I follow college football, one team in particular. When reading about their spring practice, the coach noted that players run 110-yard sprints. I could easily walk or jog that, but an all-out sprint? Those days have passed.
One thing people don’t think about as they are aging is the similar effect life has on your brain. We all know that as we age we become a little slower, or perhaps wake up with various aches in the morning. But many people feel as sharp mentally as they were when they were in their 20s. Unfortunately, just like with our ability to sprint, our mental abilities decline as we age too.
Financial abilities in older populations
As with other decisions, the ability to make sound financial decisions declines as people age. Often these cognitive changes are so minute that they are unrecognized until something major happens; an elderly relative may lose track of their bills or become a victim of a scam. Many of these people have spent their lifetimes managing their financial matters, often quite successfully. They want to continue living independently, paying bills, or managing their household without undue interference.
Financial literacy peaks at 50
Researchers found that financial awareness among Americans starts to decline around age 50. While 50-year-olds often still feel confident in their decision making, they may not fully recognize financial stimuli they might have 20 years earlier. The problem of course is that a mistake made when you’re 30 and still gainfully employed can be overcome. It’s much harder to handle a decline in the value of your portfolio when you are retired.
As Boomers age, it’s coming to a head
According to The Wall Street Journal, Boomers own more than “half the estimated $50 trillion in total US household financial assets.” Over $6 trillion of that is invested by people who manage their own money. Most of these boomers are well past the age at which financial difficulties start to accumulate (the youngest are 58). This means their rates of cognitive impairment will only increase.
No real guidance
On top of any decline that an older person may be experiencing, the financial community has been extremely slow to provide education on how to withdraw money during retirement. Think about all the handouts and meetings you had to encourage you to save for retirement when you started working. There’s a lack of that when you retire. So at an age when you might not be functioning at your peak, you are challenged to make decisions in a vacuum.
Signs of trouble
I’ve written before about talking with your parents about financial difficulties. If you walk into their home and find it in disarray, find bills stacked up on the kitchen table going back months, or see evidence of new spending patterns (like unopened delivery boxes filling the closets), don’t be afraid to ask questions. Additionally, there are online tests people can take to better judge their financial acumen.
Given family dynamics, you may be able to broach this topic with ease and work out a gradual schedule where your help increases over time. Or you might end up struggling to even mention the issue. If you see something amiss, prepare yourself before you decide to bring it up. You know what kind of family you have, you are aware of the history, and you may have an idea of how stubborn your parents could be when you talk about finances. Don’t just rush to talk in a huff.
Ways to help yourself
It’s funny as you age; small mistakes take on bigger meaning. I made an error paying a credit card bill for the first time in more than 20 years. Did that mean I was getting too old to pay my bills? Of course not. But I’m aware that day could be coming. Here are some ways to hold off that day as long as you can.
Maintain your financial literacy. Read financial books and magazines, watch documentaries on streaming services, and read message boards where people discuss personal finance questions.
Set up a trusted contact. Interestingly, many big-name brokerages are starting to track when their clients either have difficulty navigating the site or suddenly go from being an index fund investor to attempting margin trades. They provide an option for the account owner to set up a trusted contact. That way, if the brokerage notices something amiss, they can message the trusted contact to inform them of the divergence between current and past behavior.
Have a plan. I’ve been working to ensure my beneficiary information is correct on my various brokerage and bank accounts. Right now, I have too many accounts; that’s very clear to me. My goal over time is to simplify not only the number of accounts but the way in which I invest my money.
Discuss big decisions with a financial planner. One thing I plan to do when I am closer to retirement is sit down with a fee-only financial planner to double-check my assumptions. I’m pretty sure that I’m considering the various factors that will provide for a secure retirement, but I still will run it by someone else just to make sure.
Keep up with scams. Scammers understand where the money is, and it’s often in the accounts of retirees. Don’t be paranoid, but check out various sites that list recent scams. The credit bureaus will often provide a list and your bank may even email you about recent scams. The Federal Government also keeps an ongoing list of scams that’s regularly updated. As articles noted recently, just knowing about different scams can make you less likely to be a victim.
Be willing to enlist an advocate. If you start to notice regular and repeated issues with your ability to manage your money, it may be time to find someone to help you. This can be a spouse, family member, or even a professional. This doesn’t mean you’re handing over the keys to your financial plan all at once. Maybe early on you have someone reviewing your checking account so you don’t miss bill deadlines. Or perhaps they go with you to talk to a financial professional. Having someone to help can greatly reduce your stress around money and may allow you to enjoy the fun side of retirement more.
I mentioned the need to simplify my accounts as I approach retirement. Additionally, one step I plan to make is to have a “CliffsNotes” version of my financial plan with high-level overview that’s easy to understand and implement. Not only will this make my management easier as I age, it will make it easier if someone else needs to step in to help me at a later date.
Photo by Nicola Barts