An uncomfortable reality about getting older and retirement planning
Financial planning is not a rocket science. With enough free time and discipline, anyone can learn the basic principles of retirement planning: diversify, pay attention to taxes, prepare for unexpected events, design appropriate legal protection, etc. I promise everything is available online.
Many people may still find benefits in hiring a financial planner. It can be a good move if you don’t have the interest or the free time. Others may need professional help for guidance and discipline. The knowledge and experience a planner acquires over time is also of great value.
But there are also plenty of home improvement. They pride themselves on directly handling all of these pressures. There’s something you need to understand: even if you have the time and discipline to make your own planning, you are still in a losing battle with Father Time. That said, given a sufficiently long time horizon, you likely have no choice but to get outside help. The problem is, at this point it may be too late to realize it.
How do you drive these days?
Undoubtedly, it is uncomfortable to think about the many physical and cognitive declines that come with age. But there is no denying that as we age we become increasingly dependent. Ignore this risk with regards to your money at your own risk.
Sooner or later someone may have to take your car keys away. If not a family member, it could be the state. Many states have stricter requirements for driver’s licenses once drivers are over 70. With good reason, the Road Safety Insurance Institute found that people over the age of 70 drive a car more often than any other age group other than drivers 25 and younger. Because older drivers are more prone to injury, they are more likely to sustain serious injuries or die.
We have observed all seniors who can see, hear and reflect significantly less. We restrict their access to the street not only for their safety, but also for our own. It makes sense for society to impose these restrictions. However, cognitive problems are more difficult to spot and less effective for society, so fewer safety precautions are in place. You’re on your own.
And this is where the trouble begins. The average handyman will treasure their talents or they would not dare tackle the full breadth of personal finances. Unfortunately, this talent is on the way to losing weight.
Gradual decreases are difficult to see
It is said that there are two types of intelligence. The first, crystallized intelligence is where seniors have an advantage. Your crystallized intelligence is the sum of your life experiences and your knowledge. The second type is fluid intelligence, and this is where time works against you. Fluid Intelligence is our ability to logically think through problems in novel environments. Studies have shown that in an ever-changing financial landscape, our fluid intelligence can decrease by up to 1% for every year after age 60.
Let’s not get too defensive here. Many of us will be “sharp as a turning point” well into our golden years. But we are all reminded in small ways that our bodies and minds are no longer what they used to be. I know I struggle with intermittent back pain and find it takes longer to downsize for swimsuit season. I didn’t have these problems when I was 20. You probably didn’t either, did you?
The insidious thing is that these declines are gradual. Look at your average elite NFL quarterback. Despite Tom Brady, you can’t be elite forever. And even if your skills drop a percent or two per year, it’s no big deal. But then comes a season in which every third run is an interception. Or a small hit brings them down for half the season. What happened? All of these small declines added up and cumulatively placed them beyond the point of no return.
Don’t feel bad for that poor quarterback. He’s probably a multimillionaire. Worry about yourself! Year after year, you lose the ability to cope appropriately at the very time your nest egg is at its peak.
Being proud and persistent can cost you
You probably think that when that time comes you will be smart enough to pass the torch. Unlikely. Studies show that seniors who are already in cognitive decline tend to overestimate their abilities when compared to observations made by their family or health professionals. We get stubborn. The handling of our affairs is a sign of pride. Other character families will step in when the time comes. But remember, they have their own problems! And they may not have the time, ability, or ability to help when it is needed most.
And take it from someone who’s hosted a radio show and hundreds of briefings. I would guess that only about 10% of our audience is over 75 years old. Where are these people? Has your need for financial information stopped? Are their plans so ironic? Unlikely! Tools, laws, opportunities, and family dynamics are constantly changing. People at all ages should be able to get financial information. I suspect that over time we will lose interest or the ability to focus on or care about these issues.
“A financial advisor is too expensive.”
“I can do this alone.”
“Managing my money is fun. It’s a hobby that gives me something to do. “
These statements can be true. But while you can avoid many common financial mistakes in the short term, you may be on track to making them all in your 80s or 90s. Don’t leave this to chance. Create a written budget. Don’t keep your goals a secret. And rest assured someone other than you has your back throughout your retirement journey. Your success may depend on it.
This article is written by our contributing advisor and presents the views of our contributing advisor, not the Kiplinger editorial team. You can review advisor records with the SEC or FINRA.
Founder and CEO of Arcadia Financial Group LLC
Michael R. Panico, CFP®, is the founder and CEO of Arcadia Financial Group LLC, based in Manchester, NH. Michael works with investment and insurance products to help clients achieve their financial goals.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this article for submission to Kiplinger.com. Kiplinger was not compensated in any way.