Seniors need to plan who will handle their finances if they face mental decline. This tough talk is vital and should be part of their financial planning.
A study by Boston College stressed the need to appoint a trusted person to manage money before mental decline causes irreversible financial errors. The study linked mental decline with financial mistakes and higher risk of financial abuse.
The study involved about 2,500 Vanguard clients aged 55 or older, each having at least $10,000 in retirement funds. Most (70%) said a child or child-in-law would likely manage their money if their spouse died first.
They felt their chosen agents were trustworthy, capable decision-makers, and available when needed. But they worried about when to hand over financial control.
The Timing Issue
Knowing when mental decline starts is hard. People may keep making financial decisions, leading to irreversible errors.
The researchers said around 23% of people aged 65 or older have mild mental decline, and another 11% have dementia. These rates rise with age.
When asked about the best time to hand over control of their finances, only 8% said they would do so at the first sign of mental decline. Another 8% would wait until they had lost all abilities. The rest (84%) felt the transfer should happen at a middle stage of decline.
But they worried about getting the timing wrong – either too early or too late. They feared not noticing their own decline, their trusted agent not noticing it, or changing their mind and refusing to give up control.
The Solution: Regular Checks on Mental Abilities
The researchers suggested that seniors can help themselves by regularly checking for early signs of mental decline. This could help find the best time for the transfer of control and protect seniors’ financial health.
Seniors should start planning early for someone trusted to take over their finances if needed. Regular checks on mental abilities can help get the timing right, protecting seniors from financial errors and abuse.
10 Essential Tips For Seniors: Planning For Financial Management In Case Of Cognitive Impairment
It’s important to have discussions about who will manage your finances in case of cognitive impairment as early as possible. This is a crucial part of your financial plan.
Choose a trusted individual who can manage your finances before cognitive decline leads to irreversible financial mistakes. This person should be trustworthy, capable of making decisions, and available when needed.
According to the Boston College study, many seniors choose a child or child-in-law as their financial agent. Consider your family members’ ability and willingness to take on this role.
Recognizing the onset of cognitive impairment can be difficult. It’s important to consider when the right time might be to transfer control of your finances.
Regularly check your cognitive capacity to detect early signs of decline. This can help secure the optimal timing for the transfer of control.
Understand that cognitive decline can lead to financial errors and increased susceptibility to financial abuse.
Some people may want to transfer control at the first sign of cognitive impairment, while others may prefer to wait until they have completely lost their abilities. Consider your comfort level with these different stages.
Be prepared to adjust your plan if your cognitive abilities change or if your chosen agent is no longer able to fulfill their role.
It’s natural to worry about transferring control too early or too late. Discuss these concerns with your trusted agent and consider seeking advice from a financial advisor or legal professional.
The ultimate goal is to protect your financial well-being. Make decisions that prioritize this, even if they are difficult or uncomfortable.