Research Shows Financial I.Q. Declines – Just When You’ll Need It Most

• Admit your weakness. First and foremost, acknowledge that your ability to make financial decisions will decline after age 60. Don’t think, “This won’t happen to me!” At some point, it will. Just like you won’t be able to run as fast, or jump as high, it’s reasonable – and responsible – to anticipate a decline in your mental capabilities.
• Educate early and often. Most financial concepts and products are detailed applications of basic ideas. Life insurance, estate planning, retirement and the like can be understood by the average consumer – it isn’t rocket science. The more you are exposed to both the concepts and the details, the easier it is for you to maintain understanding. It sounds simplistic, but most people would dramatically increase their financial literacy if they just read a personal finance publication on a regular basis. Even better would be scheduling regular meetings with your financial advisors, not every week, but perhaps once a quarter. Regular discussion conversation keeps you sharp.
• Prepare a plan today – and put it in writing. No one says you have to wait until the event is upon you before making a decision. For example, since you know the likelihood of diminished capacity in old age, it makes sense to develop a retirement-income plan that won’t require ongoing complex decision-making in the future. Putting these plans in writing serves as a ongoing reference for you, and can instruct others who may offer help or advice.
• Find help. Cultivate relationships today with those you might consider delegating some decisions to in the future. If you know your decision-making may slip in later years, begin working with someone who will be 60 when you’re 80. Meet with a family member, knowledgeable friend, or financial expert who has your trust and understands your priorities. Ideally, you want an individual who is younger than you working at a firm that’s older than you – it’s a combination of youth and experience that can stay with you over time.
• Annuitize. Like many other economists and financial behaviorists, Finke recommends planning to annuitize a portion of your assets, preferably in a straightforward immediate annuity, or perhaps using a mix of annuity and investment products (but don’t make it too complicated, right?). This “pre-set” strategy takes pressure off you andyour financial advisers.

Whether the topic is saving for retirement, executing a will, applying for life insurance, or some other aspect of personal finance, an accompanying statement is often “Do it now!” because procrastinating may result in a missed opportunity. But the value of acting today is more than simply completing a task and crossing it off the list.
One of the major themes from the Millionaire Next Door, a 1996 book that studied the habits and priorities of prodigious accumulators of wealth (PAWs), was that wealthy Americans invested considerably more time and energy discussing, executing and reviewing their financial plans – long before retirement. The comparative success of PAWs was due to a solid foundation of knowledge and preparation. They knew more, and had more successful experience to draw on.
Acting today, when you are most lucid and capable of making a good decision, is the best way to secure your financial future. You don’t want to delegate your financial decision-making to the 80-year-old version of yourself, who may not be as capable as the 60-year-old version. And in order for the 60-year-old you to make the best decisions, the time to prepare is now.