Why You Should Include Memory Care in Your Retirement Plan

Planning for memory care after retirement is one of those topics people tend to avoid—until it becomes urgent. But conditions like dementia or Alzheimer’s can require long-term, specialized support that is often expensive and not fully covered by traditional insurance. Thinking ahead gives you more control, better options, and less stress for both you and your family.

Retirees often underestimate how long they might need care. Memory-related conditions can progress slowly, meaning that care may be required for several years. This creates a unique financial risk: Costs are high, duration is uncertain, and coverage is limited.

As a Senior Care Consultant specializing in memory care, I’ve provided care planning information to hundreds of families in the Santa Barbara area. Many of them were surprised (shocked, even) by needing these services in the first place, by how high they actually cost, and by how little they can count on government programs to pay for sorely needed memory care. Traditional retirement planning tools—like Social Security, pensions, and basic savings—are often not enough to absorb these extended expenses without careful preparation.

While not everyone will need memory care, the probability increases significantly with age. Ignoring this possibility doesn’t reduce the risk—it just eliminates your ability to prepare for it. Given the high incidence of dementia cases, planning ahead for memory care is not only wise but can also keep a family from making costly mistakes in the long run.

Dementia cases in the U.S. continue to rise, with roughly 514,000 new cases annually as of 2020, expected to reach 1 million by 2060. About 42% of Americans over age 55 are expected to develop dementia, according to recent estimates. Over 7 million Americans are currently living with Alzheimer’s, the most common form of dementia.

Conditions like Alzheimer’s disease and other forms of dementia don’t just affect health—they fundamentally change the level of care a person needs. Memory care is specialized, long-term, and expensive. It often includes round-the-clock supervision, structured routines and activities, and highly trained staff, all of which come at a premium.

Without a plan, families are often forced into reactive decisions that may force them to choose facilities based on urgency rather than quality, drain savings faster than expected, effectuate quick sales of properties at a high tax burden, and rely heavily on family members for caregiving.

Planning ahead allows you to make decisions on your own terms, preserve your dignity, and reduce emotional and financial strain on loved ones.

Understanding the Cost of Memory Care

Memory care is not simply assisted living, but rather a specialized form of long-term care designed for people with cognitive decline and dementia. It is often referred to as custodial care, in which direct support and supervision are provided by a team of caregivers either in the home (home care) or in a residential care facility (residential care).

Costs can vary widely depending on location and levels of care. In the U.S., residential memory care often ranges from $4K to $10K/month (in Santa Barbara, we are seeing average costs exceed $10K/month). Unlike general assisted living, it includes special training, additional safety measures, and therapeutic programming, which drives up the price.

Home care services are charged by the hour. In our area, they range between $38 and $45 per hour, which would result in a monthly expense of nearly $30,000 for patients needing 24/7 care.

There is no cure for the underlying conditions causing progressive dementia and cognitive impairment, such as Alzheimer’s and vascular dementia. Care is often needed for years, or decades in some cases.

The key takeaway: This is not a short-term expense. Most people need care for several years.

Start With a Long-Term Financial Plan

If you’re still working or recently retired, this is the time to map out potential scenarios.

Ask yourself:

• How many years could I realistically need care?

• What assets could be used?

• Would I prefer in-home care first, then transition to a facility?

Work memory care into your broader retirement strategy—not as an afterthought, but as a potential phase of life.

Explore Long-Term Care Insurance Early

Long-term care insurance can help cover memory care costs and be a powerful tool, but it’s highly time-sensitive. People often delay purchasing it because premiums seem expensive, or they feel healthy, and “not ready.” And by the time they revisit the idea, premiums may be unaffordable—or they may no longer qualify due to emerging health conditions. Waiting removes one of the most effective planning options.

Policies are cheaper when purchased in your 50s or early 60s and harder or impossible to get after certain health issues arise.

Look closely at:

• Daily/monthly benefit limits

• Coverage duration

• Waiting (elimination) periods

Some hybrid policies combine life insurance with long-term care benefits, which can be a good middle ground.

Fewer than 5% of the families I’ve worked with over the past 20 years had the foresight to purchase long-term care insurance. However, I’ve consistently seen a meaningful difference in both overall family well-being and the quality of care among those who did. Without the full weight of financial responsibility, caregivers are free to choose the most appropriate and highest-quality care for their loved ones.

While the emotional pain of watching a loved one experience cognitive decline remains, there is significant comfort in knowing that the best possible care is within reach.

Understand What Medicare and Medicaid Cover

This is where many people get caught off guard. Hardly a week passes without someone reaching out to us in search of a Medicaid bed for a loved one living with dementia. These situations are truly heartbreaking, often leaving families with limited care options. In many cases, they must depend on relatives who are already overwhelmed or, in some instances, unavailable altogether. And in most cases, neither Medicare nor Medicaid will help:

• Medicare
  Many people assume Medicare will cover long-term memory care. It won’t. Medicare primarily covers short-term medical needs—like hospital stays or rehabilitation—not ongoing custodial care. This misunderstanding leads to major financial gaps when care is actually needed.
  

