Ask Liz Weston

Get smart with your money

cognitive decline

Q&A: When is the right time to start simplifying your finances?

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Dear Liz: You recently answered a question about closing credit cards and mentioned the “mental load” of managing too many cards. That got me thinking about when is the right time to start simplifying my finances. I have lots of rewards credit cards and have opened several bank accounts to get bonuses, but I wonder at what age I should start consolidating so everything’s easier to track.

Answer: Simplifying our finances can allow us to better monitor our accounts, helping to avoid mistakes and fraud. Reducing the number of accounts we have also makes it easier for our trusted people to take over for us, should we become incapacitated.

But consolidating gets particularly important as we age and start to face cognitive deficits. Our financial decision-making abilities peak in our 50s, after all, and can really drop off in our 70s and 80s.

You can get ahead of this curve by consolidating accounts as you go along. When you leave a job, for example, consider rolling your old retirement account into your next employer’s plan or an IRA so that you don’t lose track of the money. If you’re thinking of opening a new bank account, consider whether there’s an old one you can close. Shuttering credit card accounts can affect your credit scores, so open new accounts sparingly and think about closing any that you’re not using, particularly if they’re newer or lower-limit cards.

Your 60s may be a good time to get serious about winnowing the number of accounts and institutions you’re juggling. Many people find it’s much easier to have one bank, one brokerage and a few credit cards than to have accounts scattered across the financial landscape.

Q&A: A greedy friend eyes a suitcase of (suspected) drug money

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Dear Liz: A person I know who is in his 80s and very wealthy recently described having a suitcase of old cash. The bills date from the time before the electronic strip was introduced. He said, “I don’t know what to do with this.” Long ago he sold marijuana. I immediately thought that this should pass into the hands of those who are struggling (which includes me). How could this be done legally?

Answer: Your acquaintance should talk to his tax pro. Money is supposed to be declared to the IRS as it’s earned, and that includes proceeds from illegal activities.

There are statutory limits to how long a person can be prosecuted for dealing drugs. There’s no statute of limitations, however, if a taxpayer files a fraudulent return or fails to file a return at all. That’s how the feds ultimately got gangster Al Capone: He was convicted of tax evasion for failing to file tax returns declaring his illegal income.

What your acquaintance should not be doing is talking to anyone else about this cash — particularly someone whose immediate thought is how to get their hands on it. He should consider getting evaluated for cognitive decline, and putting measures in place to protect himself from fraud and elder abuse.

Q&A: Is getting old reason enough to cancel some credit cards?

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Dear Liz: Recently, someone asked if closing a credit card would be worth the hassle and you responded that there is no compelling reason to do so and in fact, it might hurt your credit scores. As an older person, I can think of two good reasons: theft and fraud. Many of us of a certain age no longer carry a mortgage or other debt. But, I am finding it harder to keep track of my finances. I would like to cancel three of my five credit cards for that reason.

Answer: You misquoted my response. What I actually wrote was, “If there’s no compelling reason to close a card, you might consider leaving the account open and using the card occasionally to prevent the issuer from closing it.”

Wanting to reduce your risk is reason enough to close a card account. All of us would be smart to consider simplifying our finances as we get older, says Carolyn McClanahan, a certified financial planner and physician in Jacksonville, Fla.

You also might think about who could help you manage your finances as the task gets more difficult. A legal document called a power of attorney allows you to name a trusted person to take over should you become incapacitated. You can familiarize this person with your finances and consider giving them online access to your accounts so they can help you spot fraud, theft or missed due dates. Involving them now, when you can help guide them, is generally better than waiting for a crisis and hoping they can figure everything out on their own.