Over Confident in Old-age: Cognitive Decline and Financial Literacy

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Rob5TCP
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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by Rob5TCP » Sat Oct 05, 2019 7:08 pm

About 6-7 months ago I read a short book "What to do When I Get Stupid'"
Which goes into a fair detail on this subject. While I still have a "bunch" of years
before this transpires, making plans ahead seems like a good strategy.

https://www.amazon.com/What-When-Get-St ... 169&sr=8-3

typical.investor
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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by typical.investor » Sat Oct 05, 2019 7:18 pm

afan wrote:
Sat Oct 05, 2019 4:40 pm
Having someone manage your investments will do little to solve the problem of cognitive decline. Leaving assets in a handful of index funds dies not require much mental acuity. Resisting sales pitches mat take more. But an advisor cannot keep you from buying that over priced annuity or penny stock.
I agree, and compared to Medicare part D plans, investments don't seem that complicated. Who knows my future though. I guess I should try and listen to the concerns of those around me and not try to deny it if they bring issues up. The trouble is my wife was pointing out my forgetfulness at age 35 (and I responded with a "who cares about that ... bigger fish to fry and can't be bothered with such details" response).

This Medicare part D discussion confuses me. Health plans in general confuse me. viewtopic.php?f=2&t=291948

The reference study based their findings on people not choosing the best rewards card or refinancing their mortgage. Both those things pale in comparison to the difficulty in insurance decisions I think. Scary.

Seriously, how do you even get the information to make a decision? Here's a quote from the above thread
Decided to peek at Part D plans on Medicare.gov.

The new Part D find-a-plan website is a disaster. Some lowlights.

1) It shows an erroneous town name shown for my ZIP code. Fortunately pharmacies, etc. appear to be correct (i.e. based on the ZIP code, not the town name).

2) It does not seem to be possible to use the website to obtain the total annual cost of premiums + drugs. In the past that was the most prominent number shown. In the past, you not only saw the total, you could actually drill down into a bar chart showing month-by-month prices. That bar chart isn't available, and a choice that promises "monthly cost" shows me only "November."

Even using a calculator, it does not seem to provide the numbers from which it is possible to calculate total annual cost (premiums + drugs).

3) The stated drug costs seem... unlikely.

4) The site says I will be paying a monthly price for two drugs of about $55, until I meet a deductible of $365. Yet it also says that I will not meet the deductible.

5) My current plan is listed at the top with a plan number. The lists of plans to compare with it includes a plan with an identical name, an identical plan number, a different monthly premium and a different deductible.

TN_Boy
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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by TN_Boy » Sat Oct 05, 2019 9:42 pm

fourwheelcycle wrote:
Sat Oct 05, 2019 6:00 pm
TN_Boy wrote:
Sat Oct 05, 2019 4:51 pm
fourwheelcycle wrote:
Sat Oct 05, 2019 3:57 pm
My wife and I have hoped to spare our two adult children from the details of our finances and estate plans until they are at least in their early fifties.
To be honest, waiting until mid-80s is a truly terrible idea. I am really really glad my parents didn't do that.
Looking back at our own lives, my wife and I were, fortunately, able to be focused on our family and careers until our early sixties. We were, perhaps selfishly, although not consciously, almost totally focused on our family and careers through our forties. During our fifties, as we began to plan for our own retirement, we asked our parents enough directed questions to satisfy ourselves that they were OK financially and had appropriate documents in place for durable powers of attorney, wills, and advanced directives. As it turned out, we did not have to begin assisting our parents with their finances, taxes, and health care until their early nineties, which came during our mid and late sixties.

Our goal has not been to wait until our mid-eighties to involve our own children in our finances and estate plans, but rather to wait, if possible, for them to focus on their own lives, free of concerns for us, until their early fifties. To be clear, they do know we are OK financially, that we have our home and all of our taxable savings in a revocable trust with them as the sole beneficiaries, that we have DPOAs which will likely impose responsibilities on them someday, and that we have advance directives. However, they have not asked for, and we have not offered, any details about our finances or our estate documents. We realize we need to begin considering how soon to involve them in these details.
Obviously I don't know the specifics of your family situation. Because of that, I don't understand the concern about letting the children "focus on their own lives." Until you actually have to start doing things, understanding parent finances, estate plans, etc in moderate detail seems .... relatively easy with no major time commitment. A couple of hours discussion maybe. Here's is what we have, here is what needs to be managed and so forth.

Of course, some people are very reluctant to give out such details to children. That wasn't the case in my family.

Put another way, if your finances are simple, why not share now? And if they are NOT simple, well, it seems like letting them get an early look might be helpful. Declines can happen really fast.

I triggered on your comment about waiting until you were in your mid 80s because in my immediate family, some parents would have been deceased or already cognitively impaired by that age ..... things would not have gone well.

I probably would not accept being named in a POA unless I knew something about the finances I might need to manage someday. If you are going to assign me responsibilities, you are also going to tell me something about those responsibilities!

MathWizard
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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by MathWizard » Sat Oct 05, 2019 10:26 pm

This seems overblown to me, at least for my finances.

These are quite simple, and will be pretty much on autopilot.

SS benefits.
Small SPIA which with SS will cover base expenses.

Health supplement insurance with prescriptions, so no medicare part D decision each year.

I have a printed copy of what I should withdraw from each account
which I update every year, so I have a base plan.

