Financial Literacy Goes South at 60

[nwsteve]

I seem to see more and more articles on how we loose financial "smarts" as we age.
This article suggests it is even more pronounced and widespread than I had wanted to believe--1.5% degradation every year after 60--regardless of gender or background.
The scary switch that happens to investors over age 60
Check out the survey questionnaire they used link in the article--seems pretty straightforward to me and I am 68.
Unfortunately, the full study while linked in the article is behind a pay-wall.
Anyone else noticed degradation?
Nwsteve

 

[2017ish]

....
Anyone else noticed degradation?
...

The problem is that we tend not to notice. Written investment/withdrawal plans and simplification are important for this reason. (And, yeah, I need to get to that!)

 

[W2R]

I seem to see more and more articles on how we loose financial "smarts" as we age.
This article suggests it is even more pronounced and widespread than I had wanted to believe--1.5% degradation every year after 60--regardless of gender or background.
The scary switch that happens to investors over age 60
Check out the survey questionnaire they used link in the article--seems pretty straightforward to me and I am 68.
Unfortunately, the full study while linked in the article is behind a pay-wall.
Anyone else noticed degradation?
Nwsteve

Not in investing, but then I have few investing decisions that come up these days. I am pushing 68 and retired at 61. I took a DIY approach and set up a written financial plan. My portfolio is almost, but not quite, as easy to manage as UncleMick's. I have five funds at Vanguard and one at the TSP, and I just rebalance and withdraw every January. Not too complicated. That's intentional since I am growing older and since I don't want to knock myself out managing my portfolio. So far it seems to be working out nicely.

A lot of the questions on that questionnaire seemed to be focused on insurance. Hmm.

 

[Car-Guy]

I seem to see more and more articles on how we loose financial "smarts" as we age.

Anyone else noticed degradation?

No, not at all. The reverse is true,,,,,, so far....

 

[RunningBum]

The problem is that we tend not to notice. Written investment/withdrawal plans and simplification are important for this reason. (And, yeah, I need to get to that!)

That's what I was going to say. If you ask most people, they'll deny that their financial literacy, driving skills, etc, are diminishing. It's not easy to tell that they aren't, much less admit it.

The simpler the portfolio, the less that can wrong in my opinion. But I still have things like Roth conversions, where to withdraw from, which lots to sell for tax efficiency, when to take SS, whether to get an SPIA, etc, to think about.

Every morning I play a Sudoku-like game called Futoshiki www.brainbashers.com/futoshiki.asp. There are 8 different levels each day and I track my scores on a spreadsheet and do weekly and yearly averages. In part it's just for my interest, but I can also see if my time to solve the puzzles is going up, which I would take to mean I'm not quite as sharp as I was. I started last year, and my times have gone down this year, but I think that's due to a slow start last year before I figured out better methods. Also I'm still a few years from 60.

 

[6miths]

So we need a study to show this... Fortunately, investing is not that complicated but I wonder to whose benefit it would be to: a) convince us that is way too complicated for anyone but an 'expert' to handle no matter how intelligent and b) even if you were the exception to the rule at one point in your life, better smarten up and get a bunch of help with all that money when you get old and senile.

 

[2017ish]

Here is another, freely accessible, study on this topic (there are several that I've run across): http://crr.bc.edu/wp-content/uploads/2015/01/IB_15-1-508.pdf

This is the key sentence from the conclusion:

The study also finds that large declines in cognition and financial literacy have little effect on an elderly individual’s confidence in their financial knowledge, and essentially no effect on their confidence in managing their finances.

This Brief/paper is from Center for Retirement Research at BU. (Note that it actually is newer than the one linked in the CNBC article, which Finke et al. completed in 2012, but languished before publication)

 

[misshathaway]

So we need a study to show this... Fortunately, investing is not that complicated but I wonder to whose benefit it would be to: a) convince us that is way too complicated for anyone but an 'expert' to handle no matter how intelligent and b) even if you were the exception to the rule at one point in your life, better smarten up and get a bunch of help with all that money when you get old and senile.

