As Cognition Slips, Financial Skills Often the First to Go

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Beth*
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As Cognition Slips, Financial Skills Often the First to Go

Post by Beth* »

Here is an interesting New York Times article about how the ability to competently handle financial matters is one of the first things older adults lose if they develop cognitive issues:

http://www.nytimes.com/2015/04/25/your- ... iness&_r=0

I think Bogleheads can appreciate this piece of advice:

David Laibson, an economics professor at Harvard and co-author of the research, said he believed that crystallized intelligence tended to plateau when people reached their 70s. That plateau, accompanied with declining fluid intelligence, might explain why older consumers made more financial mistakes than middle-age ones in his study.

“At that point, vulnerability increases,” Professor Laibson said. “ Our nation’s wealth is disproportionately held by older adults, and they are exactly the group, particularly as they reach their 80s and 90s, that are most vulnerable. But our system has the fewest protections for those people.”

He said he wishes all 65-year-olds would start by simplifying their financial lives, reducing the money clutter to just a few mutual funds at a reputable institution.
letsgobobby
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by letsgobobby »

Beth* wrote:Here is an interesting New York Times article about how the ability to competently handle financial matters is one of the first things older adults lose if they develop cognitive issues:

http://www.nytimes.com/2015/04/25/your- ... iness&_r=0

I think Bogleheads can appreciate this piece of advice:

David Laibson, an economics professor at Harvard and co-author of the research, said he believed that crystallized intelligence tended to plateau when people reached their 70s. That plateau, accompanied with declining fluid intelligence, might explain why older consumers made more financial mistakes than middle-age ones in his study.

“At that point, vulnerability increases,” Professor Laibson said. “ Our nation’s wealth is disproportionately held by older adults, and they are exactly the group, particularly as they reach their 80s and 90s, that are most vulnerable. But our system has the fewest protections for those people.”

He said he wishes all 65-year-olds would start by simplifying their financial lives, reducing the money clutter to just a few mutual funds at a reputable institution.
My dad turned 80 this year, remains stunningly sharp and has the advantage of having been born frankly brilliant in some respects.

But I see subtle signs that he is not as sure as himself; needs a bit more reassurance that his decisions are proper; and occasionally even asks about something relatively simple, in which case I think he is primarily overthinking things as he is wont to do.

This is not something I'm looking forward to witnessing.
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by nisiprius »

Well, this not-quite-septuagenarian is still sharp enough to know that there is no such word as "cognitivity."

I'd probably better check... OK, if my Merriam-Webster's Unabridged app is correct, a "cognitivist" is "an ethicist who holds that genuine ethical judgements are cognitive or empirically confirmable," and a "cognitivism" is "the ethical theory of a cognitivist," but...

...no, there is no such word as "cognitivity." Yet.
Last edited by nisiprius on Fri Apr 24, 2015 3:28 pm, edited 2 times in total.
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by jebmke »

Beth* wrote:He said he wishes all 65-year-olds would start by simplifying their financial lives, reducing the money clutter to just a few mutual funds at a reputable institution.
No reason to wait until 65 to do this.
When you discover that you are riding a dead horse, the best strategy is to dismount.
Dandy
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by Dandy »

That sure is a worry and I'm sure it may be hard to recognize gradual decline or to admit to it. On the physical side I usually go up on the roof to clean the gutters out - my daughter said that wasn't wise - it made me think just because I've done it for 40 years when would I decide not to do it? When I fall? It is hard to make these decisions before you have to but that is really what is required.

When to stop driving will be the biggest hurdle.

I have two daughters but there are not investment savvy - I hope they can handle our financial affairs in our decline. I would really be scared if I had no children as to who to trust. I agree that not having too many places where your money is and not having too many funds is a great idea.
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by jebmke »

nisiprius wrote:...no, there is no such word as "cognitivity." Yet.
My local library puts up a cognitivity scene every December.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by nisiprius »

Dandy wrote:That sure is a worry and I'm sure it may be hard to recognize gradual decline or to admit to it. On the physical side I usually go up on the roof to clean the gutters out - my daughter said that wasn't wise - it made me think just because I've done it for 40 years when would I decide not to do it? When I fall? It is hard to make these decisions before you have to but that is really what is required.

