How To Plan For a Potential Decline in Financial Capacity

Plan now to avoid a serious problem later.

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Financial capacity is the ability to manage your financial affairs. A financially capable individual should be able to:

– Perform basic mathematical functions

– Pay bills in a timely fashion electronically or by mail

– File taxes in an accurate and timely manner

– Understand financial documents like bank statements and investment records

– Understand financial concepts like interest rate, minimum balance, credit limit, and deductible

– Identify the risks of mail, telephone and internet fraud

– Plan for long range financial goals like home ownership, education needs, and retirement

– Seek advice on financial and legal issues as needed.

A study called What is the Age of Reason?  from Center for Retirement Research at Boston College states that financial capacity peaks in the 50s when middle age grants experience and the mind has sharp focus.  Financial capacity decreases for older adults due to normal aging and in response to cognitive illness.  Diminished financial capacity is a serious problem for seniors who after a lifetime of work and savings may have considerable assets AND are the most vulnerable to their own financial mistakes and scams perpetrated on them by others.

What can you do to plan for you own potential diminished financial capacity?

  1. Recognize that it can and may happen to you to some degree at some point in your life.
  2. Simplify your financial affairs by consolidating multiple accounts.
  3. Simplify your bill paying system and if you are married, ensure that your spouse understands that system.
  4. Find trusted individuals who can assist you with financial matters BEFORE you need them. Even if you have always prepared your own tax return, even if you have always managed your own assets, you will find that you need assistance as you age to do the best possible job and to offer continuity to your surviving spouse in your absence. So find a tax preparer now. Find a trusted financial manager now.
  5. Review your beneficiaries on all your retirement accounts and those investment accounts and bank accounts that are considered “transfer on death” or “payable on death.” These accounts pass outside the will.

Finally, with the help of a trusted estate attorney, be sure your estate documents are in order.  You will need a will, a financial power of attorney, a medical power of attorney and a medical directive.  While the will ensures that your wishes concerning the distribution of your assets are followed after your death, the other documents are even more important in the case of diminished capacity. They can insure that wishes are carried out should you become ill.

Plan now to avoid a serious problem later.

Will Your Money Last Through Retirement?

No one wants to run out of money. But without goals and a solid plan,
how can you know for sure whether you’re on the right track?

Will I be able to maintain my current lifestyle?

What will my monthly income be in retirement?

Can I protect my hard-earned savings and still
have the income I want?

Rodgers & Associates answers questions like these every day.

Get Personalized Answers
2025 Lititz Pike, Lancaster, PA 17601
Phone: 717-560-3800, Toll-Free: 888-876-3437