Many are uncertain about the best ways to save for
retirement, how to make their money last and how much they'll
receive from Social Security and Medicare
NEW
YORK, April 17, 2024 /PRNewswire/ -- A survey by
the TIAA Institute and the Global Financial Literacy Excellence
Center (GFLEC) connects people's confidence in their retirement
plans to a new benchmark called "Retirement FluencySM,"
which measures how much people know about topics, such as Social
Security, Medicare and options for retirement savings. When asked
about those topics, Americans correctly answered only 40% of the
questions.
To improve retirement outcomes, we must
improve our understanding of how to save and how long our
retirements will be.
These findings are from the 2024 TIAA Institute-GFLEC Personal
Finance (P-Fin) Index – an annual barometer of financial literacy –
which for the first time also covered Retirement Fluency.
The Retirement Fluency portion consisted of five multiple-choice
questions. For most of the questions, about 30% of the respondents
answered, "don't know."
Many mistakes stood out. For example:
- Most respondents failed to recognize that a retirement savings
opportunity with an employer match is better than one without the
match.
- Only about half (53%) were aware that buying an annuity could
offer guaranteed lifetime income, safeguarding against the risk of
outliving retirement savings. Others answered that buying life
insurance would help or that nothing could be done.
- Almost 60% of respondents did not know that Social Security
benefits last for a lifetime and that workers receive benefits if
they become disabled before retiring.
- A vast majority lacked a basic understanding of how long people
tend to live in retirement, a knowledge gap that could keep them
from saving enough money to last a lifetime. Almost 60% said either
they didn't know, or they underestimated the life expectancy of a
65-year-old. Only one third of respondents (32%) knew the correct
answer: age 84 for men and age 87 for women.
- About 30% were aware that Medicare covers about two-thirds of
retirees' health care costs.
"Now, more than ever, financial literacy is crucial to
addressing our very real retirement savings gaps," said Thasunda
Brown Duckett, CEO of TIAA. "This report shows that if we're going
to improve retirement outcomes, we have to start by improving our
understanding of how to save and how long our retirements will be.
While there are no quick fixes to boosting our Retirement Fluency,
increasing access to education resources and operating with
intentionality will get us on the road toward financial health and
resilience."
The P-Fin research showed a strong connection between people's
Retirement Fluency and how financially prepared they are for
retirement.
Consider: Americans correctly answered an average of only 40% of
the retirement-related questions. Among people with that level of
Retirement Fluency, only 60% were confident they would have enough
money to live comfortably throughout retirement. But for those who
answered at least 80% of the questions correctly, this figure
jumped to 75%.
The 8th edition of the annual report also included
data about Americans' knowledge of personal finance. Based on a
28-question survey, people correctly answered about one half of
those questions, which has been the norm since the survey began.
All told, only 16% demonstrated a very high level of financial
literacy by correctly answering at least 22 questions, underscoring
concerns about people making financial decisions with a poor level
of financial literacy.
"The consistently low levels of financial literacy among U.S.
adults and, particularly, among the most vulnerable groups in the
population is troubling," said Annamaria
Lusardi, an economist from Stanford
University and GFLEC. "These findings are a call to action.
With financial literacy month underway, it is high time to change
the conversation about money, starting with adding financial
education in school and college."
The P-Fin Index underscores the importance of financial literacy
for financial well-being. Compared with those with a very high
level of financial literacy, for instance, those with a very low
level are twice as likely to be debt-constrained, four times more
likely to lack one month of emergency savings and three times more
likely to not have any confidence in their retirement income
prospects.
The full report can be found at the TIAA Institute's
website.
About the TIAA Institute
The TIAA Institute* is a think-tank within TIAA, conducting
cutting-edge research in the areas of financial literacy and
longevity literacy, lifetime income, retirement plan design and
behavioral finance in the context of retirement. The Institute
provides consulting services for higher education and the broader
nonprofit sector. For more information, visit
www.tiaainstitute.org.
About TIAA
TIAA is a leading provider of secure retirements and
outcome-focused investment solutions to millions of people and
thousands of institutions. It is the #1 not-for-profit retirement
market provider1, paid more than $5.6 billion in lifetime income to retired
clients in 2022 and has $1.28
trillion in assets under management (as
of12/31/2023)2.
Learn more about TIAA
Read the latest TIAA news
About GFLEC
The Global Financial Literacy Excellence Center (GFLEC) is
dedicated to advancing research and solutions that open the door to
universal financial literacy. In working toward that mission, GFLEC
has positioned itself as one of the world's leading incubators for
financial literacy research, policy, and solutions. GFLEC was
launched in 2011 in Washington,
D.C., and today is housed at Stanford Graduate School of
Business, in California. The
Center has pioneered breakthrough tools to measure financial
literacy, developed and advised on educational programs, and
crafted policy guidelines aimed at advancing financial knowledge in
the United States and around the
world. For more information on GFLEC, visit www.gflec.org.
*TIAA Institute is a division of Teachers Insurance and
Annuity Association of America (TIAA).
1 As of July 21, 2022.
Based on data in PLANSPONSOR's 403(b) 2022 DC Recordkeeping Survey,
combined 457 and 403(b) data.
2 As of December 31, 2023
assets under management across Nuveen Investments affiliates and
TIAA investment management teams are $1,284
billion.
©2024 Teachers Insurance and Annuity Association of America-College
Retirement Equities Fund, 730 Third Avenue, New York, NY 10017
GPS-3510207PM-E0525X
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SOURCE TIAA Institute