What If Creeping Dementia Impairs Your Financial Judgment?
What If Creeping Dementia Impairs Your Financial Judgment?
Being older myself, I’m curious to know if any bogleheads have taken concrete steps to protect their portfolios from… themselves.
From the article linked below:
“The many different causes of dementia have very different patterns of onset. Some are particularly dangerous to investors because sufferers don't immediately lose their memories - just their judgment.”
“The most typical pattern with many forms of dementia is that loved ones only realize there is a problem after the big checks have been written to scammers, the good investments sold at bad prices, or the abusive annuities and whole life policies purchased.”
Suggested recommendations in the article include:
- granting your doctor written permission to discuss your health with others
- openly discussing your investment particulars with your POA so they are informed well before their help is actually needed, putting them in a position to know if your judgment is slipping
- buying annuities as “dementia insurance.”
http://seekingalpha.com/article/3239846 ... d-dementia
To be clear, I am not looking for horror stories of dementia in others. I am looking for thoughts/ideas/actions/strategies for protecting my investments from my own possible not-yet-recognized dementia. (This is not an immediate personal concern, but one that may become one in the next decades.)
From the article linked below:
“The many different causes of dementia have very different patterns of onset. Some are particularly dangerous to investors because sufferers don't immediately lose their memories - just their judgment.”
“The most typical pattern with many forms of dementia is that loved ones only realize there is a problem after the big checks have been written to scammers, the good investments sold at bad prices, or the abusive annuities and whole life policies purchased.”
Suggested recommendations in the article include:
- granting your doctor written permission to discuss your health with others
- openly discussing your investment particulars with your POA so they are informed well before their help is actually needed, putting them in a position to know if your judgment is slipping
- buying annuities as “dementia insurance.”
http://seekingalpha.com/article/3239846 ... d-dementia
To be clear, I am not looking for horror stories of dementia in others. I am looking for thoughts/ideas/actions/strategies for protecting my investments from my own possible not-yet-recognized dementia. (This is not an immediate personal concern, but one that may become one in the next decades.)
Re: What If Creeping Dementia Impairs Your Financial Judgment?
Having seen my father go from a pretty sharp guy to a terminal Alzheimer's patient I think I understand the ramifications. The tough part is knowing when you have to turn the controls over, and to who.
Re: What If Creeping Dementia Impairs Your Financial Judgment?
Good question. As with most Bogleheads, currently we can manage our money and also realize that life has its way as we get older. Thus, we are thinking of a plan B. I suppose there are several options that we have not checked out: a trust, a low cost annuity, etc. But we have a fee-only financial planner in mind and lives nearby who has the same investing philosophy as us. Nobody in our families knows much about money management so we thinking about this planner when the time comes. Its not too soon to think about having a plan in place, as well as all the other challenges of getting older, where to live and who to ask for assistance. Its part of an overall plan. I think the key is to make those very difficult changes while one is still compos mentis, not to wait till a crisis.
Never in the history of market day-traders’ has the obsession with so much massive, sophisticated, & powerful statistical machinery used by the brightest people on earth with such useless results.
Re: What If Creeping Dementia Impairs Your Financial Judgment?
Here is one of several previous threads taking up the subject, along with a New York Times article with helpful information:
http://www.bogleheads.org/forum/viewtop ... 2&t=114359
http://www.nytimes.com/2015/04/25/your- ... to-go.html
http://www.bogleheads.org/forum/viewtop ... 2&t=114359
http://www.nytimes.com/2015/04/25/your- ... to-go.html
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
I took over my father's trust when I noticed repeated activities that indicated he was slipping. The trust was written such that I didn't have to have a medical person examine him, or anything. I simply had to use my own judgement.
When I advised him what I was doing, he seemed relieved, more than anything. And, looking back, I should have acted even sooner.
We were very close, and I was privy to his finances from the time I was in high school.
We most likely will follow the same route my father laid out for his finances. His trust worked out splendidly, and accomplished every thing he hoped.
