Some signs of aging are clearly visible. You get a few more wrinkles, your need glasses to view your I-phone, and your knees creak a little bit more. Even at the age of 50, these physical signs are evident. However, one study shows that your peak financial decision-making ability occurs at age 50.
Texas Tech University (TTU) recently published a study on this topic which found that one’s ability to make smart financial begins to suffer after the age of 60. This gradual decline continues and can have significant consequences for people in their 80’s and 90’s.
According to Michael Finke, the lead author of the study, the lack of financial knowledge among the elderly may result in poor decision-making. In addition, the elderly are rarely aware of how to search for lower cost options such as credit card and mortgage rates. After the age of 60, you are more likely to pay a higher rate on these and other financial products.
This decline is also evident during times of stress in the market. During the 2008 recession, the decision to pull out of the market and stock positions into cash or bonds, can lead to under-performance in their portfolios. And this poor decision can be very difficult to be able to recover from, especially when you are older and time is an issue.
If you recognize that your abilities may diminish regarding financial decisions, you may be able to make decisions now that can help in this regard. Finke recommends that a financial adviser may be a way to protect your finances as you age.
Finding a trusted adviser before this decline in decision-making and becoming comfortable with this adviser may be a key component to staying on the right track. And establishing a plan when you are in your 50’s will benefit you for years to come.
And don’t worry about your knees creaking or your eyes failing. It happens to all of us!
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