When should you stop managing your own money?

An article appearing in Next Avenue, www.nextavenue.org, a trendy new website for seniors, reprinted an article from MarketWatch.com, and addressed a common question with no easy answer – how do you handle your finances as you age? The article is titled “At What Age Are You Too Old to Manage Your Money?” It raises a very sensitive topic. In a somewhat similar vein, people might ask at what age should you no longer drive or when should you stop performing any number of tasks, the topic implying there is a time when you no longer have the abilities you possessed at a younger age. In this respect there is both good news and precautionary advice.

According to the article,a new study may have the answer to ages at which many or most Americans might be expected to lose their ability to pay bills, handle debt, maintain positive credit and assess the rate of return of an investment and detect fraud. The study conducted by the Center for Retirement Research at Boston College, “Cognitive Aging and the Capacity to Manage Money,” differentiates between the ability to pay, say your gas or electric bill and the ability to make sound financial decisions such as investment decisions you might make with a financial advisor.

First, there is good news. Assuming the individual has prior experience paying their bills and keeping track of their bank accounts, most people not suffering from cognitive impairment can be expected to continue managing their own money into their 70s and 80s. Those who are inexperienced and who, for instance, left this function to their spouses, could be expected to need help to do this.

However, according to the researchers, “financial capacity relies on two key abilities: 1. performing financial tasks, which mostly requires crystallized intelligence or knowledge; and 2. making financial judgments, which requires a mix of knowledge and fluid intelligence like memory, attention and information processing.”

In other words, while you might perform perfectly well paying your electric bill or your mortgage, your decision making ability to make sound financial judgments, like recognizing whether a proposal for a new investment is reasonable or recognizing fraud can diminish earlier. In fact, and here is one shocking conclusion, the authors stated the ability to process new information, the type of ability needed to make sound financial decisions, can begin to de-