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Fake News Strikes Again, This Time with 401(k)s

401k fake news

Note: This is the fifth and final part of a month-long series on financial awareness in the U.S., and how investors are planning – or not preparing – for retirement. Here are some surprising insights into how the spread of fake news is growing - and how it's affecting the lives of retirement investors.

Fake news has struck again. The spread of misinformation has whipped up a new public storm, this time with 401(k)s and their tax-favored status. If the news buzz was any indicator, President Trump appeared to be pushing for an end to tax-deferred saving advantages tied to 401(k) contributions in his tax policy reform proposal.

The mayhem began at a White House press conference, when press secretary Sean Spicer was taking questions about the proposed tax reforms. Trump’s plan outline had called for a pullback of nearly all tax deductions in exchange for tax code reforms elsewhere.

Amid a volley of questions, Spicer was asked if Trump’s plan would affect 401(k) contributions. He responded by saying the plan protected charitable gifts, mortgage interest deductions, and “that’s it.” Then began a flurry of media activity – press reports ranged from uncertainty to affirmation of the tax proposal advocating for 401(k) changes. The Trump administration later clarified, responding that changes to 401(k) contributions were not in the works.

While the press outlets reporting uncertainty over possible changes had it right, it shows an emerging trend: the impact of fake news, or false and/or misleading articles, on the lives of everyday Americans. And research shows it is having effects on people’s financial lives.

What’s the Trouble with Fake News?

According to the American Institute of Certified Public Accountants, fake news makes it more difficult to make important financial decisions. In one AICPA poll, over 60% of Americans say it puts a strain on their financial decisions. Of these respondents, over half of them report it as a very serious threat. Overall:

  • 44% believe it makes their healthcare choices more difficult
  • 40% say their decisions about stock market investments are harder
  • 36% report their decisions about retirement are more difficult

Notably, the sentiment of fake news being a threat holds for both genders, across different generations, and among different household income levels.

Misreports and, worse, deliberate attempts to mislead the public, aren’t limited to just the Trump administration and the buzz around 401(k) changes. As 401(k) Specialist Magazine notes, a major outlet billed the French presidential election as having the potential to yield a Brexit-like market correction. But the Dow actually rose on Monday morning – and there were no other far-reaching signs of short-term investor panic.

Why is This Important?

These trends come at a time when Americans are feeling the heat over money issues. Public confidence and knowledge of financial issues and retirement issues are also noticeably low. A GoBankingRates.com consumer survey, another study from AICPA, and consumer research from Stash report:

  • Nearly 40% of Americans can’t define a 401(k) properly
  • Almost 50% of those aged 65 and over don’t know what impacts credit score
  • 40% don’t know how inflation works
  • 49% of non-retired Americans are not confident they will reach their retirement goals
  • 71% of Americans say healthcare costs are a retirement financial anxiety
  • 67% report affording everyday expenses and bills as a top anxiety
  • 62% point to Social Security uncertainty as a retirement anxiety
  • Over 40% didn’t know that a properly diversified portfolio is safer than a single stock
  • 40% don’t understand the concept of compounding

These retirement and financial anxieties can be traced to financial illiteracy – or a lack of awareness in financial and money management fundamentals. Not illiteracy in the sense of being ignorant or dumb, but rather not being educated in money matters.

Financial Illiteracy as a Retirement Dream Killer

Jim Chilton is Founder and CEO of The Society for Financial Awareness, a non-profit public benefit organization offering no-cost financial education workshops nationwide.

In another article for the San Diego Union-Tribune, Chilton points to a lack of financial education as the culprit.

“School districts across America, overseeing kids K-12, build, create, rollout curriculums, approved by the states and the federal government that deal with “core” subject matter — classes that are essential to developing our youngsters with tools, ideas, and concepts to live out, fulfilling their lives,” Chilton writes. “Want to know a head scratching reality? Financial literacy courses – though absolutely a must in our daily lives dealing with the plethora of financial issues, concerns, hopes, dreams, and solutions to our way of life – is NOT included as a ‘Core’ subject matter.”

Instead, financial awareness is fostered through optional instruction, which can spell disaster for the financial well-being of Americans. As Chilton observes: “Here and there, financial literacy is cubbyholed as an “elective” course, a choice as a non-essential class. Again, how is it that we, as a civilized society, can deal with so many issues that fire up the engine of democracy, yet completely ignore an essential life skill necessity such as financial literacy?”

Yet this lack of financial education does not have to mean bad outcomes. Rather, happiness and peace of mind can be attained through sound decisions – which begin with better financial knowledge and awareness.

Working to Better Americans’ Financial Lives

The Society for Financial Awareness, or SOFA, offers free financial literacy workshops on a number of topics. These presentations are available to small businesses, organizations, corporations, houses of worship, and social settings in which people congregate. To see SOFA in action, learn more about their workshops and what they can bring to your organization, visit http://sofausa.org/.

If you need guidance from a financial professional with your needs and goals, SafeMoney.com can help you. Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

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