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Bad Financial Decisions May Be Early Sign of Dementia

Lower credit scores, missed payments can signal problems years before diagnosis, study finds

tabletop full of unpaid, overdue bills with a calculator, cup of coffee and hands with ballpoint pen
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Financial problems may be an early warning of Alzheimer's disease and related dementias, according to a study published in JAMA Internal Medicine.

The research, conducted by Lauren Hersch Nicholas of the Johns Hopkins Bloomberg School of Public Health and others, examined the health and financial records of 81,364 Medicare beneficiaries living in single-person households. Those with dementia were more likely to have missed bill payments up to six years before being diagnosed. They were also more likely to have subprime credit ratings up to two and a half years before diagnosis.

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"We were hearing a lot of anecdotes about patients who didn't even know that they had dementia when some of these adverse financial events were happening,” says Nicholas, a health economist and lead author of the study. “Then the whole family might find out when they'd lost a home or a business, or suddenly a new scammer had been added to other accounts and was taking their savings. We were interested in whether that was actually a common occurrence or whether these news stories were a few isolated events."

Other studies have suggested that cognitive impairment leads people to overestimate their abilities — which, in turn, often leads to financial difficulties and susceptibility to fraud. If undiagnosed dementia leads to costly financial errors, the study says, earlier diagnosis could be valuable even without effective treatments or cures.

The study, published Nov. 30, used Medicare claims data and credit data from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel. Deteriorating credit was marked by payment delinquency — paying a bill 30 or more days late — and declining credit scores. A credit score below 620 is considered subprime, meaning it has a higher default risk than those above 620. The sample included those living in single-person households in the second quarter of 2018 (or the year of their death) and born before 1947.

Education level plays a role in risk

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The study found no correlation between decreased credit scores or payment delinquency and other medical conditions, such as hip fractures, arthritis or glaucoma. (In fact, glaucoma was more commonly associated with a lower risk of missed payments and subprime credit scores.) Heart troubles, such as heart attacks, were associated with financial difficulties, but only in the year immediately previous to the event.

People with lower education levels showed financial deterioration much sooner than their peers with higher education levels. Those with less education saw financial deterioration nearly seven years before a dementia diagnosis, compared to about two and a half years for the more highly educated cohort. About 14.7 percent of Americans over the age of 70 are diagnosed with some form of dementia.

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Nicholas cautions that a single missed payment doesn't mean you are on the road to dementia — but it shouldn't be overlooked either. “The vast majority of missed payments are due to things other than dementia, so we don't want people to see the results and panic the first time something goes wrong. But at the same time, we're seeing that things start going wrong up to six years before the formal clinical recognition,” she says.

Financial advisers, accountants can help

One problem with diagnosing dementia through financial transactions is that it can be difficult to track someone's finances without their permission. If you are concerned about someone's harmful financial decisions, one person who may be able to help is a financial adviser or accountant. They can often spot troubles in advance.

"A lot of times, a client would call and either tell us they were becoming forgetful, or ask the same question over and over,” says Jack Scaff, a financial adviser and principal at Brouwer & Janachowski in Mill Valley, California. “It took several years to become full-fledged, but we knew something was going on. Sometimes it's just obvious.” Besides such familiar signs of dementia as repeating themselves, those with early dementia may start giving away money — or, worse, getting entangled with fraudsters.

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Financial custodians may contact authorities if they suspect elder abuse or fraud, but Scaff says that if you're worried about someone's deteriorating financial abilities, it makes sense to try to get permission from that person to speak to their adviser or accountant and check on their behavior. (Advisers may not be able to speak to you otherwise because of confidentiality agreements.) It's not always easy to get permission, he says, but it's probably easier than getting the legal authority to intervene in someone's spending via the courts.

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