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May 25, 2011


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I find it interesting that people worry about brainpower waning at age 40. I'll be 40 this year, and I feel that my brain is at its best & most active level ever. I'm in college, earning straight A's in my Accounting major, and learning more than I ever have before (thanks be to God!).

Maybe it's reading all these great financial blogs that is helping my brain. ;)

Maybe that's just the age most people start thinking about the future and finally start saving for retirement for real. Or maybe it's when the kids get out of the house and they can divert expenses to their own needs. I very much think 53 is probably not the age a person becomes financially wise, but the age where it's convenient to finally start thinking about your own needs vs the needs of your children or aging parents.

Woohoo! I'm coming up close on my peak!
But seriously, it may just be that in the late 40s and early 50s, it's easier to assess your entire situation, make good guesses about what the future will hold, and plan accordingly.
For example, I was talking to a tax accountant friend of mine the other day about IRAs, and he said, "You're in the sweet spot where Congress probably won't get around to changing the tax laws on IRAs very much, by the time you retire. People who are just starting their careers, though, absolutely can't count on Congress leaving their IRAs alone. They just need the money too much."

At 40, I got financial "religion"; that is, I finally started to save for retirement. I hope that younger people start saving alot earlier. I say, live within your means, start retirement savings in you're 20's (yes you can, even though you have college loans), have an emergency fund, and even if you have to, take a small part time job to save for an emergency fund and vacation. When those bases are covered, start saving for a house (and don't buy more house than you need--most families don't need a house over 1800 sq. feet). Good luck--I know that you can do it!

I can see this. You can be sure that smart decisions has more to do with a combination of experience and judgement rather than speed or mental computational ability.

I turn 26 next month. I think I'll be as prepared at 30 as I will at 53 with the wealth of information available online.

I will have done everything financially by age 30 as someone who is 53 (ie, mortgage, kid, 401k, roth ira, etc).

The age of 53 comes from a research study released in 2007

Cognitive ability starts to decline a lot earlier than age 53. The article suggests it starts in your 20s. The idea is that cognitive ability alone is not enough as a lack of experience and context will still lead to many mistakes. Decision making success is thus a combination of cognitive ability and leveraging experiential knowledge. The speculation is that the combination of these two reaches its maximum at age 53. Cognitive ability may have been dropping for decades but the gain in experience more than makes up for it. At age 53 the loss in cognitive ability is more than the gain in experience and overall decision making quality begins to drop.

Of course this is all on average and depends on each individual's various cognitive and experience circumstances.

As I have gotten older I have realized that experience is a far more important quality than my cognitive ability (not to brag but based on grades my cognitive ability is pretty good, but experience is still more valuable). Ability to think and reason through things is quite valuable. It's just that my reason is not powerful enough to give me the information that a little bit of experience will.

Yes, I believe 53. You have the wisdom of the ages; at that point you've been through all kinds of economic "events" and hopefully you've learned from them.

I would guess that at age 53, an individual has gone through a few recessions, so that individual would have a feel for the investment markets, and hopefully would have seen enough scams that they have formed a scam template in their mind by then. So they get a feel for what is legit and what is bogus.

So based off of the age, I would think that financial experiences are crucial for smart money management... (at least I hope I am by that age!)

There is no one age that is best for Money decisions.

Deciding to marry the love of my life at age 22 was a great decision.
Deciding to emigrate to America also at age 22 was a great financial decision.
Buying our first home at the age of 26 was a great financial decision.
Deciding to go for a Master's degree in engineering also at age 26 was a great financial decision.
Deciding to teach myself all I could about investing in the market at age 58, when I retired was a great financial decision.

Since then I haven't had to make any great decisions, I am 76, married for 55 years, everything is on auto pilot, and we are very happy as well as having a high income and being being wealthy.

@Old Limey-

I simply love reading your posts/responses. I actuall find myself looking for them and can always tell before I get to the end, "who's responding". God bless. You have a wealth of wisdom.

@Old Limey,

I hear what you are saying, people can make good decisions at various different times but you don't really believe that 22 year olds on the whole are just as likely to make decisions as wisely as a 50 year old do you?

