retirement womanFinancially literate seniors are less likely to develop Alzheimer’s dementia than elderly people who are not financially literate, according to a new study released by the Financial Industry Regulatory Authority Investor Education Foundation and researchers from Rush University Medical Center.

The study, Confidence in Financial Literacy and Cognitive Health in Older Persons, found that confidence in financial knowledge is associated with a decreased risk of Alzheimer’s dementia among older persons, while under-confidence suggests a greater risk of developing Alzheimer’s dementia and experiencing a faster cognitive decline.

“While it is not completely clear why this relationship exists, it could be that confident people are motivated to engage with the world and actively seek to acquire new information,” the report said.

Also, “in the face of distraction and setbacks, confident people are more persistent and tend to exhibit greater effort toward meeting their goals,” it said.

The research “does suggest that education and outreach programs aimed at increasing financial and health literacy are important to preserve cognitive health among older adults,” according to FINRA Foundation president Gerri Walsh. “Targeting soft psychological factors, such as confidence, could benefit cognitive health and well-being,” she added.

The study did not see a similar association between cognitive decline and confidence in general, FINRA said.

The study used data from 974 community-dwelling older persons participating in the Rush Memory and Aging Project. Researchers recruited seniors from retirement communities, subsidized housing facilities and local churches, as well as other social service agencies in the Chicago metropolitan area. Participants were an average 81.2 years old with 15 years of education; about 75% were female.

The Link Between Financial Knowledge and Well-Being

A separate FINRA Investor Education Foundation/Rush University Medical Center study examining links among financial and health knowledge found that a faster decline in financial and health literacy was associated with three different outcomes: poorer decision making, higher susceptibility to scams and lower psychological well-being.

That study, Adverse Impacts of Declining Financial and Health Literacy in Old Age, tracked responses from annual literacy assessments administered over a 10-year period to participants in the Rush Memory and Aging Project and found that, over time, most of those adults showed an overall decline in financial and health literacy. The study defined financial and health literacy was defined as the ability to acquire, process and utilize information necessary to make sound financial and health decisions — a key determinant of independence and well-being, FINRA noted.

“Lack of financial and health literacy in old age presents a formidable economic and public health problem,” the report said, adding: “Older adults can suffer from unrecoverable financial loss and severe health consequences because of poor literacy and decision-making.”

Additionally, “older adults with lower financial and health literacy are less likely to participate in health promoting activities, are more susceptible to financial fraud and scams and have poorer cognitive and mental health,” it noted.

The study found that “declining financial and health literacy may represent a novel harbinger of adverse outcomes, and regular monitoring of financial and health literacy could serve as a useful tool to identify individuals at risk of impending degradations in their decision-making ability,” said Walsh. “Efforts to mitigate declining financial and health literacy may promote independence and well-being in old age,” she said.

This study used data from nearly 1,046 older persons participating in the Rush Memory and Aging Project, was funded by the FINRA Foundation and the National Institute on Aging and was conducted with help from the Rush Memory and Aging Project and the Rush Alzheimer’s Disease Center.

Both studies were authored by Associate Professor Lei Yu and Professor Patricia Boyle of the Rush University Medical Center, and FINRA Foundation research director Gary Mottola and  released in recognition of World Alzheimer’s Day.

Some of their findings echoed the findings of an earlier study from the FINRA Investor Education Foundation in collaboration with researchers from Duke University and Rush University Medical Center. That study, Does Overconfidence Increase Financial Risk Taking in Older Age?, found that older U.S. investors may engage in more risky financial behaviors as they continue to age and face diminished financial knowledge.

–Check out FINRA Advances Rules on Senior Exploitation, E-Signatures on ThinkAdvisor.