Is there consensus among aging researchers that the decision-making capabilities of seniors decline as they age? The question has bearing on the current discussion about annuity sales to seniors.

A study led by Dr. Natalie Denburg and Dr. Catherine Cole of the University of Iowa concludes that 35% of the older adults studied were mentally impaired due to aging. The study, published in 2007, provides evidence that such seniors made bad decisions. The researchers suggest this is why a sizable portion of seniors fall victim to fraudulent advertising, and it could explain why seniors are often victims of fraud in general.

But are 35% of seniors really mentally impaired?

The claims of the Iowa study are so specific that I went back and looked at over 50 other academic journal studies on aging and cognition published through the end of 2007. My goal was to see whether the view that many seniors are impaired is supported or contradicted by other research. (Note: the exact age for when one becomes a senior is undefined in much of this work.)

By way of general background, many gerontologists believe that premature frontal brain lobe aging is probably why some seniors make bad decisions. The frontal lobe supports the working memory that contains current data, they point out, so if the frontal lobe has deteriorated, people do an incomplete job of thinking through all possible outcomes, with poor decisions the inevitable result.

Several researchers use a test called the Iowa Gambling Task (IGT) to see whether a person’s decision-making is up to snuff.

The Iowa study had 40 young adults (age 26-55) and 40 old adults (56-85) take the IGT test. It found that 37 of the 40 young adult subjects eventually wound up making decisions that maximized long-term rewards. However, of the 40 older adults, only 15 were “unimpaired” in that they strongly made good decisions, while 14 older adults were “impaired” in that they continued to make decisions that minimized long-term rewards. The remaining older adults produced mixed signals.

In other words, while fewer than 8% of young adults made bad decisions, a clear 35% of seniors made bad decisions.

If it is true that 35% of older adults may suffer from impaired decision-making without displaying any clear outward signs of impairment, the impact could be enormous. Older adults are making life and death decisions about their own medical care, and protecting their beneficiaries and themselves from financial risk.

If these findings are supported–that one out of three people over age 55 are decision-impaired–what should society do? The necessary fix would be far greater than banning lunch seminars. Should older adults be subjected to mandated decision-making tests every so many years, and should the courts order those who are found to be impaired to have a conservator make all meaningful decisions for these adults? What would be the impact on annuity and other financial sales to seniors?

Some studies specifically debate the validity of IGT in determining impairment, but there is also considerable research from the last several years which supports the contention of frontal lobe aging damage.

Numerous other studies conclude that working or short-term memory worsens as old age progresses.

And the so-called “socioemotional selectivity theory of aging” has proponents who say goals change as people realize death is nearing–that people shift from seeking knowledge to deriving meaning from life and ensuring good feelings. In this view, emotions become more important in processing information, and seniors use more emotional cues to enhance memory rather than factual details.

Significantly, in one 2005 study, seniors were less likely to remember whether the hot food was on the left or the right, or whether the car in the picture was red or blue, but they were just as likely as young adults to remember which food was rotten and which car was dangerous. In short, these seniors remembered what is important to them and ignored the rest. They focused on the value of the knowledge that could impact them rather than the minutiae.

(This could be why seniors sometimes do not remember specific annuity surrender charges. They have no intention of surrendering the annuity and so perceive these charges as irrelevant; therefore, the charges are forgotten.)

Findings like this suggest that the decision-making process does not necessarily become impaired with age. Instead, the process transforms into one that intentionally becomes more driven by a decision’s emotional context rather than the simple facts. What is happening is not “impaired” decision-making but rather “appropriate” decision-making, based on the senior’s needs and goals.

Another study, conducted in 2007, concluded that decision-making abilities do decline with age. It found that seniors tend to seek less information before making a decision than do younger people. The “however” is that often they obtain enough information to make a good decision. While young adults do better on cognitive tests, they do not perform better than seniors when confronted with real life problems, according to these researchers. For example, seniors were more accurate than young adults in giving the best answers for complex financial planning problems.

Many studies say seniors do process information more slowly than young adults; however, some argue that the loss of speed is traded for greater accuracy. Seniors use their lifetime experience and concentrate on the decision at hand (rather than trying to multitask) to reach decisions that are every bit as good as young adults.

An earlier study said that although senior responses take longer, the ultimate responses were as accurate as the responses of young adults, so it could be possible that as front brain neurons become impaired, other parts of the brain are used to compensate.

Other studies offer alternative explanations to the Iowa study conclusion. But I have not found data that would disprove the Iowa conclusions. It is likely that more seemingly “normal” seniors than young adults have impaired decision-making powers. Determining the extent of impairment, and whether it is treatable with drug therapy or perhaps with a type of decision-making training, will require a lot more research. In the meantime, it behooves professionals, including financial advisors, to use current understanding about seniors to guide their interactions with this important American demographic.

Jack Marrion is president of Advantage Compendium, a St. Louis research and consulting firm. His doctoral studies focused on cognitive bias in decision-making. His e-mail address is jack.marrion@consultant.com