Millions of older Americans struggle with cognitive decline, making it hard for them to manage their money, yet 75% still do it themselves. A study in JAMA Network Open shows that cognitive decline can cause overconfidence, memory issues, and bad decisions, increasing financial risks.
Dr. Jing Li from the University of Washington warns that these seniors may face serious problems like missed payments, risky investments, and being taken advantage of.
The study analyzed data from the 2018 Health and Retirement Study, focusing on 8,800 individuals aged 65 and older, assessing their cognitive status and financial management abilities.
Findings revealed that 6% had dementia, while 14% had cognitively impaired nondementia (CIND). Applied to the general population, this represents about 7.4 million older Americans at risk of financial mismanagement due to cognitive decline.
Survey data showed that most older adults manage their own finances, with 57% of those with dementia and 15% with CIND reporting difficulties. A significant number of these individuals held risky assets, with substantial median values, posing a risk of catastrophic financial losses.
Co-author Lauren Nicholas from the Colorado School of Public Health noted that trouble managing money is often an early sign of cognitive impairment, which can lead to severe financial mistakes and exploitation.
Financial planning and early cognitive screening are crucial, emphasized by experts like Scott Kaiser from Providence Saint John’s Health Center and Amy Goyer from AARP.
They advocate working with professionals, designating a power of attorney for finances, and setting up alerts to protect against scams. Early detection of cognitive decline can facilitate better financial planning, preventing severe financial consequences.
Nicholas and Goyer stress the importance of proactive financial measures. Designating a financial representative early can protect against significant losses, as cognitive impairment often results in errors that are not easily reversible.
Financial planning should include setting up a power of attorney while the individual is still of sound mind and ensuring a trusted person can manage finances if cognitive decline occurs.
As the aging population grows, addressing cognitive decline’s impact on financial management becomes increasingly critical. Families and caregivers must take proactive steps, including professional financial advice, early cognitive screening, and safeguards against financial exploitation, to protect older adults’ financial well-being.
