Retirement Knowledge Lacking Among Americans

According to a new research report by the New York Life Center for Retirement Income at The American College, Americans lack important and basic retirement planning knowledge.  The Retirement Income Literacy Survey (RICP) tested Americans on their level of retirement planning knowledge and the results were grim.  Only twenty percent of Americans passed the test, scoring over sixty percent.  Even more troubling were the high levels of false confidence Americans exuded with regards to their own retirement planning and financial understanding.  “Such false confidence coupled with a lack of knowledge appears to be a serious obstacle for those people planning for retirement and for the professional retirement planners attempting to help them develop a retirement plan.” 

According to experts, discrepancies in knowledge and confidence can lead to uneducated retirement planning decisions.  Americans struggled to answer basic retirement planning questions in areas such as Social Security benefits, annuities, investments, and long-term care planning.  The survey found only half of respondents knew Social Security benefits increased each year the benefits were deferred after full retirement age until age 70.  Despite this lack of knowledge, sixty percent of respondents said they have spent a lot of time thinking about when to claim Social Security.  “Having the proper knowledge to make the correct Social Security claiming decisions is crucial to a secure retirement as nearly two-thirds of American retirees rely upon Social Security benefits for at least half of their retirement income.”

Retirement advisors and estate planning practitioners need to be mindful of their clients’ exaggerated knowledge and prudently inform their clients about retirement risks and planning strategies. 

See Jamie Hopkins, Misconceptions and Overconfidence Hurting Retirement, New Research Shows, Forbes, Dec. 3, 2014.