I was asked to speak at the NAIC fall conference in Washington on the topic of senior decision making. My message was that the research says our decision-making powers decline sometime after age 65, but there are things that can be done so that decisions of a 75-year-old are as good
as a 35-year-old.

Why decision-making skills worsen
Working memory declines so seniors can hold less new data in their heads at one time and the speed of processing the data slows. This means seniors get easily overwhelmed by too many choices and too much data, and seniors use mental shortcuts that often do not result in good decisions. They mistake quantity for quality, they ignore the true risk of a situation and they tend to choose what they recognize instead of what is best.

And how to improve
Give seniors enough time because when seniors are given more time to study and remember new data they perform as well as young adults.

Make decisions bite-sized, meaning the advisor needs to act as data sorter to make the overall decision manageable. If the senior wants no market risk to principal and a yield guaranteed for the surrender charge period, the presentation could show which multiyear annuity terms are offered. If a five-year term was selected, the focus could then be on choosing from the three highest-yielding five-year annuities.

Standardize how information is presented so seniors can concentrate on the information instead of being distracted by the packaging. My suggestions to the regulators were to define a few important terms so that words such as “accumulated value” would mean the same thing regardless of the annuity offered and to require information to be disclosed in the same format on all disclosures, but the agent can act today. Instead of referring to one product’s annuity value, another’s contract value and a third’s policy value, the agent can standardize their own presentation so the same words always refer to the same thing.

This is not about how smart you are
The reality is if you live long enough, your decision-making ability eventually declines, but that doesn’t mean you have to make worse decisions. This is simply a part of aging and seniors need to adjust. Just as around age 50 most people find it difficult to read small print and adapt by getting glasses, the way information is presented to seniors can be changed to ensure seniors can continue to make good decisions.