By Anna M. Rappaport, Society of Actuaries and WISER Board Member
Many seniors manage their money throughout their entire life, but others reach a time when they are no longer able to do so. This requires financial support and caregiving. I have some personal perspectives on this. Good strategies for late in life often mirror good strategies at any stage of life: invest wisely, don’t spend what you can’t afford, plan for the longer term, and keep things simple. If an aging individual has no cognitive issues, money management does not change much with increasing age, except that the time horizon shortens. Other people are not so fortunate. Many people start to experience limitations later in life, so it is important to have a plan for who will manage your money when you are no longer able to.
The Society of Actuaries Research Institute funded research underlying Thinking Ahead: Informing the Design of a Roadmap for Keeping Your Money Safe as You age. That project offers a process for thinking through the issues related to a shift in money management, and it offers tools to help the consumer. The implementation tools were funded by the AARP. The strategies include simplifying your money management, preparing the situation so that the designated person can help you when the time comes, choosing someone to help, and turning over management as needed. This article is based on the SOA research, my personal experience, and some interviews with friends.
A turnover can be in steps. My mother went from full independence to securing support from someone who periodically checked over what she did as she paid bills and balanced her checkbook. The next step was that they did it together, and then the helper did it for her, and then my brother took over.
Managing Someone’s Finances
One of the first steps in a plan is figuring out when it is important to seek help with daily money management. This transition is challenging, but there are consequences to waiting too long. Money management, when it is needed, is often performed by a family member (such as an adult child) if one is available to help.
My mother chose to have an outsider help so she could maintain her independence. Eventually family members took over. One of the things we did was to include oversight. One child paid the bills, and another looked over the financial statements. This worked well since there were three children who were her co-trustees, and we could delegate roles.
People who do not have family members to help will still need help. This can be hard to find. Financial advisors offer help with investment management and important decisions, but they do not write checks and balance checkbooks.
In my mother’s case, her accountant had an employee who served as a daily money manager. Some bank trust departments offer such services. One of the financial advisors I have talked with recommends to her clients a bank that she knows will provide such services.
What is a Daily Money Manager?
In doing the research for the Society of Actuaries late in life projects, I found the American Association of Daily Money Managers. I recently met and had a chance to talk with one of their members, Jennifer.
- The Association offers a certification program, continuing education, regular meetings for professionals to exchange information, a liability insurance program and has ethics principles.
- Some DMMs were also accountants or CPAs but many, like Mary, were people who switched into this field as a mid-life career change. Most were not accountants.
- Daily money management fits well with a flexible work schedule and phasing down into retirement.
- Mary worked independently and her impression was that many DMMs work independently, but that some are part of larger firms.
- Mary said she was paid by the hour when she did this work. An AARP article says daily money manager charge different ways. Some charge by hour and some charge by a percentage of the money they manage.
A daily money manager can help with:
- Writing checks and paying bills
- Balancing checkbook
- Budgeting expenses
- Preparing information for tax preparation and interacting with tax return preparer
- Interaction with financial advisor
Additional functions performed by one daily money manager
Mary reported that she thinks DMMs vary in what services they provide beyond basic daily money management. She also had provided services like those that might be provided by a concierge, if the Power of Attorney or other client contact requested them. For example, she also assists with shopping, doing errands, going with people to the doctor if requested to do so, helped clients file health insurance claims, etc. She also watched over caregivers to see that they are not stealing money. She has observed some difficult situations. This overlaps with the services which might be provided by a health advocate. This is support that would often be offered by family members.
Putting the daily money manager in perspective
A daily money manager could be particularly important in the case of solo agers or in the case of individuals where no qualified family member is available. The daily money manager may also be hired by a family member if that person does not have time or is not nearby. These services might also be performed by an employee of a financial advisor or accountant or a trust department in a financial firm or bank. For very wealthy persons, the types of functions performed by the daily money manager could be done by a family office.
It should be noted that the individuals who manage other people’s money have fiduciary responsibility. The CFPB offers guides about what that means.