Most of us think about retirement as the last big plan we’ll ever have to make. But there’s one more thing that’s perhaps even more important. You need a plan to protect yourself against the risk of making poor decisions in your older age. Like it or not, we aren’t as sharp at 80 as we were at 60, even when we think we’re fine.
For example, Terrance Odean, a University of California, Berkeley finance professor, tells me that his father, weakened from a fall, decided to cancel his long-term care insurance at 85. He never asked his son’s advice. Two years later, he wound up in a nursing home, uninsured. “Dad was no longer thinking clearly, but didn’t know it,” Odean says.
Margaret King, director of the Center for Cultural Studies & Analysis in Philadelphia, wrote to me about an ill and widowed neighbor, age 76. She has no close relatives and zero plans for future health care or financial management. “Her friends can’t devote their lives to her needs,” King says.
Loss of powers might come on us gradually or suddenly in a crisis. The better prepared we are, the safer we’ll be.
Item one is to simplify your finances, says attorney Martin Shenkman of Fort Lee, N.J., to make it easy for someone to take over. Consolidate any scattered CD accounts and IRAs, set up automatic payments to a credit card for regular bills (card companies provide fraud protection) and create good financial files, including user names and passwords.
Then choose an agent who’ll help you with your finances if you become uncertain or unable. Give him or her your durable financial power of attorney after having a heart-to-heart about what you expect. Or consider a revocable trust. Chat with your agent about even small money decisions, in order to get in the habit. Any financial advisers should have someone to contact if you start doing odd things (for example, making big gifts to a hired caretaker).
Another power of attorney should go to the person you’d want to make medical decisions for you in case you can’t make them yourself.
When your medical and financial stand-ins are not the same person, the financial document should order the financial agent to pay for any kind of care that is chosen by the health care agent, Shenkman says. Draw up a living will that covers your wishes for continuing, or final, care.
Decide where to live next. You won’t necessarily be able to stay in your home, especially if you’re married and lose your spouse. Now is a good time to investigate independent or assisted living possibilities instead of leaving it to your worried children after a crisis.
Think about when you’ll give up driving. (Hint: It should be before your kids start demanding the keys.) Does your current neighborhood offer sufficient public transportation for you to get around?
It’s hard to identify with a future image of ourselves, King says. But that older person is someone you’re responsible for. Save yourself and your children grief by setting up guardrails now.