While there are things we can do to attempt to defy age, the reality is that, year by year, we are all advancing physically and mentally. For many, the aging conversation (if you could call it that) tends to be relatively surface-level among friends and family members. We’ve all made quips relating to recent “aches and pains” or a lighthearted joke about a silly “forgetful moment.”
It’s also true that many of these aging-related experiences are inevitable for most of us, and the topic is not a fun one to talk about. But there are things that can be done and meaningful conversations that can be had to not only age more gracefully, if you will, but also to simply protect yourself and others. Let’s spend some time considering some of the “hard truths” related to finances and healthcare as we age and think about how you and your family, along with others in your life, can plan accordingly.
There is no shortage of studies looking at cognitive decline as people age. While the findings are somewhat wide-ranging due to the number of factors involved, the consensus seems to be that the age at which the human brain peaks is probably earlier in life than one might expect. Beyond that, the point at which the decline begins may be surprising—as early as age 45 in some studies. The “hard truth” is that as people age and cognitive decline increases, they become more impulsive, overconfident, and subject to poor judgment.
While it is difficult to recognize early-stage cognitive impairment, studies suggest that financial decision-making deficits are often among the first signs. A New York Federal Reserve study examined the effect of undiagnosed memory disorders on credit outcomes. In the years leading up to the diagnosis of a memory disorder, it was found that average credit scores went down and that payment delinquencies increased, specifically for mortgage and credit card accounts.
Adding insult to injury, elder fraud and financial exploitation have been on the rise. According to a June 2023 AARP initiative examining the cost of elder financial exploitation (EFE), annual reported losses from EFE are estimated to be $8.1 billion, with an additional $20.5 billion of losses going unreported. Furthermore, approximately 72% of those losses ($20.3 billion) are due to fraud by people the victim knows. Wow!
As Benjamin Franklin famously said: “In this world, nothing can be certain, except death and taxes.” Lest you believe cognitive decline will not happen to you, the “hard truth” is that some level of decline will be a certainty for most of us. With this knowledge, do you have a plan in place for financial caretaking? Consider the following questions in evaluating your plan to prepare for impairment:
- Who is in charge?
- With couples, is the person who is least involved in the finances and/or paying bills prepared to take over if needed?
- For individuals, do you have a trusted person ready to take over finances and/or bill paying?
- Do you have the necessary documents in place, including power of attorney?
- At what point do you transition to someone else taking care of financial decisions and/or bill paying?
Beyond finances, another hard truth is that as we age, there is a high likelihood that we will need long-term services and support (LTSS). Data from the Health and Retirement Study Survey Research Center showed that 70% of adults who survive to age 65 develop severe LTSS needs before they die, and 48% receive paid care during their lifetime. This means many elderly rely exclusively on family and unpaid caregivers when LTSS needs arise.
According to the Centers for Disease Control (CDC), the U.S. has over 53 million unpaid caregivers providing the equivalent of nearly $470 billion a year in free care. Caregiving has become an essential public health issue. Based on the data, the “hard truth” is that many people will find themselves caregiving (unpaid) for a loved one with LTSS needs.
Yet another “hard truth” is the physical, emotional, and financial cost of being a caregiver. According to the CDC, one in five caregivers reports fair or poor health, often because they neglect their health needs. Nearly two out of five caregivers have at least two chronic diseases.
Financially, many employed caregivers experience lost wages due to time away from work, and almost 80% of caregivers reported paying expenses for care recipients totaling an average of $7,200 annually.
The “hard truth” is that while it is often (understandably) preferred to remain at home as long as possible, things may need to change at some point. Knowing this, what are your preferences and wishes regarding your living situation as you age?
- Do you want to stay in your current home?
- If so, how close are necessities like food and medical care?
- Is your home aging-friendly?
- Who will take care of maintenance?
- Are you willing to use technology to monitor well-being?
- At what point would you agree to move into an aging-friendly home?
- Is there a safety risk?
- Can you take care of maintenance and upkeep?
- Is transportation an issue?
- Is socialization and interaction with others negatively impacted?
- What would be the triggers for moving to assisted living and/or skilled care?
- Is there a safety issue?
- Does the cost of in-home care outweigh the cost of moving?
- Is there an unpaid caregiver who cannot/should not continue?
Healthcare decisions often go hand in hand with living transitions. Beyond conveying living preferences, it is also incredibly important to have a plan in place for handling healthcare. Have you chosen someone to be your healthcare surrogate? Here are some points to consider:
- Have you shared your healthcare preferences and/or mindset with others?
- Have you picked someone who understands and supports your decisions?
- A spouse or child is not always the best choice.
- Do you have the necessary documents in place, including power of attorney and advance directives?
- What steps should be taken if concerns arise about your ability to continue driving?
- Have you picked someone who understands and supports your decisions?
In summary, knowledge is power, and communication is key. It’s never too early to start facing some of these “hard truths” head-on.
As financial planners, we often talk about estate planning and what people want to happen when they pass. But now more than ever (cue baby boomers), it is evident that we need to spend more time talking about the transitions and experiences that are likely to occur later in life.
At CWP, we are committed to encouraging and facilitating these meaningful conversations with our clients. These discussions may not be fun to think about, but in the end, having them can help keep you safe and reduce stress for everyone as you age.
