Planning for our future incapacity is something no one wants to do. Yet new research, found that avoiding planning ahead is an especially serious problem in the elderly. Olivia S Mitchell, a professor of insurance/risk management and business economics/policy at the Wharton School of the University of Pennsylvania described her research findings in the Wall Street Journal.
Mitchell found that one reason seniors avoid planning ahead is because they become increasingly impatient with age. For example, seniors in the study were asked the following question:
“Suppose you were given the choice between receiving a payment today or a payment in 12 months. Would you rather receive $100 today or $154 in 12 months?”
If the survey participant preferred waiting for $154, they were asked he same question but with a smaller amount:
“Would you rather receive $100 today or $125 in 12 months?”
The study found that, on average, seniors believe that having $1 was equivalent to having $1.85 a year from now. This is quite amazing since it is highly unlikely that someone could earn a 1 year return of 85% from saving and investing.
The study connected this exploration of patience on an investment with end of life care. Researchers found that the most impatient seniors were less likely to have long term care insurance, a power of attorney, a living will, or to have discussed end-of-life medical plans. This, of course, makes sense. One can consider estate planning an investment in you and your family’s future. Having a will and end-of-life medical instructions in place will save your family time and money down the road.
The article concludes by recommending that we conduct our end-of-life planning, earlier in life—before we become too impatient later to do the right thing.