Signposts of financial success post 80
Last year this column ran a series of articles which focused on various age groups and the types of financial decisions that influenced their overall wealth. I found it interesting that many of those ‘markers’ of success were not related to earning capacity, but due to learned behaviours.
In December’s column I considered the 65 plus age group and I thought my article series had come to a natural conclusion. However, a recent client meeting reminded me that there is a further age group worthy of specific mention – the 80+ group.
It is not too many years ago that this group would only have been mentioned as a foot note. Today this group makes up 12% of the population over 65 and statisticians tell us that this number is likely to double over the next 30 years1.
One of the realities of this age group is that it is generally a period when we can expect to experience some cognitive decline. Overseas studies2,3 have shown that at age 80 around 15% of the population will have some form of dementia and that the rate doubles every 5 years with increasing age.
The reason for including these statistics is not to cause a bout of depression, but to highlight that if success in one’s early years is driven by learned rational behaviours, then we cannot necessarily rely on these same behaviours to continue in our twilight years. This is a time when prudent behaviour needs to be ‘hard wired’ by good systems, trusted relationships and legal structures.
So what behaviours need to be hard wired to protect this group?
1 Trusted Relationships Longstanding relationships are important, but it is critical to avoid conduct behind closed doors. Regardless of whether it is a trusted neighbour, or the client’s financial adviser, one way to stay safe from potential abuse is to maximise the visibility of advice and transactions.
I encourage my clients of this age to bring a family member to their review meetings. If the client does not want to involve their family directly then I like to receive agreement to allow copies of any recommendations to be sent to another trusted adviser (perhaps their accountant or solicitor). If a trusted neighbour or family member is helping with finances, then copies of bank statements need to be accessible (and reviewed) by another person.
I encourage my clients of this age to bring a family member to their review meetings. If the client does not want to involve their family directly then I like to receive agreement to allow copies of any recommendations to be sent to another trusted adviser (perhaps their accountant or solicitor). If a trusted neighbour or family member is helping with finances, then copies of bank statements need to be accessible (and reviewed) by another person.
2 Enduring Powers of Attorney (EPA’s) I encourage all clients to see their solicitors and have current EPA’s in place in relation to both Property and Personal Care & Welfare (these are separate documents).
3 Wills Your ability to make and update a Will is dependent on whether you have ‘legal capacity’. Part of that legal capacity test relates to your state of mind. This is yet another reason for ensuring that your Will is kept up to date.
This 80+ phase can often involve significant financial decisions relating to the retention or sale of assets. This can sometimes lead to conflicting views within the family and a parent who is confused about what to do. Having an independent person sitting at the table to assist with such decisions will have a short-term cost but it often generates a greater range of options and a more reasoned conclusion. In short, be prepared to pay for advice.
From my observation it is not all doom and gloom. To take the ‘glass half full approach’, at age 80, 85% of the population will NOT have dementia. For most people their basic cost of living reduces in this phase of their life. However, this cost reduction can sometimes be more than offset by rest home charges or increased medical costs.
For some clients, investment matters become simpler as their capital is drawn down over their remaining years. For others the reality that they will most likely leave a considerable estate becomes evident. This is a time when some clients choose to distribute capital to family and/or charities on the basis that they would like to see the benefits of their philanthropy while they are alive.
During this phase of our lives there are some issues that many of us would rather not think about. But by putting some relatively simple systems and structures in place you can ensure that your finances are not one of those worrying issues.
1. Statistics NZ – 2013 Census QuickStats about people age 65 and over.
2. Prevalence of dementia in the oldest: the Monzino 80-plus population based study. PubMed NCBI 2015 March.
3. Dementia Incidence Continues to Increase with Age in the Oldest Old: The 90+ Study. Ann Neurol, 2010 Jan: 67(1): 114-121.
2. Prevalence of dementia in the oldest: the Monzino 80-plus population based study. PubMed NCBI 2015 March.
3. Dementia Incidence Continues to Increase with Age in the Oldest Old: The 90+ Study. Ann Neurol, 2010 Jan: 67(1): 114-121.
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Peter Ashworth is a Principal of New Zealand Funds Management Limited, and is an Authorised Financial Adviser based in Dunedin. The opinions expressed in this column are his own and not necessarily those of NZ Funds. His disclosure statements are available on request and free of charge.
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First published in the Otago Daily Times on 11 February 2019, as 'Signposts of financial success for thise aged over 80.'