The founders of our country put age minimums on Congressman, Senators and Presidents at 25, 30 and 35. The more important the position, the higher the minimum age. And the American People have never chosen a President under the age of 40. They clearly thought better decision making comes with age.

You may have made a great marriage decision at age 22, but statistics are clear that the success of marriage continues to rise until age 28 when it reaches its max. People married at age 19 have a much lower success rate. Clearly there are successes at 19 and failures at 28, but the fact remains that wisdom increases with age and studies bear that out unequivocally.

Suppose for whatever reason you had to turn your wealth over to one of two unknown individuals who worked in the finance sector and you knew only 1 thing about each of them. One is 25 and one is 50. Do you pick the 25 year old? I doubt it.

Age and wisdom matter.

When I was 16 the high school teacher I most hated told my Modern European History class that we didn't know a damn thing and we wouldn't know anything until we were 25 and then we might know a little. I thought he was a blow hard who didn't know what he was talking about, I knew a lot! But that's what all 16 year olds think about people in their 50s giving them advice. He was clearly right and I was clearly wrong.

I wouldn't argue that age brings increased wisdom, I think that's the majority view.

Some very important decisions however have to be made when you are young.
These include marriage, having children, buying a home, and education and career choices.

My decision to emigrate was, in retrospect, the most important decision of my life and yet it came about by pure happenstance. I was actually 21 at the time and still in my apprenticeship and working in the Structural Analysis office at DeHavilland Aircraft in Christchurch, England. It was the custom for a catering trolley to come around to each office, twice/day so that we could get a cup of hot chocolate in the morning and off course, afternoon tea - a British custom. That morning as I lined up for my morning cup of hot chocolate in February 1956, the guy behind me in the line said, "Well I will say goodbye to you since I am emigrating to Avro Aircraft in Toronto, Canada, at the end of this week and have a great job lined up that has a 2 year guarantee, passage paid, and an excellent salary." It didn't take me long to realize what a great opportunity that was so I discussed it with my fiancee when I got home and she was all for it as well. I went for a local interview and on March 1st 1956 a job offer arrived in the mail. I accepted, we got married in July 1956, my apprenticeship finished on October 31st, 1956 and we sailed from Liverpool for Montreal on November 2nd. 1956 when I was 22.

The job was great but the company closed down two years later because the US government offered Canada, at a price they couldn't refuse, Boeing's BOMARC missile to defend the line of early warning radar stations positioned across northern Canada. We were at the height of the Cold War and the BOMARC was the world's first anti-aircraft missile, forcing the AVRO Arrow Mach 2 Interceptor Fighter, AVRO's only product, to be abruptly cancelled, and the company forced to shut down. American aviation companies descended on Toronto and quickly hired every engineer that wanted a job. I then moved to a company in Denver CO where I worked on Convair's B58 Bomber, and then two years later, in order to pursue my MS degree, moved to Lockheed in Sunnyvale, CA where, after obtaining the necessary security clearances, I spent the remainder of my working life working on the Polaris family of ICBMs for the US Navy that are still in production today.

In retrospect, Luck and Chance have played HUGE roles in my life. The circumstances under which I met my wife were the result of another chance event. One of the primary reasons for my financial success also stems from acting upon an advertisment in Investor's Business Daily back in 1993. Shortly after I retired I used to read IBD in the reference section of our local library. I was talking with the President of the company that ran the Ad a few weeks ago and he said that he only ran the Ad for a few weeks and it hasn't run since and yet it sparked my self education in the technical analysis of the market, led to making presentations that his company sponsored at large financial conferences throughout the USA, and also led to the marketing of a pretty successful piece of software which was available as recently as 2008.

I would have to say though that if it hadn't been for the Cold War my life would have turned out totally different and I wouldn't be sitting here in California today.

@Old Limey,

Yes you are quite correct that some pretty important decisions need to be made when you are young. I also find your statement about luck to be quite true as well. People tend to discount the affects of luck. But of course you have to be able to recognize when fortune smiles upon you and seize the opportunity too.

There is the saying that youth is wasted on the young. Unfortunately for too many people I think experience is wasted on the experienced as well.

Any young person who has the presence of mind to seek counsel and advice from those who have the wisdom of years will find themselves wise before their time.

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