Jonathan Burton writes in the Journal that, on average, the best age to be an investor is—drumroll—53.3-years-old. So precise!The revelation comes from the Brookings Institution study titled, “The Age of Reason,” in which the authors, including Harvard University professor David Laibson, argue the “peak age of performance” for making personal finance decisions is in “the late 40s or early 50s.”
Brookings analysed various age groups to determine how savvy they are when handling personal finance transactions, from taking out a home-equity loan to getting a mortgage and transferring a credit card balance.
The senior findings were particularly disturbing—75-year-olds pay $265 more each year for a home-equity line of credit than 50-year-olds, for example—whereas early boomers made fewer slipups overall.
Two “age-based effects” help explain this hypothesis: First, as we age we tend to retain less information, and second, “relatively young borrowers have low levels of experience and a high degree of analytic function,” whereas old folks are just the opposite. Perhaps that’s why millennials feel so anxious about their retirement prospects, while boomers continue to remain in charge of the family finances, perplexing marketers.
“Based on the evidence found in the research, anyone between 43 and 63 ‘is really in their cognitive sweet spot,'” Laibson told Burton.
“Middle-aged adults borrow at lower interest rates and pay fewer fees relative to younger and older adults Averaging across 10 credit markets, fee and interest payments are minimized around age 53.”
Perhaps there is something to the adage, “young and dumb,” after all.
What do you think? Have you made better investing decisions as you’ve gotten older?