Graying hair, shrinking bones and weakening muscles are all natural side effects of the aging process. But did you know that your fluid intelligence—or ability to reason, identify patterns and solve problems—also declines as you get older? It’s true, and according to experts at the Center for Decision Sciences at Columbia University, this makes it difficult for anyone over the age of 60 to make sound financial decisions.
That’s startling information, especially if you’re trying to care for an aging parent and are approaching retirement yourself. Fortunately, learning to identify the earliest signs of financial decline can help you recognize and manage the situation before it deteriorates further. These signs include slowness completing financial tasks (such as figuring the tip at a restaurant or writing a check at the pharmacy), missing important details in financial documents, and confusion about basic financial concepts.
If you notice that your parents are exhibiting any of these signs or are having difficulty with basic arithmetic, forgetting to pay their bills, or engaging in risky spending or investment behaviors, it may be time to have a conversation about their money management plans. Some may be hesitant, fearing that accepting assistance is akin to surrendering their independence. However, you can assure them that even minimal support will be beneficial.
For example, simple tools such as automated bill payment can go a long way towards reducing the incidence of age-related financial errors. Help them set up a payment schedule with their bank online and they won’t need to remember to pay their mortgage, utilities or cable bills. Consolidating debts can also help, leaving your parents with fewer creditors to worry about.
You may also want to talk to your parents about signing a financial power of attorney. This legal document will enable you—or whomever your parents select as their agent—to manage their finances should they no longer be able to do so themselves. It can be set up so that it goes into effect as soon as they sign it (durable financial power of attorney) or when a doctor has certified that they are incapacitated (springing financial power of attorney).
They can choose to give their agent as much or as little power as they wish including the authority to pay their everyday expenses, handle their mortgage and real estate transactions, collect their Social Security and other government benefits, invest on their behalf, manage their retirement accounts, handle bank and other financial transactions, file and pay their taxes, and transfer property to a previously created trust. They can revoke a durable financial power of attorney at any time as long as they are mentally competent.
If you’d like to learn more about financial planning for retirement, money management after retirement, or how you can help your parents safeguard their future with a financial power of attorney, give us a call today.