We all know that aging can bring its challenges — and one of the more difficult aspects is that it can eventually reduce our ability to manage money and make sound financial decisions.
Experiments show that our reasoning skills drop steadily after peaking at age 53. Add to that dementia, which affects about 1 percent of the population ages 60–64 and rises steeply to about 30 percent of 85-year-olds.
Some of the signs of this diminished capacity are bills that go unpaid (or the same bill that gets paid multiple times), important letters (bills, tax notices, etc.) go unopened and matters that used to be straightforward like balancing check books or filing paperwork become difficult. This diminished capacity can also lead to one being more susceptible to making poor investment decisions or, worse, falling victim to fraud.
PROTECTING YOURSELF, LOVED ONES, ESTATE
So, what can a person do to either to protect themselves or their loved ones when these signs of impairment become evident?
The most important thing is to bring in a support group — a healthy and capable spouse, trusted adult child or other family member (sibling, adult grandchild), financial planner or other adviser who can act as a fiduciary (i.e., someone who is required by law to put your interests above theirs). Ideally, it is some combination of the above, as each party can bring certain skills and abilities and frankly, to check to make sure the other is “behaving.”
Next, making sure that estate-planning documents are up to date is a priority. This includes making sure your agents for health care and financial powers of attorney are appropriate and able to help out in times of need.
For example, one person might have named a spouse to be their healthcare agent but that spouse is aging themselves, they may not be fully able to make the decisions required. If you named adult children or other friends, make sure they know their role and what your wishes are. And will they, in a time of emergency, know how to find the power of attorney that names them as an agent?
Also, do your financial powers of attorney know who your financial adviser is? Do they know where your investments are held, what bank accounts and liabilities you have, etc.? Can they get access online account information (username and passwords)? Of course, this has to be handled carefully, as such information should not be widely disseminated or be too easily found in the home. Agree on a place where this information is held (for example in a secure drawer in a discretely named file) and then update it from time to time.
LONG-TERM CARE OPTIONS
Have your long-term care options been considered? Do you have long term care coverage? This kind of insurance is expensive but it can help save substantial sums of money should you have a need for sustained care either at home or in a facility.
At the very least, have a plan for how you plan to pay for long-term care — it is an expensive proposition and can quickly drain a family’s financial (and emotional) resources. And, it is something that many of us will need to use as we age — at least 70 percent of people turning 65 can expect to use some form of long-term care during their lives.
Growing old is never easy. But you can protect yourself or your loved ones by taking some reasonable and common sense steps — steps that should be taken before any real situation develops.
David B. Lawrence, CFP, is a certified financial planner and registered investment adviser, who recently joined Willow Creek Wealth Management (wcfsinc.com, 707-829-1146), Sebastopol, as a financial planner. Willow Creek Wealth Management has served North Bay clients since 1984 and has been ranked one of the top 300 fee-only financial planning firms in the United States. Wealth Matters (NorthBayBusinessJournal.com/WealthMatters) is a monthly column from the firm’s partners.