Q&A: Cerebral slide can hit your wallet

Dear Liz: As a practicing attorney, age 72, I take exception to your advice to the grandmother who complained about her husband co-signing for his granddaughter’s deadbeat boyfriend’s auto loan. You said, “He is showing signs of cognitive impairment.” She never gave his age. Even if he was past 70, an impairment may or may not be true without knowing more facts. I know people in their 80s and beyond who are careful and manage their money very well. In my 30 years of practice, I have seen many cases where relatives and friends co-sign for a family member or friend, often for an auto loan. This practice crosses all age and demographic lines. Each person has a reason for co-signing (or lending money), but the most common thread in family members is: “It’s really hard to say no to a person I love.”

Answer: You might want to take another look at that column. The grandfather co-signed a loan not for a relative or a friend, but for a young man whose last name he didn’t know — and he did so without consulting his wife.

Not everyone turns into a financial fool in his later years, but our cognitive abilities do decline with age, starting in our 20s. Until our 50s, those losses in cognitive function are offset by increased experience and knowledge. After that, our growing wisdom isn’t enough to offset our cerebral slide.

If you think you’re cognitively as sharp as you were in your youth, then you may be the exception — or you may be deluded.

Researchers who tested people in their 80s found that “large declines in cognition and financial literacy have little effect on an elderly individual’s confidence in their financial knowledge, and essentially no effect on their confidence in managing their finances,” according to a paper for the Center for Retirement Research.

That’s why it’s important to put protections into place to keep yourself from making bad financial choices. You can start by simplifying your finances and consolidating accounts to make them easier to monitor. You may want to develop a relationship with a trusted financial advisor, one with a fiduciary duty to put your interests first, so that you can seek good counsel before making financial moves. Also, many people as they age give a trusted child or friend access to their accounts so they can be watched for suspicious transactions.

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