Ep 72: Ric Edelman - The Financial Implications of Alzheimer’s Disease (part 1)

Alzheimer’s disease can devastate families financially and requires smart financial planning for healthy longevity. Investment Advisor and New York Times bestselling author Ric Edelman and host Meryl Comer discuss the financial implications of Alzheimer’s. Mr. Edelman highlights a few common financial mistakes individuals often make, including procrastination in planning for retirement. Better diagnostic tools for Alzheimer’s and the importance of early detection are needed to help manage the building economic burden of the disease on individuals and society. You won’t want to miss this informative episode of BrainStorm!

BrainStorm by UsAgainstAlzheimer's is sponsored by Biogen and Eisai

Produced by Susan Quirk and Amber Roniger

Transcript

Meryl Comer(00:00):

This year's UsAgainstAlzheimer's National Summit is on October 16th to 17th. This virtual gathering brings together international leaders to explore solutions to the most pressing challenges facing brain health. This year's theme, The New Era of Alzheimer's. What Does It Mean for All of Us? Don't miss our keynote speaker, Dr. Dean Ornish, founder and president of the Preventive Medicine Research Institute. For more information about the US against Alzheimer's annual Summit, go to us a two summit.org.

Intro (00:38):

Welcome to BrainStorm by UsAgainstAlzheimer's, a patient-centered nonprofit organization. Your host, Meryl Comer, is a co-founder, 24 year caregiver and Emmy Award-winning journalist and the author of the New York Times bestseller, Slow Dancing With a Stranger.

Meryl Comer(00:56):

This is BrainStorm and I'm Meryl Comer. Our topics Smart, planning for Healthy Longevity, and the Bankrupting Cost of Dementia. Our guest is leading investment advisor, Rick Edelman. He is the number one rag New York Times bestselling author on personal finance 12 times over and his podcast, the Truth About Your Future Ranks in the Top 1% Nationally. Rick, thank you for joining us.

Ric Edelman (01:23):

I'm thrilled to be with you, Meryl. Thank you,

Meryl Comer(01:25):

Rick. From your years of investment experience, what are the most common financial mistakes that smart people either trying to build their financial worth or protect their retirement, continue to make?

Ric Edelman (01:37):

I'd say that they fall into two categories and they seem to be contradictory to each other, which is all the more interesting. The first mistake people make is figuring, oh, I've got plenty of time. I'll worry about this later. I'll be making more money in the future. I'll have fewer obligations in the future. Right now, my current expenses are high. I am not making as much as I will later. So they procrastinate and they figure they got plenty of time to worry about it later. The problem there, of course, is that they're squandering the most valuable resource we all have, which is time and the power of compounding. So people in their twenties, thirties, forties, say they'll worry about it in their fifties, sixties, seventies, and by the time they get into their fifties, sixties, seventies, they wish they had started 30 years ago. So that's the first mistake, is procrastination.

Ric Edelman (02:17):

The other mistake, which seems to be contradictory to what I just said, when people put things off and they delay 'cause they figure they got plenty of time. On the flip side of that, people dramatically underestimate how much time they actually have. If you ask them, how long are you going to live, people will routinely say, oh, I'll live into my seventies or my eighties. What people don't understand is that they're highly likely to live into their nineties, even to age 100 and beyond, which means that they're going to have to have accumulated an awful lot of money to provide for their very long retirement, much longer than they are anticipating. Good news is you're going to live a long time. The bad news is it's expensive. Takes a lot of cash to do that. So on the one hand, you're procrastinating, and on the other hand, you're underestimating how much you're going to need.

Meryl Comer(03:02):

Rick, I just checked the life expectancy stats. For a male, it's 80 years a female 83 to 84 has the trending longevity curve, upended that classic 60 40 investment strategy for those planning retirement.

Ric Edelman (03:18):

It really has. And in fact, the data you just cited, which is accurate, is also backward looking. When you look at all the actuarial data, the, I'm not sure which set of data you turn to, but whether you look at the IRS actuarial tables or the Social Security administration's data, or the Pew Research Foundation's Data, bureau of Labor Statistics, everybody says the same thing. If you're in your sixties, you've got a 20 or 25 year life expectancy. But what that is ignoring is the radical expansion of medical innovation and technology. In other words, if you're 60 years old today with a life expectancy to 85, guess what medical innovations are going to exist by the time you're 85. We're enjoying a radical expansion of knowledge unprecedented in human history, and as a result of this, you can widely anticipate that the diseases that are killing us today are likely going to be cured long before the time you ever get there, which means by the time you're in your eighties, life expectancy will then shift into nineties and hundreds and beyond.

