Robert Kneschke/Shutterstock There's been plenty of attention on aging baby boomers and their lack of preparedness for retirement. However, boomers are also finding themselves in delicate situations when it comes to their parents' finances. It's not unusual for financial advisers and counselors to see elderly clients who no longer have the cognitive abilities to handle all aspects of their finances, including their investments. Vicki Van Horn, executive director of the New Mexico Project for Financial Literacy, teaches a course in financial caregiving, providing families with strategies to help older relatives successfully manage their money. She says a common scenario is one in which a wife allows her husband to take care of all the couple's financial matters. Over time, if his cognitive abilities become impaired, his wife and adult children may not recognize the signs. Van Horn cites the example of a friend whose father passed away, leaving his wife unaware that the house was in foreclosure and that he had maxed out seven credit cards. Although he suffered from dementia, his wife continued to let him control the couple's finances. "An issue is that when people suffer cognitive decline, they become resistant. They become overconfident," she says. Greater Risk for Becoming a Victim At least one academic study has confirmed the problem of financial overconfidence among senior citizens. In November, the Center for Retirement Research at Boston University released a study called "The Causes and Consequences of Financial Fraud Among Older Americans." The researchers found, among other things, that overconfidence regarding financial knowledge puts a person at greater risk of being victimized by financial fraud. The authors also cite earlier studies that show overconfidence to be a factor in poor investment decisions.
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