Thursday, April 10, 2014
New findings in psychological and neuroscientific research are explaining why elderly investors can end up as victims of financial predators. As people age, they become focused on maximizing positive emoticons and social interactions, and thus pay more attention to those who make them feel comfortable. At the same time, this leads older people to neglect warning signs that may expose them to theft and fraud.
Even highly intelligent retirees find it more difficult to distinguish safe investments from risky ones. Some research indicates that compared with younger investors, those over the age of 65 “showed striking and costly inconsistencies in their financial behavior.” For example, elderly individuals tend to make simple errors that younger investors avoid, and these problems only worsen with dementia.
It becomes important to monitor the financial health of aging parents as closely as their physical health. For younger investors, experts recommend consulting with trustworthy people such as a spouse, wealth adviser, or accountant before making any changes to a financial plan. “Train yourself not to make a lot of fast decisions. . . Set up a simple plan and stick to it.”
See Jason Zweig, Finances and the Aging Brain, Wall Street Journal, March 28, 2014.