My accounts allow annual rebalancing.

I am more inclined not to spend than to spend too much.

The big thing is not to try to optimize, but to set a course which is simply, and does not require lots of decisions.

smectym
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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by smectym » Sun Oct 06, 2019 12:00 am

fourwheelcycle wrote:
Sat Oct 05, 2019 3:57 pm
My wife and I have hoped to spare our two adult children from the details of our finances and estate plans until they are at least in their early fifties. We want to let them live their lives and focus on their own families, jobs, and finances for as long as possible. If we make it that long we will be in our mid-eighties by then. This article suggests we should begin involving them now, or soon, since we are already in our early seventies.
I’m against investors jumping onto the bandwagon of assuming their own cognitive decline at some given age, readily yielding to the often self-interested suggestions of advisors and relatives that they yield control of assets, or any of that. The solipsistic idea that “I don’t see any evidence of my own cognitive decline, but that must show that I’ve cognitively declined and therefore can’t see the evidence” is beneath criticism. As a general rule, those who have been prudent and responsible investors for 30 or 40 years are probably going to remain prudent and responsible investors even when they pass certain age landmarks such as 60 or 70 or 80. Exceptions exist, of course. But let’s not let the exceptions swamp the rule.

Having said that, I am in favor of educating the next generation about the family financial situation sooner rather than later. The idea of cloaking the finances in some sort of mystery, keeping the kids ignorant and wondering “until they’re in their 50’s” is in my view odd, and perhaps dangerous. Of course different approaches pertain to offspring of different levels of maturity and financial responsibility, but I would assume that a responsible, normally prudent adult child in his 20’s or 30’s should be “in on the picture” of family wealth, financial problems, and inheritance prospects. And why not?

smectym
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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by smectym » Sun Oct 06, 2019 12:24 am

smectym wrote:
Sun Oct 06, 2019 12:00 am
fourwheelcycle wrote:
Sat Oct 05, 2019 3:57 pm
My wife and I have hoped to spare our two adult children from the details of our finances and estate plans until they are at least in their early fifties. We want to let them live their lives and focus on their own families, jobs, and finances for as long as possible. If we make it that long we will be in our mid-eighties by then. This article suggests we should begin involving them now, or soon, since we are already in our early seventies.
I’m against investors jumping onto the bandwagon of assuming their own cognitive decline at some given age, readily yielding to the often self-interested suggestions of advisors and relatives that they yield control of assets, or any of that. The solipsistic idea that “I don’t see any evidence of my own cognitive decline, but that must show that I’ve cognitively declined and therefore can’t see the evidence” is beneath criticism. As a general rule, those who have been prudent and responsible investors for 30 or 40 years are probably going to remain prudent and responsible investors even when they pass certain age landmarks such as 60 or 70 or 80. Exceptions exist, of course. But let’s not let the exceptions swamp the rule.

Having said that, I am in favor of educating the next generation about the family financial situation sooner rather than later. The idea of cloaking the finances in some sort of mystery, keeping the kids ignorant and wondering “until they’re in their 50’s” is in my view odd, and perhaps dangerous. Of course different approaches pertain to offspring of different levels of maturity and financial responsibility, but I would assume that a responsible, normally prudent adult child in his 20’s or 30’s should be “in on the picture” of family wealth, financial problems, and inheritance prospects. And why not?
Addendum: the idea that a rationale for not sharing financial realities from offspring is that they should “focus on their own families” is no doubt well-intended, but in my view misses that those kids are still part of YOUR family, even as they form families of their own.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by afan » Sun Oct 06, 2019 4:53 pm

We have a younger generation heir who has our DPOA and is successor trustee. Knows that they can bring in Vanguard or some other entity as co trustee if managing our simple financial lives becomes a hassle.

Mt primary plan for assuring mental acuity is my job performance. As long as I am doing well at that then I will presume I am sharp enough to manage my finances. Hoping to work until I die, so if all goes as planned it will never come up. Of course physical health problems could knock me out of the work force while my mind is still sharp. If that were to happen I would probably look to have my DPOA/trustee get more involved. Physical ailments can lead to abrupt and dramatic declines in mental ability.

I don't understand the fascination with SPIA's. All they do is convert your assets into a cash flow, minus the costs of the annuity. If a life annuity, then they could be a good deal for the small subset of people who can reliably predict that they will live considerably longer than the average annuity buyer. By definition the average annuity buyer does not outlive the mean. Insurance companies profit by selling annuities because, on average, they pay out less than comes in from buyers and investment income. For many people, perhaps most, it would be better to maintain a balances portfolio of low cost index funds and take out an income stream annually. They get an annuity in effect without the fees.

If you are worried about bad investment decisions then start by worrying whether the annuity purchase is appropriate.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by sschullo » Sun Oct 06, 2019 5:01 pm

prd1982 wrote:
Thu Oct 03, 2019 9:03 am
carolinaman wrote:
Thu Oct 03, 2019 7:21 am
I would most likely call on ... a trustworthy financial adviser from our church.
I think that is a mistake. I'm not trying to say anything bad about religious folks. But I have seen a number of articles where people were taken advantage of by folks attending the same place of worship. I suspect it has to do with letting your guard down when dealing with folks at your place of worship. I would also recommend about not using someone based on being a member of the same country club.
I agree! Association with a particular social group is NOT the primary criteria. Choosing a trustworthy FA is complicated.
Public School K-12 Educators: "Ask NOT what your annuity sales person can do for you, ask what you can do to be a Do-It-Yourselfer (DIY)."

