Financial Planning for Alzheimer's and Dementia Care

Nathan Paulus -headshotNP
By Nathan Paulus

Updated: October 21, 2025

Edited by Rae Osborn
Reviewed by Dr. Virgie Bright Ellington
fact checked icon

Advertising & Editorial Disclosure

Alzheimer's disease (AD) is the most prevalent form of dementia among older adults, marked by progressive and irreversible cognitive decline. The number of Americans with Alzheimer's or other dementias is expected to rise as dementia risk increases with age. About 1 in 9 people (11%) age 65 and older have been diagnosed with Alzheimer's dementia.

Effective care for those with Alzheimer's or dementia requires comprehensive planning spanning medical, legal, financial and daily care. This approach provides high-quality, consistent support and reduces caregiver stress. Numerous organizations offer financial assistance, training and guidance to navigate these challenges.

How to Create a Financial Plan for Memory Care

Navigating the financial landscape of Alzheimer's and dementia care requires careful planning and strategic decision-making. A comprehensive financial plan addresses the direct costs of care and considers the broader impact on the family's emotional, social and financial well-being. Here are two critical areas to focus on when developing a financial care plan:

Seek Professional Advice

Professionals specializing in elder care provide valuable insights and guidance. From financial planners to elder law attorneys, these experts help tailor a financial strategy that ensures your loved one receives quality care while safeguarding family assets and meeting legal requirements.

    businessPersonApplying icon
    Financial Planner

    A financial planner specializing in elder care or estate planning offers guidance on managing assets, planning long-term care costs and understanding tax implications. They can create a financial strategy that supports your loved one's care needs while preserving family assets.

    businessOwner icon
    Elder Law Attorney

    Consulting an elder law attorney helps you navigate legal options for asset protection, Medicaid planning and establishing trusts. They assist with legal documentation to ensure your loved one's care and estate are managed according to their wishes.

    coupleL icon
    Geriatric Care Manager

    These professionals help navigate the health care system, identifying appropriate care options and resources that save time and money. They can coordinate and manage care services.

    seniors icon
    Community Resources

    Many communities have local agencies or nonprofits that offer advice and support for families dealing with Alzheimer's and dementia. They can provide information on subsidies, grants and programs that help offset care costs.

Budget for Care

The key components of creating a comprehensive budget are assessing available funds, understanding care needs and planning for potential cost increases. This proactive approach can help families manage ongoing expenses and prepare for unforeseen costs, ensuring a stable financial footing throughout the care journey.

    money2 icon
    Assess Current Financial Resources

    Evaluate all available financial resources, including savings, investments, retirement funds and potential income streams. This step will form the foundation of your care budget.

    care icon
    Understand Care Needs and Associated Costs

    Break down the types of care your loved one may need now and in the future. Include costs for in-home care, assisted living, medication and other anticipated health care needs.

    wallet icon
    Create a Monthly Budget

    Based on your assessment, develop a monthly budget that covers all current care expenses. Use this to monitor spending and adjust as care needs change over time.

    financialPlanning icon
    Plan for Future Costs

    Alzheimer's and dementia are progressive, so anticipate and plan for increasing care costs. Include potential scenarios in your budget planning to avoid surprises.

    piggyBank icon
    Emergency Fund

    Set aside some funds for unexpected expenses related to care or health emergencies to ensure you're prepared for the unforeseen.

Types and Costs of Alzheimer's and Dementia Care

In 2023, caring for those with Alzheimer's or other dementias cost an estimated $345 billion, including health and long-term costs. Medicare and Medicaid covered $222 billion, or 64%, of these expenses. Costs include ongoing medical treatments, home safety modifications, prescription medications and personal care services. Total cost varies based on required care level, setting and duration. Medical insurance may cover some expenses but won't cover everything.

The lifetime cost of care for someone with Alzheimer's dementia was estimated at $392,874 per person in 2022, accounting for out-of-pocket expenses, Medicare and Medicaid contributions and informal caregiving. Understanding care types and making informed decisions can greatly reduce financial stress and help you allocate resources efficiently.

In-Home Care

In-home care lets people with Alzheimer's or dementia stay in familiar surroundings. However, it includes various expenses: personal care services, home health aides and household modifications. In 2022, the median cost for a nonmedical home health aide was $28 per hour and $5,358 per month. Homemaker services cost $27 per hour and $5,159 monthly.