Suspicious - or perhaps denial on my part since I just turned 59. One year left before I fall off the financial-competence cliff.

 

[MichaelB]

Here's the study http://www.smartretirement.com.au/w...ine-with-ageing.-Michael-Finke-Texas-Tech.pdf
The questions are interesting - they sound a bit academic to me.

19. Which policy provides the most coverage at the lowest cost for a young family? (K8-INS)
1 Renewable term life
2 Whole life
3 Universal life

A decline in cognitive function with age is normal, so less financial literacy is also not a surprise. There is no reason to conclude, however, that an older person would less effective managing a simple, low cost portfolio.

 

[mickeyd]

Seems as though the author of the article should have done some EZ research and logged in here. There are an awful lot of ultra-savvy financial wizards that post in this location on a regular basis. I think the majority are 60+.

 

[btdt22]

I feel so sorry for Jack Bogle and Warren Buffet- well over 20 plus years of financial literacy decay

 

[btdt22]

I can't help but wonder about this 'deleted' question from the study:

"Although respondents are asked to calculate their net worth, only a minority of respondents over 60 are able to provide this information"..........are they saying these same people could have done so in their 40's or 50's?

It also seems strange that none of the writer's have a degree?

Bottom line- I joined Boglehead's at 61 and feel/know my financial literacy has increased significantly, as well as my nest egg..................but who knows, next year at age 70, I may lose 15% in one day?

 

[braumeister]

I'm so glad I don't have to keep up with the financial world.
My Ameriprise rep takes care of all that and just tells me what I need to know.
Such a relief!

 

[Walt34]

I'm so glad I don't have to keep up with the financial world.
My Ameriprise rep takes care of all that and just tells me what I need to know.
Such a relief!

 

[UpAnchor]

I seem to see more and more articles on how we loose financial "smarts" as we age.
This article suggests it is even more pronounced and widespread than I had wanted to believe--1.5% degradation every year after 60--regardless of gender...

That's encouraging! If true, the lowly 1.5% figure should have me in my nineties well before I'm drooling in my porridge...

Anyone else noticed degradation?
Nwsteve

Yes, but not in math or financials. Yet. So far it's been recalling names or words or launching the browser only to sit there dumbfounded as to what I was planning to search for.

I do think about simplifying the portfolio and-should I ever entertain SPIAs-the anticipation of cognitive decline would be one of the drivers.

 

[splitwdw]

I seem to see more and more articles on how we loose financial "smarts" as we age.
This article suggests it is even more pronounced and widespread than I had wanted to believe--1.5% degradation every year after 60--regardless of gender or background.
Anyone else noticed degradation?
Nwsteve

I've noticed it in several posters here. I'm still in my 40's so just send your money to me and I'll handle it for you.

 

[rayinpenn]

When I hit about 58 I really cut back on the company stock which I've done very well with. When I was younger greed would have ruled. Now this old man has seen too many blue ribbon companies implode. I've diversified more each year and even though I am a big fan of equities I have a big stash of low risk stuff of what I call cash equivalents. Yeah I can tell you what sequence of events risk is too...

I may not remember the exact formula for capital assets pricing model but for some time now I have had maturity and patience to play the long game.. No I'll likely never have a 20% gain year - my steady Eddie stuff isn't going to get me there...but the portfolio should keep me and the old lady in Cheerios.... And Maybe a bottle of wine and a light beer or two each week.

I think that's just fine with me.... What's that country Song " I ain't as good as I once was but ..."

Oh and by the by Warren Buffet is no spring chicken.


Sent from my iPad using Early Retirement Forum

 

[Mulligan]

That's what I was going to say. If you ask most people, they'll deny that their financial literacy, driving skills, etc, are diminishing. It's not easy to tell that they aren't, much less admit it.

