Less than 40% of Americans on the Right Retirement Track
Less than 40% of Americans say their retirement plans are on track, and non-retirees report widespread confusion about some common financial tools and concepts, according to a new report from the Federal Reserve.
Three-fifths of working people with 401(k)s, IRAs, and traditional savings accounts reported “little or no comfort” with managing them, the Fed found in its annual Report on the Economic Well-Being of U.S. Households for 2017, released Tuesday morning.
“Many adults feel behind in their savings for retirement,” the Board of Governors of the Federal Reserve System wrote in the report. “Even among those who have some savings, people commonly lack financial knowledge and are uncomfortable making investment decisions.”
A quarter of working-age Americans have no retirement savings at all, the survey found, with the average respondent unable to answer three or more out of five “basic financial literacy questions correctly.” Among respondents over the age of 60, an eighth had no retirement savings at all, and only 49% said their plan was on track.
“While preparedness for retirement increases with age, concerns about inadequate savings are still common for those near retirement age,” the board of governors pointed out.
Respondents aged 18 to 29 said they’d feel comfortable with their savings if they had at least $10,000 set aside for retirement; that number rises to $100,000 by the time people reach age 40 and above, and the Fed pointed out that nine out of 10 people with more than $500,000 socked away for old age felt comfortable.
While men with bachelor’s degrees reported the highest degree of confidence in managing their retirement investments as compared to women of all education levels, that doesn’t necessarily mean they have the know-how to approach retirement properly.
“Expressed comfort in financial decision-making may or may not correlate with actual knowledge about how to do so,” the report notes. “To assess actual financial literacy, respondents are asked five basic questions about finances. The average number of correct answers is 2.8, with one-fifth of adults getting all five correct.”
Those questions included: “Housing prices in the United States can never go down, true or false?” And “Buying a single company’s stock usually provides a safer return than a stock mutual fund, true or false?”
Article by reversemortgagedaily.com