In cases of dementia, Alzheimer’s disease, and other issues with cognition, studies have shown that the ability to perform simple math problems and handling financial matters are often the first skills that slip away. Equally important is the research that shows that as people age, even elders that do not have issues with cognition may reach the point where making financial decisions can become incredibly challenging.
Seniors and Financial Skills
The issue of seniors handling their own financial affairs is significant in this day and age. Currently, there are 44.7 million people in the United States that are 65 years old or older, and they account for fourteen percent of the overall population. In a mere ten years, that number will skyrocket to around 66 million people, and this age group has trillions of dollars in wealth. Unfortunately, many seniors are left to manage their financial affairs on their own, despite losing the ability to do so.
Around fifty percent of all adults over the age of eighty have some level of dementia or cognitive impairment. The director of the Alzheimer’s Disease Center has said that “If you can detect emerging financial impairment early, you can also step in early and protect the person. It may be if you step in two months from now, they won’t be in a position to make a poor decision or be exploited a year from now.”
Warning Signs of Cognitive Decline
It can be difficult to determine when you should step in with your elderly loved one and take over the financial responsibilities. However, the National Endowment for Financial Education and the National Institute on Aging recently teamed up for a study to detect the early warning signs of cognitive and financial decline. The study looked at 138 adults over a period of time who were initially deemed cognitively normal when they joined and tracked their ability to handle financial tasks in addition to reevaluating the subjects for cognitive impairment.
The warning signs discovered by the study are subtle and can often be missed by a senior’s family members. However, researchers behind the study say to look for the following when determining whether your elderly loved one may be showing signs of decline.
· Difficulty identifying the risks of an investment · Focusing too much on the benefits of an investment · Completing tasks on a financial to-do list take longer · Everyday math becomes more difficult or full of errors · Financial concepts become harder to grasp
Biology behind Cognitive Decline
Even seniors with healthy brains eventually experience some level of cognitive decline, and it can affect their ability to handle finances. One study found that a person’s financial decision making abilities tend to peak at around 53 years old, or at some point in their fifties. Fluid intelligence, or the ability to solve new problems, can start to decline as early as in a person’s twenties, but it is offset by crystallized intelligence of experiences and wisdom.
Brain researchers believe that crystallized intelligence tends to plateau in a person’s seventies, and that combined with the decline in fluid intelligence might explain why seniors have more problems with cognition and financial decisions. “Our nation’s wealth is disproportionately held by older adults, and they are exactly the group, particularly as they reach their 80s and 90s, that are most vulnerable. But our system has the fewest protections for those people.”
Consider simplifying your loved one’s financial decisions or adding yourself to their accounts. You can also set up an estate plan that helps with financial decision making or create a durable power of attorney form. You can also have financial institutions send you copies of statements to ensure that everything is running smoothly with your elderly loved one’s finances.