Just last week, results were revealed from a recent RICP® Retirement Income Literacy Survey designed to determine whether people who are nearing or already in retirement have the knowledge they need to successfully plan for a financially secure retirement.
I wasn’t entirely shocked by the results and I feel it’s important to share them with you because the insight to be gained is critically important to your own financial success.
The results were this: Out of 1,019 Americans, aged 60-75 with at least $100,000 in investable assets who took this basic 38-question quiz, a staggering 80% failed.
Why the high failure rate?
It’s actually pretty simple. It’s a matter of financial education. Many people just don’t know what they don’t know. And it’s really not their fault. Financial literacy has never been taught in schools and it’s barely taught in the workplace. To make matters more complicated, the government is constantly changing the tax laws. (If you’ve read any of my books you already know, I’ve been on my soapbox about this for my entire career.) Lastly, the financial services industry has a history of using fear and confusion to market rather than providing solid financial education. Although, I’m happy to say that this is finally changing.
Americans lack basic retirement planning education and this must be fixed or it will have dire consequences — not only for individuals — but for our economy and society.
I don’t say this to scare you. It simply is what it is. Eight thousand baby boomers are going to turn 65 every day for the next 18 years. They’ve got to seek and be provided with simpler tools and financial education that empowers them.
Financial education is the foundation necessary to build a secure financial future.
What I have learned over the many years as a financial educator is that people want to be responsible for their own financial futures. The problem is most of them just don’t know how to get started. Or, if they’ve taken steps in certain areas, they’ve neglected others.
Where do you stand when it comes to your own financial literacy? If you’re reading this newsletter, chances are you’ve read one or more of my books or attended one of my seminars and that’s a great start. If you haven’t, I’d recommend reading Smart Women Finish Rich, Smart Couples Finish Rich, The Truth about Retirement Plans and IRAs, or The Truth about Money for starters. Tune in to Ric Edelman’s radio show or visit either of our sites, FinishRich.com and EdelmanFinancial.com, for lots of free content and resources. And while you’re there, check out the seminars we offer as well. The resources are all there for you — right at your fingertips.
When you know better, you do better.
The survey identifies that to increase retirement income literacy, having a written retirement plan has been found to not only be effective in leading to better planning and financial decisions, but it’s also an effective vehicle for education.
The good news is that the results showed that 63% of those surveyed have a financial planner.
But here’s what’s important to note: Only 27% of that group actually have a formal, comprehensive, written retirement plan. What that really means is that a lot of these people think they have a financial planner but in reality they have a sales person who sold them something, rather than a fiduciary based financial planner.
Financial education plays a huge role here because when you are informed enough to know what questions to ask and know what to look for, you can protect yourself against bad planners and sales people. An educated client is the best type of client for a good financial planner with the fiduciary duty to work in your best interests (as opposed to his own best interests or those of his employer.)
So, my next question for you is — do you have a formal, comprehensive written retirement plan?
If you don’t, my hope is that these survey results are enough to show you that you need one. On the other hand, if you are working with a good financial planner and you have a retirement plan in place, excellent! And keep in mind that just as you go to the doctor each year to assess your health, you must revisit your retirement plan to ensure you’re staying financially fit. I like to think of it as a “financial check-up.”
You’ve got to create a plan, work a plan, then re-evaluate the plan annually, and if needed, start all over again. It’s simply not a once and done process. It’s just like going to the doctor or dentist, you need to meet with your planner annually and review EVERYTHING.
This retirement income literacy survey certainly sheds some light on the work that needs to be done, and I’m confident it can be done. Financial education is the key and where it all begins.
If you need help with planning your retirement, reach out to us at Edelman Financial Services, where our core belief is that everyone deserves great financial advice.
We manage $13.7 billion dollars for more than 26,000 clients1 and have been helping people just like you for more than 25 years. Contact us today for your free, no obligation retirement portfolio review or simply call (855) 215-7171 and tell them David sent you.
1As of September 30, 2014