Challenges for Financial Decision Making at Older Ages

The retirement years can be a time of one’s life enriched by new freedom and comfort. While increased longevity has brought great joy into seniors’ lives, it has also brought about financial challenges for which many seniors and their families are unprepared. Although individuals continue to build their financial experience throughout their lifetime, their financial capabilities may diminish as they age. Older adults who experience cognitive decline often have difficulties managing their money. Financial mistakes made by the elderly include falling victim to financial fraud, failing to plan for future expenses, and forgetting to pay amounts owed. Most older individuals have exited the labor market, which limits their ability to respond to financial shocks. This article reviews research findings on what happens to cognition at older ages and how diminished financial capacity affects the financial landscape for seniors. I also outline what can be done to address these challenges before they become problems that can no longer be ignored.