“As boomers enter retirement, their health, life expectancy and lifestyle are taking center stage for their planning teams. Simultaneously, cognitive decline is becoming one of the most pressing challenges faced by families,” write Renee Kwok and Daniel Kern in a superlative article on a difficult subject that we read on financial-planning.com carrying the headline Cognitive Decline: The Boomer Issue that Families Aren’t Discussing. “While Alzheimer’s disease is one of the most recognized issues, cognitive decline goes well beyond this ailment. The average 65-year-old will live into his or her mid-80s, 25% live past 90, and 10% surpass 95. Estimates indicate that nearly 15% of Americans over age 70 suffer from some form of dementia, increasing to 37% for those 90 and older.” Here are additional excerpts from this important piece:
FAMILIES WITH COMPLEX FINANCES
“How should planners approach such an emotional and impactful issue? Planning is particularly important for families with complex finances. A family with fixed sources of income and limited assets may have less at risk than a family with accumulated assets that require more individualized management, and more complex medical and estate planning considerations.
“The consequences of inaction can be dire. Older consumers tend to make poor financial choices, according to various studies of decision-making. One such study found that financial literacy scores declined by about 1% per year after age 60, while other studies identified declines in investment skill and ability to manage credit.
“The Health and Retirement Study, a nationally representative study of Americans over age 50 and their spouses, found that cognitively impaired individuals are either unaware of their situation or are unwilling to acknowledge their impairment.
WHAT TO DO ABOUT IT
“Aging clients face a variety of financial considerations. The decline of defined benefit plans creates retirement planning complexity; rising costs of medical care, alongside shrinking insurance coverage, creates stress; and the tax code grows seemingly more complex every year. Cognitive decline reduces the likelihood that clients will make appropriate decisions.
“It can be difficult for friends and family to recognize the signs of decline, and there is no widely used symptom-rating system. Changes in demeanor, behavior or personality may be indicators; people who are typically on top of everything may become scattered or disorganized, or may start forgetting recent conversations or correspondence. Therefore, documenting any changes will help confirm a pattern of behavioral change and support what may be a difficult conversation with the client and family.
“Understanding the realities of aging can help families better prepare, especially when financial and personal legacies are at stake. Also, the future can be better managed by those willing to share information and responsibilities with trusted family members and advisors.
“Those who prepare for cognitive decline should consider three steps: opening lines of communication, formalizing a plan and creating a checklist to ensure critical needs are covered.
CREATING A CHECKLIST
“A comprehensive checklist of financial and legal items is one of the most critical tools for families. Working with advisors including counselors, CPAs, attorneys and estate planners should help them identify the locations of legal documents, all accounts and the necessary passwords to access critical information. These details should be available to appointed family members and held in a secure environment. Estate planners can also help families outline any considerations that may fall outside of specified directions, and provide them in a will or trust document.
“Checklist items may include:
- Emergency contact information for close family and advisors
- Health insurance information
- Health Care Proxy
- Durable Power of Attorney
- List of accounts
- Legal documents including birth certificates
- Insurance coverage
“As generations mature, their personal financial visions evolve dramatically. Those who help aging parents on one side and rapidly growing children on the other must be educated and prepared to meet challenges head on.
“The best aid for handling cognitive decline is knowledge. Families will benefit by improving their personal financial literacy, such that they can recognize warning signs and change direction when concerns arise. If they are comfortable communicating with one another, have a grasp on their own capabilities, and delegate when necessary, they can put themselves in a strong position. Their efforts will allow them to be less anxious, and to direct more energy toward emotional needs across the generations.”