Signs of Memory Loss? How to Protect Your Aging Parent’s Retirement Savings
Mild cognitive impairment cause memory loss and poor judgment, both of which may not be obvious until it’s too late. Seniors with mild cognitive impairment are at risk for making disastrous money management decisions that can jeopardize their life savings, their home ownership, as well as the finances of other family members. Learn how to protect your aging parent’s retirement savings, and how to identify the early warning signs of Alzheimer’s Disease, and elder financial abuse.
You’ve done everything right: you’ve sat down with your parents and figured out a financial plan for their long-term senior care, and so far everything’s gone according to plan. Then, one day, you notice your loved ones are having trouble managing their money: calculating the tip on a restaurant check takes them longer than it should; they’ve made unwise investments. Does this situation sound familiar? For Ann Napoletan, who writes for Caregivers.com, it’s all too recognizable. Her mother had begun suffering from Alzheimer’s-related cognitive impairment, and there came a time when Ann began to suspect her mother was having trouble managing her finances.
“It was when she asked me to help with her taxes that I noticed the checking account was a mess. There had been overdrafts, late payments, duplicate payments, and checks written to every charity that knocked on her door, called, or mailed her anything (including one we later discovered was fraudulent).” According to the Journal of the American Medical Association, the ability to manage finances is one of the first ADLs (activities of daily life) to decline in those with mild cognitive impairment or Alzheimer’s disease.
Even worse, seniors are often easier prey for scam artists—the AARP reports that memory loss and loneliness are both major factors that can impair financial judgment in older people. The key to preventing elder financial abuse and protecting retirement savings lies in recognizing when memory loss is becoming a problem, staying informed about the biggest financial risks to seniors, and, above all, having a plan in place ahead of time, just in case.
Stay Alert for Signs of Memory Loss
As many as 10-to-20 % of Americans over the age of 65 suffer from mild cognitive impairment, and more than 5 million have Alzheimer’s disease (Source: Alzheimer’s Association). But even healthy seniors may experience the natural cognitive decline that occurs with aging: information processing, reasoning ability, and decision-making skills all begin to wane beyond age 60, says an article in the AARP Bulletin. Caregivers, family members, and other trusted individuals such as the family physician should all be on the alert for signs that seniors are no longer at their cognitive best when it comes to finances:
- Sudden difficulty with common financial skills such as balancing checkbooks, calculating change, or organizing financial documents
- Forgetting to pay rent or bills, or utility service disconnection
- Concern about “missing funds” in bank accounts
- Erratic or unusual purchasing behavior or money withdrawals
- Accusations of someone else stealing or mismanaging money
- Falling prey to a marketing scam, fraud, or unscrupulous merchant behavior
- Unusually large numbers of phone solicitations or donation requests
- Calls from banks about problems with accounts
Tips for Protecting Your Aging Parent’s Retirement and Life Savings
A 2007 survey by the Financial Industry Regulatory Authority found that seniors are much more likely to engage in financial behavior that puts them at risk for fraud and other forms of abuse. In fact, seniors are losing $2.9 billion a year to financial abuse, according to the 2011 Metlife Study of Elder Financial Abuse. Not only that, older Americans, especially those with cognitive impairment, are less likely to report falling victim to fraud—and they may not even be aware that they are victims.
Caregivers and family members are in a unique position to help senior loved ones identify scams and avoid risky financial behavior.
- Simplify Investment Portfolio and Financial Accounts. One way to help elderly family members reduce their risk is to simplify their investments. “A very complicated portfolio, with all sorts of individual stocks, non-publicly traded investments, related partnerships, is not good for an 85-year-old person to be running,” says David Laibson, professor of economics at Harvard University, in a recent USA Today article.
- Use Credit Monitoring Services and Annual Credit Reports. A credit monitoring service might help if someone is having trouble keeping track of their accounts, but you can always help your loved one get free annual credit reports from AnnualCreditReport.com. One of the most critical pieces of advice is to keep your parent informed about scams that are going around, and discourage them from giving out any financial information to strangers.
- Do Not Call Registry. Add your parents to the Do Not Call registry, to prevent them them from falling prey to telemarketers.
- Offer to Help with Money Management and Taxes. An article from Kiplinger contains the valuable reminder that you can’t take over your loved one’s financial life all at once. For Ann Napoletan, it was a gradual process that began with checkbook and tax help and eventually led to close online monitoring of her mother’s accounts, full control of her checkbook, and online payments.
- Create a Spending Plan. You can also help by developing a spending plan and/or a charitable giving plan together with your senior parent. According to SmartMoney.com, more and more people are opting for “daily money management” in which financial professionals sit with seniors at home and help them pay bills and manage other day-to-day business. In the end, if your loved one’s financial behavior is impossible to control any other way, you can limit the amount of cash or credit they have access to.
- Power of Attorney and Inventory Finances. Work with your parents to select someone who will make financial or health care decisions for them if they’re incapacitated. Keep an inventory of essential financial accounts, passwords and other legal information. Families should make sure that they know where to find important legal and financial documents (download the Essential Document Locator Checklist), such as durable power of attorney, living will, and health directives.
Plan Ahead So Memory Loss Doesn’t Cause Financial Disaster
It can be tough to discuss memory loss and financial troubles with a loved one, especially if they are experiencing significant cognitive impairment—they may not even be willing to acknowledge their declining ability to monitor money. The best way to minimize the difficulty of this conversation is to bring it up well before memory loss becomes an issue.
“The planning process starts way back,” says Terry Swehla, CFP® (Certified Financial Planner), CLTC (Certified in Long-Term Care), who is Managing Director at United Capital Private Wealth Counseling in Modesto, CA. “If Mom and Dad are getting more fragile, that’s when you start looking at it.”
The Journal of the American Medical Association recommends that seniors select an agent—someone to assist or take over financial decisions—well ahead of time, when the person is of sound mind. Putting a trusted individual such as a family member or next of kin as a co-signer on accounts can help with future financial transitions when cognitive impairment begins.
Related Articles and Resources
- Guide to Elder Care Planning and Family Meetings
- Guide to Having the “Tough Conversation” with Aging Parents
- Important Documents Every Adult Child of Aging Parents Needs to Have
- 10 Essential Questions to Ask Your Aging Parents
Do you help your senior parents manage their money? Did you find it challenging to persuade your parents to involve you in financial planning? Share your advice with us in the comments.
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