Investors spend a lot of time debating valuations, interest rates, and where the next recession might come from. Very little time is spent on something that is arguably just as important over the long run: whether we remain capable of making good financial decisions as we age.
That is not a comfortable topic. It also does not show up in portfolio analytics. But the research is increasingly hard to ignore.
Financial Skill Does Not Age Gracefully
There is a common belief that experience compensates for aging. To a point, that is true. Studies suggest that decision-making around borrowing and debt tends to peak in the early 50s. Investment skill appears to hold up longer, often into the late 60s or even later.
That sounds reassuring until you look at what happens next.
Once decline begins, it accelerates. And it does not begin with obvious confusion or memory loss. It begins with judgment.
When Money Problems Appear Before Illness
One of the more striking findings in recent years came from research using U.S. credit data. People who were later diagnosed with dementia showed financial deterioration years beforehand. Credit scores drifted lower. Missed credit card payments became more common well before doctors identified anything wrong.
Mortgage issues followed closer to diagnosis, but the trend was already there. In other words, money mistakes often showed up before medical ones.
This lines up with other research looking at investment behavior. Older investors experiencing cognitive decline tend to overestimate their own abilities. The people who suffer the largest losses are not those intentionally de-risking. They are the ones who do not realize their decision-making has changed.
Why This Matters More Than Ever
Dementia-related conditions are rising sharply, largely because people are living longer. In Australia, dementia has gone from a marginal cause of death decades ago to one of the most common today. Women are particularly exposed because of longer life expectancy.
This is not just a public health issue. It is a financial one.
Longer retirement periods mean more years where decisions matter and more years where cognitive ability may slowly weaken.
Fraud Is Part of the Picture
Declining cognition does not only affect investing. It also increases vulnerability to scams.
Australia now loses billions of dollars each year to fraud, with older people disproportionately affected. The damage is often irreversible.
What makes this uncomfortable is that fraud frequently comes from familiar sources. Family members. Caregivers. People who are trusted. When scams come from strangers, they often rely on emotional triggers like obligation or kindness. Older individuals tend to have more difficulty spotting when trust is being exploited.
What Investors Can Actually Do
There is no strategy that prevents cognitive decline. But there are ways to reduce the damage it can cause.
The first is accepting that self-awareness is not reliable. People experiencing decline often believe they are functioning normally.
The second is putting guardrails in place early. Not later. Trusted advisers who can question unusual decisions. Legal structures like powers of attorney and updated wills. Clear processes that make it harder for one bad decision to unravel decades of work.
This is not about giving up control. It is about recognizing that control weakens gradually, not suddenly.
Final Thoughts
Most investment risks are visible. This one is not.
Judgment fades quietly. By the time it is obvious, money has often already been lost. For investors who care about preserving wealth over a full lifetime, planning for cognitive decline should be viewed the same way as planning for longevity or market volatility.
Uncomfortable, yes. Optional, no.
