All sorts of things happen to our brains and bodies as part of the normal aging process. While it may be tempting to ignore getting older, knowing what will happen in the future can help you plan better now.
Researchers have found that core financial skills can decline as we age. Our cognitive abilities change in ways that can adversely affect our ability to make good financial decisions.
Good news and bad news about financial decision-making as you age
first, good news. Several research Older people have been found to make better financial decisions because they have more experiential financial knowledge and fewer negative feelings about money.
of bad news That is, as we age, our brains change, making us more likely to make questionable money decisions, making us easier prey to financial scammers.
of really bad news? research A study by Texas Tech University and the University of Missouri found that financial literacy scores decline by about 1 percentage point each year after age 60. Scores decline on a variety of financial topics, including general financial literacy, investing, borrowing, and insurance.
and the some scary news? the study It suggests that confidence in financial decision-making increases as the actual ability to make financial decisions declines.
Indeed, some of us succumb to dementia or a physically debilitating illness that affects our ability to make financial decisions.
However, many of us will experience much more subtle changes that can impair our ability to manage our money.
The exact cause of age-related economic vulnerability is unknown. A combination of factors is likely to undermine our ability to make financial decisions.
One of the areas being researched is executive dysfunction. research discovered Executive function shows a significant decline beginning at age 60. It is associated with age-related prefrontal cortex atrophy, cerebral white matter disease, and cerebral microhemorrhages. Due to this deterioration, Multitasking, time organization, and a diminished ability to abstractly understand the future impact of current financial behavior.
Other brain changes may also contribute to age-related economic vulnerability.
11 Ways to Prepare for Declining Financial Ability
What’s the worst thing that could happen if your financial decision-making deteriorates as you age?
I have two concerns. You want to protect your money from:
Financial abuse of older adults is a growing problem.
according to of the FBI Total losses reported by fraud victims increased from $1.4 billion in 2017 to $3.5 billion in 2019, according to the Internet Crime Complaint Center (IC3). investigation According to (managed by Harris Polling), 22% of American adults say they have lost money to phone scams in the last 12 months. And they estimate that as many as 56 million Americans have been harmed this way, losing nearly $20 billion.
Additionally, older people may be much more likely to become victims than younger people.
We want to take some safety precautions so that you don’t make a bad decision yourself.
Here are 11 steps to protect your money.
1. Increase financial literacy now
Lack of financial literacy is a key factor in poor economic decision-making (beyond age itself). The more you know about managing your personal finances, the less risk you have of making an adverse financial move.
Here are some resources for increasing your financial literacy.
- Read books on retirement and aging
- join New Retirement Facebook GroupA great place to mingle with others on personal finance topics in a supportive environment
- Subscribe to reputable financial planning media and read personal finance news regularly. Reliable sources include Money Magazine, Forbes Magazine, Marketwatch and Bloomberg Businessweek.
2. Use it or lose it
When it comes to financial decision-making, we want to be in and stay in the game. Make money management a regular habit.
Creating and maintaining a detailed retirement plan is a good way to maintain consistent financial responsibility. NewRetirement Planner makes it easy. You can also learn a lot by running different scenarios and keeping your plans up to date.
You should also consider doing daily or weekly practice of math. Don’t let the computing part of your brain atrophy.
3. Set up proper legal and financial documentation
Having a real estate plan is important.
In particular, a power of attorney and a medical order are required. These documents allow your spouse, adult children, or close friends to make decisions about your finances and health care if you are unable to communicate your wishes.
Here’s a review of 11 real estate planning documents you should own.
4. Do a self-assessment
Dr. Peter Lichtenberg is one of the country’s leading experts on preventing financial exploitation of older people. He and his team have developed a quiz to help people determine if they are at higher risk of financial exploitation as they age or if they are less financially capable.
You may not want to know if your brain is failing, but it helps.
participate in a financial exploitation investigation
5. Simplify your finances
As you get older, you can simplify your finances by consolidating your accounts and reducing the overall number of investments. not.
author of simple path to wealthJL Collins appeared on The New Retirement Podcast and talked about the importance of simplicity.
Listen to JL Collins interview on the NewRetirement podcast.
6. Sanity Check Determination by Fiduciary Financial Advisor
We encourage you to set up regular meetings with your fiduciary finance professional to easily review important financial decisions. Their guidance will help you make sure you’re making reasonable choices with your money.
NewRetirement provides fiduciary advice from independent fee-only certified financial planners. Consultations are by phone or video call and with NewRetirement Planner the process is collaborative, cost-effective, efficient and effective.
7. Hire people you can trust
If you are not a fiduciary advisor, you may want family and friends to help you monitor your financial situation on a monthly, quarterly, or yearly basis.
But choose carefully. According to the widely cited MetLife Mature Market Institute’s survey of reported financial fraud, 51% of his scammers were strangers and 34% were family members, friends or neighbors.Recent data Researchers at USC’s Keck School of Medicine found that relatives may be at higher risk of financial abuse by older adults than strangers.
8. Consider an identity theft protection service
of Federal Trade Commission Lists and describes different types of identity theft protection services.
9. Beware of scams
Research shows that being aware of scams can help you avoid falling victim to them.
Sign up to receive alerts on current scams AARP fraud monitoring network.
10. Set up an alert system
We can build systems with credit information agencies and financial institutions. They will notify you (and/or someone close to you) if a new account is opened or if a large withdrawal or transfer is made.
11. Join the Do Not Call list
Most telemarketers stop calling after a number has been on the National Do Not Call Registry for 31 days. You can register your home phone number and mobile phone number for free. www.donotcall.gov Or call us at 888-382-1222.