The Hidden Cost Of Cognitive Decline – How Seniors Lose $31,000 In Retirement Savings

As people age, it's natural that memory and decision-making abilities change. For some, this isn't as much of an issue, but for others, it can greatly impact things like retirement savings. 

A recent study highlights how cognitive decline can cost seniors a staggering amount of money –$31,000 on average – due to poor investment decisions or falling for scams. 

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With people living longer, they're often making financial decisions later in life. However, many seniors find themselves at risk without realizing their memory or mental sharpness is slipping. This is especially true now that fewer retirees rely on pensions or annuities, leaving them to manage their finances independently. 

Franco Peracchi, an economics professor at Tor Vergata University in Rome, told the Wall Street Journal that today's retirees are more vulnerable to financial losses because they often don't realize how cognitive decline affects their decision-making. 

The University of Michigan conducted a study that followed Americans ages 50 and older from 1998 to 2014 to track their financial behavior. The study asked participants about their memory over time and conducted memory tests. Over 60% of participants experienced some form of memory decline, but the majority weren't aware of it. Just 20% of those with significant memory loss knew they had a problem. That lack of awareness is where things can go wrong financially. 

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Seniors with undiagnosed memory issues lost, on average, $31,000 in wealth over two years. Meanwhile, those aware of their cognitive decline saw a more modest reduction of about $5,400. Those who realized their memory wasn't as sharp were more likely to delegate financial decisions to trusted family members or financial advisors, which helped them avoid greater losses. 

So, why does memory loss lead to financial trouble? 

For one, seniors with cognitive decline may not realize they're making risky financial decisions, like continuing to invest in the stock market when they shouldn't. Overconfidence can lead to poor choices that hurt their savings. 

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Another major concern is that seniors with impaired cognitive abilities are more likely to fall for scams. According to the National Institute of Justice, older adults lose more than $36 billion yearly to fraud. Scammers take advantage of more trusting seniors who may not recognize deceit. Common scams include fraudulent investment schemes, fake home repair services and tech support fraud. 

If you or someone you love is experiencing cognitive decline, there are steps you can take to protect retirement savings. First, awareness is key. If memory loss is noticeable, it's important to seek help from a health care professional. Having a trusted family member or financial advisor involved in decision-making can also help ensure that choices are made carefully and wisely.

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Seniors should also be extra cautious about unsolicited financial offers. If something sounds too good to be true, it probably is. Staying informed about common scams can also help avoid fraud.

Cognitive decline can be a tough part of aging, but recognizing its impact early can help protect your savings. By staying aware and getting support when needed, seniors can avoid losing tens of thousands of dollars in their retirement years. If you're concerned about the financial impact of memory loss, talking to a financial advisor can help you take the right steps to safeguard your assets.

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