Investing / Retirement Planning

The Impact of Aging on Financial Decision Making

Published by Bob Gustafson

The Effects of Aging on Financial Decision Making

As humans get older, our bodies aren’t what they used to be, and neither are our minds. As we age, we lose our physical ability and mental acumen. It’s often hard for people to come to grips with this fact. That’s why some families literally have to take the car keys away from elderly drivers. However, when it comes to financial decision making, it’s up to you to recognize the need for a transition plan. Once you acknowledge that you’ll eventually need help, you can significantly mitigate associated risks.

How aging impacts our money matters

As we age, our cognitive abilities undergo transformations. While some areas may remain strong, others might experience decline. Memory, attention, and processing speed can all be affected. These changes can influence how we process financial information, assess risks and make decisions.

Other ways aging affects our financial decision making as it pertains to our investment portfolios include:

  • Risk Perception: As we grow older, our tolerance for financial risk may decrease. This can be attributed to various factors, including a desire for stability as we near retirement age or heightened awareness of the long-term consequences of risky investments. Understanding this shift in risk perception is crucial for ensuring your financial plan aligns with your goals and comfort level.
  • Emotional Factors: While wisdom and experience may help us make more informed financial decisions, as we age, we may also become more susceptible to emotional biases, such as loss aversion or overconfidence. Recognizing these biases can help us avoid making impulsive or irrational choices.

When you begin making bad financial decisions or if you’re unable to make a decision, this is the time to stop managing your investment portfolio yourself. One bad decision, in any aspect of life, is never good. But the cost of a bad investment decision related to retirement could be extremely detrimental to your financial situation. And no one wants that!

What should you do?

If you’re financially savvy and currently managing your own investment portfolio, recognize there will come a point when you shouldn’t do this anymore. On the other hand, if it’s your spouse who is managing your investments, have a conversation about a transition plan. To ensure neither of you get caught up denial, there are some actions you can take right now.

  • Find a fiduciary with whom you can develop a relationship with now. Work with them so they can understand your personal financial situation and preferences when it comes to taking risks. Then, when you realize you need guidance, or worse something goes wrong, the advisor can step and make sound decisions in your best interest.
  • Diversify your portfolio now. The people who stand to lose the most money due to bad financial decisions are the ones with the majority of their wealth accumulated in just a couple of stocks.

Even if you are able to manage your own portfolio, seeking guidance from a trusted financial advisor becomes invaluable. A knowledgeable advisor can help navigate the intricacies of retirement planning, investment strategies and estate management, providing tailored solutions based on your unique needs and circumstances.


Understanding the effects of aging on financial decision making empowers us to adapt and plan accordingly. By recognizing the changes in our cognitive processes, risk perception, and emotional factors, we can make informed choices that support our financial well-being throughout every stage of life. Remember, it’s never too early – or too late – to take control of your financial future. Contact an expert today to begin developing a succession plan for your investments.

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