Hitting your peak later in life (and planning for the lows)

“At 69 lots of joints are a bit creaky but you’re still healthy. And you’re already retired, so you don’t have those annoying work pressures and you’re probably still in the honeymoon phase of retiring, where you don’t miss work all that much. There’s very little to regret at this stage.”

If you’ve had children, you might also be a grandparent, which Kuestenmacher points out is generally a source of joy. It is also likely that your parents will have passed and, despite the loss, you will no longer have the pressure of caring for them. With any luck, you might already have paid down your house.

“Lots of things work in your favour,” Kuestenmacher says.

Even as you head into your seventies you will still be growing your vocabulary, which doesn’t peak until you are 72, and your happiness with your body also only peaks in your seventies. Finally, your psychological happiness keeps growing, or improving, until your mid-eighties.

Pre-retirement

Even leading up to retirement age, your knowledge doesn’t peak until you are in your fifties and sixties.

While absolute brain computing power peaks in your very late teens, your ability to work with information and make sense of it is something you build throughout your life. This makes people in their 50s and 60s better positioned to be in leadership roles as they can make sense of all the new information coming at them.

At this point you have spent the first 50 or so years of your life building an intellectual framework which is incredibly useful. If you are not inclined to leadership, why not use that intellectual capability to focus on your retirement strategy and boosting your superannuation over the next few years.

The downhill slope

But all good things come to an end and cognitive decline is unavoidable eventually. For most people, this starts in the mid-seventies.

“Cognitive decline is not a rapid event,” Kuestenmacher says.

“It’s not like you’re completely cool on Tuesday and on Wednesday you’re screwed. That’s not how it happens. It’s a small, slow process. So, you need to ask these super awkward questions of yourself: When should I stop trusting myself? When should I be handing over decision-making powers to others?”

This is where it can become awkward as anyone who has had difficult discussions with ageing parents knows. The best time to be thinking about what to do with your superannuation and retirement funds when cognitive decline occurs is well before that starts to happen.

“Theoretically, you can set all those things up in your sixties or seventies, when you’re well and truly capable. Let the organisation that you choose manage all of those things for you,” Kuestenmacher says.

The ramifications of not doing so can be dire.

Scammers are increasingly targeting older people who are much wealthier than previous generations because of super but also, unfortunately, increasingly at risk. People over 65 accounted for the largest number of reports made to the ACCC’s Scamwatch last year (2022) and lost the largest total amount of $120.7 million.

Generally, people maintain some decision-making abilities as they head into their seventies and eighties, but it is very difficult to recognise at that point that you may not fully understand everything involved in those decisions. This is even more difficult for people who held leadership or management roles during their working life.

“But I think if you essentially make this decision 15 years earlier, and you find your peace with that, that’s a better way,” Kuestenmacher says.

Make a plan

It may even be wise to make a retirement plan, not dissimilar to an investment plan, that has absolute rules around what you do at certain points or certain ages.

Just as an investment plan might include a rule that dictates you sell a stock if it rises by 20% in value, your retirement investment plan might include a statement around shifting your pension into more defensive assets at a certain age and leaving them there. Or it could be something simple as ‘I will not buy stocks on a family or friend’s recommendation after age 70’. As Kuestenmacher says, these are just numbers that you create rules around in order to make optimal life decisions.

“Sometimes these kinds of exercises get easier when you don’t say ‘I’ but when you speak about yourself in the third person,” he says. For example, a hypothetical pre-retiree, let’s call him Geoff, might write in his retirement investment plan: ‘Geoff will not buy stocks on a family or friend’s recommendation after age 70’.

The earlier you include these rules in your investment plan for retirement, the longer you will have to come to terms with them and accept them.

Steps for dealing with cognitive decline:

• Understand that cognitive decline usually starts in your early to mid-seventies.
• You won’t always be aware that it has started and how it is impacting you.  
• Make a plan before then – in your mid 60s – around what you will do about important decisions concerning your finances in retirement.
• Know that you will be more susceptible to financial scams as you age so put in place safeguards and outsource the risk if possible.
• Research shows that speaking about yourself in the third person can help psychologically when making these plans.

The bottom line

Nobody wants to think about ageing and cognitive decline before they absolutely must but the sooner you do, the better off you will be in the long run.