Meryl Comer(04:22):

Rick, the headline in a recent Wall Street Journal article, read The Tried and True 60 40 portfolio and 4% withdrawal rate in retirement could lead to catastrophic outcomes if markets behave differently than in the past. Isn't the bottom line that the prospects for longevity should prompt us all to rethink everything, including our retirement investment strategy? There

Ric Edelman (04:47):

Are two primary issues, both of them related to the 60 40 portfolio. 60 40 is the routine mix that most advisors recommend. Most clients own 60% of your money in stocks, 40% of your money in bonds. That 60 40 mix is time tested. It's well known. It works and has worked for decades. But here's the problem that 60 40 is too low for today's environment because of the incredible advances we're making in exponential technologies, which is the basis of my 12th book Over My Shoulder. The Truth About Your Future, that book is all about artificial intelligence, robotics, ai, big data, 3D, printing, nanotech, biotech, bioinformatics, financial technology, EdTech, AgTech. All of these technological innovations in addition to crypto and the metaverse are creating investment opportunities that are unprecedented. So on the one hand, a 60 40 mix is probably 2 70, 30 might be more appropriate, and second is something called the glide path.

Ric Edelman (05:51):

In other words, how long are you going to have a big allocation to stocks? Most people are in agreement that the younger you are, the more of your money you can have in stocks because the younger you are, the longer you have and the more you can tolerate risk makes a lot of sense. I don't think we would argue that a 20-year-old should have a 60 40 portfolio. They should probably have an 80 20 or a 90 10 because they've got so much time ahead of them. But thanks to today's longevity curve, even a 60-year-old can anticipate a 30 or 40 year lifeline, which means 60 40 is probably too conservative even for them. And more importantly, what's the glide path? When are you going to reduce the allocation from 70 30 to 60 40 to 50 50 to 40 60? We need to do a couple of major things. We need to increase the 60 40 to 70 30, maybe even maybe 20, and then we need to own it longer than we would ordinarily have thought. Instead of reducing your stock market exposure in your sixties, you probably want to hold onto that well into your eighties. So we need to update our investment strategy to take into account the longevity that we're now experiencing for the first time ever.

Meryl Comer(07:02):

What's your advice to those individuals that are changing their estate plans to irrevocable trust to avoid that anticipated tax exemption scheduled to go into effect in 2026?

Ric Edelman (07:16):

Well, we are going to see a huge rash of changes in our tax code because we have an election coming up, and both Kamala Harris and Donald Trump have signaled significant changes to tax law. So it's really hard to say right now what the outcome is going to be. We'll have to wait and see who wins the election, who controls the house and Senate, but no matter what the outcome, we can anticipate changes. There are two elements to this. One is the tax rate you pay today, the other is the tax rate you're going to pay in the future, and second is probate. When you finally do pass, how do we transfer our assets to our heirs? You either go through the probate process or you skip it with proper planning. The irrevocable trust idea that you mentioned is designed to avoid the probate process, which saves your heirs an awful lot of time and money and headache, but that doesn't necessarily lower taxes. So we have to engage in two different sets of strategies, one for tax and one for management, and we're going to have to wait and see on the tax side what happens with the new administration

Sponsor (08:16):

Support for BrainStorm by UsAgainstAlzheimer's comes from Biogen, driven by our commitment to patients and our strong business foundation. Biogen remains dedicated to furthering Alzheimer's disease research and treatment aiming to help address the unmet needs in this devastating condition with an emphasis on early stage disease.

Meryl Comer(08:36):

Rick, you talk about protecting oneself in retirement. The fact is that two thirds of those who get Alzheimer's are women, and we're also two thirds the caregivers. Is your investment advice on protecting oneself the same for women as men?

Ric Edelman (08:50):

It is. We do insert, I think, an extra level of urgency and imperativeness for women for the two reasons you cited. You're more likely to live a long time, you're more likely to outlive your husband rather than he outlive you, and you're more likely to suffer from Alzheimer's or other dementia. So it is a more imperative conversation for women. But nevertheless, we encourage all folks to pay attention to the likelihood that you're going to live a really long time and the longer you live, the more likely you'll develop Alzheimer's or other dementia. The likelihood of getting at age 60 is about one in 10, but by age 85 it's one in three. So we do have to pay attention to this. So we look at today's leading causes of death, respiratory illness, heart disease, cancer, diabetes. These are all likely to be cured over the next couple of decades thanks to medical innovation.