I have one daughter who works in finance, so she certainly understands that discipline. I believe she would make a good successor trustee. I would trust my other daughters to look after our finances; but their fields of knowledge are far removed from finance. It wouldn't be a stretch for me to leave it in Vanguard's hands, either. But given my wife's reluctance to learn about our finances, I will have to have something formal in place, not just make available the passwords to everything.
Broken Man 1999
When I advised him what I was doing, he seemed relieved, more than anything. And, looking back, I should have acted even sooner.
We were very close, and I was privy to his finances from the time I was in high school.
We most likely will follow the same route my father laid out for his finances. His trust worked out splendidly, and accomplished every thing he hoped.
I have one daughter who works in finance, so she certainly understands that discipline. I believe she would make a good successor trustee. I would trust my other daughters to look after our finances; but their fields of knowledge are far removed from finance. It wouldn't be a stretch for me to leave it in Vanguard's hands, either. But given my wife's reluctance to learn about our finances, I will have to have something formal in place, not just make available the passwords to everything.
Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
Re: What If Creeping Dementia Impairs Your Financial Judgment?
This is the time when a low cost advisor is a very valuable asset and worth a lot more in peace of mind than the cost of the advisor. My wife has little interest in managing our investments and to guard against my sudden death or loss of the ability to make sound decisions, we have used an advisor to manage our investments for several years. (We are 72 and 76 and in very good health.) It is very difficult to decide when a spouse slipping into a demented state is no longer able to make sound investment decisions and one bad decision could be very costly.
The lady that is our successor POA and trustee has been introduced to our advisor and she is fully aware of our investments. Each year I provide a detailed update to her so that she can easily take on the oversight/management role when that is needed.
There have been many posts about leaving instructions for the surviving spouse to use a particular advisor after the spouse that manages investments dies but having the advisor in place prior to the actual need should be considered. The surviving spouse, facing many difficult decisions, may be easily swayed by competing interests.
The lady that is our successor POA and trustee has been introduced to our advisor and she is fully aware of our investments. Each year I provide a detailed update to her so that she can easily take on the oversight/management role when that is needed.
There have been many posts about leaving instructions for the surviving spouse to use a particular advisor after the spouse that manages investments dies but having the advisor in place prior to the actual need should be considered. The surviving spouse, facing many difficult decisions, may be easily swayed by competing interests.
Re: What If Creeping Dementia Impairs Your Financial Judgment?
Mom had dementia that was not Alzheimer's. We have a flat fee advisor now due to my fading memory. DW is thrifty but is not good with decimal calculations.
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
This becomes extremely difficult when you have no children or anyone considerably younger than you to trust. A younger financial advisor, if trusted and that's not always easy to ascertain, MAY be one possiblity. You really need a POA that is sharp and trustworthy which becomes difficult if you have no one in your family that fits the bill.
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
You may want to look at posts from another financial website (several member of that website post on Bogleheads and referred me here); sorry for the long thread look at post: 4221
http://ymam.proboards.com/thread/14441/ ... To=2253175
http://ymam.proboards.com/thread/14441/ ... To=2253175
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
In addition to what is described above, one can simplify the portfolio to one balanced fund in the pre-tax portion and one appropriate fund for the taxable segment. It also means that one will not tinker with the two funds after making that commitment (which is hard to do for a BH )
Re: What If Creeping Dementia Impairs Your Financial Judgment?
I've been thinking of this issue for some time. One problem is that an individual affected with dementia typically doesn't recognize it, so you can become your own worst enemy without realizing it. Speaking with an attorney recently, he told me about an elderly client who had designated him as trustee with POA to manage his affairs as he aged. However, the client has turned around and sued the attorney on more than one occasion because dementia has impaired his judgment. So he's squandering a good deal of his assets in lawsuits against himself. I wonder how you protect yourself from that?
We don't know where we are, or where we're going -- but we're making good time.
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
^^^this^^^blueblock wrote:- openly discussing your investment particulars with your POA so they are informed well before their help is actually needed, putting them in a position to know if your judgment is slipping
I'm currently using my POA and investing per the instructions and discussions I had from 15 years ago. Its definitely not an Boglehead approved investment plan but it was their plan I'm following in good faith as tough as it can be at times.
