Protecting your mental wellbeing

Many of us can now look forward to a longer retirement due to increased life expectancy, however this could come at a cost. The prevalence of age-related cognitive decline is on the rise, which could leave those affected vulnerable to costly financial errors.

It is estimated that there are around 885,000 people living with dementia (ranging from mild to severe dementia) in the UK, which equates to around 7.1% of the UK older population. This is projected to rise to one million people by 2024 and around 1.6 million by 2040.

Other estimates suggest that between 5% and 20% of over-65s currently suffer from mild cognitive impairment (MCI) – a condition in which someone has minor problems with cognition, such as thought process and memory. Whilst the symptoms of MCI are not severe enough to interfere significantly with daily life and so are not defined as dementia, a person with MCI is unfortunately more likely to develop dementia later in life.

Retirement planning should include every eventuality, including mental decline

Despite many affected people still having the capacity to make decisions and live independently, MCI has been linked in studies to poorer financial capacity and a greater susceptibility to scams. This is why an essential element of preparing for your retirement should involve planning for the possibility of cognitive decline.

It’s all about timing

In a 2021 survey, over 80% of investors felt the ideal time to transfer financial control would be ‘sometime after they had begun to experience some cognitive decline but before they became completely incapable.’ It can be tricky to get this timing right though. Respondents thought there was a higher than one-in-three chance of a mistimed transfer, partly attributable to a reluctance to relinquish control, which highlights the need to plan sooner rather than later, so that any future transfer takes place on your terms.

Lasting power of attorney (LPA)

An LPA covers decisions about your financial affairs, or your health and care. It is set up while you still have capacity to make sure you’re covered in the future and it comes into effect if you lose mental capacity, or if you no longer want to make decisions for yourself. Want to know more about LPAs? You can find out more on gov.uk.

Make time to talk

Preparing for the possibility of cognitive decline requires careful planning, not only having legal documents, such as an LPA in place, but also starting conversations with your family and those you trust about your finances objectives and wishes, in advance of its possible onset. This fosters transparency and, with everything out in the open, your close connections are more likely to notice if you begin making decisions about your money that don’t align with your previously stated objectives.

Let us help

Although many of us will never be affected by this issue, it’s an important one to consider when thinking about your later years. Thankfully you can get help from experts at MyRetirement. We can assist you with all your retirement planning needs and in starting these conversations with family well in advance, enabling you to better plan for your future, giving you a greater sense of control and ownership of your retirement plans.