Ric Edelman (09:39):

But what's not on that list of cure is Alzheimer's. Despite 30 or $40 billion spent on research over the past several decades and many, many therapies and drugs in the pipeline today, we still don't have effective therapeutics. We don't have a cure, we don't have a vaccine, we don't have effective treatments, and this means we need to recognize that in our eighties and nineties, it is very possible that we're going to have to deal with this, and that means we're going to need to have plenty of money and plenty of advanced planning to protect ourselves from this. And it's particularly acute for women. As you noted,

Meryl Comer(10:14):

Rick, many in their prime are unwilling to step forward and be tested because they're afraid and rightly so, that the stigma of the disease will marginalize them professionally and they'll be unable to protect themselves financially. What's your reaction to those concerns?

Ric Edelman (10:30):

I'm one of those entrepreneurs that is building efforts to create a diagnostic tool, and we are hopeful to be bringing our effort into the marketplace by the end of this year or Q1 of next year. And you're right, people are asking a very valid question, why should I bother to get tested if there's nothing you can do about it? Well, fortunately, there now is a raft of research that shows you can do something about it. While we're waiting for that purple pill to swallow, that will be the vaccine or cure of Alzheimer's. In the meantime, there are a variety of lifestyle changes that have been documented, very, very successful at delaying symptoms or reducing symptoms. And you know what all those lifestyle issues are because it's the same lifestyle issues for every other aspect of our health, diet, exercise, sleep, stress, and relationships. If we pay attention to those issues of our life, then we're going to be able to combat and thwart Alzheimer's in a way that we didn't realize we could five years ago. I think that you're right, Meryl, that people are reticent to know if they have this. They don't want the mental and emotional and psychological burden of knowing that this is in their future. But increasingly people will discover that the sooner they know, the sooner they really can do something about it.

Meryl Comer(11:44):

Why did you and your wife decide to own a research company focused on early diagnostics? What do you see in the future?

Ric Edelman (11:52):

We've been  in the Alzheimer's fight, and as you have Meryl for decades, and the reason that Gina and I got involved in this fight is because of what we saw our clients experiencing. We were seeing an incredible frequency not only of clients getting Alzheimer's, but parents of clients getting Alzheimer's. And in both cases we saw the financial impact of that Alzheimer's, that's not a word any of us grew up hearing. We heard cancer, we didn't hear Alzheimer's. Alzheimer's is a relatively recent phenomenon reflected by the fact that living long ages is a relatively recent phenomenon. Alzheimer's doesn't strike people in their twenties and thirties the way cancer does, and so it's only because people are living so long that we're seeing more and more incidents of Alzheimer's. And at the same time, we're seeing that medical science is not yet delivered drugs that we need to fight this disease, which means we are left to lifestyle.

Ric Edelman (12:45):

And it all begins with diagnostics. Until you know you have an illness, you can't begin to treat it. So we recognize that if we're going to find our little place in the world of the Alzheimer's fight, where can we be most effective? It's in the creation of a diagnostic tool because there are no diagnostic tools that are good enough yet readily available, yet affordable yet. And this is the first step we believe toward enlightenment for the vast majority of people. We routinely get blood tests when we go get a medical checkup that screens for dozens of illnesses. Why are we not doing similar for Alzheimer's? So this is why we decided to focus our energies in that area.

Meryl Comer(13:29):

Rick, the early apo, E four blood-based biomarkers have shown impressive accuracy and will be far more accessible than expensive PET scans that are out of pocket unless you're in a study. What pressure do you see these innovative diagnostics putting on both private and government payment systems?

Ric Edelman (13:48):

People are getting this diagnostic tool and a certain percentage of them test positive as likely to develop this in the next 10 to 20 years. That's going to create a demand for more government funding to create treatments and cures and vaccines. So I think that this is really the key element for us getting to where we finally need it to be.

Meryl Comer(14:07):

Rick, there is typically a 10 to 15 year cycle before physicians and providers get on board to offer tests and for Medicare to reimburse for these new technologies. Isn't it up to the public to advocate for and demand access?

Ric Edelman (14:22):

We don't, as you know, the economic cost of Alzheimer's is going to bankrupt the country, so we have no choice but to deal with this, and so far it's getting too little attention.

