While we’re all aging, some of us are further along in the process than others! But even you’re still very young, you probably have people you care about who might be labeled an “older adult.” With age comes certain privileges and freedoms, but we also have to acknowledge that aging also brings cognitive changes as well as physical changes. This is true even for those with no cognitive impairment or dementia – everyone’s brain changes as they age.
This cognitive aging can lead to “diminished financial capacity” – a term used to describe a decline in a person’s ability to manage money and financial assets to serve his or her best interests, including the inability to understand the consequences of investment decisions. Some errors that occur due to diminished financial capacity may be minor, like forgetting to pay a bill, but serious errors that threaten our financial security are possible.
Happily, there are steps we can take to protect ourselves and those we care about. These steps include:
- keeping important documents organized and easy to find;
- providing names of “trusted contacts” to your financial professionals;
- creating (or updating) a power of attorney;
- and more.
The Consumer Financial Protection Bureau (CFPB) provides a practical breakdown of steps that will protect you as you age, and also steps to help you assist an older friend or relative you are concerned about: Planning for diminished capacity and illness. None of us likes to think about possible future problems, but if something happens, we know we’ll be glad we did!
NOTE: People of all ages can be injured in accidents or suffer illness that diminishes ability to manage finances and make decisions. The steps outlined by the CFPB are appropriate for adults of all ages to consider.
For more details about cognitive aging and how it affects different types of mental functioning differently, see a trio of articles from The Center for Retirement Research at Boston College, starting with Cognitive Aging: A Primer.