the March 2017 edition of the Bath Country Journal and Richfield
impairment throughout retirement and into old age is not a
misfortune that strikes some but leaves others unscathed.
Increasing evidence shows cognitive decline is natural, inevitable,
and not slowed by education or solving crossword puzzles. Like the
rest of our bodies, our brains lose their ability to quickly and
accurately respond over time. How can we plan for this?
studies on credit and investing decisions and overall financial
literacy show that financial decision-making abilities peak
sometime in the mid to late 50s. Overtime, ability will slowly but
consistently decline. Yet, this decline is not the core
Dr. Michael Finke
of Texas Tech wrote, “While financial abilities decline with
advanced age, confidence in one’s ability to make financial
decisions does not. In fact, respondents in their 80s believe their
financial knowledge is slightly higher than do respondents in their
60s. This inability to assess a decline in skills with age is not
limited to financial decisions. Other study results find that
subjects over age 65 do not perceive their decline in driving
ability despite clear evidence of reduced visual acuity and
reaction times. In fact, older drivers who had multiple crashes
were no more likely to rate their driving ability as worse than
While decline is
a concern lack of awareness of the decline is a bigger concern.
This helps explain why sweepstakes frauds, Nigerian investment
schemes, and other scams target seniors and retirees.
What can you do
to protect yourself from bad financial decisions? Documents such as
a durable power of attorney, medical power of attorney, will,
trust, and advanced medical directives should be implemented well
before any capacity concerns arise.
You can also
simply your financial life by consolidating checking accounts at
one bank and the investments at a single financial advisor or
custodian. If there are many credit cards, just leave two: one for
daily purchases and one for automatic bill payments. Sign up for
text or email alerts from your financial institutions to notify you
of unusual account activity.
Working with a
trustworthy and competent financial advisor – someone who you
identified and began working with well in advance of any decline
and who will not retire soon after you do – can also help.
Have signed documentation that the advisor can contact your power
of attorney to discuss financial matters when diminished mental
capacity is observed. At advancing ages, bringing a trusted child
into meetings with your advisor may also be a good idea.
retirees or those who may not have a trusted younger guardian to
help, planning earlier in retirement for diminished mental capacity
becomes even more important. Consider moving a
continuing care retirement community
where you can live
independently but have access to more skilled healthcare within the
same community, if the need arises. If you prefer to stay in your
home, consider an independent care manager (www.aginglifecare.org
) that can
help coordinate and oversee home healthcare and other services.
Bill pay services from a CPA or similar firm can help ensure
day-to-day financial management tasks are being taken care of
There will likely
come a point when managing financial matters becomes too complex
and overwhelming. The best advice here is have a plan in place.
When you are your more competent and less confident self, write
your future self instructions on what to do when this day comes.
Include this letter with your other important documents and share
with your trusted children and advisors. Then do your best to
follow this advice when they remind you of it, since you will not
likely be self-aware enough of your diminished mental capacity when
that time comes.
Kroskey, CFP®, MBA is President of True Wealth Design, an
independent registered investment advisory and wealth management
firm specializing in retirement, tax, and investment planning. This
article adapted with permission from Dimensional Fund Advisors.
Kevin can be reached by calling (330)777-0688 or by email