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Retirement Planning > Saving for Retirement

Consumers at High Risk for Dementia Put More Wealth in CDs: Researchers

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People who know they are growing more forgetful may have a tendency to simplify their investments — or their children may make them do so.

Three economists — Su H. Shin, Dean R. Lillard and Jay Bhattacharya — reported that conclusion in a new study distributed by the National Bureau of Economic Research.

(Related: Dear Future Me: Please Listen!)

Shin and the other economists wrote the paper, Understanding the Correlation Between Alzheimer’s Disease Polygenic Risk, Wealth, and the Composition of Wealth Holdings, to look at the relationship between people’s risk for developing dementia and their retirement savings.

The economists conducted the study by using data collected from 1992 through 2014 by the Health and Retirement Study (HRS) program.

The HRS team surveys American adults ages 50 and older, and their spouses, every two years.

In 2006, 2008, 2010 and 2012, the HRS team collected saliva samples from the survey participants. The team used the samples to develop “polygenic score” (PGS) statistics for the participants, or estimates of how likely the participants were to develop dementia, based on genetic testing results.

The researchers studied correlations between survey participants’ PGS results and their investments.

The economists found that the high-risk survey participants held about 9% more wealth in bank certificates of deposit (CDs), or “hands-off assets,” than other, comparable HRS survey participants did.

The high-risk survey participants held 11% less wealth in stocks, 15% less wealth in individual retirement accounts, and 7% less wealth in other “hands-on” financial assets.

The economists tested three possible reasons for the high-risk people’s preference for hands-off assets:

  • People might know from their family histories that they are at high risk, and invest accordingly.
  • High-risk people might simplify their investments because they are already having serious trouble with thinking clearly.
  • High-risk people may simplify their investments because they grow to understand their risk of developing dementia with more precision as they age.

The economists conclude that high-risk people’s growing understanding of their dementia risk fits the data the best.

“As people age, those with higher Alzheimer’s disease PGS alter their savings type and amounts,” the economists write. “Such changes in behavior may simply reflect a person’s recognition of accumulating forgetfulness or it may reflect a more complicated process that involves adult children more actively intervening.”

In the new paper, the economists also discuss the potential for using genetic testing to help high-risk people manage their finances.

Knowing about high dementia risk scores “might induce patients to alter their behavior in welfare-enhancing ways,” the economists write.

An individual who learns of a high risk score “may start saving earlier to finance the costs of the care he/she will want later in life,” the economists write. “The private savings improves social welfare because it reduces the amount governments need to tax. ”

There’s also some evidence that people who know they are at high risk tend to cut down on smoking and drinking, and exercise more, the economists write.

“ To the extent these behaviors yield higher lifetime utility, private welfare improves,” the economists write.

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