One more pitfall to successfull retirement: Article in the WSJ on Cognitive Decline

[Like2Plan]

Here is the link to the article:
Baby Boomers’ Biggest Financial Risk: Cognitive Decline

https://www.wsj.com/articles/baby-boomers-biggest-financial-risk-cognitive-decline-11622942343

Here is a clip from the article:

"In the next 10 years, nearly half of the oldest boomers face the likelihood of some cognitive impairment. The rates for mild cognitive decline and dementia rise from a combined 12% for ages 70 to 74 to 45% for those 80 to 84, according to a 2017 report by the Center for Retirement Research at Boston College. Even a mild decline “can rapidly erode financial capacity,” the center said.

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 ever more tightly and steer the horse over the cliff."


Also from the article:
"This year AARP, the over-50 group, is sponsoring a “Thinking Ahead Roadmap” with a how-to summary for shifting oversight of finances to a “financial advocate” and alternate—with power of attorney—who may be family members, outside professionals such as accountants, or both."


I suspect that most people on this financial board are quite a bit younger, but do you worry about cognitive decline as you age?
If so, have you taken any steps to mitigate the risk?

I admit to having a concern about this since statistically it is so common. The steps I have taken so far have been to simplify my portfolio. I have also endeavored to get my close family to understand the 3-fund portfolio and my investment objectives. But, this has been hit or miss. The 65 year old me thinks an advisor might be kind of expensive--but, we'll see....

[disneysteve]

It is certainly a concern. I'm watching it play out with my mother who is nearly 91. She was always on top of her finances to the penny, having spent years working with my father in the family accounting firm. Little by little we started seeing her have difficulty with things, first fine details and then larger issues. As a result, over the past couple of years I've gradually gotten more involved with her finances. I now have access to all of her accounts and I help manage her investments. I make her bank deposits since she has no means to do so. I've helped her balance her checkbook a couple of times and that really highlighted where she's having difficulty including with some basic concepts that she always knew well before.

I haven't done anything specifically to address this myself. As you mentioned, I have been working to simplify our portfolio and have eliminated several accounts and multiple funds. Once I'm retired, I'm sure I'll spend more time consolidating and streamlining everything so that it can be on auto-pilot as much as possible. Funds and ETFs primarily, automatic monthly withdrawals to fund our expenses, and minimal decision making needed.

[Like2Plan]

Disneysteve,
It is good that your Mom has you to help her out.

Another of the areas of concern that I have in simplifying things is to phase out the Treasury Direct account that I have. (This also ties in with another topic--beneficiaries) You can not get paper 1099's for reporting interest on taxes. They don't send out year end statements.

What if your beneficiary doesn't know you had bonds? This might be worthwhile doing a search (for your cousin's estate).
Treasury Hunt^® Request

https://treasuryhunt.gov/

[disneysteve]

What if your beneficiary doesn't know you had bonds?

I've said this many times. I have a master list of all of our financial accounts with company name, type of account, account number, online user ID and password, and phone number for the company, along with an approximate value of the account. That list is stored in our lock box where DW and DD can easily access it. I update it periodically (when I think of it).

I'm not sure how it works with bonds. Since they are government-issued, I wonder if they would learn of your death through official channels. The funeral home notifies SS, for example. That's a good question.

[ua_guy]

I suspect that most people on this financial board are quite a bit younger, but do you worry about cognitive decline as you age?
If so, have you taken any steps to mitigate the risk?

My parents have discussed this as a risk. It's an easier answer for them since my sister or myself are able to assume power of attorney. The question is, how difficult of a conversation will it be when the time comes. Will they be aware that they need to sign that over? Will a point come before-hand where they relinquish that control? What might happen to trigger the event? I believe both my parents will have good faculty for a while, but it is a conversation I think I will need to have with them.

Personally, and anecdotally, I read an article about how much cognitive function starts to drop in late 40's and early 50's. I got chills reading it--it occurred to me that in my IT circles within healthcare, there really aren't people older than about 45-ish in highly technical roles in this industry. Part of that is due to the nature of the jobs. People do make careers out of these positions, but it's very rare to find an older worker even though the pay can be very good. And I totally get it. Even in the last couple of years I'm having a harder time keeping up. There is just so much to know. So many things to remember. Details for details....every problem is so ridiculously complex and cross-functional. Every day is an emergency requiring quick triage and deep analysis, and I end every day with my mind feeling like a cooked noodle. I do not want to be doing this much longer, I can tell you that much. I've hit various stages of burnout already, which, I'm finding is common among my peers too.

[disneysteve]

My parents have discussed this as a risk. It's an easier answer for them since my sister or myself are able to assume power of attorney. The question is, how difficult of a conversation will it be when the time comes. Will they be aware that they need to sign that over? Will a point come before-hand where they relinquish that control? What might happen to trigger the event? I believe both my parents will have good faculty for a while, but it is a conversation I think I will need to have with them.

Power of attorney documents should already exist. They shouldn't wait until they need them to create them. We designated our POA years ago when we had our will made, along with health care surrogate.

If your parents haven't yet done all of that, I would encourage them to do so. It doesn't mean you are going to take over tomorrow. It just means you are legally able to assume responsibilities should the need arise, which often happens suddenly due to illness or injury.

[Like2Plan]

Power of attorney documents should already exist. They shouldn't wait until they need them to create them. We designated our POA years ago when we had our will made, along with health care surrogate.

If your parents haven't yet done all of that, I would encourage them to do so. It doesn't mean you are going to take over tomorrow. It just means you are legally able to assume responsibilities should the need arise, which often happens suddenly due to illness or injury.

+1. Totally agree.

[LivingAlmostLarge]

Power of attorney documents should already exist. They shouldn't wait until they need them to create them. We designated our POA years ago when we had our will made, along with health care surrogate.

If your parents haven't yet done all of that, I would encourage them to do so. It doesn't mean you are going to take over tomorrow. It just means you are legally able to assume responsibilities should the need arise, which often happens suddenly due to illness or injury.

Wishful thinking on my parents part. I may need to do this August when I go home. I may need to push that it's time before it's time. It's probably time now, but my parents refuse. My mom I can tell wants to just give up and hand it over to me, but my dad is alternating with reality and I don't think he's ready.

[Like2Plan]

Wishful thinking on my parents part. I may need to do this August when I go home. I may need to push that it's time before it's time. It's probably time now, but my parents refuse. My mom I can tell wants to just give up and hand it over to me, but my dad is alternating with reality and I don't think he's ready.

As DisneySteve pointed out, it is not just taking over the full time management of finances--it could be a temporary incapacitation. For older folks, you don't want to wait until they have become incapacitated and are no longer able to grant you POA, The incapacitation could be a sudden, unexpected event like a stroke. Or, a slow decline in cognitive abilities.

Arguably, you probably should have POA documents at any age. You just never know. I have POA on DH and he has my POA. I also made sure I had access to all DH's retirement accounts (and he has access to mine). (Not only signing the required paperwork, but calling in and asking questions about the account from time to time--you find out really quickly if you have the access you need on the account).

And, POA documents while they might not expire, I did run into an issue where a lawyer looked at the document with a jaundiced eye. (The POA had been created a few years prior). Then, he noticed the document had been created in his own office. As a result of that experience we try to update them ever so often.