Though everyone likes to pretend it won’t happen to them, we as humans inevitably slow down mentally and physically later in life. Preparing for the cognitive and physical decline that takes place in the later years of retirement is important, but most people spend much less time planning for this phase than they do for the early years of retirement.
This failure to plan often creates problems that could have easily been avoided. Fortunately, you can prevent a lot of issues by taking a few simple steps to prepare for this phase of life before you get there.
Choose a Financial Caretaker
A financial caretaker will help you manage your finances when you are no longer able to manage them on your own. It is important that you choose someone you trust to make decisions that are in your best interest. This is typically a responsible child and, for practical purposes, this person is often your power of attorney. Ideally, you should notify the person you designate as your financial caretaker to communicate your expectations and review your financial information with them. This will ensure a smooth transition when they eventually take over the management of your finances.
Create a Diminished Capacity Letter
A diminished capacity letter expresses what you would like someone to do if they notice you are starting to fade mentally. This can be given to your financial advisor, trusted friend, or family members. Should they raise the issue with you first? Should they notify your spouse or other family members? Creating this document ensures your wishes are followed and prevents potential conflicts and awkwardness for the people involved.
Keep Both Spouses in the Loop
It is common for one spouse to handle most of the financial decisions for a household. If you fall into this category, it is important to begin including your spouse in the financial decisions and educating him or her regarding your financial plan and investment strategy. This ensures your spouse will be able to manage the finances effectively if something happens to you. Dealing with the death of a spouse is already incredibly difficult. The last thing a widow or widower needs is an additional source of stress in their life.
Many people accumulate multiple investment accounts over time and as a result have their money spread all over the place. This makes things more complicated to manage and increases the likelihood an account will be lost or neglected when your health declines or you pass away. Consolidating your assets into as few accounts as possible simplifies your life, makes things easier to manage, and minimizes the chance that something will slip through the cracks.
Modify Your Home
If you want to stay in your house as long as possible, you will likely need to make modifications that enable you to do so. This may include installing a ramp to your front door or lifts that move you up and down the stairs. You may also want to consider downsizing, moving to a ranch, or moving to a condominium to reduce the amount of cleaning and upkeep required.
Consider the Cost of Professional In-Home Care
If you plan to stay in your home, at some point, you will probably need professional in-home care. These services can be expensive, and it is important to consider the cost of having a caretaker come to your home part-time or full-time in your financial plan.
Get on the Waiting List for Long-Term Care Facilities Early
It’s important to research long-term care facilities before you have a serious health issue. Many assisted living communities will have waiting lists to get in. Signing up for the list early can ensure they have a spot for you if your health turns suddenly. Scrambling to find a long-term care facility after someone’s health has declined can make an already stressful situation even more problematic.
Hire a Financial Advisor that Specializes in Retirement Planning
A financial planner can help you or your spouse make important financial decisions when you are no longer able to do so on your own. They can help keep your assets organized and ease the transition periods as you move through the different phases of retirement. They can help you avoid emotional investment decisions that can jeopardize your financial livelihood. Perhaps most importantly, an advisor can provide assurance that your spouse will be taken care of if something should happen to you.