When to stop driving will be the biggest hurdle.

I have two daughters but there are not investment savvy - I hope they can handle our financial affairs in our decline. I would really be scared if I had no children as to who to trust. I agree that not having too many places where your money is and not having too many funds is a great idea.
I agree with everything you've said. None of this is pleasant to think about.
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Biffer
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by Biffer »

nisiprius wrote:...no, there is no such word as "cognitivity." Yet.
This is weird, but just a few seconds after I read nisiprius' post, I re-clicked on the nytimes link, and the headline had been changed from "As Cognitivity Slips..." to "As Cognition Slips..."
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by 555 »

Biffer wrote:
nisiprius wrote:...no, there is no such word as "cognitivity." Yet.
This is weird, but just a few seconds after I read nisiprius' post, I re-clicked on the nytimes link, and the headline had been changed from "As Cognitivity Slips..." to "As Cognition Slips..."
Apparently the headline writer had had a "Cognitivity Slip".
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by The Wizard »

555 wrote:
Biffer wrote:
nisiprius wrote:...no, there is no such word as "cognitivity." Yet.
This is weird, but just a few seconds after I read nisiprius' post, I re-clicked on the nytimes link, and the headline had been changed from "As Cognitivity Slips..." to "As Cognition Slips..."
Apparently the headline writer had had a "Cognitivity Slip".
That can happen when you get older...
Attempted new signature...
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Beth*
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by Beth* »

[quote="Dandy"]
When to stop driving will be the biggest hurdle.
[quote]

I told my children that one day they will need to stop me from driving and that I probably would not be very nice about it at the time but I forgive them in advance. While I am in my right mind I know that one day it will be the right thing for them to do.
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by The Wizard »

So do driving skills go first or financial skills?
I'm only 65 and think I'm still on top of both.
I could, of course, be mistaken...
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letsgobobby
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by letsgobobby »

The Wizard wrote:So do driving skills go first or financial skills?
I'm only 65 and think I'm still on top of both.
I could, of course, be mistaken...
you are likely mistaken about your driving skills, but apparently, so is most of the world.
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by nisiprius »

Biffer wrote:
nisiprius wrote:...no, there is no such word as "cognitivity." Yet.
This is weird, but just a few seconds after I read nisiprius' post, I re-clicked on the nytimes link, and the headline had been changed from "As Cognitivity Slips..." to "As Cognition Slips..."
And neither of us is losing our memory... yet... because right now Google is showing the New York Times as using the correct word, but numerous secondary sources that picked it up from the Times are still using the non-word.

Image
555 wrote:Apparently the headline writer had had a "Cognitivity Slip".
Put it in the wardrobe with the chastity belt and the paternity suit.
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by The Wizard »

letsgobobby wrote:
The Wizard wrote:So do driving skills go first or financial skills?
I'm only 65 and think I'm still on top of both.
I could, of course, be mistaken...
you are likely mistaken about your driving skills, but apparently, so is most of the world.
Perhaps, but I've heard the same is true of financial management, that one just doesn't know when they've "lost it"...
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sawhorse
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by sawhorse »

This is consistent with my observational experiences. The elderly, even those who do not meet the diagnostic criteria for dementia or Alzheimer's, fall for scams and frauds that they would never have when they were younger. In fact, they can fall for the same scams they were warning other people about in their younger years. I also know cases of elderly people doing financially impulsive things like pawn their car when they don't need to and go on gambling binges--things they never did before.

And with many cognitive changes, it's hard for the person to realize and/or accept. It's not just the elderly. Many younger people have trouble realizing or accepting that they have an eating disorder or other mental illness, for example.

