Mild dementia and portfolio risk

[Meadbh]

This is something I worry about and it's why I keep my advisor.

The Biggest Threat To Your Retirement Portfolio: Mild Dementia | Seeking Alpha

 

[REWahoo]

Summary

Self-directed investors take appropriate steps to protect their assets should they become fully disabled, but ignore the threat posed by the changes characteristic of early dementia.

The many different causes of dementia have very different patterns of onset. Some are particularly dangerous to investors because sufferers don't immediately lose their memories - just their judgment.

Because physicians are slow to pronounce people incapable of managing their affairs, a proactive strategy is needed to protect you from yourself should you lose judgment or emotional control.

A very pertinent article, especially for DIY investors like myself who have a family history of dementia. I'm going to share the article with our two children.

We definitely need to discuss how to prevent me from making big errors should my judgement start to slip before it becomes obvious I've lost the ability to manage our financial affairs. I do feel a little sorry for my CPA daughter, who will be stuck managing our finances at some point in the future...

 

[EastWest Gal]

That's why after deciding my advisor was too expensive and had moved into a lot of hype and even some hedge type funds (yikes!) when they were bought out 5 years ago, I decided to go for a less expensive advisor. Also, DH has no interest in money and DS is not ready to handle 7 figures invested yet. So if something happens to us and DS gets a windfall, he will be in a position to have his inheritance well-managed.


Sent from my iPhone using Early Retirement Forum

 

[growing_older]

Somehow I'd find this more convincing if it wasn't hosted on a site dedicated to investment advisers. Of course they recommend using an adviser. There may be lots of good reasons to use an adviser, but "because advisers recommend you use advisers" isn't one of them

 

[REWahoo]

I don't think the fact it was hosted on a FA site changes the fact "dementia happens" and it makes good sense to plan ahead. How you carry out those plans - be it a relative or an advisor - is up to you.

 

[Meadbh]

Somehow I'd find this more convincing if it wasn't hosted on a site dedicated to investment advisers. Of course they recommend using an adviser. There may be lots of good reasons to use an adviser, but "because advisers recommend you use advisers" isn't one of them

Well, this is similar advice from the NHS in Britain.

Dementia and your money - Dementia guide - NHS Choices

 

[imoldernu]

+1
This should be mandatory reading for everyone. Not so much for the financial advice, but for the description of dementia, and the onset symptoms. The author was spot on, in describing how the memory and judgement processes begin to degrade.
Going through the process myself, his explanation is right on target. Small losses of memory give way to more problematical issues like attention span, and panic when names, words or memories of events or uncompleted tasks begin to change daily life.
From my standpoint, the management of finances is a task shared by me and DW, and the necessary legal documents and POA are in place... still at the next family meeting, we'll share the details with our sons, and be sure that necessary copies are secured.
We feel safe for the time being, but in another year we will do a complete legal review with an elderlaw lawyer.
Whether dementia or some other untoward situation, leaving the legal door open to challenge or subversion of any sort is not a risk that should be taken lightly by anyone, no matter the current state of mind or general health.

 

[redduck]

Somehow I'd find this more convincing...

The article is about the insidiousness of mild dementia and how it could affect a person's judgment re: a portfolio. The author suggests that having someone (an advisor, a family member, a buddy, etc.) help monitor the portfolio.

You need to be convinced of that?

 

[folivier]

Yes dementia does happen. I had to go to court and be named my dads custodian a number of years ago. That was the only way to protect his investments. And yes there are some very unscrupulous people out there.

 

[Meadbh]

Somehow I'd find this more convincing if it wasn't hosted on a site dedicated to investment advisers. Of course they recommend using an adviser. There may be lots of good reasons to use an adviser, but "because advisers recommend you use advisers" isn't one of them

Just talk to any geriatrician. They have some horror stories.

 

[samclem]

So, if we are worried about dementia and judgement, should we opt for a young FA as our backup plan? Is that discriminatory? Is it fair?

I'd say an advisory group or a quantitative approach (Betterment, etc) might be better insurance than an individual FA for several reasons. If my judgement is slipping, then I become a fairly easy target for all kinds of shenanigans.

 

[Meadbh]

I'd say an advisory group or a quantitative approach (Betterment, etc) might be better insurance than an individual FA for several reasons. If my judgement is slipping, then I become a fairly easy target for all kinds of shenanigans.

Agreed. My "advisor" is actually the wealth management division of a major Canadian bank. My contact there is very well informed and, I believe, trustworthy, but he is also backed up by a strong research, analysis and policy infrastructure, including estate planning. If he were run over by the proverbial bus, I would be sad, but I wouldn't be worried. Wealth management fees at my level, while higher than those for index funds, are a fraction of most exorbitant mutual fund MERs in Canada. They are also tax deductible for non-tax sheltered accounts.

 

[redduck]

I've decided to use REWahoo's CPA daughter.

 

[Rick_Head]

Agreed. My "advisor" is actually the wealth management division of a major Canadian bank....

But if you suffer mild dementia, might you not fire this FA and sign up with IG. How do you avoid that?

