Cognitive Decline: An Often-Overlooked Retirement Risk

When planning for retirement, one overlooked factor is the possibility of cognitive decline, which can impact memory, decision-making, and financial management. As we age, normal cognitive changes can occur, but more serious conditions like Alzheimer’s affect millions of people globally. While maintaining a healthy lifestyle can promote brain health, financial planning also plays a key role in protecting your wealth and independence.

Cognitive Decline and Financial Management: What You Need to Know

The World Health Organization (WHO) reports that approximately 55 million people worldwide live with Alzheimer’s or similar cognitive disorders. These conditions can significantly impact memory, reasoning, and decision-making abilities—including managing finances.

The Link Between Cognitive Health and Financial Security

Cognitive decline doesn’t just affect memory—it can also have serious consequences for managing money. According to a study published in Kiplinger Personal Finance, “The ability to manage finances is one of the first cognitive skills to deteriorate, leaving many people vulnerable to suboptimal financial decisions and scams.”

The Role of a Financial Advisor

Cognitive decline can make managing personal finances challenging, so working with a wealth advisor or retirement planner is essential. At Goodwin Investment Advisory, our financial advisors specialize in helping you prepare for a meaningful retirement while also addressing the risks of cognitive decline. Our team can guide you in creating a financial plan that not only aligns with your goals but ensures that your assets and decision-making processes are protected, even if cognitive challenges arise later in life. At GIA, we help our clients by establishing a trusted contact on accounts that we can contact when our clients are exhibiting unusual behavior.

The importance of establishing a trusted contact for financial accounts

As financial advisors, one of our primary goals is to protect our clients’ wealth while ensuring they maintain financial independence. Establishing a trusted contact person (TCP) on financial accounts is a proactive step that can safeguard our clients’ assets and provide peace of mind.

Why a trusted contact is essential

1. Protection against financial missteps
   Cognitive decline can sometimes manifest as difficulty understanding financial concepts, forgetting past decisions, or impulsive behaviors. A trusted contact can serve as a safeguard, ensuring that someone responsible and informed is aware of unusual account activity or concerning financial behavior.
2. Scam prevention
   Older adults are often targets of financial scams. In 2022 alone, Americans over the age of 60 lost billions to fraud according to the Federal Trade Commission (FTC). A trusted contact allows advisors to alert a family member or chosen individual if there are signs of suspicious activity, such as unexpected withdrawals or transfers.
3. Providing peace of mind
   Knowing that someone they trust is in the loop can provide an additional layer of security for clients. It reassures them that their interests will be protected if they ever face cognitive or medical challenges.
4. Advisory partnership
   As financial advisors, we often notice changes in behavior or communication patterns during regular interactions with our clients. Having a trusted contact on file allows us to responsibly address any concerns we may observe without breaching confidentiality or neglecting the client’s best interests.

How a trusted contact works

The trusted contact is a person the client designates on their financial accounts who can be contacted by their advisor in specific situations. While the trusted contact does not have access to the account or decision-making authority, they serve as a vital point of communication.

Scenarios where a trusted contact may be notified:

• Unusual Transactions: Large withdrawals or out-of-character account activity.
• Cognitive Decline Indicators: Confusion about prior decisions or frequent forgetfulness.
• Fraud or Scams: Suspicion of exploitation or unauthorized account access.
• Health Emergencies: If the client cannot be reached due to illness or hospitalization.

The benefits for clients and families

Establishing a trusted contact helps protect not only the client’s financial well-being but also their loved ones from the stress of managing issues after the fact. Proactively designating a TCP can:

• Ensure that financial plans remain intact.
• Reduce the emotional toll on family members.
• Preserve the client’s legacy and prevent avoidable financial losses.

For example, if a client began exhibiting signs of forgetfulness and suddenly requested to liquidate a significant portion of her retirement account, we would reach out to her trusted contact. If it turned out that the client had been targeted by a scam, then having a trusted contact we could reach out to would allow us to intervene and protect their hard-earned savings.

A proactive step toward financial security

At Goodwin Investment Advisory, we emphasize the importance of protecting your financial future—both for you and your loved ones. Setting up a trusted contact is a simple yet powerful way to ensure your financial plan is secure, even in unforeseen circumstances.
If you’re a client with us, consider this an essential step in your financial journey. And if you’re not yet working with an advisor, let us help you take these proactive measures to protect your legacy.

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Taking small steps like establishing a trusted contact can make a significant difference when navigating life’s uncertainties. Let’s work together to ensure you—and your family—are protected.

Other ways to prepare and protect your wealth

How to prepare financially

• Streamline Finances: Automate bill payments and track accounts centrally to make managing money simpler as you age.
• Build a Support Network: Include family members, trusted friends, and professionals who understand your financial goals.
• Establish Legal Safeguards: Create a will, power of attorney, and revocable living trust to ensure your wishes are respected.

Tips for protecting your retirement

• Use technology: Tools like YNAB can help budget, track expenses, and investments, ensuring nothing slips through the cracks.
• Work with a trusted advisor: Regularly review your financial plan with a financial advisor to ensure everything is in place. Our team at Goodwin Investment Advisory uses tools like Monte Carlo simulations to project the longevity of your assets under different market conditions, giving you peace of mind about your financial future.
• Establish legal safeguards: Work with an estate attorney to set up a power of attorney, a living will, and a trust if needed. These documents allow trusted individuals to manage your finances if you become unable to do so.
• Prioritize regular health checkups: According to the National Institute on Aging, staying physically active, eating well, and engaging your brain regularly can help reduce the risk of cognitive decline.

Proactive planning for a secure future

By taking steps now, you can reduce financial stress and protect your future. Cognitive decline is a reality for many, but with thoughtful preparation, you can maintain financial security and independence.

By working with Goodwin Investment Advisory, you can ensure your financial plan remains solid no matter what the future holds. Our team is dedicated to helping you achieve financial security and peace of mind, allowing you to enjoy your retirement with confidence.

If you’d like to discuss how we can support you through this transition, please reach out to our experienced financial advisors. We are here to guide you through every stage of your retirement journey.

If you’d like personalized advice on organizing your finances, schedule a consultation with a financial advisor today.

Sources:

Cleveland Clinic: Normal Aging vs. Dementia: What’s the Difference?

World Health Organization: Dementia Key Facts

National Institute on Aging: Maintaining Cognitive Health in Older Age

Kiplinger Personal Finance: Cognitive Decline and Financial Decision-Making

Disclosure:

All investment carries risk, and we cannot guarantee performance or results. Past performance does not guarantee future results. GIA does not earn any compensation from any of the non-GIA links provided in these resources. The market insights, podcast, blogs, book recommendations, self improvement thoughts, food recipes and activities are based on our perspectives and experience, and may not apply to your unique situation or be appropriate for your health and wellness. We are not aware of any conflicts of interest relating to any testimonials or endorsements. Please contact us for any questions relating to the content above, or to discuss how we can support you in your specific situation, and help you to reach your financial and personal goals.