For most of our adult lives, managing our finances is a symbol of independence. We work, save, invest and make our own decisions. We take pride in knowing where our money is and how it is being managed.
But as we get older, there may come a time when having someone else involved in our financial lives becomes less about giving up independence and more about protecting it. That transition can be difficult to recognize and even more difficult to talk about.
There usually isn’t a single moment when someone suddenly becomes unable to manage their finances. Instead, changes can happen gradually. Things that once seemed easy may take more effort. Keeping track of multiple accounts, remembering financial conversations, completing paperwork or staying on top of investment decisions can become increasingly challenging.
And because these changes can be subtle, it is important to approach the subject with care and respect.
The question isn’t necessarily, “Can I still manage my finances?”
It may be, “Would having someone I trust involved make it easier to protect what I’ve worked so hard to build?”
Financial Independence Doesn’t Mean Doing Everything Alone
There is an important difference between making your own financial decisions and handling every financial responsibility yourself.
Someone can be perfectly capable of deciding how they want their retirement savings invested while finding it more difficult to keep track of statements, paperwork, passwords, tax documents or multiple financial accounts. Getting some help doesn’t necessarily mean handing over control.
It might simply mean inviting an adult child to an annual investment meeting. It could mean having someone help organize financial paperwork. It might mean introducing a trusted person to your financial advisor so they know who to contact if questions arise.
You can remain the decision maker while allowing someone else to become familiar with your financial picture. In fact, doing this while you are fully capable of making your own decisions may be one of the best ways to preserve your independence for as long as possible.
Recognizing the Warning Signs With Compassion
There are certain changes that may suggest it is worth considering whether additional financial support would be helpful.
But these signs deserve a careful, compassionate approach. Forgetting something occasionally, making a mistake or becoming frustrated with paperwork doesn’t mean someone can no longer manage their finances. We all have bad days.
The concern is more about changes over time or patterns that are noticeably different from how someone has traditionally handled their financial affairs.
Some examples might include:
- Bills or paperwork are increasingly difficult to keep up with. Payments are missed, duplicated or left unopened.
- Financial accounts become confusing. It becomes difficult to remember where accounts are held or how they are structured.
- Investment decisions seem out of character. Someone who has historically followed a thoughtful investment strategy suddenly wants to make significant or unusual changes without a clear reason.
- The same financial questions come up repeatedly. Important conversations or decisions may be forgotten shortly afterward.
- Financial tasks are increasingly avoided. Something that was once handled routinely becomes overwhelming or is continually put off.
- There are concerns about scams or unusual financial activity. An unexpected solicitation, unfamiliar transaction or pressure from someone seeking money may warrant additional attention.
- Communicating with financial professionals becomes more difficult. Someone may have trouble following conversations or remembering what was discussed.
- A trusted family member begins noticing changes. Sometimes the people closest to us recognize changes in our financial habits before we do.
Again, none of these automatically means that someone should stop managing their own finances. Instead, they can be an invitation to ask a more constructive question:
Would a little more support make managing things easier and help protect the financial life we’ve built?
The Goal Is to Protect What You’ve Built
There is another reason to think about this transition before it becomes necessary: your investments and other financial assets still need to be managed and protected, regardless of who is making the decisions.
After decades of saving, a retirement portfolio may represent someone’s financial security for the rest of their life. Protecting those assets means more than simply protecting against investment losses.
It can also mean making sure:
- Investment decisions continue to reflect the person’s goals and risk tolerance.
- Required distributions and other financial responsibilities aren’t overlooked.
- Accounts are monitored for unusual activity.
- Important financial documents can be located when needed.
- Beneficiary designations and account information don’t become outdated.
- The person isn’t unnecessarily vulnerable to financial scams or exploitation.
- Someone trustworthy knows enough about the financial picture to step in if circumstances change.
A transition plan can help make sure that the assets someone worked so hard to accumulate don’t become harder to manage simply because managing them has become harder.
A Trusted Contact Is a Good Start But It Isn’t the Whole Plan
Many investment accounts allow you to designate a trusted contact person. This is an important safeguard and can give a financial institution someone to contact if there are concerns about financial exploitation, unusual circumstances or difficulty reaching the account owner.
But a trusted contact generally isn’t someone who automatically has authority to manage your investments or make financial decisions for you. That’s an important distinction.
A trusted contact is part of the safety net. It isn’t necessarily the person who will help manage your financial affairs if you eventually need more assistance.