Medicare may subsidize part-time or intermittent skilled nursing care and home health aide services but excludes 24-hour care, long-term care, meal delivery and personal care. Depending on the state, Medicaid and home and community-based services can provide more home care and long-term care support.

Adult Day Care

For many families caring for a loved one with Alzheimer's or dementia at home, adult day care offers an affordable and beneficial option. These centers provide social interaction and supervised care during daytime hours, ideal for caregivers who work. This option costs less than residential memory or private home care. The median cost of adult day care services in 2022 was $81 per day.

Medicaid covers adult day care costs for low-income seniors with Alzheimer's and dementia nationwide, with specific eligibility for those interested. Most states also offer financial assistance for adult day care, though these programs might not specifically target adult day care or dementia.

Memory Care

Memory care units, often part of assisted living facilities, offer specialized and secure care for individuals with Alzheimer's and dementia. The median monthly cost for an assisted living residence was $4,672 in 2022, amounting to $56,068 annually.

Medicare doesn't cover memory care costs in assisted living facilities or dedicated memory care communities. However, under specific conditions, Medicare may cover certain costs, usually up to a limit of 100 days for skilled nursing care.

Nursing Home

Nursing homes provide 24-hour medical care and assistance with daily activities, offering a structured environment suited for those in advanced dementia stages. In 2022, the average cost for a private room in a nursing home was $308 per day or $112,556 annually. A semi-private room cost $270 per day or $98,534 annually.

Financial assistance for long-term nursing home care for those with Alzheimer's or dementia is limited. Medicaid is a vital funding source for long-term nursing home care in the United States, covering most care for eligible individuals. Requirements and eligibility differ across states.

Medications

Medications specific to Alzheimer's or dementia and treatments for related health conditions play a part in expenses, with the average annual per-person payment for prescription medications reaching $4,811. Necessary medical equipment such as wheelchairs, walkers or hospital beds for home use adds further costs. Regular medical check-ups, specialist consultations and emergency care also require professional fees.

How to Pay for Alzheimer's and Dementia Care

Financing Alzheimer's and dementia care involves exploring various options: personal savings, insurance benefits and financial aid. Asset liquidation and retirement savings can be practical funding sources. 

You can also leverage insurance coverage. Policies may offer treatment coverage for Alzheimer's upon a doctor's diagnosis. A wide range of financial assistance is available. Government programs like Medicare and Medicaid and nonprofit grants offer substantial support, helping families navigate dementia care's financial challenges.

Private Pay

Using private funds can be a strategy to pay for Alzheimer's and dementia care. These funds come from personal savings, retirement accounts, asset sales like real estate or financial contributions from family members. Private funds grant you greater control over care choices, especially since insurance often doesn't cover long-term care.

  1. 1
    Personal Savings and Assets

    Families often depend on personal savings for initial care expenses, drawing from cash reserves and both nonretirement and retirement accounts. Personal assets, whether owned by the dementia patient or other family members, can also support care costs. These assets include investments such as stocks, bonds, savings accounts, real estate and valuable personal property.

  2. 2
    Retirement Benefits

    Retirement plan benefits, including IRAs, annuities and pension plans, can provide financial support, even before retirement age. Withdrawing funds from retirement savings accounts may have tax implications and potential penalties. However, early withdrawals from IRAs or employer-funded retirement plans might avoid the usual 10% penalty under certain conditions. Such withdrawals are considered taxable income.

  3. 3
    Other Assets

    Selling or leveraging assets, like real estate, can generate necessary funds. Options include downsizing a home or liquidating investments. Home equity can also be converted into cash through a reverse mortgage for individuals 62 or older, which allows homeowners to borrow against their home's equity without affecting Social Security or Medicare eligibility. However, it may influence eligibility for other government programs.

Insurance Coverage

Understanding your insurance options can make a big difference in covering Alzheimer's care costs. Options range from government insurance like Medicaid and Medicare to private health insurance. 

Each type has its own rules about what's covered, out-of-pocket costs and application processes. Understanding these details helps you maximize the coverage you have.

  1. 1
    Medicare

    Medicare is available to all U.S. adults over 65 and those with certain disabilities. For those with Alzheimer's and dementia, Medicare covers diagnostic tests, doctor's visits, hospital stays and, under Part D, prescription drugs. Medicare doesn't cover nonmedical dementia care, such as day-to-day living assistance and long-term nursing home stays.

