How to Minimize 4 Financial Management Disasters That Come With Aging

Many people spend their lives planning and preparing for old age. However, as individuals age, they may encounter some unexpected situations.

While not the most enjoyable thought experiment, it’s important to consider the risks that come with aging and how they can impact a person’s financial situation.

Here are four common financial management disasters that aging can bring, and how experts say you can avoid them.

1. Vulnerability to Financial Mistakes and Scams

Age can bring cognitive declines, which impact an individual’s ability to manage their finances.

“Cognitive decline often leads to trouble with basic math tasks like paying monthly bills,” Glen Goland, certified financial planner and senior wealth strategist at Arnerich Massena, said in an email.

He noted it can also leave people more susceptible to fraud.

[Related:This Is What Fraud Costs Consumers]

“Many of the most sinister online fraud schemes target elderly email recipients who may not be as familiar with internet scams and/or who are easily confused,” said Goland.

“These fraudsters impersonate everyone from presidential candidates to representatives from the local bank in a never-ending effort to get ahold of some senior citizen’s hard-earned money,” he added.

To protect an at-risk elderly individual, Goland suggested bringing in help.

“Some families pay a trustee to manage affairs and/or hire a bill pay service to manage these tasks, while many others turn to a relative or friend to keep things paid up,” he said.

It doesn’t have to be a full hand-off from the start; it can be a gradual process in which another person provides an increasing amount of support over time.

He added that it may also be worth it to freeze the senior citizen’s credit with the three reporting agencies so a nefarious actor can’t steal their identity and open new credit cards or loans.

The Consumer Financial Protection Bureau recommends taking the following steps to fully prepare for the declining ability to manage your own finances:

— Organize your important financial documents and let loved ones know where to find them.

— Provide your financial advisors with a contact person you trust.

— Appoint a representative payee with the Social Security Advance Designation program.

— Consider appointing a durable financial power of attorney.

2. Sudden Death or Disability of a Family’s Financial Manager

While it’s common for one person to take the lead with a household’s finances, it can be problematic if that person suddenly becomes disabled or passes away.

“The sudden disability or death of the individual managing the family finances can often lead to chaos,” Goland said.

The family needs to have a contingency plan.

“Americans can plan for this by having conversations with their spouses and families about their wishes, where their important documents are stored, where passwords are stored and who the members are of the financial, legal and tax teams,” Goland says.

It can also help to have regular check-ins with the family’s financial lead and another family member so someone else is aware of the bills, insurance policies, investment accounts and so on.

3. Unexpected Long-Term Care Expenses

“One financial mismanagement I often see is failing to plan for the costs of long-term nursing care,” Andrew Latham, a certified financial planner and the managing editor at SuperMoney, said in an email.

Not planning for long-term nursing care can come with difficult consequences.

“Semi-private rooms in care facilities cost families more than $100,000 per year in many American cities. This expense can send seniors to the brink of insolvency and often wipes out any expected inheritance for family members,” Goland said.

While you may plan to rely on Medicaid, it can present problems.

“Medicaid can help cover nursing home costs, but there are strict asset eligibility requirements. Without meeting Medicaid’s strict asset and income limits, individuals may be forced to pay out of pocket until their assets are exhausted, which can leave a healthy spouse vulnerable, and risk impoverishment,” Latham said.

He suggested a potential strategy to avoid this could involve legitimate spend-down tactics, such as establishing irrevocable trusts, utilizing spousal asset protection methods, paying off debts, buying medical equipment and investing in home modifications.

[Related:Revocable vs. Irrevocable Trust: What’s the Difference?]

Further, Goland recommended younger Americans plan ahead by purchasing long-term care insurance, while older Americans should consider as many alternatives to full-time residential care as possible.

“One of the best pieces of advice I ever gave was suggesting a client go through with their idea to turn a portion of their home into an Accessory Dwelling Unit. Their family has saved many thousands of dollars by hiring an in-home caregiver who lives on the premises,” Goland said.

4. Running Out of Money

Another potential financial disaster can occur if you don’t have enough funds to last you throughout your life.

“Thirty million Americans will retire between now and 2030, and nearly two-thirds of those approaching retirement age feel unprepared and will struggle to meet financial needs,” Satayan Mahajan, CEO of financial advisor matching website Datalign Advisory, said in an email.

A lack of emergency savings is of particular concern.

“In recent years, inflation and the rising cost of living have been major barriers to many Americans’ abilities to save. More than half don’t have savings to pay for an unexpected expense of $1,000 or more, such as an emergency room visit. This issue could spiral into a disaster as these individuals age,” Mahajan said.

[READ: How Much Should You Save In an Emergency Fund?]

To ensure you’re prepared, financial planning is essential.

“It’s imperative aging adults recognize the importance of developing a financial plan to alleviate stress, have financial freedom in retirement and address any issues proactively,” said Mahajan.

Financial advisors aren’t just for high-net worth individuals. “There are experts that specialize in a range of financial situations — and no one should feel intimidated to seek help,” he said.

More from U.S. News

How to Talk About Money With Family — And Why It’s Important

How to Build Generational Wealth

Documents to Prepare Now for Your Heirs

How to Minimize 4 Financial Management Disasters That Come With Aging originally appeared on

Federal News Network Logo
Log in to your WTOP account for notifications and alerts customized for you.

Sign up