Here's a link to the slides from the study:
http://cfpevents.mit.edu/wp-content/upl ... n-Howe.pdf
And a highlight that defines the problem:
*Decline in financial performance can be explained by age related decrease in financial knowledge
*Confidence in decision making does not decline
It's very clear that as financial performance gradually declines, an investor's confidence in decisions does not. Obviously, this can present a real problem. Part of the problem is cognitive impairment decreases at about 1%/year, so it sneaks up on us.
Link to the full study:
http://cfpevents.mit.edu/wp-content/upl ... teracy.pdf
The observed decline in financial decision-making quality may be related to gradual mild cognitive impairment that occurs in old age. Boyle et al. (2012) find that the rate of cognitive decline in a sample of older adults is a significant predictor of in correct responses to a financial decision-making test and increases susceptibility to financial scams.
From the conclusion:
A decline in financial skills may not lead to poor financial outcomes if (my emphasis) individuals recognize and anticipate the decline. For example, recognition of diminished investment skills may increase demand for annuitization or the delegation of important financial decisions to a trusted advisor. Studies of trading frequency provide some evidence that older investors are less overconfident than younger investors (Barber and Odean, 2001). In contrast, our study finds that, in aggregate and within all financial decision-making domains, advanced age increases over confidence in financial decision-making abilities.
One other problem with this subject is older investors are uncomfortable with the idea of losing control and they may resist even addressing or discussion it. For example, I asked a group of friends in their 70's if they would be interested in receiving links to the information I found, and not one showed any interest, and there were not even any comments or questions. I felt like I had brought up a taboo subject.
A few things that seniors might do is simplify and automate.
Here is the link provided by Bobcat:
http://cfp.scripts.mit.edu/home/archives/1421
Paul