Seniors may be prone to money scams

Those who are more confident have the most to worry about

Published: October 28, 2014 03:15 PM

Cognitive decline makes seniors more vulnerable, a new study shows.

Everyone wants to be confident managing money but being too confident could be dangerous to your financial well-being. That's especially true for overconfident seniors with declines in cognition. 

The findings are described in a paper, "The Causes and Consequences of Financial Fraud Among Older Americans" (PDF) based on a study by researchers from DePaul Unviersity and Rush University Medical Center. It shows that seniors who have an overinflated faith in their financial abilities could be more vulnerable than others to money scams. As their cognition wanes, the risk increases.

The study examined a group of seniors, mainly women, annually for several years. They measured participants' cognitive abilities, and had them complete questionnaires to gauge their susceptibility to scams and willingness to take financial risks. They asked the women if they'd been scammed in the past as well. Participants also answered questions measuring financial literacy, and were judged on how confident they felt about their answers. Over the years, researchers were able correlate participants' survey responses with their cognitive changes.

The results of the study aren’t particularly surprising, but they do add empirical muscle to the belief that your market-timing aunt may be a more likely rube than her buy-and-hold sister. More worrisome is that the study also showed that getting stung once might not be enough to keep some overconfident types from being defrauded again.

—Tobie Stanger

Consumer Reports' Retirement Guide investigates financial elder abuse, and tells what you can do to protect yourself.

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