Seniors should share financial transactions, decisions, and plans with their spouses, families, and financial advisers. It is well-known that as we get older, we are more apt to make mistakes in our financial decisions. Emotionally, however, it often can be difficult to share or ask for outside help. Being independent is very high among the priorities of most aging seniors. Independence may be associated with continuing to make key financial decisions without consulting others.
If you're in that second camp, please read a recent New York Times story. It's about research showing that mistakes in financial decisions are one of the earliest signs that a person has contracted Alzheimer's or some other form of dementia. The story includes some sad tales of people whose finances were ruined because they lost the ability to make sound financial decisions. By the time family members learned of the problem, it was too late to avoid life-altering declines in their financial resources and standard of living.
Such miscues can be tied to conditions more mild than Alzheimer's. In a report earlier this year, the Center for Retirement Research at Boston College said many studies have found that declining analytical and decision skills are associated with even normal aging patterns. As traditional pensions have disappeared, retirees have had to assume primary responsibility for the performance of their retirement investments. Many seniors may not be able to navigate their increasingly complex financial world, the report said.
But with the swelling ranks of people in their 70s and 80s, creating an "age aware" process of making and recording financial decisions is increasingly needed. Here are ways to protect yourself and avoid unpleasant surprises. Discuss them with your family. Make sure they're right for you.
1. Online banking records. Make sure your spouse or other appointed family member has access to your banking transactions. If you're not at the point of providing real-time access to account transactions, consider E-mailing them a digital copy of your monthly banking statement showing all deposits and payments.
2. Key financial transactions. Make a list of companies that must be paid—mortgage company, utilities, insurance, and the like. Know the approximate amount of periodic payments and check them off against monthly banking statements.
3. Credit cards. Consider providing third-party access to credit-card account records. If you're comfortable, you could agree upon maximum outstanding credit limits on your accounts. These limits would avoid damaging charge-card "surprises" while not ceding control of accounts to others.
4. Investment accounts. If you don't have a financial adviser, make sure your spouse or a family member can have access to your investment accounts. How much money is supposed to be pulled out of these accounts, either monthly or on some other periodic basis? What is your desired mix of investments? Do your accounts still reflect these priorities or do they need to be rebalanced?
5. Taxes. Make sure your tax returns are seen by the appropriate family member on a timely basis. If someone else does your taxes, the returns should be shared and discussed with your spouse or other relative.
6. Master list. Build, share, and regularly update a master list of financial relationships and related online accounts and passwords. You should do this anyway, lest something happen to you. I update mine in advance of extended travel but use whatever reminder works for you.
7. Key documents. Assemble your will, ownership documents for big assets (home, car, insurance policies, etc.), and any other important documents. Make sure they can be accessed by authorized family members. Consider making digital copies of these documents and storing a set on the Internet. I use Google Docs for such storage; it's free and reliable.
8. Financial check list. Building a timeline of financial activities that need to be carried out during the course of the year. If taxes are due on April 15, don't wait until then to ask about them. Put one or two early reminders into the check list.
Should your decision making abilities become severely affected over time, you will need to consider more aggressive steps to share or even turn over decisions to others.
[Visit the U.S. News Retirement site for more planning ideas and advice.]