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Cognitive Decline, Limited Awareness, Imperfect Agency, and Financial Well-being

Author

Listed:
  • John Ameriks
  • Andrew Caplin
  • Minjoon Lee
  • Matthew D. Shapiro
  • Christopher Tonetti

Abstract

Cognitive decline may lead older Americans to make poor financial decisions. Preventing poor decisions may require timely transfer of financial control to a reliable agent. Cognitive decline, however, can develop unnoticed, creating the possibility of suboptimal timing of the transfer of control. This paper presents survey-based evidence that wealthholders regard suboptimal timing of the transfer of control, in particular delay due to unnoticed cognitive decline, as a substantial risk to financial well-being. This paper provides a theoretical framework to model such a lack of awareness and the resulting welfare loss.

Suggested Citation

  • John Ameriks & Andrew Caplin & Minjoon Lee & Matthew D. Shapiro & Christopher Tonetti, 2022. "Cognitive Decline, Limited Awareness, Imperfect Agency, and Financial Well-being," NBER Working Papers 29634, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29634
    Note: AG EFG ME
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    References listed on IDEAS

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    2. Jing Li & Kathleen M. McGarry & Lauren Hersch Nicholas & Jonathan S. Skinner, 2026. "Dementia and Long-run Trajectories in Household Finances," NBER Working Papers 34659, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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