• Medicaid (MediCal in California) can cover memory care—but only if you meet very strict location, income, and asset requirements. Assisted Living Waiver is the MediCal program that can cover memory care in California, but is only available to residents in 15 California Counties (Santa Barbara, Ventura, and San Luis Obispo are not included). Once again, plan ahead: there is a very long waiting list for these beds.

Because Medicaid eligibility rules are complex and vary by state, some people work with financial planners or elder law attorneys years in advance to structure assets and plan appropriately.

Build a Dedicated Care Fund

Some retirees assume that their general savings will be enough. But without a dedicated plan, those funds can easily end up allocated elsewhere—travel, housing, or helping family members.

When care becomes necessary, the absence of a clear funding source can lead to rushed financial decisions or quick asset liquidation under pressure. Even if you do have long-term care insurance, it likely won’t cover everything.

Consider:

• Setting aside a portion of retirement savings specifically for long-term care

• Using Health Savings Accounts (HSAs) if eligible

• Investing conservatively for accessibility rather than high growth

Another important factor to keep in mind is that memory care costs don’t stay static—they actually tend to rise faster than general inflation. Plans that seem sufficient today may fall short in ten to twenty years. Without factoring in cost growth, retirees risk underfunding one of the most expensive phases of life.

Having a dedicated fund creates flexibility and reduces pressure on family members.

Consider Home Equity Options

For many retirees, their home is their largest asset. Options include:

• Downsizing early to free up cash

• Renting out property for income

• Reverse mortgages (in some cases) or home equity lines

Planning ahead gives you greater flexibility, rather than forcing you to sell under pressure and face significant capital gains taxes—especially when the home has been in the family for many years.

Talk With Your Family Early

Many people simply don’t talk about it—not with spouses, not with children, not even with advisors.

This silence leads to a lack of clarity regarding individual preferences, legal and financial confusion, and potential family conflict during already stressful situations. Avoiding the topic doesn’t protect anyone—it just shifts the burden to others later.

Communicating with family members is just as important as the financial side.
Do discuss:

• Your preferences for care

• Who would help manage finances if needed

• Legal documents such as power of attorney and healthcare directives

While family members often want to help, memory care can be physically and emotionally demanding. Caregiving may require full-time supervision, medical knowledge, and significant lifestyle sacrifices. Family caregivers often report feeling overwhelmed by the responsibilities of providing memory care.

Still, there is a general assumption, even among healthcare providers, that spouses or children will provide direct care.

Without a backup plan, this assumption can lead to burnout, strained relationships, and inconsistent care. Clear communication now can prevent confusion and conflict later.

Factor in Emotional and Lifestyle Preferences

Not all memory care communities are the same. Some feel clinical; others feel like small, supportive neighborhoods; others yet, feel like home.

If possible, visit facilities in advance or research options in areas you’d consider living. Planning financially is important—but so is planning for quality of life.

Work With Professionals

A few experts can make a big difference:

• Financial Planners (especially those experienced in retirement planning)
  Financial advisors can help to navigate high costs, protect assets from depletion, and secure Medicaid eligibility, with memory care often costing 20–30% more than standard assisted living. They can also help create sustainable budgets, optimize tax-efficient income, and prevent financial exploitation of seniors with diminished capacity.
  

• Elder Law Attorneys
  Consulting an elder law attorney for memory care planning ensures legal and financial strategies are in place before capacity is lost, protecting assets from high care costs, navigating Medicaid/VA benefits, and establishing durable powers of attorney. They provide personalized planning, reduce family conflict, and ensure the patient’s voice is respected.
  

• Insurance Specialists
  These specialists can help evaluate complex long-term care insurance (LTCI) policies, ensuring optimal utilization of benefits, reducing financial strain, and identifying specialized, cost-effective coverage options for dementia care. Experts stay current on new products, offering superior options compared to general agents.
  

• Memory Care Specialists
  Consulting a local memory care specialist can help you create a personalized care plan, identify behavior management strategies, and connect with resources in the community that can significantly improve quality of life and safety for individuals with cognitive decline. These specialists (myself included) help families navigate complex decisions, reduce caregiver stress, and create tailored routines that address specific dementia-related needs.

These professionals can help you avoid costly mistakes and build a more resilient plan.

After all…

Planning for memory care isn’t about expecting the worst—it’s about protecting your independence and easing the burden on the people you care about.

Including memory care in your retirement plan is ultimately about control. It allows you to make thoughtful decisions in advance rather than urgent ones under pressure. It protects your savings, reduces stress on your family, and ensures that if care is needed, it can be delivered with dignity and stability.

The biggest mistake isn’t choosing the wrong strategy—it’s having no strategy at all.