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What is the Age of Reason? Most U.S. households have accumulated significant assets by retirement, but these assets are often accompanied by significant liabilities. Including net home equity, households with a head age 65-74 had a median net worth of $239,400 in 2007, according to the Survey of Consumer Finances (SCF). At the same time, the SCF reports that 48 percent had debt secured by a residential property, 26 percent had installment loans, and 37 percent carried credit card balances from month to month. Overall, about two-thirds of these households had at least one form of debt. This brief raises the question of whether older households have the ability to manage their increasingly large and complex balance sheets. The first section of this brief documents the decline in cognitive function that occurs as individuals age. The second section describes new evidence from 10 different financial transactions indicating that middle-age adults make fewer financial mistakes than younger or older adults. The third section explores possible policy responses to help older individuals more effectively manage their finances. The final section concludes that the best way forward is not yet clear, stressing that further research is needed on several key questions. > Read the report     By KS Date 22-07-2010