The United States of America provides enough employment opportunities to its citizens that they may plan for a secure future. For most Americans, retirement implies saving up enough money to sustain them for a lifetime. Besides financial risks, there is another major risk that Americans try to elude as much as possible- the risk of cognitive decline. According to the latest report by Boston College’s Center for Retirement Research, more than half of senior Americans counter dementia or other forms of cognitive impairment by their 80s.
What’s the good news?
The data from the research shows a ray of hope about cognitive aging. People who are financially intelligent now can manage their funds well into their retirement. This is because the performance of financial activities is largely dependent on two kinds of intelligence: crystallized intelligence, which requires knowledge, and fluid intelligence, which involves making sound judgments using attention, memory, and information processing capabilities.
When people transition into their 70s and 80s, they experience no decline in knowledge, which represents crystallized intelligence. However, fluid intelligence involving cognitive brain functions start to decline from the age of 30, albeit the decline is gradual and slow. Retirees, therefore, reckon on their collective financial knowledge.
Anek Belbase, co-author of the retirement report, says that the knowledge of people used to handling money is enough to perform daily tasks, such as paying bills and managing a checkbook. But for other, lack of financial knowledge stands as an overbearing challenge. This is typically seen in the case of spouses who assume financial responsibilities later in life.
However, more serious issues can crop up as people approach their 80s as the chances of cognitive decline increase. Mild Cognitive Impairment (MCI) is the most common problem, which affects only 9% of people in their 70s, but affects 37% of those in their late 80s. Nonetheless, many MCI-affected seniors are capable of handling everyday monetary tasks, though they will need help with complex tasks. But there are greater chances of fraud because their impairment makes them overconfident in managing finances. The issue is more serious for people with dementia because caregivers often subject them to abuse.
The following are three key moves that people should make to safeguard their retirement plans:
- Hiring a financial expert.
- Having a proper plan for late retirement.
Government efforts and organizations such as the representative payee program of Social Security Administration, the Consumer Financial Protection Bureau and the FINRA provide protection to senior American investors.