NEW YORK (MainStreet) -- This is not the news anybody wants to start their trading day with. But, there is solid evidence that indicates that the irrational markets we all struggle with these days may have a tragically human cause:

Traders are getting older. And they are making poorer financial choices.

"When you look at those who make questionable financial decisions, either via fraud or with simple bad judgement, advanced age is a startlingly common factor," Ted Beck explained to me over coffee last week.

Beck is president of the National Endowment for Financial Education, the Denver, Colo., think tank that promotes financial literacy. Beck's organization has looked at the effects of aging on financial decision-making before. A 2012 study it commissioned, called Diminished Capacity and Financial Decision Making, is chock full of sobering numbers on what happens when age affects investor acumen.

The study estimates that a full 12% of the population admitted to having diminished financial capacity. With about half of them claiming they struggle paying bills and managing finances; and roughly a third being unsure if they can manage simple math.

Beck says diminished cognitive ability in financial decision-making will become big news this summer. His organization is rolling out two major studies from Columbia University and the University of Alabama. And he says this scholarship will indicate that as the general population ages, diminished cognitive power will no longer be limited to just personal financial decision-making.

It will become a real factor on how a stock gets bought, sold and priced.

"The full scope will be revealed when we publish the studies," he said. "But at least from what we are seeing now, cognitive decline has a remarkably destabilizing effect on the entire market."

Wrestling with Cognitive Decline
A quick look through the most heavily cited papers on cognitive decline in financial literacy show what worries Beck. The 2007 Journal of Gerontology paper, Assessment of Decision-Making in Older Adults -- An Emerging Area of Practice and Research by Jennifer Moye and Daniel C. Moreson, points out that the convergence of aging and the enormous transfer of intergenerational wealth has "greatly expanded the incidence and importance for the capacity assessment in adults."

And a 2011 study, sponsored by The AARP, Protecting Older Investors, The Challenge of Diminished Capacity made it clear that the risks of an aging population making financial decisions was on the rise. "Cognitively impaired investors are at risk for financial exploitation," the report flatly summarized.

Market participants should also understand that the rules of the financial game are already changing subtly as regulators realize that, more and more, aging investors need special protections. Pennsylvania, for example, adopted language on decision-making for older adults. that "recognized that some persons of advanced age can be quite capable of handling routine financial matters while needing special legal protection concerning major transactions."

Not a social network
Now comes the scary part. Beck says that, given the complexity of today's trading environment, cognitive decline in financial decision-making can sneak into an investor's life -- and bottom line -- at a startlingly young age.

"Even those in their 50s can make remarkably shortsighted decisions," he said.

For Beck, what's especially challenging for the middle-aged investor is the social component mixed with new technologies that has become entwined into our lives. As investors age, and their wealth and financial confidence grow, they come in casual contact with an ever-widening network of influencers. And, sadly, that network can introduce dubious investment ideas and outright fraud. What makes it all that much more dangerous, of course, is today's ultra-easy-to-use investing technologies have made it never easier to act on investing ideas -- no matter how questionable.

The trick, Beck said, is not waiting for disaster for the effects of age to rob us of our financial smarts or our bankroll. But rather, the best practice is to break the financial decisions we make down into classes: The easy stuff such as bills and savings can be managed directly, but now is the perfect time to bring in trusted third parties to handle more complex choices, including investing theories and other long-term goals.

"That way you are staging the transition to outside advice in a sensible fashion," he said. And avoiding the possibility of a full-scale financial intervention, which can be ugly and expensive.

Either way, Beck's message hit me hard: Our past glories mixed with pretending we are not getting older is the recipe for disaster.

"It is overconfidence by the middle-aged, otherwise experienced investor that almost invariably leads to financial ruin," he said.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.