    Medicare Advantage Plans may fill some gaps, offering broader coverage options, including limited custodial care. Beneficiaries can also consider Medicare Supplemental Insurance (Medigap) to help with copayments and deductibles for Medicare-covered services, though it doesn't extend specific extra coverage for Alzheimer's or dementia care. Visit the Medicare website for detailed information on Medicare's Alzheimer's and dementia coverage.

  2. 2
    Medicaid

    Medicaid is a joint state and federal program providing health insurance for low-income people and families. With each state managing its own Medicaid program, coverage for Alzheimer's, dementia or memory care varies. A critical aspect of Medicaid eligibility is the three-year "look back" period, during which officials examine financial transactions to ensure no assets were transferred below market value to meet eligibility requirements.

    Medicaid offers more comprehensive coverage for Alzheimer's or dementia care than Medicare. For instance, unlike Medicare, Medicaid covers some level of assisted living benefits in most states and provides ongoing nursing home care beyond 80 to 100 days.

    To benefit from Medicaid for Alzheimer's and dementia care, you must meet the program's income and asset criteria, which differ by state. Find specific information about Medicaid in your state by visiting their site or calling 1-800-633-4227. 

    Your State Medical Assistance office can guide you on qualifying for Medicaid. Not all providers accept Medicaid, so verify provider participation before starting treatment.

  3. 3
    Private Health Insurance

    Private health insurance offers valuable coverage for Alzheimer's and dementia care, including diagnostic tests, specialist visits and some therapies that Medicare or Medicaid don't fully cover. Choose a plan that effectively meets care needs, considering coverage extent and additional out-of-pocket expenses. Review your policy thoroughly, understand coinsurance rates and deductibles and know how the insurance coordinates with Medicare if applicable.

    To find affordable private health insurance for Alzheimer's and dementia care, identify your specific care needs and budget constraints, then review and compare different insurance plans. Look for policies offering comprehensive coverage for dementia-related services at the lowest out-of-pocket cost. Use online comparison tools, consult insurance brokers specializing in elder care and reach out to organizations guiding dementia care to gather insights on the best available options.

Support for Veterans With Alzheimer's

Veterans with Alzheimer's or dementia can access VA benefits, even if their condition isn't linked to military service. The Department of Veterans Affairs provides various benefits to help senior veterans with care costs. VA health care programs include medical benefits useful for individuals with dementia, offering assistance from diagnosis to terminal stages. The Aid and Attendance pension benefit can offer up to about $2,230 monthly for qualifying veterans.

Veterans with Alzheimer's or dementia can also benefit from the Veteran-Directed Care (VDC) program, which allows veterans to manage their care and choose their providers, including family members. VDC offers a monthly budget for personal care, home modifications, adult day care and caregiver education, placing veterans at the center of their long-term care. 

For detailed eligibility criteria and benefits information, visit the VA Geriatrics and Veteran-Directed Care pages on the VA website. Contact a VA representative for personalized advice since eligibility and benefits can vary.

Government Assistance

Individuals with dementia may qualify for government assistance programs beyond Medicare and Medicaid. These programs aim to provide income support or long-term care services to eligible individuals, including Social Security Disability Income (SSDI) for workers under 65, Supplemental Security Income (SSI) and tax deductions and credits.

  1. 1
    Tax Credit Deductions

    Tax credit deductions, such as the Medical Expense Deduction, can help offset care costs. The Medical Expense Deduction allows deductions of unreimbursed medical expenses exceeding 7.5% of adjusted gross income (AGI). This includes payments for diagnosis, cure, mitigation, treatment or prevention of disease and treatments affecting any body part or function. 

    Other relevant credits include the Tax Credit for the Elderly or the Disabled, which is a credit for people either age 65 or older or under 65 and retired on permanent and total disability who meet certain income limits.

  2. 2
    Social Security

    Social Security is a federal program financially supporting retired seniors or people who can't work because of a disability. Benefits, based on earnings history, can be applied for online. The program's comprehensive coverage includes retirement income and disability payments. 

    The benefits you receive are based on lifetime earnings. Apply for this program online via the Social Security Administration website. For more details, visit their website or contact 1-800-772-1213.

  3. 3
    Supplemental Security Income (SSI)

    SSI offers essential financial aid to disabled adults and children with limited income and assets, including those with Alzheimer's and dementia. To qualify, you must have less than $2,000 in net resources and a couple of less than $3,000, excluding primary residences and vehicles. Benefit amount depends on the applicant's state and income level.

    Applications can be made online or at local Social Security offices. For more information or to apply, contact the Social Security Administration at (800) 772-1213. Apply early to help avoid delays and potential out-of-pocket expenses.

