Many with Dementia Manage Finances

When dementia enters an elderly couple’s home, it can bring financial mismanagement with it.

But since both spouses don’t usually become cognitively impaired at precisely the same time, couples have the option of turning over the household financial responsibilities to the person who’s not yet impaired.  The question is whether this transfer of control happens quickly enough.

Most couples are waiting until after cognition is very low to make this change, according to a new study.

Economists Joanne Hsu with the Federal Reserve Board and Robert Willis with the University of Michigan found that 80 percent of married older Americans who had been in charge of their household finances continued to manage them after a test revealed they were approaching or already experiencing dementia.

The study was based on a survey that tracks Americans, age 50 or older, over time.  The survey asks whether the person is the most financially knowledgeable in the home, which is typically the person who makes the decisions.  Also as part of the same survey, the older individuals who participate take tests periodically to detect and track any declines in cognition.

One positive finding emerged from the study.  The researchers compared how couples who have financial savings, such as 401(k) investment portfolios, react to signs of dementia compared with otherwise similar couples who do not and must solely rely on monthly pension income from Social Security or a former employer.

Couples with investment portfolios are two times more likely to switch financial duties to the spouse who isn’t suffering dementia.  “Households with the most to gain financially,” the study said, are also “more responsive to information about cognitive decline.”

Retirees face daunting financial challenges as they age, from investing their assets and calculating how much to withdraw from their savings to deciding whether to age in place or pay to live in an assisted living facility.

It’s important to plan ahead to prepare for a day when the person managing the money shouldn’t be.

Click here to read about an earlier study by Hsu examining how wives prepare financially for the day when they may become widows.