While our learning and problem-solving capacity peak when we are just 20, our financial decision-making peaks in our early 60s. From our late 60s onwards, we experience gradual cognitive decline, including our ability to understand complex financial concepts and make sound financial decisions. This means that senior Australians seeking financial advice may not have the cognitive abilities they need (and once enjoyed). If they are not aware of this fact, they can be extremely vulnerable. Below, we outline three ways to prepare for making important financial decisions in later life – for yourself or for an ageing family member.
Many people find it challenging to make financial decisions because of unfamiliar terminology and the complexities involved in questions about super, retirement, taxation, estate planning and insurance. Two factors are adding to the equation. Firstly, increasing numbers of ageing people are in need of good financial advice. Secondly, it seems that financial decision-making gets harder as we get older.
This may go some way to explain the sad statistic that 5% of Australians over 65 experienced financial abuse. An Australian study suggests that financial decision-making is one of the first skills to deteriorate as we age. This fact is an important one in a society where increasing life expectancy means that because many people need to make their retirement savings last longer, they tend to seek financial advice later in life.
Even if seniors don’t become victims of fraud, they may still struggle to make the important financial decisions that may impact on them in later life, as well as on a spouse or other family member who eventually survives them. The implications are that their retirement may not be adequately funded and their estate planning decisions may not be optimal. Here are three ways you can protect yourself or an ageing relative.
It may be appropriate for you to simplify your financial life at retirement, before natural cognitive decline begins. If you wish to help an older family member, we encourage you to be proactive. If these conversations take place relatively early, it may be possible to talk about the challenging issue of ageing without it feeling too personal for the ageing person.
You may wish to pre-authorise lawyers and financial advisors to contact a trusted relative or friend if the professional suspects diminished financial abilities. This is far preferable to waiting until a financial disaster occurs.
Trusted Friends & Family
Less formally, you could ask someone you trust to keep an eye on your accounts and to attend review meetings with your financial advisor. Or, you could volunteer in that role for another.
Financial advice that is professional and sensitive can help older Australians to fund and enjoy their years of retirement and aged care. At Pacesetter, we offer supportive and compassionate financial planning advice for families from one generation to the next. Please contact us on (07) 3808 2808.
Pacesetter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.
This information (including taxation) is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Pacesetter Financial Services strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.