Cognitive–psychological mechanisms and decision-making in later life: the role of wealth perception capability

Introduction Decision-making in later life is shaped not only by physiological decline but also by the joint influence of cognitive and psychological factors. This study focuses on wealth perception capability and examines how older adults’ subjective perceptions of their own financial circumstances affect their engagement in decision-making. By moving beyond the conventional emphasis on physical aging and functional decline, this study seeks to extend our understanding of the cognitive–psychological mechanisms underlying decision-making in later life. Methods Using micro-level survey data covering tens of thousands of elderly households, together with individuals’ self-reported psychological information, this study constructs a household-level measure of wealth perception capability. Compared with other types of decision-making, consumption behavior is more susceptible to cognitive and emotional influences; therefore, this study selects consumption decisions as the core domain for examining decision-making among older adults. On this basis, two-way fixed-effects models and two-stage least squares estimation are employed to test the effect of wealth perception capability on older adults’ decision engagement and its underlying mechanisms. Heterogeneity across different groups of older adults is also examined. Results The results show that improvements in wealth perception capability significantly enhance decision engagement among elderly households at the 1% statistical level. Mechanism analysis indicates that wealth perception capability operates primarily by reshaping individuals’ subjective perceptions of their financial situation. Specifically, higher wealth perception capability strengthens perceived financial control and financial security, alleviates psychological constraints, and reduces excessive precautionary motives driven by uncertainty, thereby encouraging older adults to participate more actively in consumption-related decisions. Heterogeneity analysis further reveals that this effect is more pronounced among rural households, older adults living alone or lacking family support, and those with lower levels of cognitive health. These findings suggest that wealth perception capability plays a stronger compensatory role among psychologically vulnerable groups. Discussion These findings underscore the importance of subjective psychological perception in shaping decision-making behavior in later life. In contrast to prior research that has primarily focused on the effects of physiological decline on older adults’ decision-making capacity, this study shows that, in the context of digital development, wealth perception capability represents an important cognitive–psychological factor influencing decision engagement among older adults. By revealing the psychological mechanisms through which wealth perception capability affects consumption decisions, this study deepens our understanding of decision-making in later life and provides useful implications for promoting cognitive well-being, financial confidence, and mental health among older adults.