Empowering Older Adults to Plan for Diminished Financial Capacity

Background and Purpose: Millions of aging Americans are challenged to prepare for uncertain health and financial setbacks in addition to the looming threat of cognitive impairment that impacts nearly one-third of adults age 85 and older.¹ Appointing an agent under power of attorney (POA) for finances and sharing critical financial information with a trusted friend or family member are optimal ways to prepare for financial incapacity. Proactive planning reduces the risk of financial exploitation, scam victimization, and unwise spending decisions that are not in line with retirement goals, yet only a quarter of Americans aged 40 and older have a written POA and half have never planned for someone else to make decisions for them.² The purpose of this study was to understand the barriers to planning for financial incapacity and to identify messages that motivate older adults to engage in advance planning.

Methods: We conducted 24 in-depth interviews with older adults, informal caregivers, geriatric care managers, elder law attorneys, financial advisors, and healthcare providers to understand the barriers and motivators to effective planning and communication about financial incapacity. These were followed by four focus groups with black, Latinx, low-income, and middle-income adults aged 65 and older (n=32). All interviews were transcribed verbatim and coded in NVivo using a constant comparison, grounded theory approach.

Results: Barriers to planning and conversation included denial of future need, difficulty identifying trustworthy agents, shame about one’s financial situation, desire for privacy, fear of losing independence, lack of immediate need, and resistance to overtures by children. Lower income adults lacked understanding of POAs and how to obtain one. Some Latinx participants expressed the belief that conversations and granting legal authority are not necessary because cultural norms dictate that children will support their aging parents and that financial abuse is uncommon. Professionals motivated older adults to plan for financial incapacity using fear-based approaches (risk of fraud victimization, fighting among family), and empowerment-based approaches (stay in control of your money as you age). Focus group respondents expressed that messages relating to financial autonomy, open communication, and elder empowerment were more appealing than messages reminding them of the negative consequences of failing to prepare.

Conclusions and Implications: Significant education is needed to educate low income adults about POAs and the meaning of fiduciary responsibility. Results inform the development of a Conversation Guide to facilitate advance planning and communication around future money management. Using an empowerment framework, the Conversation Guide will provide structure and direction on selecting a trusted financial advocate and prompts for communicating financial information to ensure a smooth future transition in money management. The Guide will be a useful resource for social workers coordinating long-term care for older clients by reducing risk of family conflict and financial exploitation.

1. Alzheimer’s Association (2018). 2018 Alzheimer’s Disease Facts and Figures. https://www.alz.org/media/ Documents/facts-and-figures-2018-r.pdf
2. Board of Governors of the Federal Reserve System. (2013). Insights into the Financial Experiences of Older Adults: A Forum Briefing Paper. https://www.federalreserve.gov/newsevents/conferences/older-adults-forum-paper-20130717.pdf