Managing Money with Cognitive Decline
Despite the normal cognitive challenges that people in their 70s and 80s inevitably face, most are sharp enough to be in charge of their financial affairs or oversee them.
But the significant minority of seniors who do have trouble is explored in a new summary of the research by Anek Belbase and Geoffrey Sanzenbacher at the Center for Retirement Research, which supports this blog.
One such group is people learning for the first time how to carry out financial tasks. Widows, not surprisingly, are often required to negotiate this financial learning curve, which gets steeper as a senior’s ability to process new information erodes. With guidance from a family member or professional, however, the novices can usually figure things out.
Seniors with mild cognitive impairment might also develop problems. Mild impairment becomes fairly common by the time people reach their 70s, affecting their financial judgment and potentially their ability to manage their affairs in ways that promote their best interests. Among those with mild impairment, 82 percent can independently handle the various financial tasks they face, such as paying bills, managing bank accounts, and maintaining good credit. This compares with 95 percent of unimpaired seniors.
Another danger facing seniors with mild cognitive impairment is their vulnerability to fraud. They are usually aware they’re slipping, yet they may remain confident about their ability to handle their financial affairs.
“The combination of high self-confidence, intact knowledge of financial procedures, and impaired financial judgment” makes them “more likely to be victims of fraud,” the researchers conclude. This puts adult children and caregivers in the position of assessing whether a senior needs assistance with their finances and how to provide it.
Things become more problematic once dementia sets in. By age 85, dementia afflicts more than one in four seniors. As the condition progresses, judgment, and eventually the ability to carry out basic tasks, declines sharply. A reliance on caregivers creates another fraud issue: a greater risk of being victimized by an abusive caregiver.
As the baby boom generation reaches advanced old age, greater numbers of elderly Americans will struggle with their financial responsibilities. The challenge will be to find trustworthy caregivers and experts either to advise them or to take over completely.
The research reported herein was performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement Research Consortium. The opinions and conclusions expressed are solely those of the author(s) and do not represent the opinions or policy of SSA or any agency of the federal government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.