Time to Start Thinking Retirement, Today

As a society driven by youth, and surrounded by ‘the rich and the famous,’ anti-aging miracle creams, and the ‘selfie’ phenomena, growing old has innately become a topic to be avoided. Quite simply, the prospect of death, wrinkles, and nursing homes is enough to keep just about anyone from planning for their last stages of life. However as psychological research regarding the deterioration of the human mind mounts, it becomes more and more vital that planning for the future begins before it’s too late. While it is well known that an aging brain puts us at a disadvantage, few people connect this with the decline in their ability to maintain their personal finances. The catch being that by the time this issue is brought to light, it is more often than not met with already developing problems.

The brain’s frontal cortex is responsible for the process of decision making, this area of the human mind predominantly sharpens as you age into your 50s, however at this critical age (and even more so in your 60s and on) it begins to decline. This makes it more difficult to put complex situations into context and control the influence of emotions on decision-making. More importantly (to me at least) this directly results in the deterioration of investment skills, as well as individual’s abilities to handle risks embedded in the financial world. As with much of life, there is a balance to this process; as the frontal cortex looses ability, the limbic system becomes more powerful. This increase in activity leads to the intensification of fear and greed emotions, a hazardous mix in the face of important investment and retirement planning. Although this phenomena does not hold true for everyone, and many continue into their 60s, 70s, and all the way into their 90s with little to no affect on their mental health, it is important to safe guard against the possibility of deteriorating health. 

The risk of these changes, coupled with the increased risk that aging puts on mental health emphasize the importance of addressing retirement before 60. Some of the most common and frightening diseases associated with old age; Dementia, Alzheimer’s, and Parkinson’s, affect memory, cognitive processing, and even personality. With a retirement plan in place before an individual is at high risk, some of the stress for both the individual and their family members can be alleviated. (This is particularly beneficial to individuals who do suffer from diseases associated with aging, as studies have shown that high stress levels directly correlate with the quickened progression of disease.) 

The population of 65 and older is on a steady increase, in 2010 representing more than twelve percent of the populace, in 2012 this increased to fourteen percent, and it is expected to increase to around twenty percent by 2050. Recent studies have estimated that by the time this population reaches 80, about half of them will not be in the position to make important financial decisions due to cognitive impairment. With a higher education and more assets than their predecessors, it is up to these individuals to address the daunting task of retirement before it is reached. Financial advisors have proposed a ‘keep it simple’ strategy as the most appropriate solution, with a passive buy and hold approach. As we age gracefully together, it is my hope that we can do so with a plan already in place.