Has the decision-making capability of senior citizens declined to such an extent that they need to be protected as a separate class?

The question comes up because Congress and various state legislatures have proposed and passed many regulations over the years to protect senior citizens. More recently, attention has focused on how insurance agents interact with seniors, and the insurance business is becoming increasingly interested in this question.

First, let’s consider who is a senior citizen. The U.S. Senate Committee on Aging describes senior citizens as anyone age 60 or older, but most state regulatory acts and proposals seem to define a senior as a citizen age 65 and up. Various studies on aging and decision-making use “old age” subject groups ranging from 50 to 82.

It appears that attempting to define “senior citizens” via a stated age bracket is entirely arbitrary. People age differently. The decision-making capabilities of the average 55-year-old appear to be very similar to the average 70-year-old, but a specific 55-year-old may have much worse mental acuity than a specific 85-year-old.

For this article, let’s refer to “seniors” as people older than middle-aged and leave it at that.

A review of over 40 peer-reviewed articles about the effects of aging on decision-making reveals conflicting views of seniors’ decision-making capabilities.

For instance, some studies find that seniors make risk-taking decisions equivalent to those of young adults and that senior economic decision-making ability is not impaired by age. But a couple of studies find that seniors make decisions about as well as young adults with frontal-lobe brain damage–essentially finding that people start to lose it at age 50 and then get steadily worse. More than a few studies just punt, saying “some” seniors have worse abilities than younger people.

But all studies agree that aging negatively impacts mental powers to some extent. After a certain point, memory skills slide, and the older one is, the more likely the person is to rely on mental shortcuts to reach a decision rather than examining the problem anew. For example, if a senior is facing a complicated decision, the person is more likely to apply the results of a similar previous decision to the new one, rather than to make the decision based solely on the circumstances on the new situation.

However, the studies disagree about whether aging causes the average senior to make worse economic decisions than those of young adults.

Studies testing general knowledge find that seniors know more than young adults. Perhaps even more important, these studies find that seniors know what they do and don’t know–and are much more willing than young adults to admit when they don’t know. Seniors are also affected more deeply by positive emotions in decision-making.

Several studies say seniors spend more time trying to feel good emotionally and tend to block out negative information and emotions. Further, if they receive negative information, seniors disproportionately forget it.

The stereotype of seniors is often the complaining curmudgeon. However, seniors are more likely to be in a good mood more often than young adults, and seniors work hard to keep themselves in a positive frame of mind. They are more affected by appeals to emotion than logic and react positively when asked to recount life experiences. Further, although all people are subject to vividness bias–reacting more to the brightest color, biggest number, loudest noise, etc.–seniors are more susceptible.

There are numerous implications for the annuity world if these results hold up in future studies. Some are shown in the chart.

Several studies have found that seniors deliberate more quickly, look at fewer facts, and tend to replay the same decisions they made earlier in life in similar circumstances. All of this could lead to seniors making bad decisions. However, one recent study says that when seniors are given more time to study and remember new data, they perform as well as young adults. Hence, if seniors are not pressured and not rushed, they tend to make decisions as well as anyone else. In addition, if given the deliberation time needed, seniors do not tend to be more risk-averse or conservative than young adults.

The research is contradictory on whether the decision-making capabilities of senior citizens decline with age. It does appear that 1) seniors may be manipulated by appealing strongly to their desire for positive emotional balance, and 2) seniors may make bad decisions if they rely strongly on vividness in processing information. But it also appears that if seniors are given sufficient time, they can overcome these characteristics and make good decisions. Clearly, more research is needed.

Should seniors be protected as a class? An 85-year-old may well be sharper than a 55-year-old. Until there is more evidence showing mentally capable seniors need to be treated as a protected class, it makes more sense to treat everyone the same.

Jack Marrion is president of Advantage Compendium, a St. Louis based research and consulting firm. His e-mail address is jack.marrion@consultant.com. He will send his list of senior studies to those who request such by e-mail.