University of California, Riverside researchers say the study is the first to measure decision making and intelligence over the lifespan through the two different viewpoints.
The first perspective is fluid intelligence or the ability to learn and process information. The next type of intelligence is crystallized intelligence, a term that refers to experience and accumulated knowledge.
Past research has found fluid intelligence declines with age, but provides no definitive conclusion as to whether decision-making abilities declines as people age.
Researcher Ye Li and his colleagues set out to answer that question.
Experts say the work has broad implications given the demographic transition of baby boomers into older adulthood.
Understanding how and how well older adults make decisions is crucial because they are faced with an increasing number of important choices related to their retirement finances and health care.
Furthermore, as new laws increase the minimum retirement age, people remain professionally active later in life, with older adults holding many key leadership roles.
For the research, Li and his colleagues recruited a group of 336 people — 173 younger (ages 18 to 29) and 163 older (ages 60 to 82) — and asked them a series of questions that measured economic decision making traits.
They also administered a battery of standard fluid and crystallized intelligence tests.
These traits included temporal discounting (how much people discount future gains and losses), loss aversion (how much the valuation of losses outweigh gains of the same magnitude), financial literacy (understanding financial information and decisions) and debt literacy (understanding debt contracts and interest rates).
The researchers found the older participants performed as well or better than the younger participants in all four decision-making measures.
The older group exhibited greater patience in temporal discounting and better financial and debt literacy.
The older participants were somewhat less loss averse, but the result did not reach standard levels of significance.
“The findings confirm our hypothesis that experience and acquired knowledge from a lifetime of decision making offset the declining ability to learn new information,” Li said.
The findings also support the fact that older people could be further helped by being provided aids to ease the burden on their decreased fluid intelligence, such as a calculator or advisor, when making significant financial decisions, Li said.
On the other hand, younger adults may benefit from more financial education so that they can gain experience with major financial decisions before making them in the real world.
Li and several of his colleagues are working on a follow-up project that asks adults ranging from 18 to 80 specific questions about decisions such as selecting a health care policy, when to start drawing Social Security and how to pay off multiple credit card balances.
The study was published in the journal Psychology and Aging.