Numerous elderly Americans suffer from cognitive deterioration severe enough to hinder their financial abilities, yet despite these challenges, 75% of these individuals proceed with their own financial management.
A recent investigation outlined in JAMA Network Open suggests that cognitive decline can propagate overconfidence, forgetfulness, and impairments in judgment — all possibly leading to perils in managing finances.
“Older individuals grappling with cognitive deterioration who carry on overseeing household finances might be at an elevated susceptibility to perpetrate financial errors with grave repercussions, including overlooked bill payments, hazardous investment decisions, and economic exploitation,” principal investigator Jing Li, PhD, an assistant professor of Health Economics at the University of Washington School of Pharmacy, detailed to Health.
For those associated with an elderly family member or an older adult, concerns are warranted. Let’s delve into the research’s revelations and the measures that can be adopted to mitigate these issues.
In exploring the possible connection between cognitive deterioration and adeptness at financial management, investigators scrutinized data from the 2018 Health and Retirement Study, a survey that is representative of the American adult population aged 50 and above. They homed in on close to 8,800 men and women aged 65 or older who had data available on their memory and cognitive conditions.
Approximately 80% of those examined showed no signs of cognitive deficiencies. However, nearly 6% were living with dementia and about 14% were experiencing cognitive impairment not thorough enough to be classified as dementia (CIND), typified by subtle yet noticeable declines in memory and cognitive functions without being at the stage of dementia.
Extrapolating these findings to the broader population, the researchers estimate this latter group embodies approximately 7.4 million Americans.
The majority of subjects polled indicated that they manage their personal finances, with 40% admitting they live solo. Among those taking care of their own financial matters, 57% of those with dementia and 15% of those with CIND reported difficulties in handling their finances.
Furthermore, around one-third of those with dementia or CIND disclosed ownership of a considerable share of “risky assets,” such as stocks or loans. Significantly, individuals with dementia reported median stock values totaling $215,000, while those with CIND held stocks with a median worth of $125,000.
The investigation forms “a segment of a broader scholarly agenda propelled by accounts of kin discovering a relative’s dementia after calamitous fiscal downturns,” co-investigator Lauren Nicholas, PhD, a health economist at the Colorado School of Public Health, explained to Health.
Complications with financial handling “are often one of the initial indications of cognitive decline—meaning elders may be oblivious to their impairments,” Nicholas articulated. However, she emphasized the “substantial possibility” for “costly, irrevocable errors such as neglecting bill payments, succumbing to swindlers, or making unwise investment choices” during daily financial activities.
This “poses a hazard of depleting funds, as reentering the workforce is generally not a prospect later in life,” particularly for those with cognitive issues, Nicholas emphasized. “This could also create monetary strife for other family members or household members who may suffer financial loss they were dependent on or have to compensate for the shortfalls,” she added.
“These insights are deeply alarming, particularly given the expanding demographic of the elderly,” Scott Kaiser, MD, a geriatrician and director of Geriatric Cognitive Health for the Pacific Neuroscience Institute at Providence Saint John’s Health Center in Santa Monica, California, revealed to Health. Per the 2019 statistics from the U.S. Census Bureau, there are 54.1 million Americans aged 65 and older, and it is anticipated that by 2034, older individuals will surpass children in numbers for the first time in the history of the U.S.
In light of the jeopardy posed by cognitive degeneration when personally overseeing household revenue, financial preparation becomes indispensable, clarified Amy Goyer, AARP’s expert on national family and caregiving, in her discussion with Health.
“Engaging with a professional advisor, such as an accountant or financial planner, can contribute valuable assistance in decision-making,” she recommended. Establishing a power of attorney for financial matters before the onset of cognitive deterioration is critical, to ensure that if mental decline should occur, protective mechanisms are already in place, Goyer advised.
“Safeguarding against scams and fraud is also essential, as individuals experiencing cognitive decline may be targeted,” she noted. “Implementing alerts and notifications so that a family caregiver is informed about atypical activities in their accounts is extremely beneficial.”
Aiding a family member to register for the Do Not Call list can also be effective in protecting against aggressive salespeople, she mentioned. Moreover, AARP provides a financial manual for family caregivers outlining detailed guidance for overseeing a relative’s monetary affairs.
Premature screening for cognitive deficits, which can often be conducted by a primary care doctor, is equally paramount, Dr. Kaiser mentioned. This also assists with preparation, as Li highlighted, because “recognizing cognitive deficits promptly can aid in organizing finances before they deteriorate to a stage of dementia.”
While it may be daunting for someone to contemplate confiding in another person with their finances, Nicholas stressed the importance of having a meticulously devised strategy in place.
“The merit in appointing a financial surrogate could amount to thousands or millions of dollars since adults in their golden years have limited safeguards against willingly transferring assets to deceitful individuals, or if they cease making payments on dwellings, mortgages, or taxes—even when these lapses stem from cognitive challenges,” she elucidated.
Goyer concurs. “It’s preferable to be ready and establish powers of attorney for finances while an individual is lucid and capable,” she stressed. “Then, if or when they are necessitated, a fiscal delegate is ready and able to assist.”
