Learn more about Keith on NerdWallet’s Ask an Advisor
According to researchers at the Federal Reserve and Harvard University, about half of the population between ages 80 and 89 have been diagnosed with substantial cognitive impairment. My father is 86, and at the time I write this he continues to manage his own finances. He does his own taxes—tough for people of any age—and makes his own investments. He also pays all of his and my mother’s bills.
But like many others with aging parents, my siblings and I wonder how long this can continue. Cognitive decline is a relentless process that starts in our 20s. When I studied physics in college the joke was that we had better make our big discoveries now, because by age 30 we would be over the hill. There is some truth to this: Isaac Newton and Albert Einstein did their best work before 30; after that it was all downhill. Research has shown that basic analytical and memory skills, such as spatial relations and word recall, deteriorate gradually as we age.
However, there is something to be said for experience. Research also suggests that our finance and investment skills peak during our 40s, when we have the benefit of experience, particularly the experience of our mistakes. We still have much to learn from our parents’ generation—but none of this really answers the question of what to do about my father. Fortunately he is keenly aware of the risks associated with aging, having friends and relatives who suffered with Alzheimer’s disease. He has given me access to his accounts and has taken the legal steps to prepare for future health issues, all on his own initiative.
It would have been much harder if he were in denial about the risks, but in my experience with clients, most families are able to face these issues openly and honestly. For our older clients we typically recommend moving all of their assets into a revocable trust. This trust is still controlled by our client, but there are other named trustees, typically an adult child, who can step in as needed. In some cases we gradually begin to work with the children on investment decisions, which is often a relief to the parent, who increasingly finds financial decisions to be stressful.
At the same time I don’t recommend pushing to take away responsibilities from an older parent until it is clear they are no longer able to handle these tasks. Whether or not I could do a better job managing my father’s money is beside the point (although I should note he has done an excellent job; despite all my professional experience I don’t think I could have done better!). As long as he is willing and able, I want to respect his right to make his own decisions. There are also important health advantages to keeping cognitively active and challenged.
Lastly, all of the research I mentioned talks about averages. There is huge variance from person to person. Some, like Warren Buffett at age 83, are clearly able to handle their own finances. Others may need help sooner. My sisters and I are prepared to step in as needed, but we hope that day is still years away.