Updated 01 October 2013

Seniors may struggle with financial decisions

People aged 65 to 90 are significantly less likely than their younger counterparts to make what researchers define as rational decisions regarding money.


Years of research have produced conflicting findings on ageing's effects on brainpower. Now, a new study says that people aged 65 to 90 are significantly less likely than their younger counterparts to make what researchers define as rational decisions regarding money.

Not surprisingly, they're also more averse to financial risk than middle-aged people, but not in all situations, the investigators found.

Families, doctors and other caregivers "should be aware of these profound differences" in how older people make decisions compared to younger people, said study co-author Ifat Levy. She cautioned that the tests used in the study have limitations, however, and "further research is needed to directly relate these measures to real-life behaviour".

At issue is the ability of seniors to consider risk when it comes to money.

There's some evidence that some types of decisions in general actually do improve with age. "It seems that older adults may be better in decisions that rely mainly on prior experience and knowledge," explained Levy, an assistant professor of comparative medicine and neurobiology at Yale University.

Indeed, another study published recently in the journal Psychology and Ageing found that seniors can make better decisions than younger people because they know more. But their brains also work more slowly, and they need more time to figure out complex financial situations, that study also found.

Worse decisions

In the new study, researchers gave test questions to 135 people in the age groups of 12 to 17 (adolescents), 21 to 25 (young adults), 30 to 50 (midlife adults) and 65 to 90 (older adults).

"Some of the choices were between gains: For example, would you prefer to receive R50 for sure or to play a lottery with a 50 percent chance to win R200?" Levy said. "Other choices were between losses: For example, would you rather lose R50 for sure or take a 25% chance of losing R500?"

One question had a "correct" answer, she noted. It asked participants to choose between winning R50 for sure or playing a lottery that would award R50 or nothing. "A participant who is interested in making money should always go for the sure amount in this case," Levy said.

Other questions asked the participants to consider financial situations in which the level of risk isn't clear. Overall, Levy said, "the choices that participants encountered in the experiment are simplified versions of real-life decisions."

Even though their brains were in good shape, the older people made worse decisions than younger people, Levy pointed out.

Mild cognitive impairment

Older people didn't like risk much compared to young and middle-aged people, and neither did teens, she said. But the seniors were willing to take on more risk when it came to choosing between levels of financial loss.

What's going on? Levy pointed to one possibility: a loss in thinking powers related to deterioration of the brain due to ageing. Also, she said, the study shows that seniors were less able to comprehend numbers than younger people.

Dr Gary Small, a brain researcher and director of the Longevity Centre at the University of California, Los Angeles, said the study is interesting. But, he said, it's limited because it may include seniors who suffer from "mild cognitive impairment a precursor to dementia which may have interfered with their decision-making."

What to do? "Doctors and families need to keep in mind that older adults may have new decision-making challenges as they age," Small suggested. "With important life decisions, family members should try to ensure that their older relative understands the key information involved in such decisions and the ramifications of alternative decisions."

The study appears in Proceedings of the National Academy of Sciences.

More information

For more about healthy ageing, try the U.S. National Library of Medicine.

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