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Do you know that millions of older Americans are experiencing cognitive decline that significantly impacts their financial skills? Surprisingly, 75% of these individuals are still managing their own money.
A recent study published in JAMA Network Open reveals that cognitive decline can lead to overconfidence, memory problems, and deficits in decision making, all of which pose risks in money management.
“If seniors with cognitive decline continue to manage household finances, they may be at high risk of making financial mistakes that have potentially severe consequences, including missed bill payments, risky investment choices, and financial exploitation,” said lead study author Jing Li, PhD, assistant professor of Health Economics at the University of Washington School of Pharmacy.
If you have a senior family member or loved one who’s an older adult, here’s what you need to know about the study findings and steps that can be taken to address these challenges.
When scientists explored the potential link between cognitive decline and money management skills, they analyzed data from the 2018 Health and Retirement Study, a nationally-representative survey of American adults aged 50 and up. The researchers focused on nearly 8,800 men and women aged 65 and older with available data on their memory and thinking status.
Eight in 10 of the individuals studied did not have any detectable cognitive impairment. However, nearly 6% had dementia and roughly 14% had cognitively impaired nondementia (CIND), characterized by slight (but noticeable) declines in memory and thinking skills that have not progressed to dementia.
When extrapolated to the general population level, the final segment of individuals represents about 7.4 million Americans.
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A majority of the surveyed individuals reported that they still manage their own finances, and 40% of them live alone. Among those who still handle their household finances, 57% of people with dementia and 15% of those with CIND found it difficult to manage their money.
Furthermore, about a third of those with dementia or CIND reported owning a lot of “risky assets” like stocks or loans. Many of those assets had substantial values, with people with dementia who had stocks having a median value of $215,000, while those with CIND had a median of $125,000.
This study was “part of a larger research agenda motivated by stories of family members who found out about a loved one’s dementia through catastrophic financial losses,” said study co-author Lauren Nicholas, PhD, a health economist at the Colorado School of Public Health.
Trouble managing money “is often one of the earliest signs of cognitive impairment—meaning that seniors may not even be aware that they have problems,” Nicholas said. But, she noted, there is “significant potential” during everyday money management for “expensive” mistakes. » …
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