If you live a long life, your chance of declining cognition gets worse. The statistics are stark: Among the over-65 cohort, 29% struggle to make wise and informed financial decisions. By that age, 11% are suffering from Alzheimer’s, while a further 15% have mild cognitive impairment, which may demand compensatory workarounds to preserve their independence.
The decline only progresses. By age 82, the likelihood rises to 50% and by age 90 to 80%.
Still, retirees and their families can prepare themselves for the mental challenges of aging.
Warning symptoms
Are stacks of unpaid bills mounting up? Is it taking you (or your parent) too long to settle the invoices? Do you flounder when you must quickly calculate a tip for a restaurant meal? Is a house that was formerly shipshape getting untidy? Is a retiree who always used to be prudent about investing suddenly throwing caution to the wind and making speculative gambles?
It can be alarming for seniors to notice those traits in themselves or for their families to recognize those signs. Before financial calamity strikes, you must act for everyone’s sake.
Retirees themselves should stay hypervigilant for financial scammers. Several tricks target the elderly, often to elicit personal information that exposes their accounts. Some of these include:
- Posing as a Social Security or Medicare representative or a utility company
- Pretending to be a grandchild in need of funds — may be online or by phone
- Pyramid schemes
- Counterfeit prescription or anti-aging products, such as for improving memory skills
- Bogus telemarketing prizes
Keep your antennae up and warn elderly relatives and other vulnerable people. Make sure to monitor accounts regularly for fraud or unauthorized activity.
Simplify finances
When retirees are competently managing their affairs, it is still sensible to streamline accounts.
You might, for instance, limit accounts to one taxable, one traditional IRA and one Roth. You should be clear in your mind as to the function of each. Is it there for income or for emergencies to draw on? Or is it intended for legacies, such as for your children or grandchildren?
If you can automate your bill payments, it will save you the hassle of tracking, paying and balancing accounts. You can also arrange for direct deposits. Another useful resource is Social Security’s own Representative Payee Program, originally authorized by Congress in 1939, which helps beneficiaries who are incapable of managing their Social Security income. Now dealing with almost 3 million recipients, the program enables a designated friend, family or an institution, like a nursing home, to direct the income toward food, shelter, bills or medical care. Leftover money goes to an interest-bearing account or savings bonds.
There are plenty of helpful budgeting tools available that retirees may find useful for keeping track of finances. A sampling includes:
- BudgetPulse — import information manually from accounts
- Budget Simple — free, intuitive interface
- Age Well Planner — for creating budgets, planning and cutting spending, plus government resources
- Mint — a popular tool for consolidating account information, with alerts for overdue bills or low fund levels
Daily money managers
A DMM can be your financial butler and executive secretary, relieving stress and preventing errors. A DMM can perform many critical tasks, preventing them from falling between the cracks. Typical jobs include receiving and paying bills, managing mail, filing insurance claims, and taking on the drudgery of organizing tax return documentation. These providers are certified by the American Association of Daily Money Managers, which requires managers to pass a criminal background check and a written examination.
But ask some key questions before you leap. What are the fees for in-person or virtual meetings? Can you get monthly statements? How many communications are allowed? Are you charged each time? Are you protected against a data breach? Can your fees be refunded for unsatisfactory service?
You should discuss other strategies with your financial advisor, such as joint accounts or a financial power of attorney. Your advisor might also suggest an annuity for a limited portion (but not all!) of your assets.