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by vineviz » Sun Oct 06, 2019 5:07 pm

Tdubs wrote:
Wed Oct 02, 2019 8:37 pm
I had planned on getting a Vanguard advisor when I turned 80. Looks like I'd better do it at 70. I might be too confident to get one if I wait.

The decline in literacy isn't as notable as the negative correlation between over confidence and cognitive decline.
Another effect of aging seems to be an increased susceptibility to recency bias. In the latest "Long View" podcast from Morningstar, the same retirement researcher (Michael Finke) mentioned this:
But as you get closer to age 65, people become far more sensitive to taking risks based on recent market performance. And this is something that I've also found in subsequent consumer surveys. This is a particularly interesting characteristic of older investors--their willingness to take investment risk is more dependent on how well the stock market has done recently. And, of course, that's not a very good way to invest. Because what ends up happening is that you end up becoming more risk-averse after stocks have fallen in price, which means that you're more motivated to sell stocks when they're cheap. And then you become more risk-tolerant after stocks have increased in price, which means that you're allocating more to equities when their prices are higher, and the expected equity-risk premium then is lower. So, a good way to consistently lose money in your investment is to focus too much on recent returns. And the data would seem to suggest that older investors are more prone than younger investors to focusing too much on recent returns.
This suggests to me, at least, that older investors would typically be well-served by using balanced funds rather than trying a DIY portfolio.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by TN_Boy » Sun Oct 06, 2019 5:09 pm

afan wrote:
Sun Oct 06, 2019 4:53 pm
We have a younger generation heir who has our DPOA and is successor trustee. Knows that they can bring in Vanguard or some other entity as co trustee if managing our simple financial lives becomes a hassle.

Mt primary plan for assuring mental acuity is my job performance. As long as I am doing well at that then I will presume I am sharp enough to manage my finances. Hoping to work until I die, so if all goes as planned it will never come up. Of course physical health problems could knock me out of the work force while my mind is still sharp. If that were to happen I would probably look to have my DPOA/trustee get more involved. Physical ailments can lead to abrupt and dramatic declines in mental ability.

I don't understand the fascination with SPIA's. All they do is convert your assets into a cash flow, minus the costs of the annuity. If a life annuity, then they could be a good deal for the small subset of people who can reliably predict that they will live considerably longer than the average annuity buyer. By definition the average annuity buyer does not outlive the mean. Insurance companies profit by selling annuities because, on average, they pay out less than comes in from buyers and investment income. For many people, perhaps most, it would be better to maintain a balances portfolio of low cost index funds and take out an income stream annually. They get an annuity in effect without the fees.

If you are worried about bad investment decisions then start by worrying whether the annuity purchase is appropriate.
In the context of this thread, an annuity might make it "simpler" to generate the cash flow needed to support yourself. Rather than selling stocks or bonds, or deciding what to sell, a check just shows up. But if you have cognitive decline, you'll eventually get to where you forget to pay bills, fall for phone scams, start buying everything in sight with your credit card.... an annuity only partially solves one small aspect of being unable to handle money.

Put another way, if you think you need an annuity because you can't handle investments, what you really need is someone to manage your finances now.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by fru-gal » Sun Oct 06, 2019 5:17 pm

smectym wrote:
Wed Oct 02, 2019 11:03 pm
Cognitive decline among older investors does occur, but be wary of buying in to some idea that “I’m 70 so I must be a victim of cognitive decline, guess that means I’m no longer competent to handle the money, guess I better label myself as “cognitively declined” and hand over authority to a much younger advisor (or a robot).” There’s a tendency on this forum to “prove what a true boglehead I am” by rather eagerly rushing to embrace the squishy “science” that solemnly intones that investors who for decades were astute money managers somehow “lose it” in their ‘60’s. Maybe. But case-by-case, maybe not. (Of course, if a 60-something investor protests that he’s still fine managing the money, that must be the symptom of “over-confidence” that raises a red flag, right? Um...no). Remember, both fund companies pushing advice algos and other advisor schemes, and sometimes family members, may have conflicts of interest when addressing this issue.

Sure, if Auntie Mame, who for decades exemplified thrift and financial acumen, all of a sudden starts breaking into the IRA to fund trips to Vegas, there might be a problem. Otherwise, it’s probably best to assume that whoever has been prudently managing the money since the Stone Age, should continue to manage the money.
+1
The older I get, the more annoyed I get at the assumptions that my brain must be turning into a turnip. I get this a lot from people who don't know me, who typically assume I'm computer illiterate, for example. Talk about ageism. No one in my family, going back to my parents, aunts and uncles, and grandparents generations and who have mostly gotten into their 80s and 90s before passing away, has turned into a turnip brain.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by TN_Boy » Sun Oct 06, 2019 8:54 pm

fru-gal wrote:
Sun Oct 06, 2019 5:17 pm
smectym wrote:
Wed Oct 02, 2019 11:03 pm
Cognitive decline among older investors does occur, but be wary of buying in to some idea that “I’m 70 so I must be a victim of cognitive decline, guess that means I’m no longer competent to handle the money, guess I better label myself as “cognitively declined” and hand over authority to a much younger advisor (or a robot).” There’s a tendency on this forum to “prove what a true boglehead I am” by rather eagerly rushing to embrace the squishy “science” that solemnly intones that investors who for decades were astute money managers somehow “lose it” in their ‘60’s. Maybe. But case-by-case, maybe not. (Of course, if a 60-something investor protests that he’s still fine managing the money, that must be the symptom of “over-confidence” that raises a red flag, right? Um...no). Remember, both fund companies pushing advice algos and other advisor schemes, and sometimes family members, may have conflicts of interest when addressing this issue.

