I usually wear my physician hat when I blog here (I'm an internist-geriatrician), but the New York Times front-page story on Halloween describing difficulties handling finances as we age forces me to put on another one.
When I'm not doctoring, I conduct research in the field of elder abuse and financial exploitation; I conducted the largest longitudinal study in the field demonstrating a threefold risk of death in elder abuse victims and co-authored the AMA guidelines on elder abuse, and I'm the senior investigator of a New York State study of elder abuse prevalence that's about to be released. Next week I'm honored to be receiving an award in San Diego for my work in this area from the National Center for the Prevention of Elder Abuse.
The Times article makes the point that often the first sign of a cognitive problem like early Alzheimers disease can be the inability to handle one's finances. Amen. I've seen it first-hand. The problems families bring to me range from the annoying ("They turned off dad's electricity because he forgot to pay the bill") to the devastating ("I went to visit mom for Christmas and she confided in me that she gave away her house and life savings to a financial adviser").
The piece also makes the case that people of all ages have the right to make bad decisions, and we should not treat older people like children, overseeing their money as if it's parental allowance. It's "politically incorrect" to treat our cherished older population like children, some say.
No argument from me; I've spent a career advocating for the rights and dignity of older people. But here's the rub: the prevalence of some degree of cognitive impairment (not necessarily Alzheimers disease, mind you) approaches 40 to 50 percent of the population by age 85, and some not-so-reputable people have taken notice of this, as well as the fact that a good deal of wealth is concentrated in this segment of the population in the form of retirement savings and home equity, especially in a down economy.
So I say let political correctness be damned if it means protecting your life savings or that of a parent or loved one. Its one thing if you're a Brook Astor, who can weather a loss of several million dollars and still have a viable nest egg. The saddest thing I see in my practice and in the wider world of elder abuse is the older person with a more modest retirement savings -- say, several hundred thousand dollars -- who gets preyed upon (or makes poor financial decisions without the nefarious assistance of others), loses everything, and now has nothing left, with no prospect for future income. They are effectively impoverished.
I propose, therefore, that you think of guarding your financial health (or that of a parent) with the same kinds of preventative health strategies that we use to prevent diseases like cancer or heart attacks. It's much easier to survive the illness if the tumor is small when it's discovered, rather than down the road when it's enormous and inoperable. So it is with the loss of financial management skills. Here are some steps:
Recognize and Acknowledge the Possibility That This Could Happen to You
Some of the victims of financial abuse that I've met have been some of the savviest folks imaginable, some even from the financial services industry, who thought they were immune and invulnerable. I cited the data above; by age 85 there is a substantial risk of at least some cognitive changes that could put you at risk. Communicate it to yourself honestly and communicate it to your parent or loved one so that he or she understands that the basis for your concern is evidence, not over-protection. You may never need assistance in this area, but we're all at risk as we age.
Never Make a Financial Decision Without a 'Time Out' and Someone Trusted to Bounce It Off
Two other conspiring problems contribute to bad financial decisions as we age. One is social isolation: the people we might have "run a financial decision by" may no longer be with us, so we make decisions alone. The second is our understandable and extreme privacy about money (one of my gerontology buddies says people talk about their sex lives more willingly than money). These two forces can cause us to make decisions quickly and without a "second opinion" when we're older.
The solutions: First, never make an investment decision on the spot; call a time out to sleep on it for days or longer. The opportunity will still be there when you wake up (despite what the seller might be telling you). Second, always find someone who has your best interest at heart (or is at least a neutral party) to discuss the matter with. This could be a sibling, an adult child, or even an investing club you're a member of, with people that you trust.
Use Technology as an 'Early Warning System'
There are all kinds of online banking tools and applications that can alert you (and sometimes a designee) when any number of sentinel events occur that could indicate a problem, ranging from overdraft, to the clearing of a check that exceeds a specific threshold, to failure to remit to a regular payee like the electric or gas company. These are not only helpful reminders to pay the bills but also indications that you or a parent may be slipping a bit in this area. Set them and pay attention to them.
Appoint a Trusted Someone to Help Keep an Eye on Things
Before it's too late, identify the adult child or other loved one whom you trust to discuss money with, and indicate what you'd want done should your financial management skills erode to the extent that you'd need help. Discuss those wishes in detail, the way you would discuss your advanced directives around health care preferences. In my book "Treat Me, Not My Age," I give specific advice on how to broach the emotionally charged topic of finances with a parent or child -- before the horse has left the barn.
Assess the Credentials of Financial Services Advisers Carefully
While certification by august bodies does not completely protect you from an unscrupulous financial adviser, programs like American Institute of Financial Gerontology, www.aifg.org are highly credible and certify advisers as having skills in gerontology. Additionally, the government's security and exchange commission keeps a list of fraudulent financial "advisers" on their web site; the financial industry regulatory authority has a similar tool at its site for brokers and firms.
Make Sure Legal and Financial Documents Are in Order
In addition to your living will and health care proxy, you should have a power of attorney that enables someone you trust to pay bills and handle other financial matters. If you're incapacitated, even temporarily, the bank will still want its mortgage payment, the leasing company its car payment, and your utilities their monthly bills paid. A power of attorney permits this, as long as it's in the right hands. In the wrong hands, it's a license to steal.
In my book "Treat Me Not My Age" I devote an entire section to money and aging, because as we get older, money and health have profound and surprising inter-relationships you may not have thought about. In this blog I'm trying to make sure that you're nest egg survives you, not the other way around. One way to do that is to understand that we're all at risk for losing some of our abilities to handle finances as we age, but there's also a lot we can do to protect ourselves.
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