In our last post we listed 10 concerns that you ought to be aware of when considering how to approach estate planning. On the bottom of that list, we mentioned that one of the most important considerations for estate planning is, quite simply, to begin the planning process before it is too late.
There are many reasons why you should start getting their estate in order sooner rather than later. One of those reasons is that the aging process can impair your judgment, making it more difficult to make sound financial decisions and achieve your estate planning and other financial goals.
According to sources, about half of individuals over 80-years-old have significant cognitive impairment. One in five individuals over 80 have dementia, and 5.2 million of those over age 65 have Alzheimer's disease. That last figure is expected to be three times as high by the year 2050.
A 2007 study from the University of Miami looking at the ability of seniors to make sound financial decisions found that investment skill significantly deteriorates after 70 years of age. Oftentimes poor judgment causes elderly individuals to make financial decisions that harm their own finances and those of their family. Those poor decisions may involve actions such as pulling money out of the stock market during a recession or purchasing low-quality annuities. Those poor decisions may also include the failure to act, such as failing to monitor an investment portfolio's performance.
The memory, language, thinking and judgment impairments individuals often experience as they age are made worse by the multitude of financial scammers out there, waiting to take advantage of poor judgment among the elderly. Unscrupulous individuals looking to make money will inevitable see an opportunity among elderly Americans, who hold a large majority of the nation's net wealth. According to government data, Americans over than 65 years of age have around $18 trillion in assets, which is about a third of the nation's net worth. Unfortunately, according to a Pew Research Center study form 2009, elderly Americans lose a minimum of $2.6 billion per year because of financial abuse or exploitation.
In our next post, we'll take a look at several ways to ensure the aging process doesn't catch you off guard and harm your financial well being and estate planning goals.
Source: CNBC, "Aging issues can put retirees' money at risk," Dave Carpenter, 7 July 2011.