term issues like rehabilitation following a fall, or long-term treatment for chronic and complex conditions, memory care or end-of-life services.

Care is delivered by licensed nurses available around the clock, with most facilities offering special memory care units for those with dementia and Alzheimer’s. It varies by state, but costs for a private room typically range from around $6,500 to $16,500 per month, according to Genworth, and long-term stays are not covered by Medicare.

Read more from our RBC Wealth Insights reports Taking control of health care in retirement and Preparing for the expected: The financial impact of cognitive decline.