Smart Money Moves to Make While You are Mentally Sharp
Smart money moves to make while you are still mentally sharp.
As we age, we tend to lose some of our cognitive abilities—and that, in turn, can cause us to make financial decisions that aren’t in our best interests.
Commonly, people experience a degradation of financial decision-making abilities and “mental sharpness” beginning sometime in their 60s or 70s. When you consider that there are some 10,000 Americans turning 65 every day and all the baby boomers will hit that age by 2030, the issue of cognitive decline—and its potential impact on wealth—is a truly serious one.
Don’t panic. There are steps you can take right now that can potentially set you up for success even if you begin to experience some form of cognitive impairment that might otherwise threaten your financial future.
1. Start early. The ideal time to be thinking about how to protect your assets from the impact of cognitive decline is well in advance of when the need arises. During our late 40s or early 50s for most of us. You cannot make a legally binding will or set up other legal documents unless you are considered to be “of sound mind”.
2. Simplify your financial life. Consider consolidating accounts under one roof. For example, you might place most or all of your investments with one trusted financial advisor, or merge multiple bank accounts into one. Such “clutter reduction” will not only help you, but may also help when a family member needs to step in to assist you down the road.
3. Have clarifying conversations with family and advisors. If something happened to you yesterday – who would be in charge today? And where would the assets go? Who will help you make sensible financial, health care and other decisions if there’s a serious mental or physical health issue? Discuss your wants, needs and values with those people.
4. Set up—or review—important legal documents. Here’s where your intentions meet up with execution. Some of the key documents you should consider having in place in the event that you experience serious physical or cognitive decline are obvious—such as a will. But others are too often overlooked or never updated, including:
Durable power of attorney for finances, Health care directives, and Living trusts.
5. Compile key documents and other important financial information. If someone eventually needs to help in making financial decisions on your behalf, it’s best to make it easy for them to step into that role. To that end, start compiling a comprehensive inventory of your key financial information. You can create a digital file or folder, or keep hard copies in a specific spot like a desk drawer. Whatever route you choose, tell your Power of Attorney, Successor Trustee or Executor the location of the paperwork.
The specific information you compile will depend on the details of your financial situation. For more ideas on what to include or how we build our personal wealth organizers for clients, check out our separate video on our website titled “personal wealth organizer”.
In Conclusion
Let’s be honest with ourselves about the possibility that we may experience some form of cognitive decline. Then we can take action steps aimed at minimizing the potential for making wealth-erasing mental mistakes. By working in partnership with family and trusted advisors, we can seek to protect the assets we’ve worked so hard to build and grow over our lives.