When I look at our own investments I'm always looking to keep it as simple as possible. If I could get by with a simple one fund solution I may be tempted. I have been thinking of giving some sort of instructions to a POA to sell everything and toss in all into a single balanced fund if I have not yet done so. I don't want my POA to have to think and or worry about anything investment related if possible, they will have much bigger issues to deal with.
Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him. |
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
IMO this is going to be a big issue legally as baby boomers get into their 70's and 80's. Recently there was a legal case involving an insurance agent, Glenn Neasham, that sold an annuity to a woman whose family later claimed she had Alzheimer's at the time of sale, which was suspected but not proven. I don't know Glenn but the case basically cost him his entire career and all of his assets. He was charged and convicted with "theft of property from an elderly person" because he "deprived" her of the money because the product had surrender charges for early surrender (as all annuities do), but the decision was later overturned. Here's a link to the incredibly long discussion (warning - 2,400 posts and 242 pages) on the insurance forum - http://www.insurance-forums.net/forum/a ... 37529.html
Of course, this isn't limited to insurance products. Any financial recommendations to a person with Alzheimer's/dementia could be construed as wrongdoing, especially if there is any financial incentive to the person making the recommendation, whether it is a financial advisor/planner, a family member, or a friend.
How is someone supposed to know that a person has Alzheimer's/dementia unless they are told by a family member? How to advise someone that may be mentally impaired but has not signed a power of attorney document? What are the ramifications for moving money around in a time period where someone may have been mentally impaired but nobody really knows for sure? Tough questions, no easy answers. Putting yourself in a position of advising an elderly person what to do with their money when they may or may understand what you're telling them could be disastrous. Family members start accusations of wrongdoing, possible legal action, etc. Messy stuff.
For a financially savvy person, setting up POA and legal instructions on financial handling would be prudent, but the vast majority of the population will never do it.
Of course, this isn't limited to insurance products. Any financial recommendations to a person with Alzheimer's/dementia could be construed as wrongdoing, especially if there is any financial incentive to the person making the recommendation, whether it is a financial advisor/planner, a family member, or a friend.
How is someone supposed to know that a person has Alzheimer's/dementia unless they are told by a family member? How to advise someone that may be mentally impaired but has not signed a power of attorney document? What are the ramifications for moving money around in a time period where someone may have been mentally impaired but nobody really knows for sure? Tough questions, no easy answers. Putting yourself in a position of advising an elderly person what to do with their money when they may or may understand what you're telling them could be disastrous. Family members start accusations of wrongdoing, possible legal action, etc. Messy stuff.
For a financially savvy person, setting up POA and legal instructions on financial handling would be prudent, but the vast majority of the population will never do it.
Re: What If Creeping Dementia Impairs Your Financial Judgment?
If a situation progresses to actual Alzheimer's, there becomes a risk that someone fires their carefully selected adviser and writes a check for their life savings to some scam artist. By itself, an adviser doesn't seem to eliminate that risk.heyyou wrote:Mom had dementia that was not Alzheimer's. We have a flat fee advisor now due to my fading memory. DW is thrifty but is not good with decimal calculations.
Re: What If Creeping Dementia Impairs Your Financial Judgment?
Hopefully the same person that will keep the dang cat from eating my tapioca pudding, but I haven't figured out who that will be yet.
Seriously, I'm hoping one of my kids will be responsible enough to handle thing via prearranged instructions, trust, etc...
JT
Seriously, I'm hoping one of my kids will be responsible enough to handle thing via prearranged instructions, trust, etc...
JT
Re: What If Creeping Dementia Impairs Your Financial Judgment?
One thing I would advise, based on sad personal experience, is that whatever one decides to tell an advisor, POA, etc, that one's wishes are with respect to investments, make it known to other family members. And arrange for other family members to be kept up to date as to the financial situation on an ongoing basis. That way any mishandling of the investments cannot be kept in the dark.
