How to Guard Your Finances in Case Cognitive Decline Sets In
Many of us are at risk of cognitive decline, but there are things we can do to protect our finances from its effects.


The greatest threat to the financial security of many older adults isn’t a recession, market correction or inflation. It’s the risks posed by health-related events.
Roughly 78% of adults over the age of 55 in the U.S. have been diagnosed with at least one chronic illness, such as diabetes, asthma or arthritis, according to the CDC. And 1.9 million people were diagnosed with cancer last year, according to the American Cancer Society. But the greatest health-related threat to financial wellness and retirement security is cognitive decline.
Unlike the progress we are seeing in other medical fields like cancer and heart disease, success in finding a cure for dementia has been elusive. Alzheimer’s is the only disease among the top 10 causes of death in the U.S. that cannot be prevented, cured or even meaningfully slowed.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Cognitive decline can affect management of finances early on
Cognitive decline can have devastating consequences for personal finances and sound financial decision-making. The ability to manage finances is one of the first cognitive skills to deteriorate, leaving many people vulnerable to suboptimal financial decision-making and an ever-growing array of pernicious financial scams.
As the population in the U.S. ages, the likelihood that someone you know experiences cognitive decline will increase. According to the Alzheimer’s Association, an estimated 11% of adults over the age of 65 in the U.S. today are living with Alzheimer’s, and an additional 3% suffer from related illnesses.
According to the American Academy of Neurology, an additional 15% of adults over 65 in the U.S. suffer from mild cognitive impairment (MCI) — defined as a “level of cognitive decline that requires compensatory strategies and accommodations to help maintain independence and perform activities of daily living.” Adults with MCI experience cognitive decline that goes beyond “normal aging.”
Together, the estimates suggest that about 29% of adults 65 and over are already having difficulty making sound financial decisions. And like many diseases, the likelihood of having dementia or MCI increases with age. By age 82, there is a 50% chance that a person has either dementia or MCI. And by the time they reach age 90, there is better than an 80% chance they have dementia or MCI.
Unfortunately, suboptimal financial decision-making is likely to occur even earlier. A comprehensive study found that financial decision-making mistakes follow a U-shaped pattern, with the “peak age” of financial decision-making occurring at around age 53. This suggest that difficulties with financial decision-making for many people begin well before the onset of a serious cognitive illness.
We can’t assume we’ll avoid cognitive decline
Since it is a virtual certainty that all of us will experience a decline in the ability to make sound financial decisions as we get older, it is imprudent for anyone to assume that they’ll avoid the risks of cognitive decline as long as they don’t develop Alzheimer’s.
So, what can we do to protect ourselves and our loved ones? A good strategy is to reduce the number of consequential financial decisions we need to make on an ongoing basis. We can all benefit from simplifying our personal finances and putting as much of our decision-making as possible on autopilot.
The execution of financial transactions, even minor ones, can present opportunities for accounting mistakes, judgment errors, memory lapses, impulsive decisions or financial scams. The downside risks associated with the need — or desire — to sell an existing asset, make a new investment or pay a bill tend to increase as we get older.
Reducing the number of financial accounts we need to manage, automating bill payments and assembling a team of trusted family members and professionals can all help lower the frequency of financial transactions and thereby decrease decision-making risks.
Consider guaranteed income strategies
Guaranteed income strategies like annuities can provide a similar type of protection. Because they decrease the need for, and frequency of, potentially risky financial transactions, they shield individuals and their families from suboptimal financial decision-making. Protected income products can comprise an important element of a safe and risk-reducing financial decision-making “autopilot” strategy, as they provide a regular stream of income, absent the need to execute a transaction.
Protected income products can also help guard against other health-related financial risks, like having a health event that leaves you temporarily or permanently incapacitated (cognitively or physically), outliving your savings or requiring lengthy long-term care.
Because it is likely to happen to just about all of us as we get older, reducing the decision-making risks associated with cognitive decline should be a major goal of any financial plan. For many adults and their families, protected income products can play an important role in meeting that goal.
related content
- Nine Questions to Ask Aging Parents About Their Finances
- Caring for Aging Parents Takes Planning Ahead and Patience
- What Gen X Needs to Know About Their Aging Parents' Finances
- Insuring Your Plan for Retirement Income
- Are You Overlooking Your Most Valuable Retirement Asset?
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Chris Heye, PhD, is the CEO and Founder of Whealthcare Solutions, Inc. and Whealthcare Planning LLC. Dr. Heye is a technology entrepreneur who writes, researches and speaks on subjects that reside at the intersection of health, personal finance and longevity. He helped design and manage a clinical study conducted at the Massachusetts General Hospital that investigated the behavioral and cognitive underpinnings of sound financial decision-making. The results of that study serve as the foundation for Whealthcare’s innovative applications that enable adults and their families to more effectively plan for health- and longevity-related financial risks.
-
Six Steps to Being Empowered and On Track: An Expert Financial Guide for Women
While most female investors feel on track with their financial goals and empowered by managing their investments, many regret not starting sooner. Here's how you can get started and take control of your financial future.
-
Selling Your Business? This Powerful Insurance Option Unlocks Multigenerational Wealth
Private placement life insurance (PPLI) offers almost unbelievable investment flexibility, estate planning and tax advantages. And it's completely legit.
-
Six Steps to Being Empowered and On Track: An Expert Financial Guide for Women
While most female investors feel on track with their financial goals and empowered by managing their investments, many regret not starting sooner. Here's how you can get started and take control of your financial future.
-
Selling Your Business? This Powerful Insurance Option Unlocks Multigenerational Wealth
Private placement life insurance (PPLI) offers almost unbelievable investment flexibility, estate planning and tax advantages. And it's completely legit.
-
How to Maximize Your Social Security Now That the One Big Beautiful Bill Is Law
When applying for your Social Security benefits, consider the new enhanced deduction for people age 65 and older, as well as your health, family situation and other financial issues.
-
I'm a Retirement Specialist: This Is How to Keep Your 401(k) on Track Amid Dire News Alerts
History shows that consistent, disciplined investing far outweighs any attempt at market timing, so focus on long-term growth and tune out the sky-is-falling news headlines.
-
Five Money Moves to Make Before Your First Child Arrives: A Financial Guide
I wish I'd known some of these when I was an expectant parent. These important steps include establishing an emergency fund, budgeting for new expenses, securing life insurance and more.
-
Retirement Tax Bombs: How Roth Conversions May Cut the Blue Wire
If you have a significant amount in tax-deferred retirement accounts, you could be sitting on a tax time bomb. Luckily, there's a way to defuse the situation.
-
A Financial Planner's Guide to Planning for Retirement Health Care Expenses
Whether you're eligible for Medicare or getting coverage through the Affordable Care Act, make sure you plan for premiums, deductibles and other out-of-pocket costs.
-
I'm a Financial Adviser Who's Been Through Divorce: This Is How I Break It Down for Clients
Dividing a divorce into three stages — decision, negotiation and finalization — makes it more manageable. These are the key steps to take in stage one.