If you’ve watched your parents or older relatives age into their final years, you might have witnessed a decline in their ability to manage their money. As they got older, they became more vulnerable to financial losses due to making mistakes, exploitation by unethical family or friends, or financial fraud.
Substantial research confirms this risk. “Problems with financial decision-making can appear many years before a dementia diagnosis. Even cognitively healthy older adults may show declines in their financial decision-making abilities,” says Marti DeLiema, Ph.D., with the University of Minnesota’s School of Social Work.
To address this risk, researchers from the Stanford Center on Longevity and the University of Minnesota recently released the “Thinking Ahead Roadmap: A Guide to Keeping Your Money Safe as You Age.” It’s a comprehensive toolkit funded by AARP that helps people select someone they trust to help manage their money if financial decisions become too difficult for them in the future.
As DeLiema explains, “We created a free resource that encourages people to plan today to safeguard their finances from fraud, abuse, and financial mistakes down the road.”
The design of the “Thinking Ahead Roadmap,” available online and in print, was guided by extensive interviews with financial, legal, and healthcare professionals. In addition to interviewing experts, the research team gathered data from more than 150 diverse older adults (age 60+) to understand the barriers in the planning process and what steps could be taken to overcome them.
According to some of the research participants, it’s important to plan ahead in order to reduce tension among family members, ease the burden on future decision-makers, and reduce the risk of scams and financial abuse. But ultimately, the most compelling reason for many study participants was the peace of mind they’d get knowing their finances were in good hands. According to one participant, “Extra effort now can provide peace of mind later.”
Pick someone you trust for your financial advocate
The roadmap provides tips on how to choose a trusted financial advocate who will put an older person’s needs first and carry out their financial wishes. “It’s a bit like picking a healthcare proxy, but in this case, you want someone who is trustworthy and who will make smart financial choices,” says DeLiema. “The roadmap also offers tips on how to have an open conversation about finances and how to overcome common issues like resistance from adult children who don’t want to acknowledge that their parents are getting older or who are uncomfortable talking about money.”
The website includes a financial inventory people can download and fill out with their own information to make the job easier for their financial advocate. The website also contains engaging videos of seniors who have used the steps in the “Thinking Ahead Roadmap” to protect their finances in their later years.
“Our roadmap is a clear, step-by-step guide to picking the right person, giving them the legal authority they need with a power of attorney, and helping them understand their role and duties, ” says co-author Naomi Karp with the Stanford Center on Longevity. “A power of attorney form legally names someone to manage their money if they could no longer handle their financial matters. Without this important document, trusted caregivers won’t be able to access the older person’s funds to pay for basic needs like food, prescriptions, and housing.”
Plan to transfer financial management when the time is right
The final part of the “Thinking Ahead Roadmap” provides advice on how to transition financial decision-making responsibilities to the advocate. Having a conversation about the potential triggers, or warning signs, that it’s time to get more help with financial decisions paves the way for a smoother, less confrontational transition in money management tasks for older individuals. Talking about these signs in advance actually gives the older adult more control over the process.
It may take some effort to complete the steps outlined in the “Thinking Ahead Roadmap.” But it’s well worth your time because it will help give you peace of mind that your finances will be safely managed in your later years, according to your own instructions.
Disclosure: I served on the research team that developed the “Thinking Ahead Roadmap.”