Meryl Comer(14:31):

Our investments in these new diagnostic technologies advised for the average investor,

Ric Edelman (14:36):

When you say investments, you mean for someone to invest in in the hopes that they'll be able to profit from this advent? It's early stage. The companies that are exploring this space are startups. It's what I'd have to call mine. Jean and I have so far been self-funding the company which has four PhDs working in this space with us, it's high risk and we're not sure of the economic viability. I'm not terribly worried if it isn't the greatest investment in the world because our primary purpose has been to use this as a fight against this dreadful disease. But we are anticipating that if the diagnostic tool we're building proves to be as effective as right now, it looks like it will be that it will perform very well in the marketplace. It'll generate an ROI for us, which will be nice to see, considering the many, many years and many, many dollars we've been devoting to this. But that said, there aren't easy ways for people to invest in this space that isn't a lot of money and a lot of time the big drug companies tend to be working on the treatments, cures and vaccines rather than the diagnostic tools. So I don't know that this is really a space for most folks to have access to at this stage.

Meryl Comer(15:45):

The 2020 study published in JAMA Internal Medicine found that deteriorating financial capabilities are among the earliest signs of cognitive decline. People miss mortgage payments fall behind on credit cards or make impulsive purchases or put money in risky investments even up to five years before diagnosis. What is the fiduciary responsibility and liability of both investment advisors and financial institutions around managing this issue?

Ric Edelman (16:15):

Yeah, it is a huge concern. We've known for many, many years that our peak intellectual performance with finance is in our early fifties. And this is a challenge because most people who are managing their money in their fifties have been doing it for 20, 30 years, our whole adult lives, and they continue to do it in their sixties and seventies and eighties. And as their abilities decline, their attitude is, I'm fine. I've been doing this my whole life, don't get in my way. And they may not even be aware of the fact that their abilities are declining, that their performance is weakening. To your point, they may be failing to balance their checkbook, failing to pay bills timely. They may be making bad investment decisions. They may be more likely to become victimized by scams and frauds. And so we all must be diligent. And there are, I would say, three major groups here who need to be paying attention.

Ric Edelman (17:06):

Number one, your spouse and family, they need to be looking at you very frequently. Next time you visit mom or dad, are there bills laying around? Does the car have any dents in it? Take a look around the house and see if it seems to be maintained in an orderly faction. If not, and it's unusual, that's a red flag. Second is your financial advisor. Your financial advisor probably has been with you for a number of years, knows you and your habits pretty well. If the advisor is paying attention and they should be, they should be able to identify behavioral changes. You're not paying attention, you're not retaining information. You are forgetting to do things that you had promised to follow up on. You are making sudden new requests regarding your money deposits or withdrawals or changing your investments, making new purchases and sales of securities, all of which may seem to be out of the norm.

Ric Edelman (17:56):

The advisor should be aware of this. And if so, talking to a trusted contact that you have, you should be providing your advisor with the name of a trusted member of your family or a close friend or member of the clergy that you have a relationship with, who the advisor can reach out to, to help ensure that you are aware of this and that we're protecting you against yourself with bad financial mistakes. And the third is your physician. You likely have as long a relationship with your doctor and they ought to be paying attention as well because you cited it really well, Meryl, that while we're trying to identify the potential for us to be suffering from cognitive decline, it often does show up in routine, mundane, daily tasks. When you're out at a restaurant, you struggle calculating the tip. It's very simple things along those lines. And as you noted, these kinds of issues can surface years before you might otherwise suspect that you might be having issues.

Meryl Comer(18:52):

Our guest has been leading financial advisor, Rick Edelman in part two. We examine options around long-term care and he shares forecasts from his two most recent books. The truth about artificial intelligence and the truth about crypto

Ric Edelman (19:08):

I would recommend for people from their twenties to their sixties is the truth about crypto blockchain. Bitcoin digital assets is one of the most revolutionary new technologies in the past quarter century. It is internet 3.0. The internet, of course, invented in the 1990s. We all wish we had invested in internet stocks back then. We all missed it. Now we have an opportunity not to miss this one being a totally brand new asset class. Most people are unfamiliar with it, don't understand how it works. It's a totally new conversation, just like computer technology was new back in the nineties.

Meryl Comer(19:43):

That's it for this edition. I'm Meryl Comer. Thank you for brainstorming with us.

Sponsor (19:49):

Support for Brainstorm by UsAgainstAlzheimer's comes from Eisai. Early Alzheimer's disease, sometimes called mild cognitive impairment or mild dementia due to Alzheimer's disease, is a progressive type of brain disease that causes problems with memory, language and thinking. You cannot stop Alzheimer's disease from getting worse, but you can take steps to slow how fast it progresses. If you or someone you love is experiencing memory loss or problems with thinking, it's important to speak with a doctor about your concerns and available treatment options that may help. To learn more about a treatment option for mild cognitive impairment or mild dementia due to Alzheimer's disease, visit treat alzearly.com. 

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