 

[Meadbh]

But if you suffer mild dementia, might you not fire this FA and sign up with IG. How do you avoid that?

I have a POA and a Representation Agreement. My POA and representative is a smart young lawyer who is a close friend. Now that you remind me, perhaps I should write her a letter stating that wanting to invest in IG is a sign that I have gone gaga!

This might be funny if it weren't so sad. I have several friends, some of them otherwise very intelligent, who are IG customers. So far, I haven't been able to convince them to move.

Note: For those outside Canada, IG is Investors' Group, recently aptly described in these annals as Canada's Ameriprise.

 

[Amethyst]

Professionals can "slip" like anyone else, and it seems to start happening in the late 50's. Example 1: my formerly wonderful dentist was forced to retire; within 2 years, the restorations she made for me in her final year at the practice started to fall out (the practice rebated part of the cost of replacements).

Now, I've started shopping for a new (younger) tax CPA. The fellow we've been going to for 20 years, who was a tiger to begin with and is not much older than I am, recently started making errors (mostly overlooking things) which I caught during my review of the completed returns...I should not be paying large sums for a service where I have to look over the professional's shoulder! What finally convinced me is that he delegated our 2014 return to a partner for some reason or other, and I caught no mistakes.

So, if we are worried about dementia and judgement, should we opt for a young FA as our backup plan? Is that discriminatory? Is it fair?

.

 

[mickeyd]

DW has little interest in financial matters but usually looks at the account totals and says "OK". If anyone is going to get dementia in our family it will be me. I find myself forcing her to look at the paper statements that arrive quarterly (yes we still have that option in place) and then I quiz her on what she has just looked at. ("Did you notice that your Roth is less than last quarter? Why is that?)

I think that she is pretty sold that index funds are the only way to invest in the long term. If she saw me making changes that included active funds she would know for sure that I had jumped the shark.

 

[Tadpole]

I've decided to use REWahoo's CPA daughter.

Me too.

But seriously, if I were to go with a relative, what would be a fair "carer's allowance" if their responsibilities included all financial transactions (SS, pensions, investments, RMD, taxes, bills, nursing, etc.) The UK NHS gives 61.35 pounds (about $95) per week for 35 hrs. care which doesn't seem right so it must be just a subsidy, not a payment.

I imagine $70,000/year would be a decent salary for a beginning accountant. So, if the work-year was 2080 hours, the hourly rate is $33.65. One afternoon a week should be sufficient so call it 4 hours. That is $135/week or $7020/year.

 

[REWahoo]

I've decided to use REWahoo's CPA daughter.

Me too.

Sorry. She refuses to take on more than one demented old geezer client at a time.

 

[redduck]

Darn, I was trying to find a Groupon for Tadpole and me to use.

 

[eta2020]

I would rather setup Irrevocable Trust then get an FA.
Good way to pass money to kids as well......

 

[ivinsfan]

I would rather setup Irrevocable Trust then get an FA.
Good way to pass money to kids as well......

That is a choice some make. Some extended family had their parents who I am not sure had their full facilities working, put everything in an Irrevocable Trust. What they said was, You should sign this if you don't want all your money to go to a nursing home. Of course 4 years later. they are still living at home alone. It felt semi-slimy....

This whole subject makes me feel queasy, as even decent people get messed up on the subject of money.

 

[eta2020]

That is a choice some make. Some extended family had their parents who I am not sure had their full facilities working, put everything in an Irrevocable Trust. What they said was, You should sign this if you don't want all your money to go to a nursing home. Of course 4 years later. they are still living at home alone. It felt semi-slimy....

This whole subject makes me feel queasy, as even decent people get messed up on the subject of money.

I have in mind lets say you have 2 million in 401k and 3 million in brokerage account in 50% VTI 50% VXUS. Something simple that even simple man can follow.

Take 3 million in brokerage account and place in Trust where you get portfolio Dividend yield till your death. Thereafter your kids get Yield until age 50 at which point they can access money in Trust. Money must stay in VTI and VXUS rebalanced on date XYZ once a year until your kids reach age 50 at which point they get control of the money.

I am not talking about shielding 300k from Nursing home cost

 

[ivinsfan]

I have in mind lets say you have 2 million in 401k and 3 million in brokerage account in 50% VTI 50% VXUS. Something simple that even simple man can follow.

Take 3 million in brokerage account and place in Trust where you get portfolio Dividend yield till your death. Thereafter your kids get Yield until age 50 at which point they can access money in Trust. Money must stay in VTI and VXUS rebalanced on date XYZ once a year until your kids reach age 50 at which point they get control of the money.

I am not talking about shielding 300k from Nursing home cost

Not I'm sure you are not and I just meant that even with mild dementia or a little confused thinking someone can be manipulated by a broker or a family member. The elders in this case only heard the words "nursing home"...

 

[eta2020]

I like simple portfolios like 50/50 VXUS VTI. SO this is how my Trust would look.

Dementia to me would be searching for something sophisticated where I make big money now
I hope my wife will warn me when I start getting it....... and really I would not hesitate much to create Trust. We already had discussions along this topic.