Modern medicine has allowed people to live longer, healthier lives and enjoy spending time with their families for many more years than was previously possible. Although we’ve overcome diseases such as polio and tuberculosis that took many younger lives, we now face higher levels of cancer and other diseases that disproportionately affect seniors. For many people, diseases that involve cognitive decline, such as Alzheimer’s, can become chief concerns for aging family members.
In addition to concerns developing that are related to physical health, there are many ways that a person’s finances can become vulnerable when they develop dementia. Aside from rising medical costs, cognitive decline makes people more vulnerable to reckless spending, fraud, scams, and monetary mismanagement. Without effective protection, a retirement fund that can last indefinitely may suddenly run out, leaving someone without the financial resources they spent a lifetime saving.
Fortunately, there are several things that we can do as individuals and family members of those who are experiencing cognitive decline. By taking steps early, either before any signs of decline become apparent or during the initial stages, we can protect ourselves and those who matter most to us.
Planning Ahead Is Essential
Even in the best circumstances, normal retirement funding takes careful planning and diligent effort spent over decades. The earlier you begin saving, the more impact your money can make when it’s time to retire. This kind of planning is even more important when there are questions of cognitive decline. According to the CDC, there are several signs of cognitive decline that can directly impact money management:
- Long-term planning is often disrupted as key memories and processes become inaccessible or erratic. This form of decline is apparent in the example of leaving the car keys in the fridge, but it also shows up in leaving bills unpaid or attempting to pay with closed accounts. These actions can incur fees and service charges that can eat away at savings.
- Decreases in judgment may increase vulnerability to scams. It becomes more difficult to discern when people are being genuine when a person experiences cognitive decline, and scammers can take advantage of this difficulty. Specifically, people with cognitive decline may agree to things out of confusion and a desire not to cause a conflict that they don’t understand. Scammers can steal thousands of dollars from well-intentioned people, and the AARP points out that both the success rate and potency of scams go up dramatically when cognitive decline is involved.
- Errors in judgment can lead to significant overspending or even pulling funds from accounts that were intended to mature for longer periods. As a result, even without scams, it’s possible to mismanage funds to the point that a retirement account that could have lasted 30 or more years is used up within 10.
Typically, you can avoid these pitfalls by taking preventative measures and ensuring that there are extra sets of eyes on these assets. While it’s helpful to have family involved, there are other ways of securing these funds that are helpful for people who either lack close family relations or have significant assets that would be difficult for the family to manage correctly.
Step-by-Step Protection
Many tools to protect your money from cognitive decline are the same as those that help regulate a stable retirement already. For example, placing money in a trust is a key component of many retirement plans that seek to create and maintain generational wealth, but it is also an effective way to remove the element of financial mismanagement and fraud. These six steps can give you protection for your money before cognitive decline fully develops.
- Test your cognitive health regularly. Catching decline early is an important factor in preventing financial mismanagement and abuse. Mental health screenings can help you make plans with family and legal agents to protect your assets.
- Confer with a financial advisor about ways to maximize your assets. Determine how you want to distribute your money and what you need to live comfortably in retirement.
- Organize your finances accordingly. Set aside money intended for future generations in a trust and open annuities to guarantee regular income. These steps can keep you from accessing your assets too frequently as you get older. Annuities are particularly strong tools, as they limit overspending well.
- Create a contingency plan that can offset the costs of in-home care or senior living. It can be much easier on your family if there’s a fund that can pay for an at-home nurse or caretaker, or otherwise pay for full-time care in a facility designed to meet the needs of those experiencing cognitive decline.
- Communicate these plans to those who should know them. Your financial advisors and lawyers will need to know about your plans so they can execute them to the fullest extent that the law and business regulations allow. People who are close to you should also know about your cognitive condition if you’re comfortable discussing it or if they’ll be helping to manage your finances. As cognitive decline sets in, those you trust can gradually take more responsibility and help to manage those financial decisions that become more difficult.
- Follow your plan. The Dementia and Alzheimer’s Wellbeing Network notes that, as people begin to experience cognitive decline, they often hide or mask signs of their condition. This often comes from a place of pride, fear, or not wanting to be a burden to others, but it can severely impact both physical and financial health. The moment that you become aware of cognitive decline, it’s time to take your plan seriously and put it into action.
Ultimately, protecting your money from cognitive decline is more than just tracking numbers. Cognitive decline impacts the mental functions necessary to properly manage your finances and overall well-being. Therefore, it’s essential to take time and plan in advance, creating the solutions today for what you may experience tomorrow. With effective planning, you can minimize or eliminate some financial effects of cognitive decline.
Resource Links
“Falling for Fraud Might Be Early Sign of Alzheimer’s” via the AARP
“10 Warning Signs of Alzheimer’s” via the U.S. Centers for Disease Control and Prevention
“Dementia and Masking – How to Avoid Being Kept in the Dark” via DAWN