Age and Decision Making Ability

There may be a reason why so many victims of scams seem to be older adults: Researchers have found that decision making ability decreases with age, according to the New York Times. The study, led by Natalie L. Denburg of the University of Iowa, appeared in the Annals of the New York Academy of Sciences.

Test subjects were divided into two groups, one of 26- to 55-year-olds and one of 56- to 85-year-olds. "The goal was to see how well the older volunteers used the skills often demanded of them when making decisions in real life about activities like investments, insurance and estate planning," according to the New York Times.

The study "used a gambling-style test in which people draw from four different decks of cards. Two decks, not to mince words, are for suckers," according to the New York Times. "They give short-term rewards but long-term losses. The other two decks do the opposite. Most people draw a lot from the bad decks first and switch. In the study, many of the older participants stuck with the bad decks."

The study attributed the decreased ability aging adults have to make good decisions to changes in the prefrontal part of the brain that influences behavior.

Those who are approaching retirement or are already retired are perhaps the investors who need to be making the best investment decisions simply because they have less time to recover from mistakes. And, just like the older adults in the study, perhaps older investors would be content to stick with the short-term rewards.

Investors of all ages who seek out immediate and/or large returns are susceptible to falling victim to scams. But older adults, making less sound decisions than in their youth, may be especially likely to become victims of scams. There are plenty of stories of older adults who put all of their money into one investment only to lose it all. Older investors, and investors of all ages, should remember to not put all their eggs in one basket, just in case one of their investments falls through.

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