Knowledge about financial matters falls 2% each year after age 60, while, at the same time, confidence in being financially knowledgeable increases, according to a study done by Michael Finke, an associate professor at Texas Tech University and other entitled “Old Age and the Decline in Financial Literacy.”
The study involved a test that measured knowledge of investments, insurance, credit and money basics. Those in at age 60 scored 59% correct while those in their 80s and older scored 30% correct.
People over the age of 60 control half the wealth in America. Unfortunately, they are generally not only unaware of their diminishing capacity, but are overconfident about their ability to make financial decisions. Not only will Americans over the age of 60 tend to make more financial mistakes, they are tempting targets for fraud promoters. Seniors are 12% of the population but make up 35% of all fraud victims, according to the National Council on Aging.
Robert Powell, editor of MarketWatch’s Retirement Weekly, advises those over 60 to consult annually with an expert to review financial decisions and develop a plan going forward. He also advises investors over 60 to use mutual funds that rebalance themselves and annuities to remove as much of the necessity for financial decision making as possible. See “Our financial smarts erode quickly after age 60” (MarketWatch).
Both Finke and Powell caution investors over 60 to be sure that their financial advisor is a fiduciary, meaning an advisor who is bound under the law by the highest duty of loyalty and good faith to act solely in the client’s best interest. They also believe it is time to impose a full-fledged fiduciary duty on all those who provide financial advice.
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