Older Investors Prone to Financial Overconfidence, Risk-Taking: FINRA

"Financial risk tolerance was lower at the oldest ages in general, but age was not very strongly related to risk tolerance," the study said, noting "age explained only about 1 percent of the variance in financial risk tolerance whereas overconfidence explained about 6 percent of the variance in risk taking."

The "overconfidence effect is larger than the age effect but it is not a large effect," the study said, adding: "The vast majority of individual differences in risk tolerance were unexplained by the variables we examined. Many other factors contribute to financial risk tolerance." Those other factors included long-term financial experience, financial advice and financial stability, it said.

The results were also the same for aging investors with and without mild cognitive impairment, according to FINRA.

"Financial literacy levels among all Americans are alarmingly low, but among older investors, our research suggests that the challenges are even greater," according to Gerri Walsh, FINRA Foundation president.

"This is because financial knowledge declines at older ages, but confidence in financial knowledge does not, and the resulting overconfidence can lead to unfortunate financial consequences," she said in a statement, adding: "Senior investors manage a large share of our nation's wealth, and risky decisions by aging investors can result in the loss or diminution of a lifetime of personal savings."

For the study, researchers surveyed more than 1,200 adults ages 58 to 101 from the greater Chicago area about their financial decision-making, financial literacy and ratings of confidence in their financial knowledge, the study said.

"Across a wide spectrum of investment choices, there are many opportunities for senior investors to take excessive financial risk," according to Walsh. However, one major problem is that, "as an individual ages, opportunities to recover lost wealth are limited, which reinforces the importance of identifying vulnerabilities in certain older adults and developing interventions to empower them to make wise financial decisions into the most advanced ages," she said.

The study, which was conducted using data from the Rush Memory and Aging Project, was authored by Gregory Samanez-Larkin, associate professor, and undergraduate student Darby Heflin, Duke University; Lei Yu, associate professor, and Patricia Boyle, professor, Rush University Medical Center; and Gary Mottola, FINRA Foundation research director.