Financial Planner 43551

A person’s financial decision-making ability peaks at age 53?

In Estate Planning, Income Planning, Investment Management, Steward Articles, Weekly Articles by Adam Cufr

According to a study performed by the Center For Retirement Research At Boston College, the cognitive ‘sweet spot’ for financial decision-making is our mid-50’s, followed by rapid declines in the years following. The result is an increase in financial mistakes and poor decisions that can have meaningful impact at a time when the stakes are higher than ever.

The New York Times article, ‘As Cognition Slips, Financial Skills Are Often the First to Go’ was also featured in The Blade on Sunday, May 3rd,, 2015. The article brought to light a number of very uncomfortable topics, regarding boomers and seniors, and their relationship to financial matters. Because of the findings of this piece and various studies, it has become glaringly obvious to me that we need to discuss these matters at greater length.

First, the biggest challenge is this: family and friends are slow to point out to a person that they might be slipping mentally. Imagine that conversation…”Dad, you just don’t seem as intelligent as you used to be.” Yet, at the same time, those closest to an aging person are the most capable of offering assistance to ensure matters are handled responsibly. This means something has to give in order for the most vulnerable to be protected.

From my perspective, the 60’s represent the most meaningful years for financial decision-making, as people begin to plan for and enter retirement. This can be a really exciting time, the realization of a lifetime goal and the beginning of a new chapter.

It is with this in mind that the article offers suggestions that I think we would be wise to consider:

  • Assemble a ‘protective tribe.’ This handful of people are on the short list of those who are willing and encouraged to step-up and assist if financial decision-making begins to decline. It pays to have more than one person in the tribe to ensure proper checks-and-balances are in place.
  • Put the tribe in writing in a ‘letter of diminishing capacity.’ This document authorizes your advisor(s) to raise any concerns with those in your tribe.
  • Ensure estate planning is in-place before any significant decline begins. Items like wills, trusts, powers of attorney, and health care directives will allow a smooth transition of control to minimize any potential relationship conflicts.
  • David Laibson, an economics professor at Harvard, and co-author of the referenced research, suggests 65 year-olds “simplify their financial lives, reducing money clutter to just a few funds at a reputable institution.”

It is important to add that, “A person can appear to have their wherewithal cognitively, but not have the ability to understand money in the same way anymore” according to Helen Clark, a retired registered nurse and family therapist. Because of the abstract nature of finances, the signs of financial decision-making often only appear when people are actually involved in the act of financial decision-making itself. This is why it is so important that we understand the challenges and engage in this dialogue. Who better to spot the signs than a financial advisor, who works closely with people who are active in financial decision-making?

I, for one, would rather not consider the realities of these findings. However, I’ll take the chance that an uncomfortable conversation can go a long way toward keeping you or a loved one out of harm’s way. I hope you’ll agree,

All the best,

Adam Cufr Signature

Adam Cufr, RICP®

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Adam Cufr, RICP® (Retirement Income Certified Professional®) is a financial advisor and founding principal of Fourth Dimension Financial Group, LLC providing personal finance and retirement planning services. Adam is a Columnist for Retirement Advisor Magazine. He is also a sought-after media commentator and thought leader. Adam was named one of The 20 Most Creative People In Insurance in 2015 and is a columnist for Retirement Advisor Magazine and the author of Off the Record – Secrets to Building a Successful Retirement and a Lasting Legacy.

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