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People Think They Know about Retirement Finances – but Do They?

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How knowledgeable are you about retirement-related finances? Odds are you aren’t as well-informed as you think. That’s the message in this recent article from Time Magazine’s “Money” website. Written by retirement expert Walter Updegrave, the article suggests that even people who think they know their stuff when it comes to money questions in retirement don’t know as much as they think they know.

According to the article, the American College of Financial Services just released the results of its Retirement Income Literacy Quiz. The scores weren’t exactly stellar. Of 1,244 adults between the ages of 60 and 75 who took the 38-question online quiz, almost three-fourths flunked, scoring 60 percent or less. Only a tiny handful of participants scored an A or B (91 percent or better).  Author Updegrave writes that he’s not surprised at this poor showing since previous surveys “have revealed some pretty disconcerting gaps in people’s knowledge of retirement planning.” Based on our experience here at AgingOptions, we think he’s right: there’s a lot of confusion and misinformation out there, and many people are making dangerous and reckless financial decisions as a result.

What’s in this test, which one expert calls “the most comprehensive retirement literacy quiz out there”? As we said, it consists of 38 multiple choice questions covering a variety of financial topics, some basic and some more complex. In Walter Updegrave’s assessment, “For the most part, I felt the questions pretty well covered the main topics you’d want to have a handle on to plan for a secure retirement.” Some examples of general questions include these:

  • What’s the maximum amount you can safely draw from your nest egg if you want it to last 30 years?
  • What’s the right age to claim Social Security if you expect to live a long life?
  • Which expenses are covered by Medicare and long-term-care insurance?
  • What are the odds that at some point in life you might need assistance with activities of daily living?

But Updegrave also cautioned that some of the questions demanded “a level of technical knowledge even well-informed individuals aren’t likely to possess.” These questions dealt with topics like payout rates for annuities, the types of stocks that generate the highest returns, and ratings of different types of bonds. When asked why these tougher questions were included, one of the officials from the American College of Financial Services said he agreed many of the questions, especially the two about annuities, were difficult. Indeed, fewer than 20% of respondents correctly answered either one. But “they were included because a lot of people in the age group surveyed are buying or have already purchased annuities, so they should understand how they work and have an idea of what they cost.” The same logic holds true for investments: if you’re going to buy stock, you had better have some basic facts at your disposal.

The good news, said Walter Updegrave, is that those who do well on the quiz appear to do better in retirement. “(They) are more likely to plan better and have more confidence in their ability to manage their finances” including having a plan in place to deal with the cost of long-term care and believing that they’re better able to manage their investments throughout retirement.” The bad news is that about sixty percent of test-takers went into the quiz with what they thought was a high level of knowledge – but two-thirds of that group flunked. The message is that over-confidence is no substitute for good information.

So you think you’re ready to give this quiz a try? Here’s the link to the Retirement Income Literacy Quiz. How long it takes is up to you, so allow plenty of time. You’ll get an automatic score at the end. And if you get an A, congratulations – only one percent managed that feat! But if you’re like most people, you may be surprised (and not in a good way) by your score.

Let us offer two big caveats. First, no single test can tell the whole story when it comes to financial literacy. Second, when it comes to planning for retirement, here at AgingOptions we urge all our clients, radio listeners and seminar attendees to remember this important fact: money isn’t everything. Yes, financial planning is critically important, but it’s only one part of a strong retirement plan, and yet far too many retirees think a financial plan is all they need. This is a dangerous misconception. Your financial plan has to work in close harmony with a fully developed legal strategy so that your assets will be fully protected. Since lack of preparation for a medical crisis is one of the biggest causes of financial catastrophe, your medical plan has to be airtight. All of these interconnect with your housing plan, so that you can maintain your independence and avoid being forced into unplanned institutional care. Finally, unless your family knows and understands your wishes – and supports them – your retirement plan can become chaotic. You need a better, more comprehensive strategy to link finance, legal, medical, housing and family together.

The only retirement plan that accomplishes this is an AgingOptions LifePlan. With your personalized LifePlan in place you’ll look ahead to your retirement with security and confidence. But don’t take our word for it: find out for yourself at a free LifePlanning Seminar, where in just a few short, fast-paced hours you’ll learn about this revolutionary approach to developing a blueprint for your retirement. We invite you to come join us soon at a location near you. Simply click here for dates, locations and online registration,  or contact us during the week and we’ll gladly assist you. Age On!

(originally reported at

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