Americans' Retirement Planning Knowledge

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Discover how well Americans understand retirement planning. Learn about safe money alternatives and improve your financial literacy today. Virtually everyone understands that money doesn’t grow on trees. But what about planning for retirement? If recent research gives any indication, many Americans may be coming up short. In the 2017 Retirement Income Literacy Quiz – courtesy of The American College for Financial Services and the New York Life Center for Retirement Income – most quiz-takers received barely-failing or below-failing grades. To measure retirement literacy, the test comes with two options: a six-item questionnaire on key retirement planning areas, and a more comprehensive test with 38 questions. With retirement literacy and retirement planning success being closely linked, you may want to check out the six-question quiz yourself to gauge your own retirement readiness. So, what exactly did these questions ask? And how did Americans fare in their retirement knowledge? Let’s delve into the data now. How Do Americans Stack Up in Their Retirement Planning Knowledge? In the study, Americans aged 60-75 and with at least $100,000 of household assets (excluding home ownership) were surveyed. Among these people, 65% had relationships with financial advisors, and 61% said they had strong retirement income knowledge. Yet despite these findings, just 26% of respondents passed the 38-question test. Of those reporting high awareness of retirement income issues, just 33% passed. The average score was 47% correct. Just 5% of Americans received a “B” grade or higher! Of the 38 questions, six focused on specific, fundamental areas of retirement planning: Managing portfolio withdrawal rates Using life annuities to combat risks of uncertainty and longevity The impact of sequence-of-returns risk, or the potential to suffer low or negative returns when taking withdrawals from investments Impact of key retirement decisions, like when to stop working and take Social Security Efficient tax reduction and planning strategies Timing of claiming Social Security benefits Six Questions on Retirement Income Knowledge Question 1 was the following and test-takers had these options: “If you had a well diversified portfolio of 50% stocks and 50% bonds that was worth $100,000 at retirem