Diminished Ability to Handle Personal Finances
As people age, they gradually lose their ability to handle their own finances. Often, this process is so gradual that the person himself and those around him are unaware of what’s happening until something serious happens. The elderly control the most assets and are the most susceptible to financial scams and poor choices. As people get older, their financial affairs often get more complex. They must deal with complex choices on healthcare, long-term care, taxes, life insurance, pensions, Social Security and estate planning. Often just handling the routine chores of daily financial affairs become beyond reach. Recently The New York Times had an article discussing the research behind the loss of cognitive skills needed for personal finance. Steps to mitigate these inevitable problems include striving to simplify your financial affairs — consolidating your holdings in a small number of financial institutions, trimming your actual number of holdings, avoiding complex or exotic instruments. Another common solution is to use automatic bill paying where possible. People should also find trusted family members, friends or professionals who can step in when needed. Appropriate advanced directives such as powers of attorney and health care proxies also need to be in place. Planning for the inevitable will help avoid many of the worst potential pitfalls.