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Mon, March 23
Lundberg, State Care of the Elderly & Labor Supply of Adult Children

Dementia Risk and Financial Decision Making by Older Households: The Impact of Information

Publication Abstract

Hsu, J., and Robert Willis. 2013. "Dementia Risk and Financial Decision Making by Older Households: The Impact of Information." Journal of Human Capital, 7(4): 340-377.

The cognitive ability needed to manage finances is a form of human capital. Dementias cause progressive declines in cognition. We analyze how information about decline affects the choice of the household financial decision maker using longitudinal data on older couples. We find that as the financial decision maker's cognition declines, financial management is eventually turned over to the spouse, often well after experiencing difficulties handling money. Couples who control their retirement accounts and are at greatest risk from financial mismanagement are much more likely to shift responsibility to a spouse in response to a diagnosis of memory disease than those with fixed incomes.

DOI:10.1086/674105 (Full Text)

NIHMSID: NIHMS578342. (Pub Med Central)

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