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 percent failed a retirement income literacy test. The results of the poll, released Wednesday by the American College of Financial Services in Bryn Mawr, Pennsylvania, 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.
These Americans were polled on 38 retirement literacy questions on basics like Social Security, life expectancy, IRAs, life insurance and investments, and the mechanics of bonds. Sadly, only 20% were given passing grades, the college said. This isn't the first survey to raise concerns about Americans’ retirement readiness. In an article titled “Americans fail in retirement literacy,“ The (Palm Springs, CA) Desert Sun noted similar shortcomings in a 2011 report.
However, the findings of that earlier report weren’t nearly as bad.
According to the article, retirement literacy and planning are critical today more than ever because Americans are on their own when it comes to retirement. Company pension plans typically have been replaced by company-sponsored 401(k) plans and IRAs.
The original article reports that many Americans — of all ages — didn’t have the best financial role models in their parents, nor do we get any formal training or teaching in the area of investments, Social Security, long-term care and related topics.
Here are a few highlights of the new report:
- Only 1 in 4 have a written financial plan;
- A significant minority have never figured out how much they need to retire;
- Only 31% know that $4,000 is the most they can afford to withdraw per year from a $100,000 retirement account to make it last 30 years;
- More than half underestimate the life expectancy of a 65-year-old man, meaning they might not know how long their assets must last; and
- Just 54% realize that Social Security benefits increase each year you delay retirement up to 70 and don't know that it is best to wait until 70 to claim Social Security if you expect to live to 90.
The article states that many people lack important knowledge about financial products and investing in general: this collective financial ignorance threatens to undermine the security of retirees. Talk to an experienced estate planning attorney to make sure you are getting good grades regarding your retirement knowledge or can start now on some extra credit to ace this all-important test.
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Reference: The (Palm Springs, CA) Desert Sun (December 6, 2014) “Americans fail in retirement literacy”