New York Estate Planning & Elder Law Blog
In multiple surveys and studies, senior Americans and retirees have not scored well on retirement literacy tests. In the latest study, U.S. citizens between the ages of sixty and 75 who were polled had an eighty percent failure rate of the retirement literacy test. The results of the poll and subsequent survey were released this week by the American College of Financial Services.
Results of the Study
The poll was conducted by the American College of Financial Services through online interviews of 1,019 people between the ages of sixty to 75 who had at least $100,000 in household assets. The participants were asked a series of 38 questions regarding retirement literacy basics. This included questions about Social Security, life expectancy, IRAs and other retirement accounts, life insurance, investments, and how bonds work. Only two in ten participants had passing grades.
The researchers behind the study admitted a lack of surprise at the fact that many retirees do not know a lot about retirement income planning; however, even they admit that they were shocked by just how poorly the participants did.
Other Retirement Literacy Studies
The poll released by the American College of Financial Services is not the first to raise concerns over the readiness of our nation’s retirees. In the 2011 report, “Financial Literacy and Retirement Planning in the United States,” done by the National Bureau for Economic Research similar shortcomings were discovered, albeit not to the same degree.
Their report concluded that “the findings from the National Financial Capability Survey paint a troubling picture of the current state of financial knowledge in the United States. Many respondents lack key knowledge of financial concepts and fail to plan for retirement, even when retirement is close at hand, only 5-10 years off. This is important since being able to develop and implement retirement plans are key to retirement security: those who do not plan reach retirement with half the wealth of those who do.”
Highlights of the Latest Study
Experts agree that most retirees and seniors living in America did not have the best financial role models in their parents. Nor is there much formal training or teaching in the area of investments, Social Security, retirement accounts, and other related topics. Some of the highlights of the latest study include:
· Only one in four people between the ages of sixty and 75 have a written financial plan, even though a written plan leads to better financial planning and financial decisions.
· A significant minority have never figured out how much they need to accumulate to retire securely.
· Only 31% know that $4,000 is the most that they can afford to withdraw per year from a $100,000 retirement account in order to make it last for thirty years.
· More than half underestimate the life expectancy of a 65 year old man, which suggests they may not realize how long their assets must last.
· Only 54% realize that Social Security benefits increase each year that you delay up to age seventy, and a similar percentage know that it is best to wait until seventy to claim Social Security if you expect to live to ninety years old.