Sure, if Auntie Mame, who for decades exemplified thrift and financial acumen, all of a sudden starts breaking into the IRA to fund trips to Vegas, there might be a problem. Otherwise, it’s probably best to assume that whoever has been prudently managing the money since the Stone Age, should continue to manage the money.
+1
The older I get, the more annoyed I get at the assumptions that my brain must be turning into a turnip. I get this a lot from people who don't know me, who typically assume I'm computer illiterate, for example. Talk about ageism. No one in my family, going back to my parents, aunts and uncles, and grandparents generations and who have mostly gotten into their 80s and 90s before passing away, has turned into a turnip brain.
Your family is extraordinarily lucky. I have known many people in their 80s with cognitive decline, often severe.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by Whakamole » Mon Oct 07, 2019 1:39 am

I'm far from the age cognitive decline typically takes place, but I'm not confident that I would be able to pick up the signs, and (even if I did) confident that I'd take action. It may well be too late by then.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by smectym » Mon Oct 07, 2019 3:52 am

“Virtue-signaling” is already a hopeless cliche, but “Hi! I’m sixty-something, and I’m cognitively declined!” does seem to be a perverse version of it that for some reason has infected this board

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by tuningfork » Mon Oct 07, 2019 8:47 am

fourwheelcycle wrote:
Sat Oct 05, 2019 3:57 pm
My wife and I have hoped to spare our two adult children from the details of our finances and estate plans until they are at least in their early fifties. We want to let them live their lives and focus on their own families, jobs, and finances for as long as possible. If we make it that long we will be in our mid-eighties by then. This article suggests we should begin involving them now, or soon, since we are already in our early seventies.
My parents first shared their finances and estate plan with us kids in their early 70's, our early 40's. Nothing actionable at the time, mainly just here's what we got, where it's at, and how much you'll get.

They only barely made it to their mid 80's, however they had no major cognitive decline. One of my siblings began handling Mom's finances only when she declined physically and needed to be placed in a nursing home.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by carolinaman » Mon Oct 07, 2019 9:31 am

There are many ways that cognitive decline can impact us. One big risk is having some unscrupulous marketer sell seniors annuities and other expensive and unneeded products via telemarketing or other means. My mother lived until age 89 and her mind was pretty good until the end. In her late 80s during the course of some sales pitch by a telemarketer, she unwisely gave her credit card info to the person. Fortunately, she realized her mistake and the bank canceled that card. She would never have done that 10 years earlier. Her hearing and vision were very poor in her later years which made it difficult for communication and understanding. She had difficulty balancing her checkbook and reconciling bank statements her last few years. I was her POA and interceded in some of these situations which was difficult because I lived 3 hours away.

A lot of our discussion has centered around investment oversight. However, seniors can make expensive mistakes at any time and by the time they are discovered, can be impossible or costly to unravel.

I had concerns about my mother's competency in her last few years. She lived alone and I feared for her safety as well as concerns about her judgment. I discovered that it is really hard to get someone declared incompetent. You have to convince the judge of danger to her safety and the evidence has to be compelling as otherwise, the judge will not do so.

My BIL and his wife both became incompetent. By the time social services interceded on behalf of the family (siblings, they did not have children), the people taking care of them in their home had gone through a lot of their money and stole valuables from their home. This stuff happens and unless someone is vigilantly looking after their well being, can result in serious financial losses and perhaps financial ruin.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by delamer » Mon Oct 07, 2019 10:58 am

carolinaman wrote:
Mon Oct 07, 2019 9:31 am
There are many ways that cognitive decline can impact us. One big risk is having some unscrupulous marketer sell seniors annuities and other expensive and unneeded products via telemarketing or other means. My mother lived until age 89 and her mind was pretty good until the end. In her late 80s during the course of some sales pitch by a telemarketer, she unwisely gave her credit card info to the person. Fortunately, she realized her mistake and the bank canceled that card. She would never have done that 10 years earlier. Her hearing and vision were very poor in her later years which made it difficult for communication and understanding. She had difficulty balancing her checkbook and reconciling bank statements her last few years. I was her POA and interceded in some of these situations which was difficult because I lived 3 hours away.

A lot of our discussion has centered around investment oversight. However, seniors can make expensive mistakes at any time and by the time they are discovered, can be impossible or costly to unravel.

I had concerns about my mother's competency in her last few years. She lived alone and I feared for her safety as well as concerns about her judgment. I discovered that it is really hard to get someone declared incompetent. You have to convince the judge of danger to her safety and the evidence has to be compelling as otherwise, the judge will not do so.

My BIL and his wife both became incompetent. By the time social services interceded on behalf of the family (siblings, they did not have children), the people taking care of them in their home had gone through a lot of their money and stole valuables from their home. This stuff happens and unless someone is vigilantly looking after their well being, can result in serious financial losses and perhaps financial ruin.
I am a strong believer in taking steps to protect myself and my assets/income from harm in the event that I develop Alzheimer’s (which runs in my family) or other cognitive decline.

