Study Finds Mental Decline Is Causing Financial Trouble For Millions Of Seniors
As we age, we become increasingly forgetful and more easily lose our train of thought, according to the Mayo Clinic. This makes handling important decisions, like our finances, much more difficult. According to a new study in Geriatrics, more than 7 million adults over 65 in the United States with some level of cognitive impairment also manage their finances. This poses a potential problem of mismanaging more risky financial assets.
The study classified more than 8,000 respondents over 65 from the 2018 Health and Retirement Study according to their cognitive status. They asked whether the participants managed their own finances and if they had problems managing their money. The researchers also collected information about their risky assets and whether the respondents lived alone.
Although less than 6% of the respondents had dementia, more than 56% of them said they had trouble managing their finances. Of the 13% of respondents who had cognitively-impaired non-dementia (CIND), 15% of them reported difficulty in organizing their finances. Less than 4% of the respondents with no cognitive impairment said they had trouble with financial management.
Among all respondents who had trouble managing their money, 43% of them lived alone. About one-third of respondents who had some cognitive impairment had risky financial assets. The researchers noted that these financial assets could possibly be mismanaged because of cognitive issues.
Importance of financial planning for seniors
The researchers said the results of this study stress the importance of detecting cognitive decline early and making plans to name someone to assist with financial planning well before cognitive decline (per U.S. News and World Report). Even people who aren't clinically diagnosed with dementia might not be aware of their difficulties in managing their financial situations. The study suggested simplifying their financial portfolios and offering financial counseling for those who might have cognitive impairment.
A recent commentary about the study in Geriatrics emphasized the importance of the study's results. It noted that those suffering from cognitive impairment who have more risky financial assets such as stocks, loan-related assets, and self-funded retirement accounts are at risk of scams and bad decisions.
Living alone poses a more significant problem, especially when it comes to scams. The author of the commentary, Dr. Jason Karlawish, wrote, "It is quite possible someone may be stopping in or monitoring these persons from afar, as some do for family members with cognitive impairment who live alone. Living alone and experiencing difficulty managing one's money, however, may lead to costly errors such as encountering a phone scam without someone nearby to say, 'Hang up!'" Karlawish called on financial institutions to help older customers by asking if they have difficulty managing their finances and referring them to financial counseling or a physician.