Does Your Long-Term Care Plan Account for Your Own Normal, Natural Cognitive Decline?

Wade Pfau, PhD, CFA, whom I’ve previously praised effusively, writes about research confirming that we all will, very gradually, lose our cognitive speed, financial literacy and verve. I believe our natural good judgment will fade along with these things because I see my clients demonstrate this so very often.

Here’s a paper Dr. Pfau cites that illustrates this normal, natural cognitive decline.

Here’s another paper Dr. Pfau cites proving normal decline in financial literacy at advanced ages.

At a healthy age 63, I notice these changes in myself to a very minor extent. I am pretty sure it’s age related and not dangerous yet. It is just annoying.

I had breakfast with a long-time financial planner this week. He believes affluent people should self-insure for long-term care. I believe that he, like so many, is divorced from and not willing to imagine the psychological reality of what often happens at advanced ages.

I gave him many reasons why affluent people need long-term care insurance (LTCi). They buy it in disproportionately high numbers. I have blogged about this extensively.

Dr. Pfau’s article gives compelling scientific proof of why the elderly are often the victims of their own bad business decisions.

I see in-person proof of these same things. Even if they have no diagnosis of cognitive impairment, I see elderly clients making very bad personal and business decisions, time and time again. I am very disturbed by this.

Children of affluent clients with multi-million dollar wealth tell me their parents would not avail themselves of home or assisted living care without their LTCi.

From what I’ve seen with my clients during the past 25-plus years, the most important reason to own LTCi may be the lack of good judgment plus the common familial dysfunction that too often accompanies aging and decline.

Long-term care insurance provides a plan that plugs in and works. When need arises, no thoughts about which assets to liquidate to pay for LTC are necessary. Irrational thoughts of outliving savings are quashed. Thoughts of imposing on family members are minimized. LTCi can drastically reduce stress and increase quality outcomes.