  4. 4
    Social Security Disability Income

    SSDI supports people who are disabled and unable to work, with eligibility based on the inability to work and expected duration of the disability. Benefits continue until you turn 65 and become eligible for Social Security retirement benefits.

Employer Benefits for Care

Health insurance benefits, often included in employment packages, may cover long-term care or offer provisions for dementia or Alzheimer's care. Examine policy details closely for any restrictions, coverage caps or clauses related to pre-existing conditions.

Employees can also leverage Flexible Spending Accounts (FSAs) by allocating pre-tax dollars to cover eligible care-related out-of-pocket expenses. Employee Assistance Programs (EAPs) can also provide crucial support, offering guidance on caregiving, emotional support and resources to help manage work and caregiving responsibilities. EAP benefits vary, so familiarize yourself with your program's details.

Community Resources

Nonprofits, community centers, religious organizations and aging councils can help families navigate Alzheimer's and dementia care challenges. These groups commonly support home health care supplies, respite care, consultancy, therapeutic activities and medical equipment like wheelchairs.

Alzheimer's Foundation of America (AFA), Alzheimer's Association and Family Caregiver Alliance (FCA) are notable organizations. They offer direct financial assistance, grants, care programs and a wealth of information and resources, including scholarships for Alzheimer's care. Eligibility for assistance requires proof of an Alzheimer's or dementia diagnosis, demonstration of financial need and other criteria specific to each foundation.

Benefits of Early Planning for Alzheimer's and Dementia Care

Planning early for Alzheimer's and dementia care helps you manage financial impacts and ensures the individual's care preferences are respected throughout the disease's progression. Early planning empowers families to face Alzheimer's and dementia challenges with more confidence and preparedness, easing the caregiving burden. Key advantages include:

    checkList icon
    Personalized Care Plans and Support

    Early diagnosis facilitates detailed financial planning and allows people to express their care preferences, ensuring their wishes are honored. It also helps create tailored care plans and identify local resources and support services, reducing financial strain and caregiver burden.

    loanReview icon
    Legal and Financial Documents

    Early planning enables people with Alzheimer's or dementia to establish trusts and guardianship arrangements and appoint a Power of Attorney (POA). Trusts can strategically manage assets, providing for care needs while ensuring assets are allocated as desired. 

    Guardianship arrangements safeguard people's rights, ensuring they receive the care and respect they deserve. A POA allows the designation of a trusted person to make decisions on their behalf, aligning financial and health care choices with their wishes.

    heartWithPlus icon
    Improved Medical Outcomes

    Early planning can lead to better disease management, potentially slowing its progression. Engaging with health care providers as soon as possible allows participation in clinical trials and access to new treatments.

Additional Resources

We've curated a list of resources that can empower you with the knowledge and support needed for well-informed care planning:

  • Alzheimer's Association: This is a leading voluntary health organization in Alzheimer's care, support and research. It provides comprehensive resources, including a 24/7 helpline, educational materials and support groups for patients and caregivers.
  • Alzheimer's Foundation of America: Offers support, services and education to individuals with Alzheimer's disease and their families. The foundation focuses on providing care and improving the quality of life for those affected.
  • Dementia Society of America: This nonprofit organization provides information, resources and support for people with dementia, their families and caregivers. It aims to raise awareness and understanding of dementia.
  • Home Instead: Specializes in providing personalized in-home care services for individuals with Alzheimer's and dementia, ensuring they live safely and comfortably in their homes.
  • National Association for Home Care & Hospice: Represents the interests of home care and hospice organizations and professionals. It provides resources and advocacy to ensure high-quality care at home for people with various needs, including Alzheimer's and dementia.
  • National Institute on Aging: Part of the U.S. Department of Health and Human Services, it conducts and supports research on aging and the health and well-being of older people, including Alzheimer's disease and related dementias.
  • Us Against Alzheimer's: An advocacy organization dedicated to ending Alzheimer's disease through public policy change, community engagement and research funding. It strives for effective treatments and improved care for those affected.

About Nathan Paulus

Nathan Paulus headshot

Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.

Read Full Bio »
sources

MoneyGeek Address:1325 Howard Ave, Suite 338
Burlingame, CA 94010

MoneyGeek Phone:904-878-4335

About MoneyGeekPressPrivacy PolicyTerms of UseSitemap
Copyright © 2025 MoneyGeek.com. All Rights Reserved