When it comes to handling finances, leave it to your grandparents to make swift, responsible money-making decisions.
When it comes to handling finances, leave it to your grandparents to make swift, responsible money-making decisions.
In a recent study, Duke researchers found that older individuals are at least as good as their younger counterparts at making prudent financial choices.
“If a person was 65 years old, theoretically they could still make the same kinds of decisions with the same outcomes as a younger person,” said Debra Henninger, a primary author of the study formerly a Duke professor who works at the health insurance company CIGNA in the department of valuation and evaluation informatics.
The study found that differences in cognitive abilities—not age—account for disparities in decision-making quality.
Researchers analyzed the decisions of 54 older adults, ages 66 to 76, and 58 younger adults, ages 18 to 35, in hypothetical economic situations. These results were then compared with tests of the individuals’ cognitive abilities—specifically memory and information processing speed.
Although cognitive decline is commonly associated with aging, implying that older adults may make worse decisions anyway, researchers challenged this perception as well. They identified ways to offset this decline by presenting information more slowly and in smaller segments to reduce strain on memory and information processing.
Indeed, a recent study conducted by Tara Queen and Thomas Hess of North Carolina State University’s psychology department found that older adults make worse decisions when they have to process large amounts of information. In situations in which less attention to detail was needed, older adults performed just as well as younger adults.
As an example, Queen referred to the Medicare Part B debacle, in which elderly adults had to choose from 30 to 50 insurance plans. She said many did not choose a plan at all because the form required elderly applicants to process a large amount of information.
“Research has shown older adults may avoid making healthcare decisions, preferring to default to someone else’s advice,” Henninger said. “The reason that might be happening is the way the information is presented.”
Queen’s findings were supported by a recent study conducted by Rui Mata and Ludmila Nunes, researchers at the University of Lisbon and Washington University in St. Louis, respectively. They concluded that older adults are better at making decisions when they are asked to process a single piece of information versus larger amounts of information.
“It would make sense to provide less information to older adults (or consumers in general) if we knew that this leads to fairly good (or even better) decisions,” Mata wrote in an e-mail. “It turns out that simple strategies that neglect information may not lead to huge losses in decision quality.”
The wise man’s decision
The Duke study raises the question of whether the longer life experience of older adults may offset cognitive decline and allow them to make better decisions.
“Take Sully Sullenberger over the Hudson—he’s not a young man, but certainly all his experience played a role in him being able to make the right decision at the right time,” said David Madden, a researcher for the study and professor of medical psychology, referring to the pilot who successfully diverted a plane into the Hudson river.
Henninger noted, however, that in many cases experience doesn’t affect decisionmaking, so the quality of the decision will ultimately depend on an individual’s cognitive abilities.
But when experience does factor into the decision, older adults may have an advantage.
“Whenever you’re making a decision about medicine... it is a disadvantage to have lower cognitive skills, but it’s an advantage to be older,” said Scott Huettel, associate professor of psychology and neuroscience and director of the Center for Neuroeconomic Studies. “We think that’s a result of older adults having experience with medicine.”
Huettel is currently looking into whether the different cognitive abilities and experience of individuals under the age of 18 impact the quality of their decision-making. He is working on the study with Elizabeth Brannon, director of graduate studies for the department of psychology and neuroscience.
“Our prediction would be that yes, cognitive abilities would play into decisions even at the earlier ages,” Huettel said. “What we don’t know is whether there are other factors that would play in with these pre-adults.”
Preventing cognitive decline
The correlation of cognitive abilities to decision-making draws attention to whether cognitive decline can be prevented in aging adults. This question has been addressed by Brenda Plassman, associate professor of psychiatry.
Plassman, working with the National Institutes of Health, identified factors that showed promising but limited results in maintaining cognitive health, such as physical activity, a heart-healthy diet and involvement in cognitively stimulating activities such as reading, solving puzzles and attending the theater. Some studies also suggested that social interaction helps prevent cognitive decline. But the evidence was overall inconclusive.
“Our systematic review had reviewed the evidence on a range of possible risk factors that might influence cognitive decline,” Plassman said. “We concluded that there was not sufficient evidence to recommend that any single act or factor is protective to cognitive decline in later life.”
Plassman noted that future research studies regarding cognitive decline must change the way preventive factors are considered and the time frames in which individuals are tested.
“It’s likely that no single factor works in isolation to protect the brain against deterioration, which means that future studies will need to look at multiple factors together,” she said. “We also know that for at least some types of dementia, like Alzheimer’s disease, the pathology of it begins years before the cognitive symptoms become obvious. That being the case, it means we need to start to study these factors in midlife or early life, and follow individuals for longer periods of time.”
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