Healthy Seniors Found to Retain Financial IQ

Many studies conclude aging brings gradual cognitive declines, but new MetLife study finds otherwise.

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In one of the nicest imaginable holiday gifts to seniors, a new study backed by MetLife finds that healthy people who age successfully during their 50s, 60s, and 70s—and that's most of us—retain their abilities to make complex financial decisions and, in some cases, may improve skills as they age.

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Rear view of a senior man calculating financial budget with calculator and laptop on table.

Many academic studies of aging populations have concluded that there is an inevitable decline in financial aptitude and decision-making skills as people age. This finding, in turn, has supported the view that aging seniors are increasingly vulnerable to scams and elder financial abuse.

In sharp contrast, the new MetLife study found that this might be true of seniors who were not mentally healthy in older age, but is not applicable to healthy older people.

"Age is not the issue. Health is the issue," says John Migliaccio, research director at the Mature Market Institute, set up 15 years ago by MetLife to research aging issues. Because 7 out of 8 older Americans do retain their mental health as they age, the prognosis for most people is very bright, MetLife concluded in its study, "Healthy Brain, Healthy Decisions."

"You have 87 percent of the people who are within normal limits" of cognition, Migliaccio says. "There's a relative amount of decline within some" of this population, but nothing like the broader findings of cognitive decline seen in the Institute's review of existing research. "What we found were people, mostly economists, referring to these broad population studies that included all the people. Those [findings] just didn't make sense to us," he says.

Partnering with the Center for BrainHealth at the University of Texas at Dallas, a research group of healthy people aged 50 to 79 was carefully screened and assembled, and subjected to extensive tests about their decision-making abilities. While only 72 people participated in the study, MetLife says its findings apply to the broader population.

"The 'Healthy Brain, Healthy Decisions' project is one of the first studies to investigate the connection between cognitive health, aging, and decision-making capacity," the study report said. The findings "offer an alternative to the pervasive negative stereotyping of the financial decision-making capacity of middle age and older adults, 87 percent of whom are cognitively healthy, according to the National Institute of Aging."

"There was no age difference" in the research subject's decision-making skills, Migliaccio says. "The 79-year-olds were functioning as well as the 50-year-olds in terms of their decision-making."

The erosion of cognitive abilities seen in other studies may well be accurate, but "those dramatic declines affect a small percentage of the population," he adds. This study "clearly establishes the fact that there are a different set of circumstances for people who are in the normal range of cognitive health."

Here are the key findings of the research highlighted in the Institute's report:

1. Healthy aging adults show no decline in decision-making.

2. Strategic learning capacity may actually increase with age. "Previous research ignores positive age-related aspects such as extensive life experiences, reasoning ability, and accumulated knowledge that may preserve or even enhance decision-making."

3. Strategic learners are less likely to fall victim to bias toward riskier options when making decisions. "Participants who performed well in sifting important information made more logically consistent decisions. In contrast, participants who performed poorly were less logically consistent and showed more bias toward riskier choices when presented with decision-making tasks that resulted in a potential financial gain or loss."

4. Conscientious decision-making intensifies with age. This trait, researchers found, is associated with being careful and organized in making financial decisions, including making retirement plans and sticking to monthly spending budgets.

5. Men and women, regardless of age, both performed equally well in making logical decisions and reflecting strategic learning skills. However, there are gender-based differences in the relationship between decision-making and IQ, which merit further research.

"Scientific discoveries now show that our brains retain immense capacity to be modified and strengthened as we age," the study advised. "To take advantage of the brain's inherent ability to grow, rebuild, and rewire itself, individuals need to implement the necessary steps to maximize cognitive function sooner rather than later, and maintain the motivation to remain cognitively active, informed, and engaged in personal financial decisions."

"Combining the present findings with emerging evidence of retained cognitive brain health in aging," it concluded, "suggests that policies aimed at protecting those most vulnerable to poor decision-making should focus on disease, rather than age itself, as a risk factor."

Twitter: @PhilMoeller