The simpler the portfolio, the less that can wrong in my opinion. But I still have things like Roth conversions, where to withdraw from, which lots to sell for tax efficiency, when to take SS, whether to get an SPIA, etc, to think about.

Every morning I play a Sudoku-like game called Futoshiki www.brainbashers.com/futoshiki.asp. There are 8 different levels each day and I track my scores on a spreadsheet and do weekly and yearly averages. In part it's just for my interest, but I can also see if my time to solve the puzzles is going up, which I would take to mean I'm not quite as sharp as I was. I started last year, and my times have gone down this year, but I think that's due to a slow start last year before I figured out better methods. Also I'm still a few years from 60.

My dad for the past 6 months has been telling me " he cannot think as well as he used to" and has been saying often now he is going to get his brokerage to run his account so he doesnt "do anything stupid". ...Yet every time I talk to him he is still buying and selling and tracking....So I think he is in the in between stage of admitting it, but unwilling to do anything about it.


Sent from my iPad using Tapatalk

 

[brett]

In our area Ponzi schemes (and affinity fraud) are all too common. They target 50 plus folks for their retirement monies. The hook is all too common.

Guaranteed high returns, 15 percent plus-often 25 or 30 percent, guaranteed safety of capital, and sometimes even the ability to pull money out of tax deferred accounts without paying tax.

Not certain why anyone would believe this but they do. They invest their retirement savings and they loose. Often without even bothering to do some basic research.

The last one was $500M. There are two others that have just been closed down-both in excess of $100M. Retirements ruined.

 

[hankster]

Possible cognitive decline makes me especially glad to have the pension payment + social security components which should guarantee there will at least be enough for beans and rice and electricity if the nest egg should get scrambled for any reason.

 

[harley]

I'm not sure if it effects my financial literacy or not, but I have noticed I have a more difficult time doing math in my head as I get older (60 now). I've always been able to do simple math (addition, division, etc.) in my head, but I'm finding now that I can't hold the numbers in place as well. I'm still usually right, but it takes more effort. And sometimes I blow it completely.

So I can see that there is some degradation in skills as I age, but I'm not sure how that would effect my financial literacy. I still know the answer to the various questions, and am fully able to budget, rebalance, and withdraw. As others have implied, as long as you have a plan and a procedure, it really doesn't matter if you can't do the division in your head.

 

[W2R]

I'm not sure if it effects my financial literacy or not, but I have noticed I have a more difficult time doing math in my head as I get older (60 now). I've always been able to do simple math (addition, division, etc.) in my head, but I'm finding now that I can't hold the numbers in place as well. I'm still usually right, but it takes more effort. And sometimes I blow it completely.

So I can see that there is some degradation in skills as I age, but I'm not sure how that would effect my financial literacy. I still know the answer to the various questions, and am fully able to budget, rebalance, and withdraw. As others have implied, as long as you have a plan and a procedure, it really doesn't matter if you can't do the division in your head.

Exactly! I wouldn't worry about that affecting your financial literacy. You can do simple math either on paper or with a calculator or computer. I wouldn't worry unless/until you have trouble pinpointing what math problem you need to solve and why.

 

[Amethyst]

I am seeing the same thing, but then again I never need to do arithmetic in my head any more. That system engineering degree that I acquired at the young age of 55 forced me to learn to use spreadsheets ;^>

I'm not sure if it effects my financial literacy or not, but I have noticed I have a more difficult time doing math in my head as I get older (60 now). I've always been able to do simple math (addition, division, etc.) in my head, but I'm finding now that I can't hold the numbers in place as well.

.

 

[mamadogmamacat]

Possible cognitive decline makes me especially glad to have the pension payment + social security components which should guarantee there will at least be enough for beans and rice and electricity if the nest egg should get scrambled for any reason.

+1

excellent Pres. Coolidge quote also

 

[Fedup]

That's why I double check with my calculator from either my iPhone or iPad. Even for tips, my kids check that we add them right.