Mild Cognitive Impairment Affects Financial Decision Making
Research at the Center for Retirement Research at Boston College has found that mild cognitive impairment (MCI) has a major impact on financial judgment, and that many people with MCI are unaware of their diminished capacity in the money management area. It presents a tricky circumstance because although judgment is impaired, the ability to carry out financial decisions is not. So a person with MCI may remain confident about making sound financial decisions when the decisions are not sound. This makes those with MCI particularly vulnerable to financial exploitation. It is also problematic because MCI can be temporary or it may herald the onset of dementia. A University of Michigan study found that the incidence of MCI increases from 9% among individuals age70-74 to 15% in ages 75-79, 30% in ages 80-84, and 37% for those over age 85. Colorado certified financial planner Jane Young says, “You need to create a plan to proactively manage risks before your cognitive ability starts to decline.” This is especially critical for those who manage their own investments. Her advice includes having financial documents well organized and simplified as much as possible and have a trustworthy person (perhaps a durable power of attorney) to share them with and who can step in if impairment makes it necessary.