However, I’ve also come to recognize that we can’t always insulate ourselves from “bad actors.” For instance, it has been shown that family members are the most common source of elder abuse, when you’d hope that those would be the very people who’d protect you from harm being done.

And I think some elders have unrealistic expectations as to how much time and money family members have available to devote to helping their elderly relatives.

No easy answers here.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by eucalyptus » Mon Oct 07, 2019 11:14 am

smectym wrote:
Sun Oct 06, 2019 12:00 am

I’m against investors jumping onto the bandwagon of assuming their own cognitive decline at some given age, readily yielding to the often self-interested suggestions of advisors and relatives that they yield control of assets, or any of that. The solipsistic idea that “I don’t see any evidence of my own cognitive decline, but that must show that I’ve cognitively declined and therefore can’t see the evidence” is beneath criticism. As a general rule, those who have been prudent and responsible investors for 30 or 40 years are probably going to remain prudent and responsible investors even when they pass certain age landmarks such as 60 or 70 or 80. Exceptions exist, of course. But let’s not let the exceptions swamp the rule.

Well said! The condescension and disrespect shown older people by the medical and financial professions is a disgrace.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by TN_Boy » Mon Oct 07, 2019 11:16 am

smectym wrote:
Mon Oct 07, 2019 3:52 am
“Virtue-signaling” is already a hopeless cliche, but “Hi! I’m sixty-something, and I’m cognitively declined!” does seem to be a perverse version of it that for some reason has infected this board
I don't see that at all. What I see is posters recognizing that 1) they *might* get hit with cognitive decline as they age. And just as importantly, realizing 2) they might *not* be aware of that decline.

There are some people who do not believe 1) and 2) could ever happen to them.

Lots of people age and die without developing dementia. But, lots will develop dementia.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by Mr. Rumples » Mon Oct 07, 2019 11:25 am

While my investment knowledge can't hold a candle to most of the folks here, when it comes to my family, I am the most knowledgeable based on discussions with them. Also, I realize that even at my relatively "young" old age, I don't think of things as fast as I use to. Thus, while there are many aspects of managing my portfolio I think I might do better with spreadsheets, buckets and so forth, I wonder how will I fare with them in 10 years or more. (I still recall while working how one little glitch in excel could cause a cascading error and I wonder if I could notice it now.) Hence, I keep it simple. I withdraw a % of my portfolio a year, I rebalance within the parameters I set and keep my allocation which has pretty stable since retirement. I have written all of this down and perhaps my nephew and niece will pick up on it. If not, I will explore having someone / entity such as Vanguard or Fidelity manage it for me for a fee.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by littlebird » Mon Oct 07, 2019 11:37 am

smectym wrote:
Mon Oct 07, 2019 3:52 am
“Virtue-signaling” is already a hopeless cliche, but “Hi! I’m sixty-something, and I’m cognitively declined!” does seem to be a perverse version of it that for some reason has infected this board
I do not see that at all. Most people on this board seem aware that it could happen to them. Some are even aware that it *is* happening to them. Is the poster saying that expressing such an awareness is like “humble bragging”?

Having lived for 26 years in a huge “active senior” community, I can say with some basis that cognitive decline is pervasive. But few -as far as I can see - can be accused of attempting to make a “virtue” of it. Some recognize its onset and deal with it as best they can. For many, the onset is insidious, or they simply do not have the self awareness to recognize its onset. But I cannot see that recognition of some cognitive decline in oneself should be a reason for either doubt or opprobrium on the part of observers.
Last edited by littlebird on Mon Oct 07, 2019 12:11 pm, edited 1 time in total.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by TheDDC » Mon Oct 07, 2019 11:51 am

eucalyptus wrote:
Thu Oct 03, 2019 12:40 pm
delamer wrote:
Thu Oct 03, 2019 10:35 am
There is no doubt that cognitive ability for many elders declines over the years.

That said, the absolute level of ability is to perform a task is important. I don’t walk as quickly as I used to either, but I can still walk.

Also, I like to see the “overconfidence” numbers for ages 25 to 60. Thinking you know more than you do is common at all ages.

Bravo.

One must be extremely "cognitive" of the bias of healthcare workers and financial advisors to assume over 70s are frail in body and mind and need to placed on a gentle glide path to the funeral home. In the past year, I've have spent a lot of time in hospitals, infusion clinics and doctors' offices, and a lot of time dealing with financial advisors to the elderly, and have been stunned to learn the extent to which caring, well-intentioned people hold stereotypes about the elderly they would be harshly condemned for holding towards any other group.

Other lessons: don't go to the wrong hospital. Don't go to the hospital without an advocate. Fail to heed these lessons at your peril.
Agreed. Having gone on the hospital journey with my 73 year old mom recently I can definitely say with certainty that without intense advocacy by a loved one you will fall prey to the "well he/she's lived a great life..." crowd who hide behind white coats.

I also would not recommend exposing an older loved on to the standard breed of "financial planner" out there unless you plan on the "adviser" slowly bleeding your family of assets. I can definitely see hiring a tax professional and family law attorney who deals with asset sheltering to keep assets in the family and away from the vultures (a.k.a. Skilled Nursing Facility).

-TheDDC
Refreshingly, a double barrel shotgun blast of truth...