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
.BruDude wrote: He was charged and convicted with "theft of property from an elderly person" because he "deprived" her of the money because the product had surrender charges for early surrender (as all annuities do)..
Vanguard's don't (at least my VVAs didn't).
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
Another problem is that it can be a slow process and not obvious to family members, let alone the legal system when the line has been crossed.Browser wrote:...One problem is that an individual affected with dementia typically doesn't recognize it, so you can become your own worst enemy without realizing it...
You can't say "he invested in an active mutual fund with an 0.79% expense ratio and he's never done that before, obviously he is no longer competent to handle his own financial affairs."
You can't say "she's stopped balancing her checkbook and calls the bank several times a week to ask for the balance, so obviously she is no longer competent to handle her own financial affairs."
Furthermore, aging people with cognitive issues can have good days and bad days and be perfectly lucid and sensible on the good days.
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
This, EXACTLY. AND having a POA does not solve the issue. I was POA for an elderly relative. However, the relative had not yet been declared incompetent. That is quite difficult to do in some states. Thus, while I was POA, the relative also had the authority to conduct transactions. On a good day, when this person could remember their social security number, they could wreak all sorts of havoc. Fortunately, the havoc, in total, cost less than $3k . It consisted mostly of opening credit cards with catalog companies that prey on seniors and the orders from those catalogs, along with orders of overpriced subscriptions.nisiprius wrote:Another problem is that it can be a slow process and not obvious to family members, let alone the legal system when the line has been crossed.Browser wrote:...One problem is that an individual affected with dementia typically doesn't recognize it, so you can become your own worst enemy without realizing it...
You can't say "he invested in an active mutual fund with an 0.79% expense ratio and he's never done that before, obviously he is no longer competent to handle his own financial affairs."
You can't say "she's stopped balancing her checkbook and calls the bank several times a week to ask for the balance, so obviously she is no longer competent to handle her own financial affairs."
Furthermore, aging people with cognitive issues can have good days and bad days and be perfectly lucid and sensible on the good days.
I'm eternally grateful to the random Fidelity representative, who decided something was not right when the relative called Fidelity and demanded a $40k check, made out to cash. They had gotten far enough to give the social, holdings in the account, address, etc. The rep got his supervisor to listen in on the call, and they refused to agree to the $40k check. Then Fidelity called me as POA, and I of course put a stop to it. I then learned we could put additional phone passwords on the account, which of course I did and only I and another (sane) relative knew the pw. What if the rep had not called me?
Re: What If Creeping Dementia Impairs Your Financial Judgment?
Roughly, 25% of people in their 80s have some form of dementia. With numbers that high, perhaps the default presumption should be that an 83-year-old client has some mental impairment until proven otherwise. Obviously, we're not going to resolve the public policy questions here, but the percent afflicted really is staggering past a certain age.BruDude wrote: Of course, this isn't limited to insurance products. Any financial recommendations to a person with Alzheimer's/dementia could be construed as wrongdoing, especially if there is any financial incentive to the person making the recommendation, whether it is a financial advisor/planner, a family member, or a friend.
How is someone supposed to know that a person has Alzheimer's/dementia unless they are told by a family member?
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
robert88 wrote:Roughly, 25% of people in their 80s have some form of dementia. With numbers that high, perhaps the default presumption should be that an 83-year-old client has some mental impairment until proven otherwise. Obviously, we're not going to resolve the public policy questions here, but the percent afflicted really is staggering past a certain age.BruDude wrote: How is someone supposed to know that a person has Alzheimer's/dementia unless they are told by a family member?
That will be very helpful (sarcasm) for the other 75% of 80+ year olds in conducting their financial affairs. Once a presumption of impairment is established, it would be negligent for an institution to accept any instructions from the presumptively impaired client. Making it mandatory for all 80+ year olds to somehow obtain a declaration of compos mentos (yearly? quarterly?) or obtain a (trustworthy? capable? )minder. Most people I know would rather be dead than accept such limitations imposed on their independence.
