Rose Miller, grants manager at the JN Foundation and head of the JN BeWi$e Financial Empowerment Programme, says there is a growing need for more senior citizens to be exposed to financial education programmes so that they can better plan for old age.
She noted that this is important as research shows that growing older doesn’t mean getting wiser when it comes to making sound financial decisions.
Mrs Miller noted that two separate studies in the United States found that older people gradually, but steadily lose their ability to make sound financial decisions as they age.
The studies were conducted by the Texas Tech University and the Centre for Retirement Research at Boston College in 2015.
It was found that at a time when persons 60 years and older are responsible for managing their retirement assets and distributions, and making complicated decisions about their investments, insurance and pensions, many also face a decline in their mental performance.
According to the research, the ability to understand financial concepts and apply them properly peaks in the mid-50s and declines by one per cent per year after age 60.
Ironically, one study also found that confidence in financial decision making and investing ability remained constant or increased with age.
Mrs Miller noted that this was a cause for concern as declining aptitude and overconfidence is a bad combination and could spell trouble if seniors and their family members do not take precautionary measures, such as financial planning, and in some cases, hands-on assistance to avoid vulnerabilities and even abuse.
“A certain amount of cognitive decline is a normal process of aging, and while this decline will differ from person to person, acknowledging that your ability to make financial decisions, and generally manage your financial affairs, will decrease, is an important part of the retirement and financial planning process,” she advised.
The JN Foundation manager further said there is no need for senior citizens and their children to worry about their financial future in retirement if they have a sound and regularly reviewed financial plan.
“It is also critical that the person or persons responsible for the care and management of senior citizens be completely trustworthy to ensure they receive the full benefit of the provisions they have put in place for this season of their lives.”
Mrs Miller advised that older persons and their families will need to put a plan in place before it is too late.
Here are a few things to consider:
- The first step is to get help from a certified financial advisor. It’s important to find an advisor who is willing to put in the time and effort to make sure that you have a sensible retirement plan,” Mrs Miller said. Make sure to find an advisor who is willing to work with trusted family members and will facilitate the intergenerational aspect of family financial planning.
- Simplify your financial affairs by consolidating retirement plans that are scattered among financial providers. This will make it easier to track your investments. Also put your financial paperwork and data together, including passwords, and store them in a safe place where a trusted friend or family member has easy access in an emergency.
- It is also important for seniors to have that important discussion with their family to address their estate-planning needs before it becomes an issue. Think about who will take over managing your finances, pay bills, file tax returns, handle investments, insurance and make medical decisions on your behalf. “Most often this is a family member and getting them involved early in the process to finalise advance planning tools, such as powers of attorney, will/trust, beneficiary designations, healthcare power of attorney, as well as helping the parent with decisions will provide peace of mind for all, and create a plan that will not only survive the normal process of aging, but ensure that during this time the needs of the senior citizen is being well managed,” Mrs Miller recommended.