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Artsdoctor
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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by Artsdoctor » Tue Oct 08, 2019 2:28 pm

"What to do when I get stupid"? "Turnip brain"? Those are awful expressions.

The majority of people will not develop dementia. There are known risk factors, some genetic, some lifestyle-based, and some related to other illnesses. It's very unpleasant to think of it in terms of ageism, although it is a fact that cognitive decline becomes more prevalent as we age.

You may ultimately choose to do absolutely nothing about safeguarding against cognitive decline, and statistically, you might be right. I do think that it would be unwise to assume that it will never happen to you, but then again, my days are filled with people who really can't grasp that family members are dying (even past the golden age of 100!).

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by LilyFleur » Tue Oct 08, 2019 2:32 pm

littlebird wrote:
Mon Oct 07, 2019 11:37 am
smectym wrote:
Mon Oct 07, 2019 3:52 am
“Virtue-signaling” is already a hopeless cliche, but “Hi! I’m sixty-something, and I’m cognitively declined!” does seem to be a perverse version of it that for some reason has infected this board
I do not see that at all. Most people on this board seem aware that it could happen to them. Some are even aware that it *is* happening to them. Is the poster saying that expressing such an awareness is like “humble bragging”?

Having lived for 26 years in a huge “active senior” community, I can say with some basis that cognitive decline is pervasive. But few -as far as I can see - can be accused of attempting to make a “virtue” of it. Some recognize its onset and deal with it as best they can. For many, the onset is insidious, or they simply do not have the self awareness to recognize its onset. But I cannot see that recognition of some cognitive decline in oneself should be a reason for either doubt or opprobrium on the part of observers.
+1
littlebird, your comments are thoughtful and articulate, as usual.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by LilyFleur » Tue Oct 08, 2019 2:46 pm

TheDDC wrote:
Mon Oct 07, 2019 11:51 am
eucalyptus wrote:
Thu Oct 03, 2019 12:40 pm
delamer wrote:
Thu Oct 03, 2019 10:35 am
There is no doubt that cognitive ability for many elders declines over the years.

That said, the absolute level of ability is to perform a task is important. I don’t walk as quickly as I used to either, but I can still walk.

Also, I like to see the “overconfidence” numbers for ages 25 to 60. Thinking you know more than you do is common at all ages.

Bravo.

One must be extremely "cognitive" of the bias of healthcare workers and financial advisors to assume over 70s are frail in body and mind and need to placed on a gentle glide path to the funeral home. In the past year, I've have spent a lot of time in hospitals, infusion clinics and doctors' offices, and a lot of time dealing with financial advisors to the elderly, and have been stunned to learn the extent to which caring, well-intentioned people hold stereotypes about the elderly they would be harshly condemned for holding towards any other group.

Other lessons: don't go to the wrong hospital. Don't go to the hospital without an advocate. Fail to heed these lessons at your peril.
Agreed. Having gone on the hospital journey with my 73 year old mom recently I can definitely say with certainty that without intense advocacy by a loved one you will fall prey to the "well he/she's lived a great life..." crowd who hide behind white coats.

I also would not recommend exposing an older loved on to the standard breed of "financial planner" out there unless you plan on the "adviser" slowly bleeding your family of assets. I can definitely see hiring a tax professional and family law attorney who deals with asset sheltering to keep assets in the family and away from the vultures (a.k.a. Skilled Nursing Facility).

-TheDDC
We experienced a different variety of white coats who were very quick to take measures that were explicitly against wishes in advance health directives. In one particular case, the hospital no longer retained the advance health care directive from a hospital stay only a month previously. It did require vigilance to advocate for the patient's wishes.

Of course these discussions can get emotional, but perhaps we can conduct them without derogatory name-calling. "Vultures" has not been our experience, and a few more rational descriptive words would probably communicate your experience better. Our parents had the best of care which was covered by LTC and savings. It was their money, and their care and well being was more important to their heirs than the inheritance.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by JackoC » Tue Oct 08, 2019 2:53 pm

typical.investor wrote:
Sat Oct 05, 2019 7:18 pm
afan wrote:
Sat Oct 05, 2019 4:40 pm
Having someone manage your investments will do little to solve the problem of cognitive decline. Leaving assets in a handful of index funds dies not require much mental acuity. Resisting sales pitches mat take more. But an advisor cannot keep you from buying that over priced annuity or penny stock.
I agree, and compared to Medicare part D plans, investments don't seem that complicated. Who knows my future though. I guess I should try and listen to the concerns of those around me and not try to deny it if they bring issues up. The trouble is my wife was pointing out my forgetfulness at age 35 (and I responded with a "who cares about that ... bigger fish to fry and can't be bothered with such details" response).

This Medicare part D discussion confuses me. Health plans in general confuse me. viewtopic.php?f=2&t=291948
I agree with both posts. I'm deeply in a 'rut' of having fairly simple financial asset (stock,bond, CD etc) investments and of not changing my basic strategy. Depending how completely I lose my marbles in the future who knows, but to suddenly need financial planning or even be at great risk from sales pitches I'd have to be pretty far gone. I think for the most part people become caricatures of themselves as they age, not something completely different. I think back to my parents. My dad was just an exaggerated version of his younger self in his last years, enjoying regaling financial salespeople with his tall tales. My mom just didn't like to deal people like that and it never changed. I'm generally more like her. I'm not that worried about suddenly becoming an all-in market timer or loving the attention of salespeople as long as I'm sentient enough to conduct basic daily life on my own.

