Is Cognitive Decline Already Reducing Your Retirement Savings?

Cognitive decline often occurs slowly, and its progression is almost unnoticed in the early stages. It can frequently be confused with the regular occurrence of increased forgetfulness related to age. Since it may not be noticed for some time, it remains undiagnosed, but it can affect the ability of seniors to wisely handle their finances.

More seniors are apt to make financial mistakes because of cognitive decline. Seniors are living longer now, which increases the likelihood that they may develop dementia or Alzheimer’s. The result is that you could lose a secure retirement due to careless financial mistakes.

Developing Dementia Can Be Costly

The change in the mental status of seniors, Benzinga says, costs some of them as much as $31,000 if they are unaware of their condition. Not only are they more apt to make poor investment choices, but they also become more prone to fall for scams.

Seniors who are aware of their declining mental condition will usually lose less money. They tend to lose an average of $5,400. People with a large retirement account will not miss these amounts, but it will hurt someone mainly depending on Social Security for their income.

Higher Investments Mean a Potential Greater Loss

People who are heavily invested have a higher risk of losing more. Making bad decisions with larger sums can result in larger losses, even though the loss percentage remains about the same. The Retirement Resource Center reports that even when there is a 10–15 percent loss of cognitive ability, there may be a 15–18 percent loss of wealth.

Cognitive Skills Start Declining After 50

Cognitive skills naturally start to decline for most people after they reach 50. Retirement-Insight reports that the decline speeds up after this point.

Sometime after they reach 88, their cognitive abilities have decreased enough that they cannot function on their own anymore. This decline occurs in about 60 percent of people who get to this age.

A University of Michigan study showed that significant memory loss often occurs before someone reaches 67. The Health and Retirement Study involved 20,000 people over a period of 16 years.

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The same study revealed that as many as 77 percent of the participants did not recognize that they had any memory loss while in the study. The loss also occurred in people who did not have dementia.

Dementia Can Be Slowed

Although dementia currently has no cure, there are some known things that you can do to delay it for a while. One of these ways is to continue working. Working past your retirement age forces you to continue using your mind, which is another way to delay dementia. Volunteering or working part time is also beneficial.

Another way to slow the development of dementia is to maintain a social life, which is also why continuing to work can help. Psychology Today says that seniors who are lonely and without ongoing social interaction have a higher risk of developing critical diseases and will likely die younger.

Develop Protective Measures for Your Finances

As you age and get closer to retirement age—or are already retired—there are some steps you can take to protect your money from poor financial decisions.

Let Your Spouse, Other Family Members Work With You

Work with your spouse or other family members on financial decisions. It is essential to choose someone you trust to work with you. When they tell you that you are not making a good decision in a certain transaction—listen to them.

Shift Your Money to More Stable Investments

Instead of trying to guess the market, put a larger portion of your investment money into low-risk investments. Although you might get a lower return, it can help ensure you get more reliable returns and are less likely to lose it. At the same time, diversify your investments to reduce your risk of loss.

Automate Your Investments

Using money managers to invest your money can help prevent you from worrying about your money. Of course, you still want to keep an eye on your money, but certified financial planners are less likely to make poor decisions.

Help is available in various ways to protect you from making poor decisions because of mild cognitive impairment. Even without impairment, or if the impairment is undiagnosed, investment advisers can help protect your retirement savings and help you keep more of it during your retirement years.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.