A Tale of Two Losses: Your Memory & Your Money

Dr. Peter Lichtenberg, Wayne State University

Older adults in the U.S. lose millions of dollars each year to financial exploitation and scams. Many factors make older adults vulnerable to financial predators, and the decline in memory and other thinking skills may be the reason. Even well before a diagnosis of Alzheimer’s or other dementia, changes in cognition can change finances. Until recently, however, we didn’t have a precise correlation between memory and money loss.

The multi-year Health & Retirement Survey of thousands of older adults has answered that question -- with shocking results. Participants were given 10 words to remember during the course of the survey. Every two years, they took another word memory test. People who showed a 10% loss of memory over two years, dropping from remembering all 10 words to remembering 9, for example, reported a 15% to 20% drop in overall wealth.

“That’s a huge monetary loss,” said Peter Lichtenberg, PhD, the director of the Institute of Gerontology at Wayne State University and an expert on financial decision making in older adults. “I was curious about the details. The survey looked from 30,000 feet. What about ground level? Exactly how do people with early memory loss manage their finances? Are they losing money because of poor financial decision making, financial exploitation, mismanagement, or a combination of all three?”

Dr. Lichtenberg’s new research study is called WALLET (Wealth Accumulations & Later-life Losses in Early cognitive Transitions). His team is recruiting men and women age 60 and older who manage their own household finances but feel like their memory is slipping or have been diagnosed with mild cognitive impairment. Participants share their past year’s primary checking account statements and credit card statements with Dr. Lichtenberg’s team for analysis. Interviews include brief cognitive tests done in the home or the Institute of Gerontology office. Participants are compensated for their time.

“We examine these statements for changes. People with significant memory problems often restrict spending. But people with minor memory problems may be increasingly impulsive and spend more,” Dr. Lichtenberg said. “We look for volatility – big shifts from month to month – and insufficient funds fees. I like to see people’s check registers, too, over a couple years. If I see more scratch outs, voided checks, mistakes, it often indicates memory declines.”

Dr. Lichtenberg cautions that 60 to 65% of financial exploitation comes from people we know rather than from strangers. Adult children who provide care for parents can feel entitled to dip into mom and dad’s money as “payment” for caregiving. It’s not malicious, but it still causes harm.

“I worked with a woman who was spending 40% of her very limited monthly income on cell phone bills. She had five other family members on her bill. They had asked for temporary help but never left the plan,” he said. The woman had difficulty realizing just how much money she was losing and its impact on her lifestyle. She also didn’t want to risk hurting family relationships by saying, ‘no.’

He advises older adults to break the taboo and talk about money, especially with their children and ideally before memory issues occur. “Discuss budget, estate planning, gifts, bequests, housing wishes. If you have doubts about trustworthiness, have an independent person review expenses and provide oversight,” he said. He warns older adults against supporting children into their 30s and 40s. “Encouraging children to be financially independent, to live within their means, is one of our main responsibilities as a parent. Real love cannot be bought. If you have to keep paying to secure affection, it isn’t love.”