OTOH I now do tax return for self, kids, trusts, family LLC: 20 federal and state returns each year . And the LLC's real estate investments also involve various accounting and regulatory paperwork I do, my kids do most of the hands-on management. But at some point I'll have to get out from under all that paperwork. Likewise as you say Medicare is complicated, so is maximizing Social Security. So is using different credit cards to maximize cash back, maximizing float on payments etc Suppose someday I will start messing all that up and have to simplify. There's a wide spectrum of 'cognitive decline' but I think along that spectrum basic management of financial asset investments won't trip me up first, and trustworthy high level financial planning is not going to help that much with the real problem areas.

Early 60's now, I don't see it as 'claiming virtue' but just reality that my memory is not what it used to be. I could claim it is, I guess I could also claim my eyesight has never been better. :happy Maybe some people my age's memory and eyesight are good as ever, good for them. Up till fairly recently the fact that I emphasized being in shape more than in earlier years meant my strength and endurance was objectively better than it was in my more sedentary mid 20's- mid 30's, but now that's beginning to slip too. My ability to understand things and make rational decisions doesn't seem noticeably diminished though so far. At least there's no objective evidence of that in radically different financial decisions, missed payments, elevated level of mistakes on tax returns, etc. But I think one is probably better off seeing more decline in themselves than there really is than not being able to see it even when everyone else can, which is a characteristic of some older people since there have been people.
Last edited by JackoC on Tue Oct 08, 2019 2:58 pm, edited 3 times in total.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by bikechuck » Tue Oct 08, 2019 2:54 pm

whodidntante wrote:
Wed Oct 02, 2019 9:35 pm
livesoft wrote:
Wed Oct 02, 2019 8:46 pm
Got children? Train them ahead of time.
Too expensive and failure prone. Plus an expectation of inheritance can drain ambition.

Buy a SPIA so they get nothing. :twisted:
Every family is different.

One of my great joys is sharing my resources with my daughters and granddaughters. My daughters are well educated and hard working so no problem with draining ambition.

If my portfolio holds up well I plan to make a sizable contribution to the cost of my granddaughter's college education if they choose to attend college.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by FIREchief » Tue Oct 08, 2019 4:37 pm

afan wrote:
Sun Oct 06, 2019 4:53 pm
I don't understand the fascination with SPIA's. All they do is convert your assets into a cash flow, minus the costs of the annuity.

For many people, perhaps most, it would be better to maintain a balances portfolio of low cost index funds and take out an income stream annually. They get an annuity in effect without the fees.
I haven't seen a lot of fascination with SPIA's here on the forum. I think the longevity insurance makes sense for some who are on the fringe with a typical (e.g. 4%) SWR. In the context of this thread, I think some see value in the more subtle form of insurance that they offer; insuring against the possibility of screwing up an otherwise viable financial plan by making poor moves after suffering from cognitive decline. For example, somebody who can no longer calculate that 4% and winds up taking out 10% every year and buying a lot of expensive gifts for their friends and family because they keep having all this extra money left over in their checking account. If they had purchased a SPIA with some of their funds, it would be hard to screw up a guaranteed monthly income.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by FIREchief » Tue Oct 08, 2019 5:00 pm

fourwheelcycle wrote:
Sat Oct 05, 2019 6:00 pm
TN_Boy wrote:
Sat Oct 05, 2019 4:51 pm
fourwheelcycle wrote:
Sat Oct 05, 2019 3:57 pm
My wife and I have hoped to spare our two adult children from the details of our finances and estate plans until they are at least in their early fifties.
To be honest, waiting until mid-80s is a truly terrible idea. I am really really glad my parents didn't do that.
It sounds about ten years to late to me (of course, everybody's situation is different). I would look at "finances and estate plans" as two different issues. We shared our full estate plans with our adult children as soon as they were drafted. Incapacitation and death can happen at any time to anybody. I know that some will claim that their adult children wouldn't take the time to understand them, but each of our children read through a "mark up" copy and wrote down questions as appropriate. It probably took them a couple of hours each, but it led to some valuable education and communication. Finances are another issue. While they know where accounts are located, and have access to current account numbers and beneficiary designations, specific amounts and investments are not shared at this time.
fourwheelcycle wrote:
Sat Oct 05, 2019 6:00 pm
Looking back at our own lives, my wife and I were, fortunately, able to be focused on our family and careers until our early sixties. We were, perhaps selfishly, although not consciously, almost totally focused on our family and careers through our forties.
Not selfish at all. Most of us needed to place first priority on our own families and careers at least into our forties.
During our fifties, as we began to plan for our own retirement, we asked our parents enough directed questions to satisfy ourselves that they were OK financially and had appropriate documents in place for durable powers of attorney, wills, and advance directives.
You're fortunate that you were able to have these discussions with your parents. Some elderly people will refuse to discuss any of this with even their own adult children.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by Ged » Tue Oct 08, 2019 5:04 pm

Tdubs wrote:
Wed Oct 02, 2019 8:52 pm
livesoft wrote:
Wed Oct 02, 2019 8:46 pm
Got children? Train them ahead of time.
You can't train someone who doesn't want to be trained.
One of the things proficiency correlates with is interest, so you are probably better off.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by FIREchief » Tue Oct 08, 2019 5:05 pm

