Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/227252 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13725
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We investigate whether older people correctly perceive their own cognitive decline, and the potential financial consequences of misperception. First, we document the fact that older people tend to underestimate their cognitive decline. We then show that those who experienced a severe cognitive decline, but are unaware of it, are more likely to suffer wealth losses compared to those who are aware or did not experience a severe decline. These losses largely reflect decreases in financial wealth and are mainly experienced by wealthier people who were previously active on the stock market. Our findings support the view that financial losses among older people unaware of their cognitive decline are the result of bad financial decisions, not of rational disinvestment strategies.
Subjects: 
aging
cognitive ability
household finance
HRS
JEL: 
J14
J24
C23
Document Type: 
Working Paper

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