Over 60? Research Says Your Money Confidence Is High but Investing Aptitude Is Not

I recently came across an interesting recently entitled “Old Age and the Decline in Financial Literacy.” 

It was authored by a couple professors from Texas Tech and one from University of Missouri. It was published in October 2015.

Basically, the study provides empirical proof that knowledge of basic financial concepts, including investing, declines appreciably after age 60. 

Quantitatively, it shows that financial literacy declines about 2% each year after age 60. Interestingly, it also shows that elderly people’s confidence level in their financial decision making doesn’t similarly decline with age. 

See the chart below to see an overall summary of their research.

Much research has been done in this area that attempts to explain this steady decline of financial aptitude.

Gradual mild cognitive impairment, declining mathematical skills, or deteriorating spatial reasoning have all been linked to it. Regardless of the cause, the evidence is fairly strong that it does indeed occur approximately after the age of 60.

Lethal combination

Financial literacy can be defined as the ability to understand fundamental financial concepts needed to make effective decisions.

For example, understanding the concept of a deductible in an insurance policy, or comprehending the basic characteristics of a mutual fund and how it differs from a common stock.

What is very interesting in this study, as seen in the chart above, is that overall confidence of this population set does not really decline past the age of 60, creating a potentially lethal combination of declining financial aptitude with an unchanged confidence.

They go into separating the concept of “financial literacy” into more finite categories, showing the decline in mental aptitude within each of these. (See the chart below.) It is noteworthy that financial literacy for the category of “investing” is the lowest and really declines the most as these respondents age beyond 60.

The researchers go on to stipulate that increasing confidence in conjunction with reduced cognitive abilities can, in large part, explain the poor overall investment decisions people often make in their later years. 

Given that financial advisors are probably in discussions with people either within this age range or rapidly approaching it, the empirical work presented here is indeed something to keep in mind.

It points to the argument that many people in their elder years or entering their elder years may need the professional services of a financial advisor or a registered investment advisor as stewards of their capital for the remainder of their lives.

5 Worst Things to Keep in Your Wallet

Every year millions of Americans see their money and personal information fall into the wrong hands, and the consequences can be devastating. To protect you and your good name, we've

Feed Your Gut Bacteria This to Support Weight Loss

Did you know that there are billions of bacteria hard at work in your digestive system? Without them, you wouldn’t be able to break down or absorb nutrients from your

This Lemon, Turmeric, Coconut Oil Tea Will Relieve Your Pain FAST

It’s a great idea to use all-natural remedies wherever possible. After all, the possible side effects of over-the-counter pain relievers can be frightening. Long-term use can even be dangerous. That’s

Save Thousands A Year By Cutting These Expensive Habits

Once a person being gets so used to engaging in expensive habits, it can be hard to stop. Even if it is pointed out to them how financially wasteful their

5 Expenses You Must Never Cut Corners On

Reducing your living expenses is generally a good thing, as it can help you live within your means and save money as well. With that said, there are certain things

New Link Discovered Between the Immune System and Brain

This incredible discovery after so many decades where the lymphatic system was already believed to have been completely mapped out is considered game-changing. Researchers are certain it will open new

What You Might Not Know About Fiber Supplements Could Hurt You

Eating a high fiber diet has many advantages, including keeping your gut healthy and happy, boosting heart health, gut health, and improving weight loss efforts. The majority of Americans fail

Which is Cheaper, Streaming or Cable TV?

There are many similarities between the streaming technology and the traditional cable TV technology that allows you to watch both live TV and on-demand, but there are also some key

Here Are The Seven Richest People in The World

What would give to add a huge number of zeros at the end of your annual income and be among the richest people in the world? While the rest of

When is the Best Time to Sell or Buy a Home?

Getting the optimal time to buy or sell a home is a profound question. It depends largely on who you are, whether you are a seller or a buyer. Traditionally,

As Monkeypox Spreads, Government Orders Shots for Just 4% of Americans — Ready in 2023

Most of us have been breathing pretty easily and without a mask after two years of panic over the coronavirus, but now there is another virus making its way to

Can Probiotics Make You Happier?

When we think about a healthy diet, we think of whole, real-food sources of vitamins, minerals, proteins, fats, and carbs. However, one component that we may sometimes overlook is probiotics.

Gary has more than 30 years of industry experience, which includes research analysis and portfolio management for both retail and institutional accounts. He worked as a Senior Vice President at Wells Fargo Advisors and Wells Fargo Investment Institute for approximately 14 years in total, where he was a senior portfolio manager for both equity and asset allocation portfolios. He was also involved in investment manager due diligence and selection for the firm’s multi-manager portfolio models. Prior to joining Wells Fargo, Gary held senior-level investment management positions with several registered investment advisory organizations. He has been a Chartered Financial Analyst (CFA®) charter-holder since 1989. The CFA is a professional credential earned by investment management professionals after successfully passing three years of rigorous examinations and recording several years as a practising professional within the industry. Gary received his Bachelor of Science in Engineering from Purdue University and his M.B.A. in Finance from The University of Missouri. Additionally, Gary holds his FINRA SIE, Series 7 and Series 66 securities registrations as well as his Missouri Life Accident & Health insurance license. He is a member of the CFA Society of St. Louis and the Financial Executives Networking Group. He resides in Kirkwood, MO with his wife Kathy, and they have three adult age children, Aly, Ryan and Josh.