TN_Boy wrote:
Sat Oct 05, 2019 9:42 pm
I probably would not accept being named in a POA unless I knew something about the finances I might need to manage someday. If you are going to assign me responsibilities, you are also going to tell me something about those responsibilities!
Bingo. Same goes for nomination as executor. I think it's even worse with an executor role because unless the decedent was open up front, you really don't know what you're stepping in (not into, but in) until it's too late (i.e. you've petitioned the courts and been formally appointed, which then gives you legal access to the estate.)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by littlebird » Tue Oct 08, 2019 11:42 pm

LilyFleur wrote:
Tue Oct 08, 2019 2:32 pm
littlebird wrote:
Mon Oct 07, 2019 11:37 am
smectym wrote:
Mon Oct 07, 2019 3:52 am
“Virtue-signaling” is already a hopeless cliche, but “Hi! I’m sixty-something, and I’m cognitively declined!” does seem to be a perverse version of it that for some reason has infected this board
I do not see that at all. Most people on this board seem aware that it could happen to them. Some are even aware that it *is* happening to them. Is the poster saying that expressing such an awareness is like “humble bragging”?

Having lived for 26 years in a huge “active senior” community, I can say with some basis that cognitive decline is pervasive. But few -as far as I can see - can be accused of attempting to make a “virtue” of it. Some recognize its onset and deal with it as best they can. For many, the onset is insidious, or they simply do not have the self awareness to recognize its onset. But I cannot see that recognition of some cognitive decline in oneself should be a reason for either doubt or opprobrium on the part of observers.
+1
littlebird, your comments are thoughtful and articulate, as usual.
Thank you Lily. I tried to say it in a P.M., but was unable to manage to sent one, although I’ve done them in the past. Hmmm.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by JackoC » Wed Oct 09, 2019 11:56 am

FIREchief wrote:
Tue Oct 08, 2019 4:37 pm
afan wrote:
Sun Oct 06, 2019 4:53 pm
I don't understand the fascination with SPIA's. All they do is convert your assets into a cash flow, minus the costs of the annuity.

For many people, perhaps most, it would be better to maintain a balances portfolio of low cost index funds and take out an income stream annually. They get an annuity in effect without the fees.
I haven't seen a lot of fascination with SPIA's here on the forum. I think the longevity insurance makes sense for some who are on the fringe with a typical (e.g. 4%) SWR. In the context of this thread, I think some see value in the more subtle form of insurance that they offer; insuring against the possibility of screwing up an otherwise viable financial plan by making poor moves after suffering from cognitive decline. For example, somebody who can no longer calculate that 4% and winds up taking out 10% every year and buying a lot of expensive gifts for their friends and family because they keep having all this extra money left over in their checking account. If they had purchased a SPIA with some of their funds, it would be hard to screw up a guaranteed monthly income.
I agree on all points. IME knee jerks against SPIA's are far more common on this forum than knee jerks for them. They make sense for people with a serious risk of running out of money before they die, ie with relatively aggressive SWR's like 4%. The fact that a portfolio is indexed and low cost does zilch to protect against a much longer than expected life. Especially in the most apples to apples comparison, bonds v SPIA's. Stocks v SPIA's is comparing less like things, where risk (to varying return) tolerance also enters in. But nobody says SPIA's have to be *the* 100% solution in any case.

For people with a 'soft' goal of leaving a lot of money behind and therefore relatively low SWR say 2%, then SPIA's don't offer a lot. If the original person lives much longer than expected and market returns are much poorer than expected, the heirs will get much less than expected. But it's relatively far more unlikely the money will run out for the original person than 4% case. As long as the original person views their heirs' situation as 'oh well, they'll get by, it wasn't their money anyway', there's less reason IMO for SPIA's in that case.

I also agree though an ancillary benefit of SPIA is the very reduction in control over the money that turns a lot of people off, as they view it from the standpoint of still having their marbles. But it's possible we end living for years after we lose them.

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Re: Over Confident in Old-age: Cognitive Decline and Financial Literacy

Post by TheDDC » Thu Oct 10, 2019 12:05 pm

LilyFleur wrote:
Tue Oct 08, 2019 2:46 pm
We experienced a different variety of white coats who were very quick to take measures that were explicitly against wishes in advance health directives. In one particular case, the hospital no longer retained the advance health care directive from a hospital stay only a month previously. It did require vigilance to advocate for the patient's wishes.

Of course these discussions can get emotional, but perhaps we can conduct them without derogatory name-calling. "Vultures" has not been our experience, and a few more rational descriptive words would probably communicate your experience better. Our parents had the best of care which was covered by LTC and savings. It was their money, and their care and well being was more important to their heirs than the inheritance.
Wow. Maybe we could swap docs? "Vultures" was/is quite fitting. A stay at a SNF is nothing more than a financial agreement. Rule no. 1: To the extent there is "care" it is to the extent that payment exchanges hands in a timely fashion. "Nothing personal, just business" is how you approach dealing with and SNF and "getting paid". You afford them the respect given to you. Rule No. 2: An SNF *always* feels entitled to the the estate first as evidenced by the agreement that is signed. As for your loved one's money, of course it is theirs, but secondly it is the "family's" and not the SNF's to skim away at which was my point.

-TheDDC
Refreshingly, a double barrel shotgun blast of truth...

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