By Daniel Stewart
As we age, it’s common to experience some decline in cognitive ability. This unfortunate situation is caused by several factors, ranging from lifestyle choices to genetics to diseases such as Alzheimer’s and other types of dementia. Unfortunately, the consequences of diminished mental acuity in seniors are disturbingly negative. Whether we
like to admit it, cognitive decline, however slight, impacts our ability to make sound money decisions as we age. This tendency to make more frequent money mistakes when older may be due to age-related declines in analytic function.
When you are younger, you have relatively low levels of financial experience but higher analytical, (sometimes known as”executive”) functionality. As you age, you gain more experience dealing with money, but your levels of executive function tend to decrease. Such a shift can create financial hazards for older Americans since analytic cognitive functions are responsible for the ability to analyze information, make decisions, problem-solve, and think critically. Also referred to as the “higher-order” function, the analytic process helps us plan and strategize, prioritize tasks, and make decisions based on our experiences, values, and goals.
Cognitive decline may affect your retirement wealth.
Researchers have discovered that, on a risk-adjusted basis, investors with even mild cognitive impairment may earn annual returns between 3-5 points lower than other investors. As people age, they may also experience a severe decline in their financial literacy and lose the ability to
absorb information about new products and planning tools. Studies indicate an estimated 50% of seniors over 80 could be incapable of making sound financial decisions. Because of this inability to analyze and act on information, many older Americans pay higher fees and interest rates than
their middle-aged counterparts. They are also more likely to be targeted by scammers and fraudsters who find them easy prey.
Could an annuity help safeguard wealth against cognitive decline?
An annuity is a financial contract that provides a guaranteed income stream for a specific time. An annuity can offer much-needed financial security for seniors wanting protection of their principal investment, predictable income for life, or a way to help pay for nursing home care. The payment amount is set when the annuity is purchased and can be structured to provide either a fixed or variable income. Most annuities also offer additional benefits, such as death or long-term care benefits, and an option to withdraw a percentage of funds in emergencies.
Adding an annuity will assist you in ensuring that you meet your long-term financial future goals. Annuities may be useful if you anticipate experiencing cognitive decline when you get older. For instance, if you have a family history of dementia or mental illness, you might look into these products while you are still healthy. Purchasing an annuity also gives your loved ones more peace of mind since they know you will have at least one steady, predictable income source that isn’t dependent on your ability to manage your money.
An annuity is also a fantastic way to supplement Social Security or pension benefits, helping alleviate financial stress and adding additional economic security. Another common use of an annuity is to ensure that assets are managed appropriately. You can structure an annuity to have payments for a specific time. Doing so lets you use your other retirement assets in a way that keeps you from depleting them too quickly.
Annuities also serve another purpose by helping safeguard your wealth from any unwise financial decisions you might make in the future. An annuity income stream may prevent you from losing your ability to meet your basic needs. These products guarantee you will still have a steady monthly paycheck even if you fall victim to fraud or make a less-than-ideal money decision.
Most seniors are likely to experience at least some decline in their cognitive abilities. Suppose you are at or near retirement age. In that case, an annuity may help safeguard your wealth and ensure financial security in the future if your ability to make sound money decisions is impaired. An annuity can create a guaranteed income stream that helps alleviate some of the fallout from unwise financial decisions. This product can also be structured to manage your assets in a way that best fits your needs and
goals, even if you can no longer take care of your finances. Annuities are not magic bullets, but with the help of an experienced safe money advisor, you can use them to create a less stressful, more prosperous financial future. If you’d like to learn more about safeguarding your wealth now and in the future, reach out to me and I will be happy to assist you.
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