In survey after survey, Americans have not scored well on retirement literacy tests. But a new survey of Americans ages 60 to 75 says 80% failed a retirement income literacy test.
The results of the poll, released today by the American College of Financial Services in Bryn Mawr, Pa., are pretty dismal. The poll was conducted through online interviews of 1,019 people 60 to 75 years old with at least $100,000 in household assets.
They were asked 38 retirement literacy questions on basics, such as Social Security, life expectancy, IRAs, life insurance and investments, and how bonds work. Only 2 in 10 had passing grades, the college said.
“We’re not surprised by the fact that people don’t know a lot about retirement income planning,” says David Littell, program director at the American College. “I was surprised at how badly they did.”
It’s not the first survey to raise concerns about Americans’ retirement readiness. The 2011 report “Financial Literacy and Retirement Planning in the United States,” done for the National Bureau for Economic Research, found similar shortcomings, though not to the same degree. That report said, “Americans fail to understand critical financial concepts, including interest compounding, inflation, and risk diversification, and these shortcomings are most acute for women, the less educated, and older individuals.” That report also said many people have failed to plan for retirement, even when it’s only five to 10 years off.
Retirement literacy and planning is critical today more than ever because Americans are on their own when it comes to retirement. Company pension plans have largely been replaced by company-sponsored 401(k) plans and Individual Retirement Accounts. “I’m not surprised that most Americans have low levels of retirement income literacy. And in many ways, can we blame them?” asks personal finance guru and author Lynnette Khalfani-Cox. “Those older people who do have good savings habits or positive money-management skills typically learned the value of thrift from their parents. But they’re the exception, rather than the rule.
The results of the poll, released today by the American College of Financial Services in Bryn Mawr, Pa., are pretty dismal. The poll was conducted through online interviews of 1,019 people 60 to 75 years old with at least $100,000 in household assets.
They were asked 38 retirement literacy questions on basics, such as Social Security, life expectancy, IRAs, life insurance and investments, and how bonds work. Only 2 in 10 had passing grades, the college said.
“We’re not surprised by the fact that people don’t know a lot about retirement income planning,” says David Littell, program director at the American College. “I was surprised at how badly they did.”
“Most Americans — of all ages — didn’t have the best financial role models in their parents,” she says. “Nor do we get any formal training or teaching in the area of investments, Social Security, long-term care and related topics. With so many complexities and so many options, it’s very difficult for the average 60-year-old to stay on top of the stock market, to fully understand the variety of annuities offered in the marketplace, and to also navigate issues like life insurance, taxes and medical insurance planning.”
