AS THE MIND SLIPS, GETTING YOUR SUMS RIGHT IS HARDER THAN EVER
Financial skills are often the first to fail when dementia takes hold, so preparing early is vital to protect against exploitation in later life
When Helen Clark brought her father-in-law, then 83, to the doctor last year, she knew his mind was slowing, but a mental status exam confirmed it. He knew the year, where he lived and the name of the president. But when the doctor asked him to count backward from 100, subtracting seven from each number — 100, 93, 86, 79 — a look of confusion washed over his face.
Studies show that the ability to perform simple maths problems, as well as handling financial matters, are typically one of the first set of skills to decline in diseases of the mind, such as Alzheimer’s, and Ms Clark’s father-inlaw, who suffered from mild dementia, was no exception. Research has also shown that even cognitively normal people may reach a point where financial decision-making becomes more challenging.
“A person can appear to have their wherewithal cognitively, but not have the ability to understand money in the same way anymore,” said Ms Clark, a retired registered nurse and family therapist in Cottonwood, California.
The issue looms large, particularly as the number of older people continues to rapidly expand: Almost a third of Thailand’s population will be over 60 by 2050. In 2010, that same demographic represented just 13.2%.
As family dynamics change, this group is often forced to manage their own finances, even as they become increasingly vulnerable. “If you can detect emerging financial impairment early, you can also step in early and protect the person,” said Daniel Marson, a neuropsychologist and director of the Alzheimer’s Disease Center at the University of Alabama at Birmingham. “It may be if you step in two months from now, they won’t be in a position to make a poor decision or be exploited a year from now.”
For Ms Clark’s father-in-law, Francis Taylor, the intervention came too late. At 80 years old, he married a woman 17 years his junior, who, over their three-year union, according to the family, cashed US$40,000 (about 1.3 million baht) in blank cheques sent by his credit-card issuer and emptied the contents of his $123,000 annuity, leaving him with little more than a giant tax bill.
Mr Taylor, a former diesel mechanic and Korean War veteran, gave his wife permission to make two annuity withdrawals over the phone. But his wife, who couldn’t be reached for comment, made 20 more withdrawals on her own by using her husband’s Social Security number and other identifying information, and signing papers to direct money into a joint account, according to documents provided by Ms Clark. After an internal investigation, MetLife, the annuity provider, concluded that it had followed proper procedures.
Preventing these situations is often difficult. Knowing exactly when to get involved can be fraught, whether you are an adult child or a trusted adviser. There are a series of early warning signs of financial decline, which Mr Marson identified in a recent study, which is being submitted for publication and was funded by the National Endowment for Financial Education and the National Institute on Aging.
The signs, while perhaps not surprising, are subtle, making them easy to miss: It may become more difficult for people to identify the risks in a particular investment, and they may focus too much on the benefits. Completing various tasks on a financial to-do list may start to take longer, such as preparing bills for the mail. Everyday maths may become more labourious or prone to errors, whether that’s figuring out a tip in a restaurant or doing a calculation that requires two steps. Financial concepts, like medical deductibles and minimum balances required in savings accounts, may also become harder to grasp. Naturally, these behaviours should represent a significant change: If a person was never adept with personal finances, this won’t serve as much of an indicator.
Mr Marson said he identified these warning signs as part of a study of 138 older adults over time who were initially deemed “cognitively normal” by a panel of four doctors when they joined the study (and after at least one annual follow-up visit). Participants were also timed as they completed financial tasks in a lab. Twentythree members of the group later received a diagnosis of mild cognitive impairment, but when the researchers went back and looked at the original results of the financial capacity test — when the group members were deemed cognitively normal — there were already subtle signs of slowing and financial decline.
“The group that would later decline already had some emerging signs,” Mr Marson said, though they weren’t glaring.
While many people continue to handle their finances with ease well into their later years, even people with healthy brains tend to experience cognitive decline. According to one study, which analysed participants’ propensity to make financial mistakes, a person’s financial decision-making ability peaks at age 53, or, more generally, in their fifties. This is the sweet spot, the paper said, because they have substantial amounts of experience but they have had only modest declines in their ability to solve new problems.
There is a general tendency for our ability to solve new problems — known as fluid intelligence — to slowly decline over time, starting as early as age 20. But this is at least partly offset by our growing experiences and wisdom, known as crystallised intelligence.
David Laibson, an economics professor at Harvard and co-author of the research, said he believed that crystallised intelligence tended to plateau when people reached their 70s. That plateau, accompanied with declining fluid intelligence, might explain why older consumers made more financial mistakes than middle-age ones in his study.
“At that point, vulnerability increases,” Mr Laibson said. “Our nation’s wealth is disproportionately held by older adults, and they are exactly the group, particularly as they reach their eighties and nineties, that are most vulnerable. But our system has the fewest protections for those people.”
He said he wishes all 65-year-olds would start by simplifying their financial lives, reducing the money clutter to just a few mutual funds at a reputable institution.
Then there are the boilerplate tools, including wills, revocable living trusts, durable financial power of attorney, and health care directives. Financial institutions often want their own powers of attorney filled out, so it helps to put them in place before you need them. If ready access to more credit isn’t important, advisers suggested freezing elders’ credit files, so criminals cannot attempt to open accounts in their names. Automate bill payments.
If adult children feel a parent needs watching over, they can ask financial institutions to send duplicate statements or notices if a parent misses a long-term care insurance payment, for example. Monitoring can also be done from afar with online access to accounts, but that sort of access can be disastrous in the wrong hands. If the person does not have trusted family members or friends, a licensed fiduciary can be a good alternative to monitor accounts, said Carolyn Rosenblatt, an elder lawyer and author who advises families on ageing-related issues.
A person can appear to have their wherewithal, but not have the ability to understand money in the same way HELEN CLARK RETIRED NURSE