How to Pick (or Be) a Retiree’s Financial Ally

If you need help managing your finances in old age, it’s a lot of work to find someone – and not a very pleasant task to think about.

But it’s crucial that retirees plan for this. As to when or whether you might need help, it really depends on your individual circumstance.

Attorney and researcher Naomi Karp cites a variety of studies that provide some clues to the different ways this process can play out. People who develop dementia obviously need what she calls a financial advocate. This might be a trusted friend, family member, lawyer or professional financial adviser.

But roughly a third of aging Americans who are experiencing natural cognitive decline are prone to making poor decisions about their money, she explained during a recent webinar sponsored by the federal Consumer Financial Protection Bureau (CFPB) where she used to work.

Financial acumen actually peaks well before retirement – at 53! – but wisdom makes up for some of that, she said. During one’s 70s and 80s, financial literacy declines, but unfortunately confidence about one’s abilities remains high. “That’s a risky situation,” Karp said.

She and other financial experts have put together an interactive website – the Thinking Ahead Roadmap – with six steps to follow to find an advocate. Each step has tips, tools, and information to guide you through the process. An adult child or caregiver could also use this website if they feel the need to assume more responsibility for an elderly parent’s finances.

The website, which was funded by AARP and the Society of Actuaries, starts with what to look for in a financial advocate – a reliable person is a good bet, and a gambler is not. It also has information on how to pull together your accounts and passwords, suggests ways to initiate productive conversations with a financial caregiver to explain your needs and expectations, and answers legal questions, such as how to assign a power of attorney. (The CFPB provides additional information, including questions to ask a prospective financial advocate.)

So when is the right time to take action? The road map lists the warning signs of trouble ahead. Some are subtle: “You start neglecting tasks like looking at your account balances, home maintenance, housekeeping, and food shopping and preparation – chores that you previously did just fine.”

The warning signs, “taken together, might indicate that you need some help.”

Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBC. To stay current on our blog, please join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here. This blog is supported by the Center for Retirement Research at Boston College.