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Ecology of Money

Making a Safety Net for Cognitive Decline

It's best to address the sensitive issue early, preferably before retirement, says contributor John Wasik.

For tens of millions of Americans living in and facing retirement, the subject of diminishing brain power may be one of society's last taboos. Based on my personal experiences with parents and grandparents, I can say it's an agonizing experience to go through.

Yet there's much you can do to protect yourself or a loved one, who, when facing cognitive decline, will become vulnerable to everyone from bill collectors to swindlers. Here are some steps you can take to provide a safety net for yourself or a loved one who may develop cognitive impairment.

Recognizing Cognitive Decline
Many cognitive issues are subtle, such as losing the ability to pay bills or balance a checkbook, while others are profound, such as forgetting who people are and the inability to perform daily activities like cooking or bathing. All told, there are some 16 million Americans with cognitive impairment, according to the U.S. Centers for Disease Control.

While many mild forms of decline are natural consequences of aging--we can’t process multiple pieces of information after a certain age--other deficits compromise our well-being and the ability to live independently. For instance, when I first noticed that my father wasn't paying his bills, it became clear that he had lost the recognition that he even needed to do this task. Other mental errors then followed--driving mishaps, the inability to understand how to use a microwave.

Here are some telltale signs of cognitive decline:

  • Trouble with numbers
  • Difficulty with basic math, such as balancing a checkbook and calculating percentages
  • Not understanding items on unpaid bills
  • Driving becomes a challenge, as does navigating new places or reading maps
  • Decreased articulation and understanding of basic reading materials, such as newspaper articles

While events from decades ago may be fresh, the ability to recall what happened or what was said a day or even hours ago becomes challenging.

Engaging in complex tasks becomes very difficult. What neurologists call "executive" function--the ability to sort facts and make sound decisions--is noticeably impaired.

While "crystallized knowledge," or a lifetime of attained knowledge or wisdom, may remain intact, the individual loses the ability to quickly work through a problem.

"Older adults tend to be slower in conceptualizing problems and less ready to change strategies when circumstances shift," writes neuropsychologist Diane Howieson, of the Dana Foundation. "In one well-known study involving decision making, approximately one third of older adults did poorly compared to younger adults."

Most people are not trained on how to spot the often gradual erosion of mental capabilities. In most cases, it's not like hitting the rapids just before a waterfall.

Although physicians can give tests to determine the degrees of mental decline--you should always consult them first--families who observe loved ones on a daily basis should be directly involved.

Daily observation is important since doctors may not have complete information on how a patient's abilities have eroded over time. As a result, some 40% of doctors missed cognitive impairment in patients who were showing those symptoms, according to the National Institute on Aging.

Note pronounced changes. What has changed in daily behavior over time? Is he getting lost more often while driving or having frequent accidents? Are bills piling up? Is he unable to remember bank deposits or withdrawals? Is he unable to compile things like grocery lists or navigate a supermarket? Does he get lost while driving?

Carolyn McClanahan, a physician and certified financial planner, suggests primary care doctors run tests if you see changes.

"A diagnosis of dementia is based on a combination of factors," McClanahan says. "The 'mini-mental status exam' is usually done first and other tests are added to rule out other causes that can mimic dementia."

Legal and Financial Matters
The best advice is to make sure legal and financial protection are set up long before any cognitive decline may set in.  

At the very least, powers of attorney should be granted to responsible family members. These documents, available online or prepared by elder law attorneys, will enable a third party to make decisions in the event of mental or physical incapacity.

There are two main power of attorney documents: healthcare and financial. Both give someone else the ability to make decisions about medical treatment and bill payments, for examples. These are essential documents in any estate plan

McClanahan says the best time to prepare for the future is early--preferably before retirement age. That gives families plenty of time to discuss estate and charitable planning. You might want to sit down with a trusted financial adviser such as an accountant, attorney, or certified financial planner (or all three).

"Our way of dealing with dementia," McClanahan adds, referring to her financial planning practice, "is to address the issue long before it occurs, or if it is a new client that already may be having issues, we address it as soon as possible. This involves creating a caretaking plan, which includes documenting when financial decision-making will occur, desired living transitions, healthcare decision making, and when the client will quit driving."

At the very least, have a family discussion on how to handle the responsibility if struggles with a mental or physical disability begin. Who in the family can take over financial affairs and make sensible decisions?

"The most important thing to deal with dementia is to have a plan in advance," McClanahan adds. "Once a person has dementia, it is hard to get things done because they may not have the capacity to make decisions. For example, powers of attorney are great, but sometimes the person may need a legal guardian. If families have not agreed on this, then this can turn into an expensive legal battle."

Granted, these can be difficult discussions and decisions. But they can be tackled with more compassion and understanding if you have time to weigh all of the options.

John F. Wasik is a freelance columnist for and author of 16 books, including Lightning Strikes: Timeless Lessons in Creativity from the Life and Work of Nikola Tesla. The views expressed in this article do not necessarily reflect the views of