NEWS AND RESOURCES

Financial Planning for January 2015

Back-up Plan in Case of Dementia

Whether suffering from outright dementia, Alzheimer’s or even just more frequent “senior moments,” by about age 70 the human brain experiences a decline in fluid intelligence – which is the ability to solve problems. By age 80, age-related cognitive decline is recognized as a greater handicap in economic reasoning than even low income or low education. It’s simply a function of the aging process – regardless of a person’s socioeconomic background.

This is why we read stories about seemingly rational elderly people paying too much money for someone to clean out gutters, investing all their savings in a single holding, or falling prey to a shyster they would have ignored when they were younger. About 20 percent of Americans age 65 and older are taken advantage of in financial matters, but some experts believe that number is much higher as many seniors either do not recognize that they’ve been swindled or are too embarrassed to admit it.

Experts recommend seniors “age-proof” their portfolio before they turn 70 – the financial equivalent of putting a retirement income plan on auto pilot. In other words, that’s the age by which an active trader should stop stock-picking and settle into more reliable vehicles designed for the long run.

Also, while equities might be appropriate for many seniors, they should focus on publicly traded securities rather than a new start-up or other risky venture. Seniors might want to consider investing in equities via an indexed mutual fund or ETF with low fees.

Seniors also should have their estate plan in place by the time they turn 70, including a durable power of attorney, living revocable trust to protect their assets, healthcare proxy and living will.

They should also consider an alternate plan if they come to a point when they can no longer live independently at home. Unfortunately, some 800,000 Americans with Alzheimer’s disease currently live alone. About 80 percent of care provided at home for people suffering from various types of dementia is delivered by family caregivers. However, they too also suffer – from increased physical, emotional and economic stress. It’s important for seniors to consider a contingency living arrangement and long-term care options while they still have a say in how their care and money will be managed down the road.

The following checklist can help address the key issues seniors face:

  • Transportation – For when an elderly person can no longer drive, consider a car/shuttle service or public transportation to shop for groceries and go to doctor’s appointments.
  • Housing – To help seniors remain at home longer, consider resources for mowing, raking and cleaning gutters; cleaning the house and cooking.
  • Healthcare – According to a study from the Journal of General Internal Medicine, out-of-pocket medical spending in the last five years of life leaves one in four American seniors bankrupt. Plan ahead by utilizing strategies to reserve a portion of assets for the later stage of life.
  • Long-term care – Consider purchasing insurance with long-term care benefits while still young and healthy enough to qualify.

Developing a plan for old, old age can be beneficial whether a person suffers from the early stages of dementia or just the normal slowing down of old age. That’s because the simple act of creating a plan can help make growing older feel less tenuous. Besides, it could be like carrying an umbrella on a cloudy day – the very precaution makes it less likely to rain.

Another advantage of developing a plan ahead of time is to give adult children some peace of mind. When old age issues concerning their parents arise, adult children often either ignore or overreact to them. They could try to take extreme actions when all an elderly parent really needs is just a little more help with daily activities.

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