Bob Dylan hit on a universal truth when he sang about his son and the attraction of remaining young.
May your hands always be busy
May your feet always be swift
May you have a strong foundation
When the winds of changes shift
May your heart always be joyful
May your song always be sung
May you stay forever young
Dylan’s voice was best described, famously by Joyce Carol Oates, as if sandpaper could sing, but he was, according to Time magazine, “the guiding spirit of the counterculture” and the voice of his generation. Today that generation—my generation, the baby boomers, including Dylan—isn’t young anymore. And none of us is going to defeat Father Time. As Dylan’s friend John Mellencamp sang in “Life is Short Even on Its Longest Days,” “one day you get sick and you don’t get better.”
Those of us lucky enough to live so long will see our bodies and minds slip and in many cases slip badly. Studies confirm what most of us have seen among our families and friends, even if we’ll never admit it about ourselves. The ability to make effective decisions declines with age. Thus those age 60 and up unnecessarily lose nearly $3 billion to fraud annually. To put it starkly, the research shows that financial literacy declines by about 2% each year roughly after age 60.
Despite that decline, our self-confidence in our financial abilities remains undiminished (and may even increase) as we age. I’ve seen it personally (and tragically). The aged and infirm drive too long, buy too many needless things from the unscrupulous, and simply aren’t as good at making decisions as they once were. As cognitive impairment increases, the aging remain certain that they’re really OK and become belligerent when anyone suggests otherwise. We all like to think we’re highly competent and desperately want to maintain our independence. Trying gently to let aging loved ones know that they need help can readily turn into an ugly confrontation.
In 1999, David Dunning and Justin Kruger published a paper that documented how, in many areas of life, incompetent people do not—cannot!—recognize just how incompetent they are, a phenomenon that has come to be known as the Dunning-Kruger effect. Subsequent testing has shown that people who don’t know much tend to grossly overestimate their prowess and performance in a wide variety of areas, including logical reasoning and financial knowledge. Aging makes that tendency even worse. Thus, for example, elderly people applying for a renewed driver’s license overestimate their driving competence by a lot.