Abstract
Cognitive decline may lead older Americans to make poor financial decisions. Preventing poor decisions may require timely transfer of financial control to a reliable agent. Cognitive decline, however, can develop unnoticed, creating the possibility of suboptimal timing of the transfer of control. This paper presents survey-based evidence that older Americans with significant wealth regard suboptimal timing of the transfer of control, in particular delay due to unnoticed cognitive decline, as a substantial risk to financial well-being. This paper provides a theoretical framework to model such a lack of awareness and the resulting welfare loss. (JEL G51, G53, H55, J14, J26, J32)
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