Americans’ Retirement Literacy Is Lacking, And It Matters

The American College of Financial Services just released its fourth Retirement Income Literacy Study. Every three years in the past decade The College has conducted a comprehensive survey of retirement income literacy, and these surveys have helped measure Americans’ understanding of key retirement planning issues. I draw four conclusions from the current iteration of this important research.

1. Older Americans lack actionable retirement knowledge. They averaged only 31% on a 38 question retirement literacy quiz.

2. The needle hasn’t changed. The most recent previous survey was conducted during the pandemic, and the respondents performed poorly then as well. Since then, there have been governmental efforts to improve literacy through improved Social Security statements and mandated annual illustrations of lifetime income from a 401(k) participant’s account balance. Unfortunately, the current survey results tell us Americans continue to perform inadequately on answering key retirement planning questions.

3. There is a distinct advantage to getting help. Eric Ludwig, Director of the Center for Retirement Income at The College found that “there’s a clear link between how much you think you know about retirement planning, how much you’ve actually saved, and whether you’re seeking out that expert advice to make your retirement as robust as it can be.” In fact, participants with ongoing advisory relationships scored 11 points higher on retirement income literacy than those without (38% vs 27%).

4. There are significant differences in knowledge about retirement planning. The study analyzed a number of possible factors that influence retirement literacy and found the results to be highly variable across different parts of society. For example, respondents with more than $1.5 million in investible assets scored twice as high on the quiz as those with less than $100,000 (50% vs. 25%).

This fourth point – that retirement literacy varies significantly by demographics – is a key finding from this research. The data can be sliced a number of ways, and it reveals interesting results. For example, respondents who have earned advanced degrees score highest, followed by college graduates. Men consistently score higher than women. White and “Other” respondents, including Asian/AAPI respondents, score higher than Black and Hispanic respondents. And retired respondents score higher than non-retired respondents. These disparities make a difference because they remind us that when designing a retirement plan, one size doesn’t fit all. Not everyone knows the same thing about retirement planning, and each plan must be unique. Consider how retirement planning issues vary by socioeconomic and demographic differences.

Importance In the United States retirement system, the importance of knowing about retirement issues can vary by the nature of an individual’s employment. A career military veteran will not have the same need for retirement literacy as the sole owner of a small business. The veteran will have a pension and secure medical benefits provided through the federal government. This doesn’t negate the need for planning by members of the military, but for them their options are more defined, and to an extent mandated by their employer. In contrast, the typical business owner will have to be more proactive in creating a retirement plan. In many ways, saving for retirement for the business owner is, beyond Social Security, largely voluntary. So, the owner will need to consider pre and post tax retirement savings options, various medical care plans, and make a host of other retirement choices.

Access to Advice The study establishes a compelling link between retirement literacy and working directly with a financial advisor. Advised respondents have higher scores across all knowledge areas, are more financially well-off, and feel more confident about retirement. A challenge for many, however, is access to this kind of advice. There are plenty of financial advisors willing to counsel wealthy Americans concerning their retirement plans, but underserved markets often lack access to professional advice. Even where there are such services, an absence of trust may interfere with retirees’ willingness to act on the advice being given. Particularly with the further complexity in retirement rules created by the SECURE and SECURE 2.0 Acts, retirement planning is not a do-it-yourself proposition. Yet for many there are limited avenues for getting professional help.

Kind of Information Across different demographics, there are differing needs regarding the kind of retirement knowledge required. Take, for example, employment status. Arguably, with a middle-income employee who has a solid 401(k) plan at work, they may be able to invest their savings adequately by using the target date funds offered through their employer’s plan. They can invest as much as $23,000 annually (plus the employer’s match and any catch-up) into these funds, and only have to decide how to allocate between pre-tax and Roth accounts. An affluent self-employed worker, however, will have a much greater need for retirement literacy on issues such as tax, investments, and options for qualified plans.

On the other side of the advice spectrum are those who are not currently employed, for example a stay-at-home spouse. This cohort of individuals is especially in need of retirement literacy because of their limited sources of retirement savings and medical options available without employment.

The kind of information needed can also be affected by the demographic of the participant’s age. Individuals in their 40s and 50s are primarily focused on accumulation of savings as a retirement goal. Accordingly, their retirement literacy is likely focused on investments and taxes. But once individuals are in their 60s, retirement literacy demands awareness of the Medicare and Social Security systems. And once elderly, other retirement issues are pressing, such as long-term care and RMDs (required minimum distributions). We should, in theory, be informed about all of these issues, both to and through retirement. In reality, however, different ages will focus on different retirement issues. This may explain why in the research respondents aged 70-75 scored higher on the literacy quiz (38.2%) than respondents aged 50-54 (24.9%). The elderly respondents have had to face all of these retirement issues, while prospective retirees may be putting off acquiring this knowledge until later.


If you sense that you need to sharpen your personal knowledge about retirement planning, the natural question is “how”? As my title indicates in my review of the 2020 version survey by The College, “What Retirees Don’t Know About Retirement Income Planning Does Hurt Them”. Lack of literacy leads to poor, often irredeemable mistakes. So, how can we acquire that knowledge?

Know More Retirement literacy is an issue in the United States because of a combination of the voluntary nature of retirement savings and the significant complexity of our tax and regulatory system. As a retiree you will need to make choices concerning Social Security and Medicare, and, because of the 401(k) and IRA plans that many of us have, we’ll need to decide both how to invest and drawdown our retirement savings. That puts the onus on us, as prospective retirees, to learn more and know more about retirement planning. The more you know, the more likely you are to make smart decisions that will augment your retirement success.

Get Help While the 2023 research strongly underscores the importance of the use of advisors in retirement planning, getting that advice can be a challenge. Still, there are sources. It may come from employer-provided meetings, seminars offered to you through the government and community organizations, or through meetings generated by product vendors. Ultimately, however, you may find you will need direct help from a professional. Many of your questions cannot be handled in a two-hour group meeting, and you’ll want one-on-one help in creating your retirement plan.

A trend in providing this kind of direct retirement planning is having some or all of this advice delivered virtually rather than through face-to-face meetings. With help, you create your plan on your computer rather than at an advisor’s office. When this advice is provided virtually, the next question is the source of that advice. Who – or what – is on the other side of the computer? Is the advisor DNA-based or A.I.-based? If your strategy is to go the route of using A.I. as your advisor, there’s one more revelation that comes from The American College’s research. As part of the 2023 study, researchers at The College administered the 38 question quiz to ChatGPT. It scored 45%, only 14% better than the participants’ overall average of 31%. Draw your own conclusions, but retirement planning often takes help, and the source of that help matters.

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