By Rosanne Roge, CSA, RFG, CFP®
Although we are all living longer, healthier lives, studies show that cognition tends to regress with age. One study recently confirmed that declining cognition is often associated with a significant decrease in financial literacy, and can impact overall financial decision making. Additional research proved that by age 60 our ability to process new information starts to slow. This aging process can be accelerated by medical conditions such as Alzheimer’s and Dementia.
Early Warning Signs
Two research projects by the University of Alabama-Birmingham and Columbia University found five early warning signs that aging may be impacting ones financial decision making skills.The early warning signs include: (For more, see: How to Manage Money for Someone with Alzheimer's.)
- Taking longer to complete financial tasks.
- Missing key details in financial documents.
- Experiencing difficulty with everyday math.
- Showing decreased understanding of financial concepts.
- Difficulty identifying risks in investment opportunities.
Steps to Take
Having trouble figuring out a tip at a restaurant, forgetting to sign a check, or finding piles of paperwork or unpaid bills in your loved one’s home can all signal that help is needed. Here’s a few steps you can take to prepare for the impact aging has on financial decision making.
- Talk with your loved ones as soon as possible regarding how they would like their financial matters handled should the need arise. Perhaps ask them if they have a will, and where it’s located, and whether medical directives are in place for the future. When talking with aging parents, consider using a 40-70 rule.
- Ask your family, trusted friends or even hire professionals to assist. If your sister or spouse is better at organizing documents, and perhaps your strength is ensuring bills are paid on time, be sure to allocate responsibilities appropriately. The American Association of Daily Money Managers is a great place to start to find professional help. This association helps individuals with navigating bills, budgets and record keeping.
- Having basic legal documents in place is extremely important. Your loved one should have a will, durable power of attorney, medical directive, and an estate plan. You can download our free Aging Facilitation form, which can be completed and given to your family’s financial advisor.
- Discuss the rising danger of financial abuse and scams that specifically target seniors. Consider being added to a loved one’s bank account and/or receiving copies of their statements. You can also sign them up for a credit monitoring or identity theft protection service. Detailed information on financial scams can be found through the National Council on Aging (NCOA).
Having a conversation and a plan in place regarding your loved one's wishes for their future is extremely important. Hopefully your loved one will remain cognizant well into their senior years, and you’ll never need to execute the plan. On the other hand, perhaps you will need the plan sooner than you think, and you will be glad you were proactive regarding how to best assist them. (For more, see: Asset Protection Trusts: Help for Seniors.)
This article was originally published on Investopedia.