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The Biggest Financial Risk for Boomers: Cognitive Decline

  • Writer: Patricia Faust
    Patricia Faust
  • Jun 28, 2023
  • 3 min read



A few years ago, I wrote about the dilemma of money and dementia. The boomers had not moved into the later years of old age just yet. Most of them who heard my message were taking care of their parents and didn’t consider that they would be a high-risk group in the near future. However, the future is here! Boomers are now between the ages of 60 – 75. In the next 10 years, nearly half of the oldest boomers face the likelihood of some cognitive impairment. The rates for mild cognitive impairment and dementia rise from a combined 12% for ages 70 – 74 to 45% for those 80 – 84, according to a 2017 report by the Center for Retirement Research at Boston College. Even a mild decline “can erode financial capacity,” the center said.


Big Money at Stake

Boomers own more than half the estimated $50 trillion in total U.S. household financial assets. Of that, $26 trillion, roughly a quarter, or $6.5 trillion, is invested on a do-it-yourself basis. A big majority of that DIY total resides at Vanguard, Fidelity, and Schwab.


The challenging math of asset allocation and withdrawal rates from 401(k)s and individual retirement accounts creates “an enormous problem that we are only vaguely aware of,” says David Laibson, an economics professor at Harvard University who co-wrote a study that found financial skills peak at age 53. Without mechanisms in place to delegate such decisions, investors with cognitive decline may “hold on to the reins even more tightly and steer the horse over the cliff.”


Do–It–Yourself Boomers

Boomers who are calling the shots without help from wealth advisors are more vulnerable to making bad investment decisions. Unaware of the risks aging brains impose on good financial decision-making, boomers may veer from some “set it and forget it” stock and bond allocation into risky margin debt. Or it may be that they have a stack of unpaid bills that they lose track of, and somebody has to intervene to sort things out. Or it may be that their finances are a chaotic mess. Meredith Stoddard, Fidelity’s vice president of life events planning, says she knew of one investor who died holding “56 accounts at different firms.”


Financial groups around the country are aware of these risks and have taken some steps to protect their clients and also protect themselves. Unfortunately, there’s no one size fits all solution to deal with cognitive decline. People’s family situations and estate size and complexity vary. Some people may distrust their own children, complicating a power of attorney designation.


Since February 2018, brokerage firms have been required to ask customers to designate a ‘trusted contact’ who can be notified of possible problems. But a survey result indicated that less than 25% of firms’ clients have provided a name. Another rule that was instituted, gives firms greater power to step in and temporarily halt disbursements when fraud is suspected.


The Dark Cloud

Baby boomers themselves have some responsibility to take steps to prepare for a possible future of cognitive decline. A 2014 survey co-sponsored by the Merrill Lynch unit of Bank America found that fears about dementia outweighed all other possible illnesses combined. Fear can’t win in this scenario. Developing a plan for the future is a necessity. One key element of a plan is identifying a person or service provider who can help manage one’s financial affairs, preferably under the kind of legal authority embodied in a power-of-attorney or trust. Another idea is collecting for that person – either in a binder or an internet vault – a list of goals and all of the relevant financial account numbers and passwords, as well as regular monthly bills and important records.


In the event that you notice that financial skills are declining in yourself or a loved one – get a cognitive assessment and find out what you are dealing with. Preplanning will make the transition go a whole lot smoother. Denial of cognitive decline puts you at risk of financial scams and exploitation. Not acknowledging this situation only results in bigger losses and greater heartache.



Reference:

Smith, R. (June 6, 2021). Baby boomers’ biggest financial risk: cognitive decline. Retrieved from https://www.wsj.com/articles/baby-boomers-financial-risk-cognitive-decline-11622942343


 
 
 

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March was an unusual month for me.  Normally I work on articles, give presentations and generally just stay tuned to what is going on in the field of aging.  This month I “learned” a lot.  Last year I learned how to write a book.  At the time I took the course I thought it would just be a natural extension of all the writing I had done over the years.  WRONG!!  The actual writing of the book was the easy part.  Putting it together into a book was difficult for me.  The course gave me step by step lessons on constructing a book.  Then editing and formatting were just as challenging.  On June 7 last year the book was published!  It was one of the most satisfying days of my writing career. 

Naturally, when you self-publish, you do not have a publisher promoting the book and getting it in the right categories for best sales on Amazon.  That was crushing because I really didn’t know to appropriately market it.  I am a brain health person!  In December of last year, I purchased a marketing program that is based on statistics.  I am technical minded and so this approach made sense to me.  The course is almost completed.  Can’t wait to see if it improves sales!

The next step I am looking at is recording an audiobook.  This is another venture I knew nothing about.  But I am already tagged on Facebook for marketing of audio book programs.  Facebook picks up everything.  Now my husband was creative director for an advertising agency and when I told him I purchased another class – he couldn’t believe it.  “This was my business.  I know how to do recordings, why didn’t you ask me?” Well, I knew he was an expert in that business, but this audiobook needs to meet all the criteria that Amazon requires for publication.  So, he can take care of the recording part of this audiobook, and I will navigate the process of meeting Amazon’s requirements.  We worked on the book together like this. 

Then I talked with some coaching experts on the viability of starting group teaching programs.  Reading The Boomer Brain book and implementing the Brain Healthy Lifestyle have two entirely different outcomes.  This lifestyle is important to maintaining high cognitive function throughout the later years of our lives.  Look for updates as to when I will roll this program out.

My last learning endeavor was attending a two-day bootcamp for Speakers.  I am really excited about what I learned there.  That is a late this year or next year project, but it is one I am really looking forward to.

 

What Is Happening in April?

The American Society on Aging is having their annual conference in Orlando Florida April 21-24.  This is the largest multidisciplinary conference on aging and the annual conference for Members of ASA.  I have attended a number of these conferences throughout the years, and it is consequential.  Keynote speakers and special events are focused on combating ageism in our society.  Although this is a professional meeting, the attendees come from all aspects of aging services.  They have their work cut out for them this year!

April is Stress Awareness Month.  We should be aware of stress every month and understand how we can break the stress cycle.  These are stressful times, and we need to protect ourselves

Here is a positive one “April is National Volunteer Month”.  When I am working with new retirees who don’t know what to do, I talk to them about volunteering. It is important to have a purpose after you leave the workforce.  There are so many nonprofits who need help in all aspects of their organizations.  It is a perfect way to give back.

Finally – It was Opening Day for the Cincinnati Reds – the oldest major league team in the nation.  Cincinnati takes that responsibility seriously.  There is always an Opening Day Parade through downtown to the Ball Park.  Huge crowds line the streets and every year there is talk of making it an official holiday.  Schools and employers look the other way when there is an empty desk.  No matter what the outcome of the game is, there is so much joy, and you can feel that energy.  I am fortunate that I get to experience that.  We all need some joy right now. 

Enjoy your April.

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