In my (limited) observational experiences, the bill paying stuff wasn't so bad. Perhaps it's that they had been doing it so habitually for decades, or perhaps it's that it's not noticeable, or even important in most cases, if they take a little longer to balance their checkbook.

This article certainly makes a case for doing your estate planning long before you get a terminal illness or reach the average life span.
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by Professor Emeritus »

nisiprius wrote:
555 wrote:Apparently the headline writer had had a "Cognitivity Slip".
Put it in the wardrobe with the chastity belt and the paternity suit.
and the planetary gear, so you can have the teeth engaged
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by nisiprius »

Professor Emeritus wrote:
nisiprius wrote:
555 wrote:Apparently the headline writer had had a "Cognitivity Slip".
Put it in the wardrobe with the chastity belt and the paternity suit.
and the planetary gear, so you can have the teeth engaged
After turning the cognition key.
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john94549
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by john94549 »

As someone pushing 68, I'm sure my trading skills have moderated somewhat. I'm only a tad over my benchmark.

My silly trading account is doing quite well, thank you.

Grandpa John.
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Re: As Cogntivity Slips, Financial Skills Often the First to

Post by black jack »

In light of this information, when should you get concerned about your parents' financial skills, and how can you address the situation if you see that their skills are slipping? It's not always easy to distinguish suboptimal decision-making from cognitive deterioration.

I'll bet this topic has been covered before, but I'm too lazy to check, so will recount my experience here.

Dad developed dementia, and was being taken care of by Mom. Perhaps it was the contrast that blinded us to the reality that Mom was developing "cognitive deficits" too.

I have written recently of their decision - or their succumbing to a salesman - to transfer their retirement savings into a deferred equity-indexed annuity. I didn't even regard that as a warning sign; such annuities are very confusing, and the salesmen are persuasive.

But soon after, during a holiday visit, I just got nosy, and started poking through their checkbook and bank statements. I continued this during subsequent visits, and It gradually became clear that they (Mom, at that point handling all the finances) were spending far more than their income could sustain. She had already taken out a HELOC to get more money to cover their bills, was carrying large credit card balances, etc. I think at first Mom was overwhelmed with looking after Dad, and so paid bills and spent whatever money seemed necessary, and paid little attention to the big picture (a big part of the deficit spending was tens of thousands being given to an unemployed sibling).

But it wasn't until after Dad's death that my wife began pointing out Mom's cognitive lapses. Then, when I discovered that a family member was stealing thousands of dollars from Mom every month (which I only discovered because I noticed that there were ATM withdrawals from her account on a date and time that I knew I had been with her and we hadn't gone to the bank), I decided I needed to start helping Mom with her finances. As I gathered her paperwork and began to assemble the full picture, I found she hadn't filed income taxes in a couple of years, among other things. And then it took another couple of years for me to gradually decide to take total control of her finances, and for her to accept that - which she was not happy about at first, but later would regularly thank me for (not unlike the situation with stopping seniors from driving).

What haunts me about this experience is wondering how many seniors out there don't have a relative to help them the way I was able to help Mom.

In summary, I don't have any great ideas about how to check on your parents' financial skills. In my case, it involved snooping into their financial paperwork. And even if you decide there is a problem, what to do about it? I had already repeatedly spoken to Mom about my concern about her spending, to no avail. It was only the discovery that she was a victim of in-family theft, rather than concern about her financial decision-making, that steeled my resolve to move from just observing her finances to start taking some control of them.
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Re: As Cognition Slips, Financial Skills Often the First to

Post by LadyGeek »

FYI - I fixed a typo in the title "Cogntivity" to "Cognition."

Here's a relevant thread: “How Does Aging Affect Financial Decision Making?”
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Re: As Cognition Slips, Financial Skills Often the First to

Post by montanagirl »

My dad was pretty sharp with his investments until 80 or so, when he could no longer navigate from the recliner to his PC. He had 3000 shares of Palm when it peaked during the tech boom but couldn't decide whether to sell. It was analysis paralysis time and we kids were no help. I couldn't see it as "my" property though I probably should have. So I deferred to his judgment. We did nothing and the stock crashed back down to earth.

