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Cognitive decline and household financial decisions at older ages

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  • Angrisani, Marco
  • Lee, Jinkook

Abstract

Using data from the Health and Retirement Study, we examine the association between cognition and financial outcomes among older American couples. We first investigate the relationship between couple members’ cognitive ability and financial responsibility within the household. Our results suggest that differences in the level of cognitive ability play a major role in determining who is the household financial decision-maker, while changes in cognitive ability of both couple members over time only marginally modify such choice. Next, we study changes in financial wealth following pronounced declines in cognitive test scores of household members. We observe significant reductions in wealth among households whose financial decision-maker experiences such declines. Wealth reductions are less sizeable among those with pension/annuity income and receiving help with finances from their children.

Suggested Citation

  • Angrisani, Marco & Lee, Jinkook, 2019. "Cognitive decline and household financial decisions at older ages," The Journal of the Economics of Ageing, Elsevier, vol. 13(C), pages 86-101.
    • Handle: RePEc:eee:joecag:v:13:y:2019:i:c:p:86-101
    DOI: 10.1016/j.jeoa.2018.03.003
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    Cited by:

    1. Carole Roan Gresenz & Jean M Mitchell & Belicia Rodriguez & R. Scott Turner & Wilbert Van der Klaauw, 2024. "The Financial Consequences of Undiagnosed Memory Disorders," Staff Reports 1106, Federal Reserve Bank of New York.
    2. Kuti, Mónika & Schepp, Zoltán, 2020. "Aging Society and Attitude to Risk," Public Finance Quarterly, Corvinus University of Budapest, vol. 65(4), pages 457-471.
    3. Md Jamil, Abd Rahim & Law, Siong Hook & Khair-Afham, M.S. & Trinugroho, Irwan, 2024. "Financial inclusion and income inequality in developing countries: The role of aging populations," Research in International Business and Finance, Elsevier, vol. 67(PA).
    4. John Ameriks & Andrew Caplin & Minjoon Lee & Matthew D. Shapiro & Christopher Tonetti, 2023. "Cognitive Decline, Limited Awareness, Imperfect Agency, and Financial Well-Being," American Economic Review: Insights, American Economic Association, vol. 5(1), pages 125-140, March.
    5. Aida Isabel Tavares, 2022. "Time and risk preferences among the European seniors, relationship and associated factors," Journal of Business Economics, Springer, vol. 92(8), pages 1283-1302, October.
    6. Marco Angrisani & Jeremy Burke & Annamaria Lusardi & Gary Mottola, 2020. "The Stability and Predictive Power of Financial Literacy: Evidence from Longitudinal Data," NBER Working Papers 28125, National Bureau of Economic Research, Inc.
    7. Kim, Hugh H. & Maurer, Raimond & Mitchell, Olivia S., 2021. "How financial literacy shapes the demand for financial advice at older ages," The Journal of the Economics of Ageing, Elsevier, vol. 20(C).

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