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
The unfortunate state of our society is that there are many vultures waiting to prey upon older people with declining mental capacity. A very sad state of affairs. That's why I tell my folks "tell them the answer is NO, and then call me."robert88 wrote:Roughly, 25% of people in their 80s have some form of dementia. With numbers that high, perhaps the default presumption should be that an 83-year-old client has some mental impairment until proven otherwise. Obviously, we're not going to resolve the public policy questions here, but the percent afflicted really is staggering past a certain age.BruDude wrote: Of course, this isn't limited to insurance products. Any financial recommendations to a person with Alzheimer's/dementia could be construed as wrongdoing, especially if there is any financial incentive to the person making the recommendation, whether it is a financial advisor/planner, a family member, or a friend.
How is someone supposed to know that a person has Alzheimer's/dementia unless they are told by a family member?
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
This is an interesting topic. I read the OP but not replies, so apologies if this repeats anything that has been said.
I think it would be interesting to have a "Is this ok" forum (with a better name, perhaps) where people who have any concerns that they may not be making the clearest judgement (panicky investors, folks with mental debilitation or other mind issues, etc) could post what they are planning to do and have the community just do a quick "woah that is way out there think about this more/don't do it" or "seems fine".
One issue is that someone who is currently not making the best judgements may judge that there is no need to verify their judgement...
I think it would be interesting to have a "Is this ok" forum (with a better name, perhaps) where people who have any concerns that they may not be making the clearest judgement (panicky investors, folks with mental debilitation or other mind issues, etc) could post what they are planning to do and have the community just do a quick "woah that is way out there think about this more/don't do it" or "seems fine".
One issue is that someone who is currently not making the best judgements may judge that there is no need to verify their judgement...
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Re: What If Creeping Dementia Impairs Your Financial Judgment?
Indeed.Morik wrote: One issue is that someone who is currently not making the best judgements may judge that there is no need to verify their judgement...
My thought is that it is a good idea to inoculate oneself against such concerns by a) developing a habit of systematically seeking advice (e.g., by asking a question on this forum) on any investment decisions one is considering long before such concerns are anywhere on the horizon and b) developing a habit of waiting for an extended period of time before making any major change in investments (often lucidity comes and goes, so just waiting can be helpful.)
Both these provisions could go in one's written IPS.
Re: What If Creeping Dementia Impairs Your Financial Judgment?
Being single with no children this is something I will face at some point. My thoughts today are that well before then I will have annuitized a large percentage of my assets and consolidate the rest into a self managing fund like Vanguard's Life Strategy. With the fund I'll probably implement a systematic withdrawal plan.
My hope is that in the future Vanguard gives you the option to have a SWP that automatically takes into account your age, base desired withdraw amount and the performance of your portfolio. Something like Vanguard's Managed Payout fund but could be applied to LS. I'm not excited by Managed Payout itself.
Another line of defense would be to hire a financial advisor to keep an overwatch. Paying Vanguard 30 basis points may be worth it.
My hope is that in the future Vanguard gives you the option to have a SWP that automatically takes into account your age, base desired withdraw amount and the performance of your portfolio. Something like Vanguard's Managed Payout fund but could be applied to LS. I'm not excited by Managed Payout itself.
Another line of defense would be to hire a financial advisor to keep an overwatch. Paying Vanguard 30 basis points may be worth it.
Re: What If Creeping Dementia Impairs Your Financial Judgment?
I agree that a fee only adviser could be a good safety net.
If you do not like that idea (or need to know when to switch), try this. Have a written investment policy statement. Be specific about what you are and are not allowed to do (including purchasing of insurance and annuities). Go over your finances with someone on a bi-annual basis. (Wife, trusted child, etc.) When you start to get unclear or you start to meander away from said written IPS, let them cue you in that it is time to let someone else take the driver's seat.
If you do not like that idea (or need to know when to switch), try this. Have a written investment policy statement. Be specific about what you are and are not allowed to do (including purchasing of insurance and annuities). Go over your finances with someone on a bi-annual basis. (Wife, trusted child, etc.) When you start to get unclear or you start to meander away from said written IPS, let them cue you in that it is time to let someone else take the driver's seat.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.