He never fell for any scams, though. He'd seen it all during the Depression.

I'm only 66 and it seems so unlikely that I will lose my skeptical attitude toward scammers but obviously, stuff happens. I knew one old guy who couldn't stop buying cars, and heard about a lady who heloc'd out all her home equity to gamble in our two bit casinos here. My mother went a little crazy with her credit card but all in all it wasn't too bad.

What is the answer? Certainly, putting off SS to 70 is one part of it. But what else? Spend more up front, and put the balance in an SPIA? It would be great to have people to watch out for your finances, but who will watch the watchers?
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As Cognitterment Slips, Financial Skills Often the First to

Post by 555 »

Beth* wrote:Here is an interesting New York Times article about how the ability to competently handle financial matters is one of the first things older adults lose if they develop cognitive issues:
http://www.nytimes.com/2015/04/25/your- ... iness&_r=0
You could pay an AUM fee and have Cognitterment run your portfolio.
montanagirl wrote:What is the answer? .... It would be great to have people to watch out for your finances, but who will watch the watchers?
Then pay another AUM fee for watcher watchers.
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Investment Governance: Guarding against cognitive decline (or worse)

Post by Leeraar »

[Thread moved into here, see below. --admin LadyGeek]

Mike Piper posts another horror story of cognitive decline and fraud:

http://www.obliviousinvestor.com/invest ... e-decline/

What can be done? This is scary.

I am thinking of granting a collective Power of Attorney to our three sons, who would have to agree on any action. (They are all heirs in our estate.) Plus, we will have a yearly review with a fee-only hourly-compensated adviser (and with the sons) to review the state of our finances. If they agree I should not continue managing the finances, so be it.

What have others done? It seems to be difficult to guard against future possibilities.

L.
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Re: As Cognition Slips, Financial Skills Often the First to Go

Post by LadyGeek »

I moved Leeraar's thread into here. The combined thread is in the Personal Finance (Not Investing) forum (capacity to make financial decisions).
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Re: Investment Governance: Guarding against cognitive decline (or worse)

Post by ralph124cf »

Leeraar wrote:[Thread moved into here, see below. --admin LadyGeek]

Mike Piper posts another horror story of cognitive decline and fraud:

http://www.obliviousinvestor.com/invest ... e-decline/

What can be done? This is scary.

I am thinking of granting a collective Power of Attorney to our three sons, who would have to agree on any action. (They are all heirs in our estate.) Plus, we will have a yearly review with a fee-only hourly-compensated adviser (and with the sons) to review the state of our finances. If they agree I should not continue managing the finances, so be it.

What have others done? It seems to be difficult to guard against future possibilities.

L.
It is my understanding that only one person can be power of attorney at a time, no multiple persons. You can have successors, one after another, but not several at the same time.

This might be state dependent, but is certainly so in my state.

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Re: As Cognition Slips, Financial Skills Often the First to Go

Post by SurferD »

From my experience as soon as cognitive decline reaches a certain stage the sharks move in and they are usually the black sheep of the family who then starts to siphon off money on the quiet.

I personally after seeing both my parents lose all their money will be looking into a trust one day to secure my money once I am past it as without such protection it will be gone either way..we all work so hard to ensure we will have enough till we are 80 or 90 but from my experience the money will be long gone from either a. making some bad choices we would never do now because of age related cognitive decline, or b. having the remaining funds siphoned off by family members who do not have the scruples we may have,

This is some way off for me luckily but something anyone in the older age group (especially the financially savvy people on here) may want to consider..somehow locking away the funds you may need once you cant manage it yourself and entrusting it to a trustworthy, legally responsible and accountable person...the sharks are continually circling...
SurferD
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