That’s why it’s worth thinking beyond simply naming a trusted contact.
Start With Involvement Not Control
One of the best ways to make this transition easier is to start involving someone before there is a need for them to take over anything.
An adult child or other trusted person could attend an investment review meeting. They can become familiar with your financial advisor, learn generally how your accounts are organized and understand your overall financial plan.
They don’t have to make decisions. They don’t have to have access to everything. They simply become familiar with your financial life.
This can be especially valuable if something unexpected happens. Instead of your family having to figure everything out during a stressful situation, someone already knows who your financial professionals are, where your accounts are held and what your general wishes are.
And importantly, you remain in control.
You get to choose who is involved, what information they receive and how much responsibility they have.
Think of It as a Gradual Transition
Financial independence doesn’t have to be an all or nothing decision.
For many people, the transition can happen gradually.
First, you’re completely independent. You make your financial decisions and handle your affairs yourself.
Then, someone becomes familiar with your finances. A trusted person begins attending meetings or learning more about your financial plan.
Next, they may help with certain responsibilities. Perhaps they help organize paperwork, keep track of important information or assist with administrative tasks.
Eventually, they may become more involved in managing your financial affairs. This could happen because you want the additional help or because your circumstances have changed.
If necessary, legal authority can provide the next level of support.
The important point is that you don’t have to wait until the final stage to begin the conversation.
Where Does a Power of Attorney Fit?
A financial Power of Attorney is an important part of this planning.
Depending on how it is drafted, a Power of Attorney can give another person authority to act on your behalf regarding financial matters. An estate planning attorney can help determine what type of document is appropriate and when it should become effective.
But a Power of Attorney shouldn’t necessarily be viewed as the starting point.
The planning should begin much earlier.
While you’re fully capable of making your own decisions, you can choose the person you trust. You can introduce them to your financial professionals. You can organize important documents and make your wishes known.
Then, if the day comes when additional authority is needed, the transition doesn’t have to begin from scratch.
The Conversation Can Be Difficult
Perhaps the hardest part is simply bringing up the subject.
Parents may worry that involving their children means admitting they’re getting older. Adult children may worry about offending their parents or appearing to question their abilities.
That’s understandable.
The conversation doesn’t have to be, “I’m worried you can’t manage your finances anymore.” It can be:
“I’d like you to understand how we’ve organized our finances in case you ever need to help us.”
That is a very different conversation. It isn’t about taking away control. It’s about making sure someone you trust understands your wishes and knows how to help if circumstances change.
And there is a practical benefit as well. Your children may not know what you own, where your investments are held, who your financial advisor is or what your financial priorities are.
Sharing that information while you’re able to explain it yourself can be one of the most helpful things you can do for them.
Don’t Wait for a Crisis
One of the biggest mistakes we can make is assuming that we’ll know exactly when it’s time to ask for help. Often, there isn’t a clear line.
That’s why it can be helpful to make the transition part of your financial plan long before you actually need it.
Think about who you trust. Consider who you would want involved if managing your finances became more difficult. Introduce that person to your financial advisor. Make sure important documents are organized. Talk with your estate planning attorney about your Power of Attorney and other legal documents.
And, importantly, revisit the conversation periodically.
The goal isn’t to assume that getting older means losing the ability to make good financial decisions. The goal is to recognize that our needs can change over time and a good financial plan should change with us.
The money you’ve spent a lifetime earning and saving deserves to be protected.
Sometimes protecting it means continuing to manage it yourself.
Sometimes it means asking for a little help.
And sometimes the most financially responsible decision you can make is to let someone you trust become part of the process before you need them to take over.
Start the Conversation Before You Need It
Planning for the future isn’t just about deciding how your investments should be managed today. It is also about thinking ahead to how those decisions may need to be handled as life changes.
If you’re approaching or already enjoying retirement and thinking about how to protect your financial life as you age, we’d be happy to have a conversation. Whether you’re considering involving someone you trust, reviewing your estate planning documents or simply making sure your financial plan can adapt as your needs change, there doesn’t need to be a problem or a crisis to start planning.
You don’t have to wait until someone else needs to step in. Planning ahead can help you stay in control while making sure the people you trust are prepared to help when the time comes.
Contact Uncommon Cents Investing to schedule a complementary introductory call and take the first step toward creating financial stability that can adapt with you through the years.
