What Happens if We Forget the Bad Financial Times?

Overconfidence in past financial decisions can cost you as you age, causing people to take more risk than they can afford. As we get older, we benefit from more experience and perspective, but we are subject to biases that affect the details of what exactly we remember.

Consider a study where senior citizens were approximately 25% less likely than their younger counterparts to recall faces paired with larger losses. These senior citizens tend to pay more attention to positive information, which is consistent with previous research. To help with these biases, it is helpful to rely on financial autopilots and target-date funds.

See Shlomo Benartzi & Alan Castel, The Financial Price of Forgetting Bad Times, Wall Street Journal, June 12, 2016.