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Dumber after age 53?

New study says people get smarter with money only to a certain point, usually around age 53.

By Kim Peterson Nov 17, 2009 3:16PM
Insurance needs © Siri Stafford / Photodisc Red / Getty Images We're supposed to get smarter about money and finances as we get older, right? One new study suggests that may not be the case.

Researchers have been tracking the financial mistakes people make in their lives, and came up with an interesting conclusion: The mistake pattern is U-shaped, with the most mistakes occuring early and then later in life.

So when are we the smartest in life, financially speaking? At age 53. After that, we get dumber with money.

I can understand being financially dim-witted early on in life. You don't have much money in your 20s, for example, and there's an unwritten law that the money you do have you will spend stupidly.

But seniors don't really go around blowing cash on 7 For All Mankind jeans. So how do we get dumber?

The researchers studied 10 different kinds of credit behavior. The mistakes they tallied included wrongly estimating the value of your house, paying too much when it comes to interest rates and fees, and not taking advantage of credit card balance transfer offers.

Carla Fried at CBS says that a few decades ago, older Americans weren't making the kind of big-ticket financial decisions they are today. Back then, retirement income was pretty cut and dry, and came from pensions and Social Security.

But now, retirees are more hands-on with retirement income, and have more options, including 401(k)s, IRAs and a variety of other investing tools. Those new choices leave more room for errors.

"The bottom line is that while our cognitive skills may peak at 53, the need to keep making smart financial decisions doesn’t recede with age," Fried writes. "If anything, it continues to grow."

Older adults are particularly vulnerable to mistakes, the researchers say. Half the adults between age 80 and 89 either have dementia or have been diagnosed with "cognitive impairment without dementia."

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