One of the earliest signs of cognitive impairment, including dementia, is the inability to manage personal finances. Problems with balancing a checkbook, reading a credit statement or paying a bill are all associated with cognitive problems. So is suddenly erratic behavior like instructing your broker to put all of your money into one stock.

Researchers are now looking into how such problems can be detected. Lauren Hersch Nicholas, a professor at Johns Hopkins, and Joanne Hsu, a senior economist with the Federal Reserve, are analyzing consumer and health data. On the financial side, they are looking at credit scores, balances, past due bills and the opening of new accounts, among other data. On the medical side, they are looking at both Medicare indicators of dementia and other chronic/acute conditions as well as cognitive status scores from the Health and Retirement Study (HRS).

Nicholas thinks “a trail of financial transactions that would let us catch some of these signs of cognitive impairment” may exist. If financial warning signs could be identified, conceivably the data could be used to predict future dementia diagnoses. She envisions the data being used in a way akin to how credit card companies identify whether or not fraudulent purchases are being made.

To do this, the two researchers are considering reaching out to the private sector for assistance. A challenge the researchers are facing is developing the complex mathematical formulas and training machines to analyze the data. David Weir of the HRS described the expertise for such a project as existing not in academia, but rather in the private sector where compensation is higher.

The link between declines in cognitive abilities and new or worsening financial problems has previously been documented in medical literature. Several years ago, the Journal of the American Medical Association (JAMA) published guidelines for physicians to follow when meeting with elderly patients. The guidelines are intended to help patients avoid serious financial problems (“Five Ways Physicians Can Protect Seniors’ Portfolios,” AAII Journal, December 2014 Briefly Noted.)

Beyond the potential financial problems, dementia is a costly diagnosis. The median out-of-pocket lifetime spending for a person with dementia is $36,000. Half of those diagnosed with dementia spend less, but costs can exceed $206,000 in 2014 dollars.

Source: “MRRC Newsletter, Spring 2017,” University of Michigan Retirement Research Center.