Making Financial Sense: Aging and Your Finances

James C. Knapp, AIF®

I thought it important to focus this month’s article on Aging Well and what that may mean to your financial future.

As we age, the greatest benefit is the accumulation of knowledge and experience. From this knowledge and experience, we are able to learn from our past mistakes, and hopefully, make more informed decisions in the future.

Unfortunately, managing your financial affairs may not work in the same manner as other life endeavors. Imagine studying for your college final exam or when you were taking your driver’s test. The worst case scenario would be  having to retake the academic course or driver’s test until you achieve a passing grade. Regrettably, your financial affairs rarely get a fresh start or redo. Those mistakes can affect you for many years to come.

Mistakes made in your financial affairs can have drastic implications. In previous articles, I outlined the fact that negative returns & high volatility are typically destructive to wealth building. It is imperative that you are aware of how your portfolio could act in various market environments and that you are comfortable with both outcomes whether it be positive or negative. Remember, your hard earned financial assets rarely get a redo.

Historically, bear markets and recessions often occur many times over a lifetime and can begin for a variety of reasons. I suggest that you be prepared for the next bear market at all times and enact strategies that strive to preserve your financial affairs. Prepare for a downturn before it occurs, not after it’s already underway.

To provide some context, consider these facts according to the Bloomberg article “Be Prepared for a Bear Market” by Ben Carlson. Since World War II, there have been 15 bear markets[1] in the S&P 500. On average in these bear markets, the S&P 500 fell almost 30 percent. It can also take some time to break even in stocks after a bear market. The longest breakeven period in this timeframe was after the 2000-2002 bear market, when it took five years and eight months for an investor to recover from the previous peak.[2] After the recession of 2007, it took four years and five months to make your money back.

This knowledge can help mitigate some common assumptions about aging and finances. As humans, we generally have a positive outlook, though this can make us too comfortable in our current status and progress. Some detrimental assumptions that I have experienced guiding families are:

1.      The belief that they will be healthier than they will be

2.      The belief that they will have more money than they do

3.      The belief that their families will step up and help when needed

I’ve also found that many aging adults have a desire for their family members or close friends to take control of their financial affairs should anything occur to make them unable to do so. Though sadly, many aging adults never have the important conversations about their finances with their family members. I suggest you seek ways to engage family members as early as possible to ensure their financial well being and their wishes are carried out in a manner they desire.

Regardless of health, status, etc, I ask you to reach out to your mother and father discussing who they would like to take over their affairs should the need arise for someone to step in. If you have adult children, please share with them your wishes and share your approach to managing money and what experiences have helped shape who you are and how you see the world. Don’t keep these tidbits to yourself. You may be surprised that this can even bring your family closer together.  

Recognizing diminished mental capacity of aging adults is critical. Therefore, I want to share with you several common early warning signs which may indicate an individual’s declining financial decision-making ability. Should you recognize these symptoms in your loved ones, please make an attempt to have a conversation with those affected. These signs may include:  

1.      Slowness in completing financial tasks

2.      Missing key data in financial documents

3.      Problems with everyday arithmetic

4.      Decreased understanding of financial concepts

5.      Difficulty identifying investment risks

 Aging is a beautiful and natural process that we should embrace and cherish. With age comes great responsibility to do your part in helping make the next generation more knowledgeable so they can avoid the same mistakes you may have made or seen others experience.

Knowledge is your power. I believe the best strategy is one that makes sense to you and one that you can stick with!

Please consider us as a resource for you in your endeavor to financial independence. For more educational articles or videos, visit If you have specific questions, don’t be shy and reach out to James at This email address is being protected from spambots. You need JavaScript enabled to view it..

Securities offered through LPL Financial, member FINRA/SIPC


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.


The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.


Investing involves risk including loss of principal.

[1] The technical definition of a bear market is a drawdown of 20 percent, though I have included the four times that stocks have fallen 19 percent in this period.

[2] Assuming reinvestment of dividends