Have you ever walked into a room and completely forgotten why you went there in the first place? Most of us laugh it off as a “senior moment.” But what if those moments start adding up – and quietly draining tens of thousands of pounds from your life savings?
A groundbreaking new study has just revealed something rather unsettling: people who experience cognitive decline in later life can see their wealth drop by an average of £30,000 over a decade. And here’s the part that really caught my attention – the wealthiest retirees tend to lose the most, both in actual cash and as a percentage of their portfolio.
It turns out your investment choices in your fifties and sixties could come back to bite you in your eighties in ways none of us ever expected.
The Hidden Financial Cost of Getting Older
For years we’ve been told to take risk when we’re young and gradually dial it down as retirement approaches. Solid advice, right? But this latest research suggests the story doesn’t end when you stop working. The real danger might begin when your memory starts to fade.
Think about it. Most of us reach our seventies and eighties with the bulk of our wealth in financial assets – shares, funds, bonds, that sort of thing. These aren’t like property or physical gold you can just leave alone. They require decisions. When to sell. When to rebalance. When to take profits or cut losses.
Now imagine trying to make those calls when you’re not quite as sharp as you used to be.
What the Numbers Actually Show
The study tracked people over 50 for years, measuring both their cognitive abilities through memory tests and their financial wealth. The results were stark.
- Cognitive scores stay pretty stable through your fifties and early sixties
- From late sixties onwards, most people see a gentle decline
- By the eighties, the drop becomes much steeper for many
Fast forward eight to ten years after the first signs of decline appear, and the financial gap becomes visible. Those who experienced cognitive decline had roughly £30,000 less in net financial wealth than similar people who stayed sharp.
And no, this wasn’t because they suddenly started paying massive care home fees or gifting everything to their grandchildren to avoid inheritance tax. The researchers controlled for those factors. The money simply… disappeared from their investment accounts.
Why Wealthier People Lose More
Here’s where it gets really interesting. The wealth drop was heavily concentrated among the richest households. Poorer retirees, who tend to have most of their money in cash savings or defined-benefit pensions, barely saw any difference.
Why? Because wealthier people have more “complex” money. They’re the ones with sizable stock market exposure, investment funds, SIPPs full of individual shares or actively managed portfolios. These assets don’t manage themselves.
When your mind isn’t firing on all cylinders, the very sophistication that helped you build wealth becomes the thing that undermines it.
There’s also evidence from America that people who experience severe cognitive decline – but don’t realise it’s happening – make the worst financial mistakes. And those mistakes are most common among people who were previously active stock market investors. In other words, the more financially “engaged” you were, the more vulnerable you become when things start to slip.
The Psychology of Financial Mistakes in Later Life
I’ve spoken to plenty of retired investors over the years, and there’s a common pattern. Many pride themselves on staying involved with their money well into their seventies and beyond. “I’m not handing control to some fund manager,” they’ll say. “I built this portfolio myself.”
There’s something admirable about that attitude. Until it isn’t.
Perhaps the most worrying finding is that many people don’t notice their own decline. Your spouse might see it. Your children definitely will. But you? You’re often the last to know.
And if you don’t realise there’s a problem, you’re not going to hand over control of the investments you’ve spent a lifetime building.
Could Annuities Be Part of the Answer?
The researchers behind this study suggest something quite radical: bringing back annuities, at least partially.
Yes, I know – annuities have been deeply unpopular for years. Low interest rates made them terrible value, and the pension freedoms of 2015 let people keep control of their money instead. But maybe we threw the baby out with the bathwater.
The beauty of an annuity is its simplicity. Once you buy it, you can’t mess it up. The income arrives every month no matter how confused you become. No decisions required.
Interestingly, new regulations are coming that will force pension providers to offer some kind of default retirement income solution. The researchers argue these defaults should include buying an annuity with part of your pot – perhaps at age 75 or 80 – exactly when cognitive decline often accelerates.
The Power of Attorney Conversation Nobody Wants to Have
Here’s something that made me wince. Nearly 40% of people aged 65-75 with private pensions have never really thought about what happens to their money if they lose mental capacity. And over 80% don’t have a lasting power of attorney for property and financial affairs in place.
I get it. Nobody wants to have that conversation. It feels like tempting fate. But the alternative is grim.
Without a financial lasting power of attorney, your family can’t just step in and help. They have to apply to the Court of Protection to become your deputy – a process that takes months and costs thousands. In the meantime, bills go unpaid, investment opportunities are missed, and poorly performing funds just sit there losing money.
- Bills pile up and credit scores get damaged
- Investment accounts drift with no rebalancing
- Tax-efficient moves get missed year after year
- Scammers have a field day targeting vulnerable people
Setting up a lasting power of attorney when you’re fit and healthy costs a few hundred pounds and takes an afternoon. Waiting until there’s a problem? That’s when it becomes complicated, expensive, and sometimes impossible.
Practical Steps You Can Take Right Now
The good news? There’s a window of opportunity here. Cognitive decline tends to happen gradually, which means most of us have years to put protections in place.
Here are some thoughts – not financial advice, just ideas I’ve picked up over the years that seem to make sense:
- Consider moving a portion of your portfolio to truly passive investments earlier than you planned – the kind that need checking once a year at most
- Talk to your family about lasting power of attorney while everyone still enjoys having the conversation
- Think about whether some guaranteed income in your late seventies or eighties might actually buy you peace of mind
- Simplify your financial life – fewer accounts, fewer logins, fewer decisions
- Maybe keep one “play” account for the stocks you love following, but make sure the bulk of your money doesn’t need active management
I’ve seen too many families discover these issues the hard way. The parent who always handled the money suddenly can’t remember their PIN numbers. The portfolio that performed brilliantly for decades starts to drift. The children feel helpless because nothing was put in place.
We spend our working lives building wealth. Perhaps we should spend a little time thinking about how to protect it when we’re no longer at our best.
Because getting older is inevitable. Getting poorer because of it? That’s optional.
